PCF still expects to deliver ROE (return on equity) of 12.5% by 2020 (8.4% 1H18, annualised) and we still anticipate c.2.6% of ROAA (return on average assets) by the same date (2.6% 1H18, annualised). Our expectations-derived forecast for earnings per share (EPS) for the financial year 2020 using an impairment rate of 0.86% is for 3.84p per share.Full report is available via Capital Network website
Following the release of the 2017 full year results for the financial year to end September 2017 on the 5th December 2017, and ahead of the release of the 2017 annual report due on the 6th February 2018, we have updated our forecasts for profit and earnings for the period 2018e to 2020e.
PCF Group ( LON:PCF) has announced that deposit funding from retail investors, which only started in July 2017, has increased substantially again and now exceeds £100m. This compares to previous announcements of £53m at the end of September ‘17, and £81m at the end of February ’18. We estimate that compared to the last reported Group total liability dated September ‘17, the bank now only requires an additional c.£35m of deposit funding to be able to completely replace, should it be desirable to do so, all of the third party bank funding reported at that date. However, whilst funding has grown significantly since the full year results, loans to customers continue to expand also. It is likely therefore that the bank will continue with at least some sort of diversified funding for some time yet to help manage this growth.
Substantial growth in new business forecasted by management; the current customer portfolio stands at £128m which management expect to grow to £350m in 3 years and to £750m in 5 years across both Consumer and Business Finance divisions. The returns guidance is very positive with ROAA (Return on Average Assets) targeted at 2.5% and ROE (Return on Equity) targeted at 12.5%, with both metrics improving further in the 3-5 year horizon. Combined with the reduction in credit risk as the Group focuses on the Prime and Super-prime markets (low and lowest credit risk), the potential returns look attractive.
An exciting opportunity for the Group (PCF.LON) and new PCF Bank Ltd; the positives of operating a bank include the opportunity to diversify treasury operations and fund directly from the savings markets. Matching the funding to risk appropriate customer loans should be straightforward, managing the regulation and bank oversight less so as this is more complex, but the rewards could be significant.
An authorised UK bank now seeking access to retail deposit funding; following bank authorisation PCF (PCF.LON) is now raising retail deposits. The group has historically relied upon more expensive wholesale market funding, but following the change to a diversified treasury strategy to include deposits, the fall in overall cost of funding will enable the Group to offer more competitive finance rates to customers in higher credit areas of the asset finance market.
No investment advice
The information on this Site is of a general nature only. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions. You acknowledge and understand that neither the Company, its related bodies corporate, the information providers or their affiliates will advise you personally about the nature, potential value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter. You should read our FSG and any other relevant disclosure documents and if necessary seek persona advice prior to making any investment decision.
You understand and agree that no Content (as defined below) published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person.
You understand that in certain circumstances the Company, its related bodies corporate, the information providers or their affiliates may have received, or be entitled to receive, financial or other consideration in connection with promoting, and providing information about, certain entities on the Site and in communications otherwise provided to you.
You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate. From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.
Before you act on any general advice we provide, please consider whether it is appropriate for your personal circumstances.