Vanquis warns over hit to profits from surge in claims and strategy overhaul

11 March 2024 , 08:43

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Specialist lender Vanquis has warned over a hit to full-year profits (Image: PA Archive/PA Images)

Vanquis, a specialist lender, has issued a warning about a potential drop in its full-year profits due to an increase in costly claims.

Shares in the group plunged more than 36% in Monday morning trading as it revealed it has seen “significant levels of third-party complaint submissions”, largely relating to credit cards.

It warned that, even though the “vast majority” of complaints are not upheld, rising costs of reviewing them will “materially” affect profits. But the group stressed it is not subject to the Financial Conduct Authority’s investigation into motor financing, which is a small part of its business.

The firm also said that changes to its products and pricing are affecting income, which is expected to be considerably lower than the market prediction of £583.3 million. As a result of these factors, Vanquis anticipates that its underlying pre-tax profits for 2024 will be much lower than the expected £75.1 million.

Vanquis said it is looking into taking “proactive legal steps” in the face of soaring and costly third-party complaints submissions. It is thought most of the complaints relate to a single claims management company.

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Ian McLaughlin, Vanquis' chief executive, said: "We have short-term challenges to address but remain confident that the group's new strategy will deliver good outcomes for our customers and attractive and sustainable returns for our shareholders."

The group, which bought money-saving app Snoop from former Virgin Money boss Dame Jayne-Anne Gadhia last year, plans to make big changes in early 2024. They aim to improve their customer service and adjust their pricing. They hope these changes will lead to a small increase in lending from the start of the second quarter.

"However, income is expected to be materially lower than market consensus expectations for 2024," it said. But the lender said 2023 underlying profits are still expected to come in at £25 million. The group is to lay out a new strategy plan on March 27.

"At its strategy seminar, the group will describe in detail the initiatives already under way to serve a broader, carefully targeted addressable market with a more extensive customer proposition," it said. "It will also present a detailed route map to achieve significant payback across the business in 2026 from its technology infrastructure investment."

Lawrence Matheson