Provident Financial share price plummets by a fifth as debts are left uncollected after jobs are cut

 
Oliver Gill
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Provident Financial investors got that sinking feeling as markets opened this morning (Source: Getty)

Shares in sub-prime lending giant Provident Financial have been sent into freefall, spooked by a warning yesterday evening it had "experienced higher operational disruption than planned".

The FTSE 100 lender said it has been struggling to deal with spiralling levels of uncollected home credit loans in the first half of the year.

Over half a billion pounds was wiped off Provident Financial's market cap as markets opened this morning, with shares falling by almost a fifth. They are currently trading over 16 per cent lower.

The firm started a cost-cutting exercise earlier this year, with staff told at the start of February some 2,000 middle management roles were to go.

Gary Greenwood, an analyst at Shore Capital told Bloomberg:

People knew they were leaving and therefore probably haven’t bothered doing their jobs.

Management had underestimated the extent of that. Questions will be asked now and confidence in them will have taken a knock.

Provident Financial have been contacted for comment on the impact of the job cuts.

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In yesterday evening's stock market announcement chief executive Peter Crook said:

I am disappointed to report higher than expected operational disruption from the migration of the home credit business to a new operating model.

In April, Provident Financial warned investors that collections performance had deteriorated, with the lender shouldering a £15m hit. Yesterday evening the trend had continued "particularly in May" and the business reassessed the impact as up to £40m.

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It said: "With the vast majority of new field based roles having been filled, June collections performance is stabilising.

"However, the switch over to the new operating model in early July will deliver a significant step-up in resource and direct control over the field organisation, including all collections activities. From this point the rate of collections will begin to normalise."

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