Rivals move on Provident's patch

DOORSTEP lender Provident Financial has seen profits fall in its key UK home credit division.

The firm, which specialises in loans to those on low incomes, said credit card providers were targeting the same market, contributing to a drop in customers and 1.7% fall in pre-tax profits to £60.1m.

The Office of Fair Trading is currently investigating the UK home credit market in which Provident is the largest player, following a complaint about a lack of competitiveness from the National Consumer Council.

Other major players include London Scottish Bank and Cattles.

Elsewhere in the group, the Yes Car Credit business saw a slowdown in the second-quarter of the year, which the company attributed to reduced customer confidence, and said the outlook for the year is hard to predict.

Motor Insurance operations also expect to see the reduction of policy holders and written premiums carry on, but Provident predicts 'benign claims trends' will continue, allowing the unit to report an increased profit for the year. Pre-tax profit in the first-half climbed 13% to £16.6m at the unit.

Group pre-tax profits before goodwill rose 6.3% to £87.2m.

Numis brokerage cut its rating on the stock to 'reduce' from 'hold' and reduced its price target to 520p from 590p.

'We believe that life is going to remain tough for Provident Financial and while we keep forecasts unchanged at present...we feel the risk to numbers is on the downside and pedestrian earnings-per-share growth at present merits a reduced target price of 520p,' the broker said.

Provident shares slipped 1/2p to 571 1/2p in early trading.