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Provident Financial unveils £331M rights issue after £171M penalty

Provident Financial Plc unveiled plans to carry out a rights issue to raise gross proceeds of approximately £331 million after agreeing to pay more than £170 million to settle misselling at its Vanquis Bank Ltd. unit.

The British subprime lender will issue 104,998,731 new ordinary shares, representing approximately 70.8% of the existing issued share capital and 41.5% of the enlarged issued share capital immediately following completion of the rights issue.

The issue price of 315 pence per new ordinary share represents a 46.4% discount to the closing price of 588 pence per existing ordinary share on Feb. 26 and a 33.7% discount to the theoretical ex-rights price of 475 pence per ordinary share.

The plan will be proposed for shareholder approval at the March 21 company general meeting. The rights issue is conditional upon admission becoming effective by no later than 8 a.m. London time March 22 or at a later time and/or date not later than April 16.

The plan comes as the company reached a settlement with the U.K. Financial Conduct Authority in relation to the latter's investigation into a product of unit Vanquis Bank called a repayment option plan. The FCA found that Vanquis Bank failed to disclose the full price of the product.

Vanquis Bank agreed to pay a fine of nearly £2.0 million and to pay roughly £168.8 million in compensation. The FCA said the fine was reduced from roughly £2.8 million, representing a 30% discount, as Vanquis Bank agreed that it had breached the FCA principles for businesses.

In connection with the settlement, Provident Financial said it booked £172.1 million in provisions in its full-year 2017 results.

Meanwhile, Provident Financial vehicle financing unit Moneybarn is continuing talks with the FCA in relation with the regulator's ongoing probe into the processes it applied to customer affordability assessments for vehicle finance and its treatment of customers in financial difficulties.

Provident Financial said an estimated cost of £20 million in relation to the investigation has been booked as an exceptional cost in its annual results, adding that a final resolution to the probe will likely take up 24 months.

Provident Financial reported a statutory pretax loss of £123.0 million, compared to the year-ago statutory pretax profit of £343.9 million.