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Amigo Holdings' shares tank after higher impairment warning

Amigo Holdings PLC's shares fell after the company warned that it expects to take higher provisions than previously expected amid what CEO Hamish Paton described as a "changing regulatory and economic landscape."

The company's shares were down 50.83% as of 3:20 p.m. London time on Aug. 29.

The British guarantor loan provider said it would prioritize new customer lending, tighten credit policy and invest in key internal areas in response to the changes. This comes ahead of possible actions by the U.K. Financial Conduct Authority against Amigo amid concerns about the company's business model, the Financial Times said.

The firm said it has already reviewed and tightened its eligibility criteria for lending money although only 12% of its customers have twice taken further advances to loans. It added that it would continue to cooperate with regulators on whatever actions they would set out.

For the three months to June 30, the firm reported an unaudited profit and total comprehensive income attributable to equity shareholders of £18.1 million, an increase from the year-ago £12.3 million. Revenue rose on a yearly basis to £71.5 million from £62.9 million, while impairment of amounts receivable from customers widened year over year to £21.8 million from £16.0 million.

Amigo Holdings also revised its guidance for the 2020 fiscal year, with net loan book growth now expected to be broadly flat, the cost-to-income ratio to be in the low 20% level and impairment-to-revenue ratio to be in the low-to-mid 30% range.