Home credit providers say collections performance improving

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International Personal Finance PLC (LON:IPF) has seen business pick up in recent weeks despite the continuing effects of the pandemic.

The home credit company said in April it expected debt collections to weaken during the first half of this year. But in fact its actual collections performance has continued to be strong, giving a faster than expected improvement in impairment as a percentage of revenue.

Meanwhile, credit issued has been broadly in line with management forecasts, so overall it expects a better outcome for the year than it had anticipated.

It said: “While we remain cautious given the dynamic COVID-19 environment, the faster-than-anticipated improvement in impairment in April and May is expected to result in a further improvement in the full-year impairment charge and a significantly stronger rebound in profitability in 2021 than was expected at the time of our first quarter trading update.”

Analyst Gary Greenwood at Shore Capital said: “Today’s positive update sees us nudge our fair value up to 135p [from 130p], which continues to factor in a 25% haircut for regulatory risk (mainly in respect of price capping risk in Poland).”

The shares have moved higher than that on the news, adding 10.6p or 8.35% to 137.6p.

Elsewhere, fellow home credit provider, Non-Standard Finance PLC (LON:NSF) said it has seen a “steady build” in month-on-month growth in lending from branches and at homes, while also giving an update on its finances, having said back in February that it needed to strengthen its balance sheet to support future growth as well as addressing material uncertainties that could affect its status as a going concern. 

Today NSF said it is working on a share issue expected to be in the region of £80mln that is likely to be in the form of a placing and open offer, supported by major shareholder Alchemy Partners.  

However, the fundraise is dependent on reaching an agreement with the regulator, the Financial Conduct Authority, on the proposed redress methodology to certain guarantor loans customers.

NSF also said it is determining whether there is any read-across to other divisions or implications from recent decisions by the Financial Ombudsman Service.

“Until this is complete, there can be no certainty as to the outcome, but the Board is currently planning for the capital raise to take place in the third quarter of 2021,” the company said.

The shares were down 7% to 4.84p.

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