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Provident Financial's outlook 'finally looking up' after tough 2017, says Barclays

Published: 18:54 22 May 2018 AEST

Provident Financial
Shares in Provident Financial were higher in mid-morning trading

The outlook for troubled doorstop lender Provident Financial PLC (LON:PFG) is "finally looking up" after a difficult 2017, according to Barclays.

Barclays reinstated an ‘overweight’ rating on the stock with a target price of 750p, saying the valuation “looks cheap”.

The bank said regulatory issues have been resolved and the recovery of Provident’s home credit business is on track.

In 2017, the group swung to a loss of £123mln from a profit of £343.9mln, reflecting struggles in its home credit business and a provision to settle an investigation by the Financial Conduct Authority into its credit division Vanquis.

READ: Provident Financial rallies on reassuring update

In February, Provident drew a line under the FCA probe into Vanquis after it was fined £2mln and ordered to repay £169mln to customers for interest charged on an add-on product they were sold called Repayment Option Plan (ROP), which was not fully explained.

Having resolved put the issue behind it, Barcalys said: “Vanquis credit cards remain a key beneficiary of the structural growth of the subprime credit card sector.”

Barclays expects a 20% compound annual growth rate in earnings per share for fiscal years 2018 to 2021. 

In mid-morning trading, Provident's shares rose 1.9% to 668p. 

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