Vanquis Bank, specializing in lending services, recently faced significant challenges following an in-depth internal review, as detailed in its latest trading update released ahead of its interim results for the first half of 2024. The bank’s disclosures highlighted substantial revisions prompted by a comprehensive reassessment of its balance sheet, which unearthed several critical issues necessitating adjustments to historical financial figures.
Central to these revisions was the reassessment of Vanquis Bank’s Vehicle Finance Stage 3 receivables, resulting in a downward revision of £29 million. This adjustment was crucially accompanied by a charge against the value of the bank’s vehicle finance portfolio, with £16 million specifically reflecting a restatement of prior year results. In addition to these adjustments, the review identified £11 million in one-time charges related to various expenses, including the write-down of development costs for a now obsolete mobile application, property dilapidations, and other miscellaneous balances.
A significant footnote in the trading update revealed that gross customer interest earning balances were understated by £51.6 million, further underscoring the scale of the financial discrepancies uncovered through the review process. These findings collectively posed a significant impact on the bank’s financial metrics, leading to the projection that Vanquis Bank would no longer meet its previously set targets for return on tangible equity and profitability for the year. Moreover, the bank indicated that its Tier 1 capital ratio would fall below the board’s established range of 19.5% to 20.5%, signaling heightened financial challenges that needed addressing.
In response to these developments, Ian Mclaughlin, CEO of Vanquis Bank, expressed disappointment over the unexpected discovery of these one-off items. He acknowledged that while the findings were disappointing, they had brought clarity and stability to the bank’s financial position, essential for navigating future operations effectively. Despite the setbacks highlighted by the balance sheet review, Mclaughlin pointed to encouraging trading performance towards the latter part of the first half of 2024. This included positive trends such as growth in customer numbers, improved profit margins, and a notable recovery in receivables by June, indicating resilience amid challenging circumstances.
Looking ahead, Vanquis Bank remains steadfast in its commitment to achieving £60 million in cost savings by the end of 2024, a strategic initiative aimed at bolstering operational efficiency and financial resilience. Furthermore, the bank affirmed that costs associated with complaints remained within acceptable levels, with ongoing efforts across the industry to combat fraudulent and unwarranted claims continuing unabated.
Earlier in the year, Vanquis Bank faced a surge in complaints from a single claims management firm concerning past lending practices. In response, the bank initiated legal proceedings aimed at addressing these complaints and mitigating associated financial losses, underscoring its proactive approach to regulatory compliance and customer protection.
The unexpected adjustments to its balance sheet underscore Vanquis Bank’s commitment to transparency and financial integrity, essential for rebuilding investor confidence and sustaining long-term growth in a competitive financial services landscape.