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Amigo to take “more conservative” approach to lending

Guarantor lender Amigo Loans said it expects “no growth” in the current financial year as it prioritises new customer lending over relending to existing customers.

The FTSE 250-listed lender enhanced and tightened its credit policy as it braces itself for increased Financial Conduct Authority (FCA) scrutiny and an economic downturn precipitated by Brexit and the increasing likelihood of no deal with the European Union.


The firm said it would be setting aside more cash for provisions, including an increase in its impairment-to-revenue ratio of 5.1ppts to 30.5 percent – up from 25.4 percent at the same point the year before. It also relates to provisions over customer complaints, as well as an increase in operating expenses, the company said.


“Higher impairments were largely a result of operational challenges within collections which resulted in more customers in early arrears. We are investing in our teams to address capacity constraints,” it said.


“In addition, we have updated our IFRS 9 Financial Instruments model to reflect the increased probability of a no deal Brexit and the corresponding adverse effect this is expected to have on the economy and on consumer sentiment. While past recessions have demonstrated the resilience of our business, we believe it is prudent to factor a deteriorating economic outlook into our impairments model.”


Amigo said it would focus on finding new customers rather than handing multiple loans to existing borrowers. The FCA has expressed concerns over the practice of relending to customers and the possibility that they can fall into persistent debt.


Amigo chief executive Hamish Paton, who assumed the post earlier this year, said: “Amigo is both a responsible and profitable lender. We are focused on our future returns and building a sustainable business for the long term. We are accelerating investment in our operations to enable continued delivery of best in class customer service and further enhancing credit and conduct policies.


“This positive action means that we are hitting the ground running ahead of what we recognise is a changing regulatory and economic landscape. By doing this, we are being proactive and pragmatic.”


Despite those changes, Amigo’s latest results show its net loan book stood at £728.4m in the year to June 30, 2019, a 14.1 percent increase on the same point a year ago, (£638.2m) driven by a 17.3 percent rise in customers to more than 210,000.

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