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Provident 2010 Net Rises on Collections, Misses Estimates

Provident Financial Plc, the U.K.’s biggest subprime lender, said full-year profit rose 15 percent on higher revenue and collections from its credit-card division.

Net income climbed to 101.5 million pounds ($165 million) from 88.6 million pounds a year earlier, the Bradford, England-based company said in a statement today. That missed the 102.5 million-pound median estimate of 10 analysts surveyed by Bloomberg.

Provident Financial, which typically charges 500 pounds for a 300-pound loan, has risen by almost a third since Oct. 22 when Chief Executive Officer Peter Crook said the government’s record spending cuts on welfare would only have a “modest” impact on customers’ ability to repay loans.

“The mood amongst our customers is probably slightly better” since then, Crook said by telephone. “There were a lot of customers out there fearful of the government spending cuts and welfare cuts. Now all that bad news is out there, our customers are getting on with life.”

The stock dropped 5.2 percent, the most in seven months, to close in London at 979.5 pence for a market value of 1.3 billion pounds. The shares have climbed 12 percent this year.


Hedge fund investors including Odey Asset Management LLP, BlackRock Inc. and Fortelus Capital Management LLP have disclosed short positions in Provident stock over the past three months. The lender is the second-most short-sold stock in the FTSE 250 Index, with 17 percent of the shares on loan, according to Data Explorers. That figure has recently declined to 13 percent, with Fortelus reducing its short position by almost half in recent weeks, Crook said.

Short sellers bet on falling prices by borrowing a stock and selling it in the hope of buying it back more cheaply later and returning it to its original owner.

Profit at Provident’s Vanquis credit-card unit climbed 89 percent to 26.7 million pounds in 2010, while income at its doorstep lending division was little changed at 129.1 million pounds. Impairments as a percentage of revenue at its credit card unit declined to 39 percent while delinquencies at its doorstep unit were 33 percent compared with 32 percent at the end of 2009.

The company had “sound collections performance with a strong performance in the final quarter,” it said in the statement.

The lender has begun courting investors in the U.K. and Channel Islands for the possible bond sale, it said today. The company is seeking to get permission from the Financial Services Authority to take deposits in the second quarter of this year, Crook said.

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