July 28 (Bloomberg) -- Provident Financial Plc said first- half profit rose as customer numbers climbed to the highest in the 129-year history of the lender to low-income households.

Net income for the six months ended June 30 advanced 4 percent from a year earlier to 38.2 million pounds ($63 million), the Bradford, England-based company said today in a statement. Customer numbers rose by 5.3 percent to 2.1 million, or 4.3 percent of the U.K population.

“It’s a slightly slower rate of growth than we saw in 2008 as we’ve been growing the business very carefully to get the balance right between growth, impairments and costs,” Chief Executive Officer Peter Crook said in a telephone interview.

Provident, which goes door-to-door to collect payments from its customers every week, has been gaining customers while rivals such as Cattles Plc struggle to contain bad debts, which have soared across the banking industry in the worst recession for a generation. Half of the lender’s customers receive some form of state benefit, providing a cushion against rising unemployment.

Arrears remained “stable” at 31 percent of revenue in the six months to June 30, compared with 30 percent a year earlier, Provident said. That level of bad debts has been consistent throughout the company’s history, including during World War II and the Great Depression, Crook has said.

‘Up-Tick in Arrears’

“There has been a mild up-tick in arrears,” said Nitin Arora, a London-based analyst at Noble & Co. with a “buy” rating on the stock. “If there is a sudden up-tick of even two percentage points, that will be taken negatively.”

Provident fell 3.3 percent to 827 pence at 8:33 a.m. in London trading, snapping a five day rally and paring its gain since July 21 to 3.4 percent.

“Provident is trading at a significant premium to banks and it’s had a rise for a couple of days,” Arora said. “There might be some profit booking going on.”

The company was raised to “outperform” from “underperform” last week at Credit Suisse Group AG, which cited “superior performance.”

To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net

Last Updated: July 28, 2009 03:39 EDT