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Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
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Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
Rising interest rates are normally good for banks so investors may be puzzled why FTSE 250 lender Vanquis Banking (VANQ) has plunged nearly 20% in six weeks to 183.6p, putting the company firmly in relegation territory from the mid-cap index.The business, previously called Provident Financial, is trying to change its spots, shifting away from higher-risk, poor credit borrowers to a more mainstream, lower credit threat provider, hence the new name earlier this year.
Previously accused of handing out unaffordable loans to cash-strapped borrowers, change was probably inevitable, even if it means lower gross margins.
But a lender doesn’t change its whole loan book overnight and investors are clearly worried about Vanquis’ long-tail of higher-risk borrowers, especially with interest rates seen staying higher for longer.
This can be managed by most borrowers in regular employment with a little belt-tightening and a modicum of financial discipline, but that could change if recession bites, and widespread workforce cuts emerge.
We are not close to such a scenario now, but things can change quickly, and investors are clearly discounting potential financial threats.
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