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Provident First-Half Net Beats Estimates as Bad Debts Fall

July 27 (Bloomberg) -- Provident Financial Plc, the U.K.’s biggest publicly traded subprime lender, posted first-half profit that beat analyst estimates as bad loans declined.

Net income rose 18 percent to 45.8 million pounds ($75 million) in the six months to June 30, the Bradford, England-based company said today in a statement. That beat the 42.8 million-pound estimate of four analysts surveyed by Bloomberg. The shares rose to the highest in a decade.

There is “clear momentum in the business,” Rae Maile, a London-based analyst at JPMorgan Cazenove, wrote in a note to clients today. “The notable feature is lower-than-expected impairments, which have been achieved in what remains a tough operating environment.”

Investors including BlackRock Inc. and Ivaldi Capital LLP have disclosed short positions in Provident’s stock in the last two months, betting that a sluggish U.K. economy and reductions in welfare payments will cause an increase in arrears. While Provident is the most short-sold stock in the FTSE 250, with 16 percent of shares on loan according to Data Explorers, it has risen 25 percent since the beginning of the year.

The stock rose 6.2 percent to 1,093 pence a share, the highest since 2001, as of 8:24 a.m. in London trading.

“We’ve got favorable trends in both of our businesses in terms of arrears and losses even though it’s not an easy economic environment,” Chief Executive Officer Peter Crook said in a telephone interview today. Incentivizing agents to collect more loans and focusing on lending to existing customers helped minimize arrears, he said.

Impairments dropped 7 percent to 169 million pounds in the six-month period, Provident said. The company raised its first-half dividend 5.1 percent to 26.7 pence a share.

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

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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