Monday 20 July 2020 8:05 am

Amigo Loans swings to a loss after huge complaints bill

Lender Amigo swung to a loss after taking a hit from the coronavirus pandemic and a surge in customer complaints.

The figures

Amigo reported a £37.9m loss for the year to the year ended 31 March 2020, down from a profit of £111m the year before.

This was due to the cost of complaints jumping to £126.8m, compared to £100,000 in 2019.

Amigo’s net loan book dropped 9.1 per cent to £643m, while revenue grew 8.7 per cent from £270.7m to £294.2m. But the impairment to revenue ratio jumped to 38.5 per cent, which the lender said reflected the “material impact” from coronavirus.

The total dividend per share for the year – 3.1p – was paid in January 2020 but the board will not recommend a final dividend.

Why it’s interesting

Amigo warned about its financial future after a surge in customer complaints. The Financial Conduct Authority (FCA) started an investigation into the firm’s credit worthiness, which Amigo warned could result in a huge fine or a remediation exercise which could “reasonably be expected to exhaust the group’s available liquid resources”.

Amigo also warned it was facing a “material uncertainty surrounding going concern” because of the economic hit of coronavirus. This come in tandem with “a potential increase in the level of complaints received and the possible outcome” of an investigation by the watchdog.

In a separate announcement today, Amigo said it had lined up Jonathan Roe as its new chairman. The veteran banker was most recently chairman of Vanquis Bank for three and a half years.

This month the lender reappointed its former chief executive Glen Crawford after a fight between Amigo’s founder and board of directors.

He led the firm through its initial public offering (IPO) and authorisation process with the FCA, before stepping down last year for medical reasons. He returned to the firm as an adviser before confirming he would take over again as boss on 1 August.

What Amigo said

Acting chairman Roger Lovering said:

“The last 12 months have been a challenging and difficult period, which is reflected in our results today. We are operating against an evolving regulatory picture, while facing economic uncertainty due to the Covid-19 pandemic.”

“Subsequent to our year-end, we have seen a substantial increase in the volume of complaints and this has led us to make a significant provision, which resulted in an overall loss for the financial year. We continue to engage productively with our regulators to understand the evolution in their approach and anticipate that this will remain an ongoing focus for the new Board members of Amigo.”