Amigo Loans warns of “significant uncertainty” about the future
Subprime lender Amigo Loans posted a half-yearly loss and warned of “significant uncertainty” about its future after its income was hit by payment holidays for borrowers and a pause in new lending.
For the six months to the end of September, the group recorded an adjusted after-tax loss of £ 58.1million, compared to a profit of £ 35.8million a year earlier. Income has fallen by more than a third to £ 92.3million.
The group, which lends to people with bad credit histories but can provide a guarantor, said all new loans have been suspended except for key workers and 57,000 clients have taken advantage of the “holidays.” government sanctioned payments.
Of its 176,000 borrowers, 22,000 were still on payment leave at the end of October.
Amigo also tried to cope with a backlog of 25,000 complaints by a deadline of October 30 agreed with the Financial Conduct Authority. It is also under investigation by the regulator for its lending standards.
The group said on Thursday it had sufficient cash to continue funding its operations, with £ 160million in cash as of November 25. uncertainty about future complaint volumes and the possible outcome of the FCA’s ongoing investigation ”.
Gary Jennison, a turnaround specialist with 40 years of financial services experience, became chief executive in September just days before shareholders foiled a second attempt by the founder Jacques Benamor regain control of the ailing company. Mr. Benamor had openly criticized Amigo’s handling of customer complaints.
Announcing the results on Thursday, Mr Jennison said higher volumes of complaints over the past six months had cost the company £ 93.7million and resulted in a balance sheet provision of £ 159.1million sterling. But Amigo has significantly improved his processes since then, he said.
“In the last three days, we received 766 complaints from a claims management company, but 374 were rejected and 259 of them were duplicates,” he explained. “We now know how to deal with them immediately. A few weeks ago, we would have been overwhelmed.
He added that Amigo reported two claims management companies to the FCA and one to the Solicitors Regulation Authority for submitting multiple claims for the same client and some of people the group did not lend to.
James Hamilton, analyst at Numis, said the FCA and the Financial Ombudsman Service would ultimately determine Amigo’s future, adding: “They currently appear to favor claims management companies.”
Amigo also said he was instrumental in the FCA’s review of the unsecured credit market and kept the regulator apprised of plans to offer new products to people turned down for loans elsewhere because of their history of unsecured credit. coronavirus credit or payment holidays. Mr Jennison said these included unsecured loans without a guarantor, risk-rated credits and loans with built-in payment holidays.
“We are engaging with the regulator [on these products] only out of courtesy, because we want to be open and transparent, ”said Mr. Jennison.
Amigo shares, which have not released full-year guidance, fell as much as 16% in morning trading in London on Thursday before recovering their losses. They are down more than 95% since Amigo’s listing in 2018.