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A leading
specialist bank
focused on
underserved
markets
Provident Financial plc Annual Report and Financial Statements 2021
Blueprint strategic drivers
Our strategic roadmap
We help to put people on the path to a better everyday life
To operate our business
of lending to our customers
in a responsible manner
To act responsibly and sustainably
in all our stakeholder relationships
Read more on pages 48 to 74
Read more on pages 14 to 19
Be hungry for better
Put the customer
on the team
Act like it’s yours
Grow customer-centric
businesses
Act responsibly
and with integrity
Maintain a secure funding
and capital structure
Read more on pages 26 to 30
Customer
progression
Human
experiences
Head
AND heart
decisions
Fighting fit
Purpose
Our behaviours
Our strategy
Our ESG strategy
Visit: providentfinancial.com
View: Corporate Responsibility Report at
www.providentfinancial.com/sustainability/
corporate-responsibility-report-2021
Strategic report
1 At a glance
2 Chairman’s statement
4 Chief Executive Officer’s review
6 Group overview
8 Environmental, Social
and Governance overview
14 Our Purpose
20 A bank for the underserved
22 Investment case
24 Business model
26 Strategy
31 Key performance indicators
34 Market overview
40 Credit Card Division
43 Vehicle Finance Division
46 Personal Loans Division
48 Environmental, Social and Governance
75 Section 172
87 Risk management and principal risks
100 Relations with regulators
101 Viability statement
102 Financial review
Governance
108 Board leadership and Company Purpose
108 Chairman’s introduction
112 Our Board
116 Setting our strategy
120 Promoting long-term sustainable
success: Board activities
123 The Board: our culture – promoting
colleague voice
127 Stakeholders and investor relations
127 Stakeholder engagement
132 Effective engagement with
shareholders and stakeholders:
investor relations
134 Division of responsibilities
139 Composition, succession and evaluation
139 Board composition
140 Induction for new directors
141 Board evaluation
143 Nomination Committee Report
150 Customer, Culture and Ethics
Committee Report
153 Audit, risk and internal control
153 Audit Committee Report
158 Risk Committee Report
162 Directors’ Report
Directors’ Remuneration Report
169 Annual Statement by the Chair
of the Remuneration Committee
174 Remuneration at a glance
177 Annual Report on Remuneration
Financial statements
193 Consolidated income statement
193 Consolidated statement
of comprehensive income
193 Loss per share
193 Dividends per share
194 Balance sheets
195 Statements of changes
in shareholders’ equity
197 Statements of cash flows
198 Statement of accounting policies
206 Financial and capital risk management
211 Notes to the financial statements
261 Independent auditor’s report
271 Alternative performance measures
Shareholder information
275 Glossary
276 Information for shareholders
Provident Financial plc Annual Report and Financial Statements 2021
1
Strategic report
£1.7bn
Amounts receivable
from customers
1
(2020: £1.7bn)
At a glance
1.6m
Customer numbers
1
(2020: 1.8m)
0.2m
£167.8m
Adjusted profit before tax –
continuing operations
(2020: £27.8m)
£142.2m
100%
2
Statutory profit before tax –
continuing operations
(2020: LBT (£37.0m))
Operational carbon
footprint offset
(2020: 100%)
£140.0m
£0.7bn£706.5m
Regulatory capital
(2020: £674.8m)
Liquidity
(2020: £1.0bn)
£31.7m
£0.3bn
1 Continuing operations.
2 Not including Scope 3 emissions
associated with purchased goods
and services.
Certain alternative performance
measures (APMs) have been used
in this report (see pages 271 to 274)
£179.2m
Provident Financial plc Annual Report and Financial Statements 2021
2
Chairman’s statement
We are committed
to serving customers
in underserved markets
Introduction
2021 was a strategically important year for PFG as we
successfully transitioned the Group to becoming a leading
specialist bank focused on underserved markets. The Board
and Executive Management team delivered a number of
significant strategic initiatives during 2021, including closing
our Consumer Credit Division, establishing a personal loans
business and, shortly after the period end, making some
important changes to the Group’s governance structure.
The Board and I look forward to 2022 with confidence. We will
continue to establish PFG as a leading specialist bank built
on a platform of credit cards, vehicle finance and personal
loans, all of which is underpinned by a strong and diversified
balance sheet, aligned governance and harmonised risk
management. I am delighted to report that we have been
able to reinstate the dividend to our shareholders for FY’21.
2021 was the year in which we
repointed and restructured PFG.
In 2022 we will progress with
our plan to make PFG a leading
specialist bank focused on
underserved markets in the UK.
Patrick Snowball
Chairman
Governance
Our primary responsibility as the Board is the effective
oversight of the Group and to determine its strategic direction
and objectives. We are committed to the highest possible
standards of corporate governance and delivering long-term,
sustainable shareholder value. Shortly after the period end,
we announced the next phase of our strategy. We have
restructured the Board of Vanquis Bank to substantially align
its membership with the Board of PFG. This is an important
step in the execution of the Group’s specialist bank strategy,
which includes the wider use of retail deposit funding across
the Group from H2’22. I believe that streamlining the Boards
of the two legal entities in this way will create a simpler, more
efficient Group governance structure, whilst streamlining and
enhancing both PFG and Vanquis Bank’s handling of corporate
governance. Further details of these changes can be found
on page 134.
Our Consumer Credit Division
The Board took the regrettable and difficult decision to
close our Consumer Credit Division (CCD) during 2021 in
response to changing industry dynamics. We committed to
close the business by the end of the year. We achieved this,
within the closure cost guidance of up to £100m. The closure
Strategic report
Provident Financial plc Annual Report and Financial Statements 2021
3
We have made some changes to our governance structure
which included Malcolm Le May, Neeraj Kapur (Group CEO and
CFO, respectively) and me as Chairman assuming the same
responsibilities for Vanquis Bank. As a result of these changes,
Robert East, Neil Chandler and Gary Thompson (Chairman,
MD and FD of Vanquis Bank respectively) have decided to
leave the business at the end of March 2022. I would like to
personally thank them for their efforts in managing our credit
card business so well during such difficult times.
Outlook
The Board and I look forward to 2022 with confidence. We
have achieved a lot in 2021, but there is still a great deal to look
forward to as we establish PFG as a leading specialist bank
focused on underserved markets. The provision of credit to
these customers will remain our primary focus, enabling us
to deliver our social purpose, whilst also ensuring that we can
generate attractive and sustainable returns to our shareholders.
Patrick Snowball
Chairman
6 April 2022
of CCD involved launching a Scheme of Arrangement
for its customers. This was a step that we did not have to
take, but we felt that it was necessary to protect customer
outcomes. The result is that PFG has reduced its operational
risk profile and no longer operates in any ‘high-cost’ credit
market segment.
I would like to take this opportunity to extend my sincere
gratitude to all our former colleagues from across CCD
for their hard work and dedication, and for doing such an
outstanding job in difficult circumstances.
Shareholders
2021 was another busy year of shareholder engagement, and I
personally met with several of PFG’s investors. The focus of our
discussions was the Scheme of Arrangement, and the closure
of CCD, ESG and the strategic vision for refocusing PFG. Please
see our Corporate Responsibility section for more details on
the work we are doing around ESG, including how we lend
responsibly to our customers and how we approach financial
inclusion, on pages 48 to 74.
Unfortunately, Covid-19 meant that we were still unable to
meet with our shareholders in person. In 2022 we plan to have
more face-to-face engagement with our shareholders and
prospective investors.
Our People
On behalf of the Board of Directors, I would like to extend my
sincere thanks to Malcolm Le May, the wider management
team and everyone at PFG for their hard work and dedication
to our customers during 2021. Once again I would like to
recognise the outstanding commitment of our colleagues
in CCD during the most very difficult time. We have achieved
a significant amount whilst still supporting our customers,
colleagues and communities, which is no mean feat.
Read more in our Corporate Responsibility Report at
www.providentfinancial.com/sustainability/
corporate-responsibility-report-2021
Supporting our communities
Through the Board’s engagement with the Group via our Customer, Culture and Ethics (CCE) Committee on the work that is
being delivered on the ESG agenda, I have been particularly proud of the activities and initiatives that have been supported
during 2021 via the PFG Social Impact Programme. The strategy of this programme, which is aligned with the Group’s Purpose,
is to invest in community-based activities and initiatives which seek to address some of the key factors which, on their own
or acting together, can reduce social and financial inclusion. The work that has been delivered to support financial wellbeing,
the education and skills agenda, and community investment during 2021 has been inspirational.
Financial
wellbeing
The work we supported The Money Charity to
deliver during 2021 focused on providing information,
advice and guidance to people of all ages, so
that they can manage their money well and
increase their financial wellbeing by delivering:
– 332 hours’ worth of financial education
workshops to 7,640 young people;
– 79 hours’ worth of financial wellbeing, Covid-19
response and bespoke workshops to 675
adults; and
– 10 hours’ worth of workshops to 67
young people impacted by the criminal
justice system.
Education
and skills
Community
investment
Through our longstanding partnership with
National Numeracy, approximately 11,000
children, parents and teachers from 19 schools
in areas of need across England were supported
to develop the numeracy skills they will need,
both at school and throughout their lives.
During 2021, PFG distributed £307,000 to 51 grass
roots voluntary organisations via community
foundation partners in Bradford, London, Kent,
Hampshire and parts of Scotland and Wales
to address a range of financial and social
inclusion issues.
Provident Financial plc Annual Report and Financial Statements 2021
4
Chief Executive Officer’s review
PFG is a leading
specialist bank focused
on underserved markets
Introduction
2021 was an important year for PFG as we successfully focused
the Group on becoming a leading specialist bank focused
on underserved markets. From the outset, the Board and
the Executive Management team remained focused on key
strategic initiatives, whilst not losing sight of the critical role
we play in our customers’ lives. Our credit card and vehicle
finance businesses commenced their rebound from the early
impact of Covid-19, delivering excellent profitability growth
and receivables growth from H1’21.
During 2021, we established a personal loans business, building
on the work already done within Vanquis Bank, and invested
in a new IT platform known as ‘Gateway’. We also launched
our second successful partial tender of our 2023 Senior
bonds whilst issuing an oversubscribed Tier 2 subordinated
debt instrument with gross proceeds of £200m. This issuance
increased the Total Capital Ratio (TCR) to over 40%.
PFG remains committed to
delivering long-term, sustainable
and attractive returns to its
shareholders as we target the
growing mid-cost segment
of the market.
Malcolm Le May
Chief Executive Officer
Group financials
Turning to the financial results for 2021, the Group reported
an adjusted profit before tax from continuing operations
of £167.8m (FY’20: £27.8m), which reflects lower impairment
year-on-year driven by provision releases. Including amortisation
of intangibles, CCD discontinued operations and exceptional
items, the Group PBT was £4.1m (FY’20 loss before tax: £113.5m).
At the start of the Covid-19 pandemic, the Group took the
prudent decision to tighten underwriting standards. These
standards were not relaxed during 2021 and, as a result, new
customer bookings across cards, loans and vehicle finance
of 249k were lower year-on-year (FY’20: 286k). At the end of
December the Group had 1,635k customers (FY’20: 1,759k,
excluding CCD). As lockdown restrictions eased and demand
for credit from customers returned, the Group saw positive
momentum in its receivables book during the second half of
the year until restrictions were reintroduced in November 2021.
As a result, total receivables stood at £1,678m (FY’20: £1,661m,
excluding CCD) at the end of December.
Provident Financial plc Annual Report and Financial Statements 2021
5
Strategic report
PFG remains committed to meeting the recommendations
of the Task Force on Climate-related Financial Disclosures
and, to support this objective, the Group became a signatory
to the UN Global Compact’s Business Ambition for 1.5°C
pledge. This agreement sets carbon reduction targets which
align with current climate science and are approved by the
Science Based Targets initiative.
PFG has continued to work with charities and other organisations
to address issues such as inequality and disadvantage
in the community. In 2021, we invested approximately £1.4m
in activities and initiatives which sought to support children
and young people whose education has been negatively
impacted by Covid-19. By supporting organisations like
National Numeracy, the National Literacy Trust and
School-Home Support, PFG has been able to boost
education, skills and opportunities in the community.
Further underpinning our commitment, I joined the National
Numeracy Leadership Council in September 2021. The Council,
which includes representatives from Amazon, Bloomberg
and Experian, will grow the network of organisations and
individuals actively addressing the issue of poor numeracy in
the UK. It will also support people to improve their numeracy
by creating positive attitudes to numbers and maths,
supporting financial wellbeing.
Outlook
PFG remains well placed in growing addressable markets of
over £17bn, and is underpinned by a strong, well capitalised
balance sheet with a customer-centric model and a new IT
platform. Reflecting the Board’s confidence in the Group’s
ability to deliver attractive and sustainable growth and returns
for shareholders, the Board, subject to market conditions,
expects to move to a dividend pay-out ratio of circa 40%
of adjusted earnings from FY’22 onwards.
The current macroeconomic environment in the UK, and
the inflationary pressures our customers will be experiencing,
have been factored in to our underwriting processes,
affordability checks and capital adequacy planning. During
the first two months of 2022, overall trends in our credit
card and vehicle finance businesses have continued to see
encouraging momentum. The personal loans pilot phases
continue to track broadly in-line with internal plans.
For the remainder of FY’22, we anticipate credit card spend
in areas such as travel to increase, and non-discretionary
elements, such as food and other essentials, to continue and
for receivables growth to benefit as a result. We also expect
impairment trends to benefit from the ongoing release of
provisions and overlays, of which c.£60m remain, and PFG’s
continued evolution towards higher quality customers and
lower risk credit, resulting in lower coverage ratios. Indeed,
PFG will target a mid-teens coverage ratio over the medium
term. The Group’s cost to income ratio is expected to reduce
marginally in FY’22 versus FY’21, including the remaining
transformation investment in the Group’s businesses, and
we expect it to reduce to c.40% from the end of 2024 onwards
as the Group benefits from operational efficiencies as a result
of its transformation programme. Assuming the Group’s large
limit waiver application to the Prudential Risk Authority (PRA)
is successful, we expect to benefit from reducing funding
costs, notwithstanding the rising interest rate environment.
Malcolm Le May
Chief Executive Officer
6 April 2022
As we positioned PFG for the attractive market opportunity,
we have made changes in the Group including restructuring
the Board of Vanquis Bank and investing in a number of areas
including a new IT platform to initially support the mid-cost
personal loans business, the Group’s Treasury capability
and other growth initiatives including a new cards mobile
app and the launch of the Open Market loans pilots.
The Group’s capital and liquidity positions have remained
robust throughout the period. At the end of December, the
Group held total regulatory capital of £707m, equating to a
Total Capital Ratio of 40.6% and a surplus above the minimum
regulatory requirement of £344m. During the year, we issued
a Tier 2 subordinated bond with gross proceeds of £200m,
launched a successful partial tender for our 2023 Senior
bonds, refinanced and extended Moneybarn’s securitisation
funding and Vanquis Bank accessed the Bank of England
Term Funding Scheme for SMEs (TFSME) for the first time.
Certain alternative performance measures (APMs) have
been used in this report. See pages 271 to 274 for an
explanation of relevance as well as their definition.
Closure of CCD
During 2021, the Board took the regrettable and difficult
decision to close the Consumer Credit Division (CCD) in
response to changing industry dynamics. It was closed on
schedule by the end of the year and was delivered within
the closure cost guidance of up to £100m. The closure of
CCD involved launching a Scheme of Arrangement in order
to provide £50m of compensation for its customers. The
Board and I felt that this was necessary in order to provide
customers with the best possible outcome. The result of the
closure is that PFG has reduced its operational risk profile and
no longer operates in any ‘high-cost’ credit market segment.
The Board and I would like to extend our sincere thanks to
all colleagues from CCD for their excellent work during very
difficult circumstances.
Governance changes
Shortly after the period end, PFG announced the next
phase of its strategy to reinforce its position as a leading
specialist bank with a focus on underserved markets. PFG has
restructured the Board of Vanquis Bank to substantially align
its membership with the Board of PFG. This is an important
step in the execution of the Group’s specialist bank strategy,
which includes the wider use of retail deposit funding across
the Group from H2’22, subject to PRA approval. PFG believes
that streamlining the Boards of the two legal entities in this
way will create a simpler, more efficient Group governance
structure, whilst streamlining and enhancing both PFG and
Vanquis Bank’s handling of corporate governance.
PFG recently announced the hiring of Fiona Anderson for the
newly created role of Managing Director of Cards. Fiona has
a wealth of significant experience across credit cards and
personal banking.
Environmental, Social and Governance (ESG)
As the Group works towards its vision of becoming a leading
specialist bank focused on underserved markets, its Purpose
of helping to put people on a path to a better everyday life
continues to underpin our commitment to integrating and
reporting on issues of Environmental, Social and Governance
(ESG). For further details of our approach to ESG topics, please
see our 2021 Corporate Responsibility Report.
Throughout 2021, PFG continued to implement measures aimed
at reducing the impact that the Group’s operations have on
the environment, particularly in relation to climate change.
Provident Financial plc Annual Report and Financial Statements 2021
6
We help customers through our
market-leading businesses
PFG meets the needs of its customers through three distinct products: credit cards, vehicle finance and unsecured personal
loans. The credit card business offers credit cards, over a wide range of price points, and retail deposits. The vehicle finance
business offers secured finance on a range of vehicle types, including cars, motorbikes and light commercial vehicles.
The personal loans business offers unsecured loans of between £1k and £5k over one to four years.
Credit cards
Vehicle finance
Personal loans
1.5m
£150-
£4,000
93,900
19,900
£4,000-
£25,000
£1,000-
£5,000
3-5
years
1-4
years
Our awards
Credit cards Vehicle finance
Specialist Lender of the Year and
Vehicle Finance Provider of the Year
at the National Credit Awards 2021.
Best Brand at the Lending
Awards 2020.
A Lotus Award for Culture
for the third year running in 2020.
Sub-Prime Lender of the Year
at the Motor Finance Awards 2021.
Non-prime Lender of the Year at the
Motor Finance Europe Awards 2020.
Customers* Credit card limits
Customers*
Customers
*
Loan range
Loan range
Loan terms
Loan terms
Nominated for the Best Fintech Partnership with the
LOQBOX partnership at the Banking Tech Awards 2021.
Submitted for Best Marketing Campaign
and Changing Lives in the Community at The Card
and Payments Awards 2022.
Shortlisted for the Credit Builder Card Provider of the
Year award at the Moneyfacts Consumer Awards 2021.
Shortlisted in the Social, Sustainable and Responsible
Banking category at The Banker: Innovation in Digital
Banking Awards for the LOQBOX partnership.
Success in Customer Service at The Card and
Payments Awards 2021 for our persistent debt
personalised video.
Moneyfacts Consumer Awards 2020 – Credit Builder
Card Provider of the Year – highly commended.
Named one of the UK’s Best
Workplaces™ in 2020 by Great
Place to Work (in the Large
Organisations category).
* Customer numbers as at 2021 year end.
Group overview
Read our investment case on pages 22 and 23
Read more on pages 40 to 42
Read more on pages 43 to 45
Read more on pages 46 and 47
Provident Financial plc Annual Report and Financial Statements 2021
7
Strategic report
Credit cards Personal loansVehicle finance
We understand
our customers
The Group is a leading specialist bank focused on underserved markets in the UK. Consumers may not be well served
by mainstream lenders for a multitude of reasons:
Managing on below-average incomes
with limited savings, meaning unforeseen
expenses can be challenging
Have variable incomes (e.g. self-employed,
on a zero-hours contract, have multiple
part-time jobs)
Experienced a significant life event
(e.g. job loss, ill health, divorce)
New to credit or new to the UK and
therefore have little or no credit history
Looking to build or
rebuild their credit rating
Value a more tailored
product and service
Our customers’ typical characteristics
Full-time salaried (77%)
or self-employed (15%)
Full or part-time salaried (66%)
or self-employed (16%)
Full or part-time salaried (77%)
or self-employed (6%)
Earning around the national average (£30k) with core spread between £20k and £50k
10% hold a mortgage
1
20% hold a mortgage
1
16% hold a mortgage
1
Limited savings
Circa half have material savings
(enough to cover emergencies or anything unexpected)
Income
source
Income
level
Housing
Savings
Typical
age
Credit
score
Read our market overview on pages 34 to 39
36–55 years old 46–65 years old 26–45 years old
Mid-cost/near prime Mid-cost/near prime Mid-cost/near prime
Typical customer credit scores sit between 500 and 600
2
Source: BoxClever survey of 3,510 non-prime consumers and 2,929 PFG customers, December 2019.
1 The mortgage holders’ data was sourced from internal customer data.
2 Customer credit scores based on TransUnion Gauge 2 score.
A wider range of suitable and sustainable credit products is required than is typically provided by mainstream lenders.
In addition, our customers sit across a broad range of risk profiles. It is therefore important that a range of price points can
be offered, increasing financial inclusion. Finally, our customers’ needs and circumstances are often more fluid than those
of consumers served by mainstream providers, requiring us to provide a more flexible approach.
Provident Financial plc Annual Report and Financial Statements 2021
8
Environmental, Social and Governance overview
Delivering on ESG matters
to support our Purpose
At PFG, our Purpose of
helping to put people on a
path to a better everyday life
fundamentally informs the
decisions and choices that
we make as a business.
This is not just about the decisions and choices we
make in the day-to-day running of our business,
but also about the ones that are longer term and
ensure that PFG is a force for good and plays its part
in addressing globally important issues such as
climate change. Our Purpose is therefore just as much
about continuing to provide our customers with the
responsible credit products and services that meet
their particular needs, as it is about ensuring that
we address the social, environmental and ethical
challenges facing our business and society at large.
Ensuring that we take positive action on ESG-related
matters is therefore an important way that we can
demonstrate that our Purpose is aligned with our
strategy of lending responsibly to our customers, and
ensuring that we act in a responsible and sustainable
manner in all our other stakeholder relationships.
This enables us to create a fair, inclusive and diverse
workplace, support our local communities, take
positive action on climate change, treat suppliers
fairly, and engage with our investors on the wider
ESG agenda.
One
S
o
c
i
a
l
E
n
v
i
r
o
n
m
e
n
t
a
l
G
o
v
e
r
n
a
n
c
e
ESG
At PFG, our commitment to managing and reporting
ESG-related matters is most clearly expressed
through our Purpose of helping to put people on a
path to a better everyday life. So, as interest in the
ESG agenda has gained momentum amongst all
our stakeholders, not just campaigners and certain
parts of the City, it is reassuring that it is part and
parcel of who PFG is. By continuing to commit to
the ESG agenda, I know we can continue to deliver
outstanding products and services to customers
who are underserved by mainstream banks, as well
as do our bit to build a better world. This will not only
enable us to ensure that PFG’s growth is sustainable,
but also that our competitiveness, profitability and
share price improve.
Malcolm Le May
Chief Executive Officer
Provident Financial plc Annual Report and Financial Statements 2021
9
Strategic report
Customers
Continuing to support
our customers as the
economy returns to
pre-pandemic levels
and by establishing
PFG as the specialist
diversified bank
and focusing on the
mid-cost segment
of our market.
Colleagues
Building and
sustaining an inclusive
culture and diverse
workforce which
ensure the wellbeing
of all our colleagues,
and enable us to
respond to the
needs of our diverse
customer base,
while at the same
time enabling them
to realise their own
career aspirations.
Communities
Providing ongoing
support to our
communities,
particularly to children
and young people, so
that they can achieve
their full potential
and participate
in, and contribute
to, a brighter and
more sustainable
future for all.
The environment
Taking positive action
to reduce our impact
on the environment,
particularly in
relation to climate
change, and to
help build a more
sustainable financial
services industry.
ESG governance and key performance indicators
Over the past year, our approach to managing our ESG performance has sought to
prioritise the following four areas, because the effects of Covid-19 continued to be felt
by some of our key stakeholders during 2021, and also because the need to take positive
action on climate change is an important issue for PFG:
Our stakeholders
Our customers
The environmentOur colleagues Our communities
The Board and its committees
Customer,
Culture and Ethics
Committee
Remuneration
Committee
Nomination
Committee
Risk
Committee
Audit
Committee
Group Executive Committee
Climate Risk Committee Inclusion Steering Group
The Provident Financial plc Board takes overall accountability for the delivery of PFG’s strategy and reviews the Group’s ESG
performance. The Board’s Customer, Culture and Ethics Committee supports the Board in providing oversight of the Group’s
approach to managing and reporting ESG-related matters. The Group Executive Committee, with support from the Climate Risk
Committee and Inclusion Steering Group, provides management oversight of the progress being made by PFG in managing its
strategic ESG objectives.
Provident Financial plc Annual Report and Financial Statements 2021
10
Environmental, Social and Governance overview continued
To enable us to assess our performance against our ongoing ESG commitments, we have
developed a range of non-financial measures.
These measures are included in a ‘Blueprint’ Dashboard, which is shared with the Board’s Customer, Culture and Ethics
Committee and the PFG Executive Committee so that Board members and directors can monitor and challenge the embedding
of the Group’s culture and the management of a range of ESG-related matters, and ensure that the Group’s businesses are
delivering positive outcomes to our customers.
For further details on ESG initiatives and activities and progress against 2022 targets, see pages 48 to 74
Objective Measure Performance in 2021
Customers
Customer outcomes are
positive and consistent with
PFG’s Purpose and culture.
Levels of customer
satisfaction.
Credit card: 4.7/5 (2020: 4.6/5.5).
Vehicle finance: 4.4/5
(2020: 4.5/5).
Number/percentage of
customer complaints.
Total: 66,516 (2020: 90,264).
Number of complaints referred
to the FOS: 13,313 (2020: 13,736).
Colleagues
PFG’s Blueprint is embedded
and colleagues are engaged
with and supportive of the
Group’s Purpose and culture.
Colleague engagement
score as measured
by annual colleague
engagement survey.
Overall colleague engagement
score 68% (2020: 72%).
Better Everyday Index
score which relates to PFG’s
culture and the way we treat
customers and colleagues.
Better Everyday Index score 63%
(2020: 60%).
Communities
Positively impact the lives of
the people in the communities
we serve, particularly children
and young people, by providing
them with access to education,
social and financial inclusion,
money advice and economic
development opportunities.
The amount invested per
year to support community
programmes, money
advice programmes and
social research, including
the number of grants
distributed to grass roots
community organisations.
£1.4m invested to support
community programmes, money
advice programmes and social
research (2020: £1.2m).
425 hours volunteered by
colleagues during work hours
(2020: 509).
The environment
Continue action to reduce our
impacts on the environment,
particularly in relation to
climate change.
Absolute scope 1 and 2
greenhouse gas emissions.
Scope 1 and 2 emissions: 1,239
tonnes of CO
2
e (2020: 1,521 tonnes
of CO
2
e), a reduction of 19%.
Total scope 1 and 2 (and associated
scope 3) emissions: 1,648 tonnes
of CO
2
e (2020: 1,848 tonnes of
CO
2
e), a reduction of 11%.
The progress of our
work in meeting the
recommendations of TCFD.
Refer to pages 68 to 72.
Assessing performance
against our ongoing
ESG commitments
Provident Financial plc Annual Report and Financial Statements 2021
11
Strategic report
2021: Continuing to
support our stakeholders
during Covid-19
While the impacts of Covid-19 were less severe in 2021 than in 2020, the effects of the virus have
nevertheless continued to be felt throughout the year by many of our stakeholders. We have
responded effectively to the challenges of Covid-19 by ensuring the safety and wellbeing of
our customers and colleagues, and contributing support to the communities we serve.
Customers
During 2021, we continued
to support our customers
throughout a difficult period
whilst delivering on several
important strategic initiatives.
For example, the closure of the
Consumer Credit Division at
the end of December and the
launch of a new personal
loans offering, Sunflower
Loans, supported by
a newly
developed IT platform
, which
has the ability to share
customers across our product
groups. Due to the changeable
macroeconomic conditions
that were experienced during
the year, we took the prudent
decision to maintain the
underwriting standards that
were tightened at the start
of the Covid-19 pandemic
in 2020. Our colleagues,
however, despite themselves
experiencing significant
disruption which saw many
of them continue to work
remotely, have been able
to maintain high levels of
customer service. Throughout
this period, we continued to
support customers in financial
difficulty by ensuring that
we adopt a sympathetic
approach to understand
their circumstances
and offer forbearance
where appropriate.
Colleagues
Ensuring the health, safety
and wellbeing of all our
colleagues throughout 2021
remained one of our highest
priorities. During this time we
have continued to run our
offices in accordance with
government guidance and
have made sure that where
colleagues cannot work
remotely they can do so in a
way that is socially distanced,
and safe and secure. We have
also dedicated a lot of effort
to support the positive mental
wellbeing of our colleagues.
This has involved hosting
regular online check-ins
and, as social distancing
restrictions have started to
be lifted, running sessions for
colleagues on returning to
work and mental health (read
more on page 59). We are also
using our positive experiences
of remote working over the
past two years to develop
plans to shift our workplaces
to flexible arrangements
which will, where appropriate
for the business and our
colleagues, see remote
working and virtual meetings
continue, albeit less intensely
than at the pandemic’s peak.
Communities
We know, through the
work we deliver in the many
communities we serve, that
Covid-19 has continued to
provide many challenges to
organisations in the charity
and voluntary sectors,
precisely at the time when
the services they deliver have
been in high demand. This
is why we have continued
to honour the funding
commitments we made
to our existing community
partners and work with them
flexibly to respond to the
‘lockdown’ situation. This
has enabled our partners,
many of which are directly
providing frontline community
support or disbursing grants
to organisations involved
in the response to Covid-19,
to continue to support the
communities we serve,
some of which will be
facing a tougher recovery
from the challenges.
Provident Financial plc Annual Report and Financial Statements 2021
12
Environmental, Social and Governance overview continued
2021: Contributing to the
Sustainable Development
Goals (SDGs)
Lending responsibly
Our customers
– Provide our customers with the credit products that
meet their particular needs and deliver fair customer
outcomes throughout their journey with us
Acting sustainably
Our investors
– Engage with the investment community
on sustainability matters
Our regulators and government
– Remain a responsible taxpayer
Our colleagues
– Create an inclusive and engaging workplace
Our suppliers
– Ensure that we treat our suppliers fairly
Our communities
– Support our Purpose through
our Social Impact Programme
Our environment
– Taking action on climate change
PFG’s commitment to growing our business in a truly responsible way is longstanding. This is
not only about continuing to provide our customers with the responsible credit products and
services that meet their particular needs, it is also about ensuring that we address the social,
environmental and ethical challenges facing our business and society at large.
In working towards achieving this, we recognise the importance of ensuring that our sustainability strategy, and the ESG activities
we deliver to support it, align with existing, globally accepted frameworks. To this end, we have ensured that the work we do
is aligned to the United Nations Sustainable Development Goals (SDGs), supports the Paris Agreement and the UK’s transition
to a net-zero economy and takes urgent action to tackle climate change and its impacts.
Our Purpose
Helping to put people on a path to a better everyday life
Our sustainability strategy
Read more on page 54
Read more on page 55
Read more on pages 56 to 59
Read more on pages 60 and 61
Read more on pages 62 to 67
Read more on pages 68 to 73
Read more on pages 52 and 53
Provident Financial plc Annual Report and Financial Statements 2021
13
Strategic report
No
poverty
Quality
education
Gender
equality
Aim
To end poverty in all its forms everywhere.
Aim
To ensure inclusive and equitable quality
education and promote lifelong learning
opportunities for
all.
Aim
To achieve gender equality and empower
all women and girls.
PFG objective
By 2030, we will contribute to ending poverty
in all its forms everywhere, by ensuring our
customers have access to cost-effective and
appropriate products for their needs and
supporting them through financial difficulty.
PFG objective
By 2030, we will contribute to ensuring inclusive
and equitable quality education and promote
lifelong learning opportunities for all by
partnering with organisations that will help to
equip children and adults with essential skills
and knowledge that will allow them to excel in
many different directions.
PFG objective
By 2024, we will have 40% female representation
in the Group’s senior management population.
FY 2021 highlights and achievements
Our Purpose to help put people on a path to a
better everyday life is about lending responsibly
and aiding financial inclusion by supporting
the one in five people in the UK who cannot get
access to credit products through mainstream
banks and building societies. We currently do
this by providing our 1.6 million customers in
the UK with credit cards and loans through
our Vanquis business and vehicle finance
through Moneybarn. Through our Social Impact
Programme, we also provide grants to charities
and specialist partners to address issues such
as customer vulnerability, product accessibility
and financial difficulties. To contribute to
this Goal in 2021, the funding we provided
to The Money Charity enabled it to provide
information, advice and guidance to people of
all ages, so that they can manage their money
well and increase their financial wellbeing
by delivering: 332 hours’ worth of financial
education workshops to 7,640 young people;
79 hours’ worth of financial wellbeing, Covid-19
response and bespoke workshops to 675 adults;
and 10 hours’ worth of workshops to 67 young
people impacted by the criminal justice system.
FY 2021 highlights and achievements
We contribute to this SDG through the
education workstream of our PFG Social Impact
Programme which supports children, young
people and adults to boost their education,
skills and aspirations, in order to participate in
society and secure a brighter financial future.
Through our longstanding partnerships with
National Numeracy, the National Literacy Trust
and Leading Children we have supported a
number of programmes which aim to boost
the literacy and numeracy skills of children,
young people and adults. For example, our
funding in 2021 enabled National Numeracy to
deliver its ‘Becoming a Numeracy Champion’
programme which supported approximately
11,000 children, parents and teachers from 19
schools in areas of need across England to
develop the numeracy skills they will need, both
at school and throughout their lives. We have
also continued to provide funding for School-
Home Support practitioners in four schools
across Bradford and Medway who work with
families. During the year, these practitioners
supported 284 individuals which contributed
to achieving an average school attendance
increase of 10.9%.
FY 2021 highlights and achievements
PFG’s senior management population currently
has 27% female representation. The key actions
we undertook throughout 2020 to support
this SDG included: ensuring that there is a
50/50 gender balanced short-list when we
recruit for senior leadership roles across PFG;
continuing to deliver leadership development
programmes to high potential women from
across PFG to help strengthen the female talent
pipeline at the senior/middle management
level; and running colleague-led Peer Circles
to encourage peer support for women in
relation to a range of issues, including on
interview techniques, performance reviews
and menopause support. Through our Social
Impact Programme, we also support projects
which aim to empower women and girls. For
example, this has included in 2021 providing
a grant to the Kurdish and Middle Eastern
Women’s Organisation in North London to
deliver its ‘Breaking Digital and Personal Barriers
to Employment’ project, which works with
women to break down the barriers they face
in achieving their personal goals including low
digital skills, childcare, caring responsibilities,
language, self-esteem, self-worth, low
confidence, and lack of support.
Decent work and
economic growth
Reduced
inequalities
Aim
To promote sustained, inclusive and sustainable
economic growth, full and productive
employment and decent work for all.
Aim
To reduce inequality within
and among countries.
Aim of the TCFD recommendations
To support the UK’s transition to a net-zero
economy and take urgent action to tackle
climate change and its impacts.
PFG objective
By 2030, we will contribute to promoting
sustained, inclusive and sustainable economic
growth, full and productive employment and
decent work for all by creating opportunities for
all generations and protecting and promoting
labour rights in both our business and
supply chains.
PFG objective
By 2030, we will contribute to reducing
inequality by building our capabilities to better
identify, support and empower our stakeholders
who may face inequality and exclusion whether
it is because of their age/sex/gender identity/
race/ethnicity/origin/disability/ability/where
they live/what their economic status is.
PFG target
To achieve net-zero carbon dioxide emissions
by 2040 (which relates to the scope 1, 2 and 3
emissions that arise from PFG’s operations).
FY 2021 highlights and achievements
Many of the activities and initiatives we support
through the PFG Social Impact Programme
continue to contribute to supporting this
SDG and creating opportunities for inclusive
and sustainable economic growth, full and
productive employment and decent work for
the communities we serve. In 2021, this has
involved providing grants to Ripe Enterprises
to deliver weekly one-to-one and group digital
skills training with employability support
to people experiencing disadvantage in
Southwark and Lambeth, and Autus to deliver
twice weekly online workshops delivering
digital skills training and employability support
to young autistic people. We also continue to
support and participate in the Social Mobility
Business Partnership, which brings together
large corporate organisations and professional
sports clubs to remove barriers, develop
skills and provide experiences to sixth form
and college students from disadvantaged
backgrounds. The programme helps build
aspirations and inspire the students to pursue
a career in a profession that they may not
have previously considered. During 2021,
PFG colleagues played virtual hosts to 33
Year 11 students and delivered presentations
and workshops on a range of legal and
professional topics to inspire the young people
who attended.
FY 2021 highlights and achievements
To support this SDG, and contribute to reducing
inequality, we have provided funding to a
range of projects through our PFG Social
Impact Programme in 2021. For example, we
provided core costs to Leeds GATE – a Gypsy
and Traveller-led youth project – that aims
to build the skills and confidence of this
extremely marginalised community of young
people through a programme of activities
and one-to-one work and by connecting
them to opportunities. We also supported the
Dadihiye Somali Development Organisation
to deliver one day per week of linguistic and
culturally appropriate debt advice supporting
ethnic minority people (predominantly Somali
women) over a year in Kensington and Chelsea.
In terms of providing an inclusive and secure
workplace at PFG, we have our well-established,
Group-wide Inclusion Community, which
comprises five aligned Affinity Groups focused
on Disability, LGBTQ+, Gender Balance, Ethnicity
and Social Mobility. These groups currently have
125 active and representative members, as well
as an extensive network of Affinity Group allies,
and help to coordinate work across the Group
to celebrate, learn and increase awareness
around an extensive range of inclusion and
diversity-related events, including Pride,
Inclusion Week, Living with Autism and Black
History Month.
FY 2021 highlights and achievements
TCFD is built around four overarching pillars:
governance, risk management, strategy,
and metrics and targets, which in turn
include 11 recommendations to support the
development of meaningful climate-related
financial disclosures. Taken together, these
provide a consistent framework for companies
to report on their exposure to material
climate
-r
elated risks and opportunities, and
a means to communicate decision-useful
information to investors, regulators and other
stakeholders. Set out on pages 68 to 72 is
an update on the progress made by PFG
during 2021 in meeting the recommendations
of the TCFD.
Provident Financial plc Annual Report and Financial Statements 2021
14
Our Purpose is to help put
people on a path to a better
everyday life.
We do this by providing customers with
opportunities to borrow in a transparent, responsible
and sustainable way, so they can live their lives with
access to finance.
The Group has been providing financial inclusion
for consumers whose needs are not well met by
mainstream lenders for nearly 140 years. We are
a responsible lender providing tailored products
and service propositions to 1.6 million customers
throughout the UK.
Serving our customers in a responsible manner
As a specialist bank, helping customers in underserved
markets, we provide customers with credit cards, vehicle
finance and personal loans. We help our customers by
offering appropriate and affordable amounts of credit,
maintaining close contact with them throughout the term of
their borrowing, and working with them sympathetically if they
experience difficulties.
Improving customer satisfaction
Customer satisfaction is a key metric for PFG. It helps us
determine whether our products and services are working
for our customers, and also how we can improve them. In
2021 for our credit card product, which has almost 1.5 million
customers, our customer satisfaction rating was 4.7/5,
up on 2020.
Further details on our customers can be found
on pages 52 and 53
Customers (m)
20 21
1.6m
customers
1.8
1.6
Vanquis Bank
Moneybarn
Our Purpose
Helping
our customers
Handling customer complaints responsibly
Keeping customer complaints to an absolute minimum is a
good indicator that we’re treating customers fairly. In 2021
our total number of complaints referred to the Financial
Ombudsman Service was down on 2020. When we do get a
complaint, we aim to ensure our Customer Complaints teams
are the best they can be, and in 2021 we had over 39,000 hours
of customer-focused training for our colleagues.
Supporting customers in vulnerable situations
We know that customers can find themselves in challenging
financial situations, driven often by unforeseen circumstances
such as ill health, loss of income or family bereavement.
We therefore ensure our customer-facing colleagues are
trained to recognise vulnerability, provide forbearance for
our customers who require it, and work with money advice
organisations like the Money Advice Trust and IncomeMax
which can provide tailored support to our customers.
Customer case study - Eric’s story
My name is Eric, I live in South London with my family and I’m
a Resettlement Case Worker and Musician. Music has always
been in my life. It’s been my career for the most part, working
with bands such as The Orb, but more recently I’ve spent more
time doing charity work.
As a Resettlement Case Worker, I work with people who are
homeless, people in recovery and ex-offenders. When people
are recovering from addiction or if they’re an ex-offender, they
need a base. They need a home, so we help in whichever way
we can. I work with clients to help them find somewhere to live,
and then I continue to work with them for a further 12 months.
In that time, I’m working to empower them so they can be
independent and start their life, anew.
I first got a Vanquis card around four years ago because
I needed a credit history. I saw it as Vanquis taking a chance
on me, because I haven’t got much experience using credit.
I was really careful, particularly in the beginning. And, basically,
having the card has got me in the habit of making a small
purchase and paying back on a set date. I try to pay off the
whole balance, but if I don’t, I make a note so that everything
is paid off in due time.
I mainly spend on my card because it is just so convenient. I’ve
got peace of mind and security on my purchases and it’s so
easy to use. I can use it contactless, and manage my account
from my phone or online – it’s wonderful. This week I bought a
laptop with my Vanquis card so that I can do some work, do
some music production and get online on the go. I’m currently
doing some vocals and music production on a dance project,
so hopefully you’ll hear that in the near future!
I mainly spend on my card
because it is just so convenient.
I’ve got peace of mind and
security on my purchases
and it’s so easy to use.
Eric
Resettlement Case Worker
Watch Eric’s full interview at
www.providentfinancial.com/who-we-are/
our-customers/meet-eric
Strategic report
Provident Financial plc Annual Report and Financial Statements 2021
15
Provident Financial plc Annual Report and Financial Statements 2021
16
Our Purpose continued
Supporting
our colleagues
We provide an encouraging, supportive and inclusive workplace
culture. Our colleagues are key to our long-term success, and their
dedication and hard work are what give PFG its unique character and
culture, which enable us to deliver the best service to our customers.
We have around 2,500 colleagues* based in
Bradford, Chatham, London and Petersfield. During
the pandemic they mainly worked from home, with
some colleagues in the office. As we return to the
office, PFG will be implementing a hybrid model,
which will deliver positive outcomes for customers
and colleagues.
Listening to our colleagues’ thoughts and opinions
With lockdown in place for the start of the year, it was important
PFG engaged and supported colleagues through potentially
challenging times. Engagement, though, is a two-way street,
and PFG carried out its colleague engagement survey to find
out what colleagues thought and felt about working here.
Scores for engagement were strong, though slightly down on
2020, which could be due to pandemic tiredness and a desire
to return to normal life. Key colleague engagement scores
for 2021 are:
83%
of colleagues understand
PFG’s Purpose and what we
are trying to achieve
89%
of colleagues feel their
manager treats them fairly
and with respect
84%
of colleagues feel people
help and support each
other at PFG
85%
of colleagues care about
the future of PFG
88%
of colleagues feel well
equipped to work
regardless of whether at
home or in the office
Further details on our colleagues can be found
on pages 56 to 59
* We consider ‘colleagues’ to be full and
part-time colleagues excluding contractors.
Provident Financial plc Annual Report and Financial Statements 2021
17
Strategic report
Spotlight on inclusion and diversity
PFG’s ambition is to create a truly inclusive workplace. To
achieve this, we need to build a diverse workforce that reflects
the customers we serve, and the communities we work in.
In the future we will be setting diversity goals, but that has
not stopped us making progress now. We have successfully
launched our Group-wide Inclusion Community, delivered
targeted training on inclusion, and set-up Peer circles across
the Group through our inclusion Affinity Groups. PFG also
joined the Government’s Social Mobility Taskforce in 2021,
which aims to improve the socio-economic diversity of senior
leaders in financial services.
19.6%
of colleagues informed us they had a disability
or long-term health condition.
19.2%
of colleagues informed us they came from a Black,
Asian or Minority Ethnic background.
6.5%
of colleagues informed us they were part
of the LGBTQ+ community.
17.2%
of colleagues informed us they had free school meals and
33.7% of colleagues came from a working class background.
Read more about how we support our colleagues at
www.providentfinancial.com/sustainability/
supporting-our-colleagues
I chose to lead the Ethnicity Affinity
Group because I wanted to make
a difference for our colleagues as
well as customers. I have the ability
to shape PFG’s culture, ensuring our
diverse workforce feels included in
every way, and to help create an
environment that colleagues and
customers can be proud of.
Rita Patel
Solutions Architect
Focus on gender diversity
A key area of activity for PFG has been gender diversity. The
Group is striving to achieve a better balance going forward in
gender for our senior leadership population. In 2019 the Group
signed the HM Treasury Women in Finance Charter, with a
target of achieving 40% female representation in the Group’s
senior management population by 2024. We are on track to
achieve this aim and have completed various initiatives in
2021 to help us achieve it. For example, we delivered the Next
Generation Women’s Leadership Programme, and gender
balanced short-lists for all senior leadership vacancies.
27%
of senior management representation is female.
37%
of employees who received a promotion identified as female.
Our commitment to colleague health, safety
and wellbeing
At PFG we recognise the importance of supporting colleague
mental health and wellbeing, both in terms of our individual
colleague’s welfare and the impact it can have on our
customers. We have promoted and arranged targeted
activities on mental health and wellbeing, whilst fostering
an internal culture of resilience and openness. We provide
a dedicated Employee Assistance Programme, work with
the Bank Workers Charity on wellbeing, and have delivered
live colleague sessions with it on ‘Positive mental health in
the workplace’ and reduce/raise awareness of loneliness
and isolation.
Provident Financial plc Annual Report and Financial Statements 2021
18
Our Purpose continued
Investing in
our communities
We support our Purpose through
our Social Impact Programme. Its
aim is to address the key barriers
to financial and social exclusion,
and help people overcome them.
Our Corporate Responsibility Programme is based
on the core themes of ‘customers, education
and community partners’, and supports the UN
Sustainable Development Goals programme. We
invest in activities that could affect someone’s ability
to get credit. We support children, young people and
adults to boost their education and skills, so they
can participate better in society, and we support
community projects in areas where people are more
likely to face social and financial exclusion.
In 2021 we invested £1.4m in our Corporate Responsibility
Programme, of which £307,000 was invested in 51 grass
roots voluntary organisations via community foundations.
Colleagues also volunteered 425 hours for community projects.
Unlocking talent in our communities
Through our education programme we have partnered with
literacy and numeracy organisations to help young people
in disadvantaged areas. In 2021 we supported National
Numeracy’s National Numeracy Day, aimed at getting
everyone to improve their numeracy. With the National Literacy
Trust, we worked with schools in London and Birmingham, and
help to deliver its ‘Early Words Together’ programme. With
Leading Children, through a partnership with an Education
Consultant, we worked with teachers in Bradford which helped
Nursery and Reception teachers improve their teaching of
literacy. Also, with School-Home Support, we worked with
practitioners in Bradford and Medway, to help break down any
barriers that could prevent children from attending school.
Cash
2021: £1,230,677
2020: £1,035,984
Management costs
2021: £126,649
2020: £143,129
Value of employee time
2021: £12,116
2020: £11,219
2021 community
investment figures
Further details on our communities
can be found on pages 62 to 67
Cash Management
costs
Value of
employee
time
Total
£1,369,442
2020: £1,190,332
Provident Financial plc Annual Report and Financial Statements 2021
19
Strategic report
How our community foundation
partnerships work
We work community foundation partners in our key
colleague locations: Bradford, Chatham, London and
Petersfield. The funding we provide supports financial
inclusion and social mobility and involves our colleagues
in their respective locations by making grants to local
charities that support our aims. In 2021 we allocated
over £300,000 to 51 of these projects.
In London, we funded the Havelock Family Centre to deliver
money management workshops to vulnerable clients
experiencing financial difficulties.
In Bradford we funded Bradford Community Broadcasting,
which helps children and young people to increase their
oracy, digital skills, confidence and self-esteem.
In Petersfield, we funded Wet Wheels, which provides
sailing trips to people with disabilities aimed at increasing
mental health and mental wellbeing.
In Chatham, we funded Refocus, which provides
educational sessions on the dangers around gangs,
violence, drugs and grooming.
Read more about how we invest in our communities at
www.providentfinancial.com/sustainability/investing-our-communities
I just want to say a huge thank you
to PFG for the amazing contribution it
makes to School-Home Support. 2021
was a challenging year for so many
of the families we work with, but PFG’s
continued commitment has helped
us to give every child the chance to
thrive and achieve despite immense
challenges caused by the pandemic.
Jaine Stannard
School-Home Support CEO
Provident Financial plc Annual Report and Financial Statements 2021
20
A bank for the underserved
Becoming a leading
specialist bank focused
on underserved markets
We want to be the best and most trusted provider of credit
to customers not well served by mainstream finance. We will
support our customers on the path to a better everyday life
through a broad range of products and distribution channels.
The starting point on this journey is Vanquis, which, through its banking licence, will provide the anchor from which
we can explore funding opportunities and efficiencies to benefit the whole Group.
Our vision is to be a bank focused on underserved markets in the UK
+
Funded through:
– Retail deposits
(fixed term and instant access)
– Securitisation
Product offering:
– Revolving credit (Vanquis Bank)
– Secured finance (Moneybarn)
– Loans (Vanquis Bank
and Sunflower)
– Helping customers save
Well positioned in
growing addressable
markets across…
– Credit cards
– Vehicle finance
– Personal loans
…underpinned by a
customer-centric vision
and strong balance sheet
– Well capitalised for growth
– Access to retail deposit funding
– Capital management
framework
A long-term, sustainable business model targeting sustainable and attractive returns to shareholders
…targeting
sustainable returns
– Strong receivables growth
over the medium term
– Attractive returns
on a sustainable basis
– The Board anticipates moving
towards a pay-out ratio of
circa 40% from FY’22 onwards
*
,
subject to market conditions
and on a sustainable basis
1 2 3
How we will become a bank focused on underserved markets
* Dividends to be paid out of adjusted earnings, which is defined as profit after tax before amortisation of acquisition intangibles and any exceptional items
including one-off provision releases.
Provident Financial plc Annual Report and Financial Statements 2021
21
Strategic report
How we will become a bank focused on underserved markets
Our focus will be on providing customers with credit products appropriate for their circumstances, delivering good customer
outcomes and, through this, generating sustainable shareholder returns. To do this we will:
Deliver a broader product range
Establish a single view of our customer
Enhance our distribution capabilities
Grow responsibly, delivering
sustainable shareholder returns
One
Group
One
One
team
– During 2021, PFG has moved away from serving the high-cost segment of the credit market following its withdrawal from
the home credit and high-cost short-term credit markets. We see this transition as being a core part of our drive towards
making PFG a more sustainable lender, focused on providing much needed credit to our customers, whilst enabling good
customer outcomes and providing sustainable returns for our shareholders over the medium term.
– Looking forward, we’re moving towards a Group-level structure which operates the product lines and is supported by
shared central services and centres of excellence:
Credit cards Vehicle finance Personal loans
Savings
Other products
– Restructuring the Board of Vanquis Bank to substantially align its membership
with the Board of PFG (announced 13 January) was the next phase in the journey
and will drive increased efficiency and improved corporate governance
and oversight.
– Shared services and centres of excellence will facilitate sharing of best practice
across the Group.
– The streamlining of the Vanquis Bank and PFG Boards is an important part of the
Group’s plans to enable it to utilise its retail deposit funding more widely across
the Group from H2’22, reducing cost of funds and increasing funding optionality.
– PFG will remain structured around its core product lines (credit cards, vehicle
finance, personal loans and savings) whilst exploring opportunities for expansion
into adjacent markets.
PLC
Retail deposit funding
Shared central services and centres of excellence and single customer view
Product lines
Provident Financial plc Annual Report and Financial Statements 2021
22
PFG is a leading specialist bank and a constituent of the FTSE 250 Index. We aim to deliver attractive
and sustainable returns for our shareholders through our strong market positions, robust balance
sheet and competitive advantages. Our investment case is based on five key areas:
Investment case
We operate in growing
addressable markets
We are well positioned in the large and growing
market segments across credit cards, vehicle
finance and unsecured personal loans
In the UK, there are between 10 and 14 million working adults who are
underserved by mainstream lenders. With our broad range of products
and services, we are well positioned to be the credit provider of choice
for these customers. In aggregate our addressable market is >£17bn.
We have a Purpose-driven strategic Blueprint,
which sets us up for sustainable growth
Our Blueprint brings together why PFG exists as an organisation, framed in
the context of the role our business plays in the lives of our customers. It also
sets out the strategic focus and key priorities that will drive both competitive
advantage and commercial success for the whole Group. From our recent
colleague survey 85% of colleagues care about the future of PFG.
We have a customer-centric, responsible culture
While our customers share many similarities with mainstream credit
customers, there are important differences arising from their individual
circumstances. Our customers need a tailored approach and a wider range
of suitable and sustainable credit solutions to best serve their needs. We
aim to put the customer on the team. We have invested in a brand new
IT platform that in the future will support all of our products.
Financial resilience and strong capital position
Over the medium term, our plan is to become a broader banking group
operating in underserved markets. To achieve this, we are working
collaboratively across the Group and focusing on our customers. We have
significant opportunities to take our Group forward as we look towards new
markets, new products and new digital advancements and we have the
financial strength to achieve this. Our Total Capital Ratio is >40%.
Sustainable growth over the medium term
To support the delivery of our Purpose, we have a financial model founded
on investing in customer-centric businesses with attractive returns, which
aligns an appropriate capital structure with the Group’s dividend policy
and future growth plans. We will operate with a progressive dividend policy
and we anticipate moving towards a payout ratio of approximately 40%
of adjusted earnings from 2022.
>£17bn
Read more on
pages 34 to 39
85%
Read more on
pages 26 to 30
New IT
platform
Read more on
pages 14 and 15
>40%
Read more on
pages 102 to 107
>30%
Read more on
pages 48 to 74
Strategic report
Provident Financial plc Annual Report and Financial Statements 2021
23
Customer case study - Graeme’s story
My name’s Graeme and I live in London with my partner in a Mews
just off the back of Regent’s park. We live in a three-storey town
house and, given where it is, it’s quite small, but it’s very quiet round
here and we like it. I run my own companies in the insurance industry
and I’ve done that most of my adult life, since I left the army.
I had a financial catastrophe about five years ago when my
businesses all went into liquidation and as a result I was made
bankrupt because of personal guarantees I’d given to banks.
I came out of bankruptcy three years ago, and when I did, my
credit rating was about as poor as it was going to get, so I had
to restructure my life.
I was able to start my own businesses again, which I did, but with
the credit rating I had, getting any sort of credit card just felt
impossible. A few months later, I was checking my credit score
regularly, and Vanquis came up as an option that might offer
me a credit card. I applied to them and to my surprise, I was
granted one. And I’ve used it ever since. The card is contactless
as well which is helpful and I got it at a time when no one else
would help me.
In the three years I’ve had the card, my rating has improved
massively; they’ve increased my credit limit as I’ve used it too.
I like the Vanquis app because it’s simple; it’s dead easy to use
and I’m not a massive technological wizard. It’s always got your
balance right in front of you, what your next bill is and what you’ve
spent, so I’m ever so happy with it. For me, it’s just so easy.
I would absolutely recommend Vanquis to anyone. They helped
me out when no one else would, and I’m more confident
financially because of this.
In the three years I’ve had the
card, my rating has improved
massively; they’ve increased my
credit limit as I’ve used it too.
Graeme
Business Consultant
Watch Graeme’s full interview at
www.providentfinancial.com/who-we-are/
our-customers/meet-graeme
Provident Financial plc Annual Report and Financial Statements 2021
24
Business model
We are driven by our
Purpose to create value
for our stakeholders
Customers
Our 1.6 million customers are at the heart of what we do; they
are the 20% of UK adults who at any one time are looking for
something that mainstream lenders do not offer.
– We have developed tailored products to meet their
needs through a detailed understanding of their needs
and challenges.
– We carefully assess affordability and creditworthiness
and are specialists in managing arrears and supporting
customers in financial difficulty.
– Our Customer, Culture and Ethics Committee is focused
on ensuring the best outcomes for customers across all
our customer interactions.
Colleagues
Our 3,000 colleagues are critical to delivering our business
model. The success of the Group is dependent upon
having motivated colleagues with the right expertise
and skills to help deliver our strategy.
– We conduct an annual colleague survey to register
sentiment and continually focus on making
improvements for the betterment of our colleagues.
– We have diversity and inclusion working groups
(focusing on gender, race, disability and LGBTQ+)
that meet regularly and focus on ensuring the work
environment is inclusive.
– We offer support to colleagues through our Employee
Assistance Programme (EAP) and through the provision
of the Thrive app to all colleagues.
Equity and debt investors
We secure long-term, lower-rate funding through strong
relationships with our lending banks, depositors and
investors. We engage in discussions with our equity and
debt investors to understand their needs and expectations
leading to better outcomes over the long term and
improving our sustainability.
– We interact with debt investors and shareholders
through half-yearly results presentations, regular
trading updates and management meetings.
– Our Board and ExCo receive periodic updates from
Investor Relations on market activity and investor sentiment.
– Our Tier 2 debt issuance in October 2021 was oversubscribed.
Suppliers
Our suppliers are essential to provide our divisions with
the goods and services required to enable us to continue
to meet our customers’ needs. They play a vital role in
our operations so it is important that we develop strong
relationships with them.
– We have launched a new Supplier Management
Framework to engage with suppliers effectively including
having executive sponsorship for our key relationships.
– We have signed up to the Prompt Payment Code and
are committed to paying the majority of our suppliers
within 30 days.
Communities
Our community investment strategy is aligned to our social
purpose and seeks to invest in activities and initiatives which
address the key factors that tend to reduce access to credit.
– In 2021, we invested £1.4m in the PFG Social Impact
Programme, which supports our partners in addressing
issues such as customer vulnerability and financial
difficulties, helping children, young people and adults
to boost their education and enabling community
foundations and other partners to address a wide range
of social inclusion and social mobility issues.
– Our CEO became a member of the National Numeracy
Leadership Council in September 2021, which aims
to grow the network of organisations and individuals
actively addressing the issue of poor numeracy and
elevate the understanding and importance of the issue
at a national level.
Regulators and government
We believe maintaining an open, constructive and trusting
dialogue with policymakers and regulators (the Prudential
Regulation Authority (PRA) and Financial Conduct Authority
(FCA)) is critical. We work closely with our regulators to
ensure we meet all regulatory standards and contribute
to a safe and robust banking system.
– We have submitted our application to the PRA to allow
us to use retail deposits to fund different parts of the Group.
– Our CEO was a member of the Woolard Review advisory panel.
– During the Scheme of Arrangement, we worked
collaboratively and openly with the FCA to deliver
the best outcome for customers.
At our core, we focus on acting responsibly and sustainably in all our stakeholder relationships:
We respond to the needs of our stakeholders by creating a fair, inclusive and diverse workplace,
supporting our local communities, responding to climate change, treating suppliers fairly,
and engaging with them on environmental, social and governance (ESG) matters.
Read more on pages 50 and 51
Provident Financial plc Annual Report and Financial Statements 2021
25
Strategic report
1
We develop tailored
products to meet
customers’ needs.
We focus on the UK credit market,
developing simple, transparent
products with flexibility to help
customers manage life despite
not being well served by
mainstream lenders.
4
We lend responsibly.
We tend to lend smaller
amounts over shorter periods
and only lend when customers
demonstrate suitability.
5
We collect payments due.
We offer many ways for customers
to pay or get in touch to discuss
their payments. We maintain
frequent customer contact and
stay close to customers through
our call centres and digital
communications (including
texts, emails and mobile
app notifications).
3
We carefully assess
customer affordability
and creditworthiness.
We use internal and external data,
taking into account both the
current situation and the likely
future.
6
We manage arrears and
customer difficulties.
We establish early contact and
ensure an ongoing dialogue
with customers who have
difficulties. This provides a
sympathetic approach to
understand customer
circumstances and
offer forbearance.
2
We attract customers
who we can serve.
We use many ways to reach
consumers including increasingly
digital methods, as well as
through partners such as
agents and brokers.
Customers are
at the heart
of what we do
How we help to put people on a better path
We support financial inclusion and social mobility by lending
responsibly to the financially underserved
Read more on pages 48 to 53
Provident Financial plc Annual Report and Financial Statements 2021
26
Grow customer-centric businesses
which continue to diversify to meet customer
expectations by delivering positive outcomes
and providing positive returns for shareholders.
Act responsibly and with integrity
in all we do. Create sustainable businesses
which our stakeholders are proud to be a part of.
Maintain a secure funding
and capital structure
to enable us to continue to provide
for all of our stakeholders.
Objective
– Grow businesses to provide customers with products
which help put them on a path to a better everyday life.
– Tailor products to meet the needs of our customers.
– Ensure products are distributed and collected in a way
which meets both customer and regulator expectations.
– Generate a sustainable return from each division
which meets the Group’s target returns.
Objective
– Lend to customers in a sustainable manner, offering support
when needed throughout the customer journey.
– Develop a positive and proactive relationship with
the regulators.
– Ensure colleagues are proud of what they do and how it will
benefit customers’ lives.
– Generate sustainable profitability to provide a positive return
to shareholders.
– Continue to support the communities where we lend.
– Treat all suppliers fairly.
Objective
– Maintain a secure funding structure which meets contractual
maturities and fund growth over the subsequent 12 months.
– Diversify the Group’s funding sources.
– Maintain regulatory headroom above internally set risk
appetite limits, which are in excess of our regulatory
prescribed requirements.
– Adopt a progressive dividend policy.
Performance
£167.8m
Adjusted profit
– continuing
operations
1.6m
Customers
£1.7bn
Amounts receivable
from customers
Performance
71%
Colleague
engagement
£1.4m
Community
investment
12p
Dividend
per share
Performance
29.1%
CET1 ratio
£0.4bn
Liquidity
£290m
Funding headroom
Read more on page 25 Read more on page 26 Read more on page 27
Progress in 2021
– Launch of personal loans pilots in the open market through
both the Vanquis and Sunflower brands.
– Broadening of Vanquis Bank card offering including trials
of a number of new APRs and balance transfer offers.
– Closure of the Consumer Credit Division including write off
of balances outstanding at year end.
– Launch of near-prime offering in Moneybarn.
– Successful launch of Scheme of Arrangement.
Progress in 2021
– LOQBOX partnership launched with Vanquis Bank to build
customer credit scores.
– Group inclusion and diversity programme established.
– During the Scheme of Arrangement, we worked collaboratively
and openly with the FCA to deliver the best outcome
for customers.
– Launch of new Supplier Management Framework.
– Our CEO joined the National Numeracy Leadership Council.
– Continued investment in the community.
Progress in 2021
– Successful issuance of £200m Tier 2 debt capital providing
capacity for future growth.
– Successful tender and buyback of £71m of £175m 2023
Senior Bonds.
– Completion of access to Bank of England Liquidity
and Funding Schemes (TFSME).
– Submission of application to the PRA to allow us to use retail
deposits to fund different parts of the Group.
– Reduction in liquidity to more normalised levels (following
steps taken in 2020 to increase liquidity at the onset of the
Covid-19 pandemic).
– Resumption of dividends.
Challenges in 2021
– Continued lower credit card spend as a result of Covid-19
restrictions, particularly in the travel sector.
– Rising inflation and cost of living squeeze risks impacting
customers’ disposable incomes.
Challenges in 2021
– Overall colleague engagement score fell to 68% (from 72%).
– Establishment and roll-out of hybrid working for colleagues.
Challenges in 2021
– Integration of PFG and Vanquis Bank Treasury teams.
Risks
– Credit risk.
– Operational risk.
– Information and
data security risk.
– Regulatory risk.
– Conduct risk.
– Business
resilience risk.
– People risk.
– Model risk.
Risks
– Information and data security risk.
– Conduct risk.
– People risk.
Risks
– Capital risk.
– Liquidity and funding risk.
– Model risk.
Read more on pages 48 to 61 Read more on pages 48 to 61 Read more on pages 48 to 61
Focus for 2022
– Leverage existing expertise to expand the Group’s personal
loans pilots.
– Broadening of Vanquis Bank proposition including launch
of digital wallets.
– Continued growth of the Moneybarn near-prime
product offering.
– Consideration of launch of new asset classes in Moneybarn.
– Complete customer remediation through the Scheme
of Arrangement.
Focus for 2022
– Continued investment in the communities we serve through
community foundation partnerships.
– Maintain existing high levels of customer satisfaction.
– Development of the IR programme and a 2022 Capital Markets
Day to communicate the Group’s ongoing strategy following
a period of significant change.
Focus for 2022
– Delivery of application to the PRA to allow us to use retail
deposits to fund different parts of the Group, resulting in lower
cost of funds for the non-bank group.
– Ongoing diversification of the non-bank group funding.
Our Blueprint strategic drivers
Our Blueprint strategic drivers
Our Blueprint strategic drivers
Strategy
Building a
sustainable
Group
The Group’s strategy provides the direction
needed to ensure that we can help to put
people on a path to a better everyday life.
The strategy has remained consistent over time but
has, more recently, been supported by the strategic
Blueprint. This defines not only what we do, but how
we do it. The three key pillars of our strategy are
aligned to the Blueprint which ensures all of our
decisions are aligned to stakeholder expectations.
When stakeholder expectations are aligned, we can
build a sustainable Group which will continue to
provide for both our current and future customers.
Our Blueprint strategic drivers
Customer progression
Head AND heart decisions
Human experiences
Fighting fit
Key
Certain alternative performance measures (APMs) have
been used in this report. See pages 245 and 246 for an
explanation of relevance as well as their definition.
1
Provident Financial plc Annual Report and Financial Statements 2021
27
Strategic report
Grow customer-centric businesses
which continue to diversify to meet customer
expectations by delivering positive outcomes
and providing positive returns for shareholders.
Act responsibly and with integrity
in all we do. Create sustainable businesses
which our stakeholders are proud to be a part of.
Maintain a secure funding
and capital structure
to enable us to continue to provide
for all of our stakeholders.
Objective
– Grow businesses to provide customers with products
which help put them on a path to a better everyday life.
– Tailor products to meet the needs of our customers.
– Ensure products are distributed and collected in a way
which meets both customer and regulator expectations.
– Generate a sustainable return from each division
which meets the Group’s target returns.
Objective
– Lend to customers in a sustainable manner, offering support
when needed throughout the customer journey.
– Develop a positive and proactive relationship with
the regulators.
– Ensure colleagues are proud of what they do and how it will
benefit customers’ lives.
– Generate sustainable profitability to provide a positive return
to shareholders.
– Continue to support the communities where we lend.
– Treat all suppliers fairly.
Objective
– Maintain a secure funding structure which meets contractual
maturities and fund growth over the subsequent 12 months.
– Diversify the Group’s funding sources.
– Maintain regulatory headroom above internally set risk
appetite limits, which are in excess of our regulatory
prescribed requirements.
– Adopt a progressive dividend policy.
Performance
£167.8m
Adjusted profit
– continuing
operations
1.6m
Customers
£1.7bn
Amounts receivable
from customers
Performance
71%
Colleague
engagement
£1.4m
Community
investment
12p
Dividend
per share
Performance
29.1%
CET1 ratio
£0.4bn
Liquidity
£290m
Funding headroom
Read more on page 25 Read more on page 26 Read more on page 27
Progress in 2021
– Launch of personal loans pilots in the open market through
both the Vanquis and Sunflower brands.
– Broadening of Vanquis Bank card offering including trials
of a number of new APRs and balance transfer offers.
– Closure of the Consumer Credit Division including write off
of balances outstanding at year end.
– Launch of near-prime offering in Moneybarn.
– Successful launch of Scheme of Arrangement.
Progress in 2021
– LOQBOX partnership launched with Vanquis Bank to build
customer credit scores.
– Group inclusion and diversity programme established.
– During the Scheme of Arrangement, we worked collaboratively
and openly with the FCA to deliver the best outcome
for customers.
– Launch of new Supplier Management Framework.
– Our CEO joined the National Numeracy Leadership Council.
– Continued investment in the community.
Progress in 2021
– Successful issuance of £200m Tier 2 debt capital providing
capacity for future growth.
– Successful tender and buyback of £71m of £175m 2023
Senior Bonds.
– Completion of access to Bank of England Liquidity
and Funding Schemes (TFSME).
– Submission of application to the PRA to allow us to use retail
deposits to fund different parts of the Group.
– Reduction in liquidity to more normalised levels (following
steps taken in 2020 to increase liquidity at the onset of the
Covid-19 pandemic).
– Resumption of dividends.
Challenges in 2021
– Continued lower credit card spend as a result of Covid-19
restrictions, particularly in the travel sector.
– Rising inflation and cost of living squeeze risks impacting
customers’ disposable incomes.
Challenges in 2021
– Overall colleague engagement score fell to 68% (from 72%).
– Establishment and roll-out of hybrid working for colleagues.
Challenges in 2021
– Integration of PFG and Vanquis Bank Treasury teams.
Risks
– Credit risk.
– Operational risk.
– Information and
data security risk.
– Regulatory risk.
– Conduct risk.
– Business
resilience risk.
– People risk.
– Model risk.
Risks
– Information and data security risk.
– Conduct risk.
– People risk.
Risks
– Capital risk.
– Liquidity and funding risk.
– Model risk.
Read more on pages 48 to 61 Read more on pages 48 to 61 Read more on pages 48 to 61
Focus for 2022
– Leverage existing expertise to expand the Group’s personal
loans pilots.
– Broadening of Vanquis Bank proposition including launch
of digital wallets.
– Continued growth of the Moneybarn near-prime
product offering.
– Consideration of launch of new asset classes in Moneybarn.
– Complete customer remediation through the Scheme
of Arrangement.
Focus for 2022
– Continued investment in the communities we serve through
community foundation partnerships.
– Maintain existing high levels of customer satisfaction.
– Development of the IR programme and a 2022 Capital Markets
Day to communicate the Group’s ongoing strategy following
a period of significant change.
Focus for 2022
– Delivery of application to the PRA to allow us to use retail
deposits to fund different parts of the Group, resulting in lower
cost of funds for the non-bank group.
– Ongoing diversification of the non-bank group funding.
Our Blueprint strategic drivers
Our Blueprint strategic drivers
Our Blueprint strategic drivers
2 3
Provident Financial plc Annual Report and Financial Statements 2021
28
We moved out of London because
I was offered a media teaching job
with better prospects at a college in
Basingstoke. But I could only take it if I
had a car. When I got my car through
Moneybarn and started my job, I was
just teaching media studies, but now
I’m leading my course and teaching a
new subject and have taken on more
responsibility in the college, which is
really quite nice because I’m evolving
within my career.
Natasha
Media and E-Sports Teacher
Strategy continued
Grow customer-centric businesses
Our strategy
in action
Launch of personal loans
Our Purpose is to help put people on a path to a better
everyday life by supplying personal credit products to the
non-prime population. The broader the range of credit profile
we can support, the better we fulfil this Purpose. In support
of this we launched two loan propositions in 2021:
– The Vanquis Loans proposition is an expansion of our
existing customer offering which launched in 2016. It
utilises the significant learnings made (across credit
risk, customer servicing, IT systems and others) through
our existing customer lending and provides unsecured
personal loans to customers, predominantly via brokers.
– The Sunflower Loans proposition has been designed to
address a customer demographic that sits at a slightly
higher risk profile than those being served through
Vanquis. With this customer profile, particular care has
been taken to build a robust approach to creditworthiness
and the customer journey includes speaking with
customers to validate their application.
We recognise the need to continually evolve in an increasingly
digital and competitive landscape. Our Sunflower Loans
product has been delivered on a new IT platform (named
Gateway) using best in class third-party providers. The
Gateway platform has been designed to be agile, ensuring
it is adaptable, can be changed rapidly and will provide a
source of competitive advantage into the future. In addition,
the Gateway platform has the potential to provide the IT
infrastructure for every product across the Group in time.
Moneybarn expansion into near prime
In recent years, Moneybarn has expanded from not only
providing cars to our customers but also offering finance
on motorbikes and vans. This followed increased demand
and therefore our offering has been adapted to meet
customers’ needs.
Across 2020 and 2021, the credit quality of our customers
has improved and we have significantly reduced the level of
lending in the highest risk bands. In addition, in January 2021,
we launched our near-prime vehicle finance product. This has
increased the size of our addressable market and provides a
large area for future growth.
1
Provident Financial plc Annual Report and Financial Statements 2021
29
Strategic report
I’m really grateful to Vanquis
because they gave me a card
when no one else would help me
out. Since then I’ve been able to
build up my credit rating by buying
my everyday shopping on my card
and paying it off the next month.
The app is good as well because it
sends me little reminders, so I don’t
get behind or anything.
Stephen
Warehouse Manager
Supporting our customers
PFG is in the business of providing tailored and responsible
products, services and partnerships. We serve a wide range
of customers. Some may bring in a regular salary while others
have less consistent incomes or receive benefits. Many bring
home average salaries, but we also work with customers
with lower incomes and those who have had to deal with
significant life events, such as divorce, job losses or long-term
illness, which can cause them financial difficulty.
Short or longer-term financial difficulties can damage
customers’ credit files, which can lead to them being
underserved or totally excluded by prime lenders. The
products, services and partnerships we offer are made to
meet the specific needs of these customers in the non-prime
market. Our services can help people enter or re-enter the
credit market, stay in control of their finances and build up
their credit scores for the future.
Supporting our communities
In 2021, we invested £1.4m in the PFG Social Impact Programme
which supports our Purpose by addressing the key barriers to
social and financial inclusion by helping people to overcome
them. Through our Social Impact Programme, we support
charities and specialist partners to address issues such as:
– customer vulnerability and financial difficulties;
– supporting children, young people and adults to boost
their education and skills; and
– aiding community foundations and other partners in
addressing the wide range of social inclusion and social
mobility issues.
During 2021, we offered a number of Company-led
volunteering opportunities to colleagues through our Social
Impact Programme where 25 colleagues took part in 6 grant
panels giving 175 volunteering hours.
In support of our Social Impact Programme, our CEO became
a member of the National Numeracy Leadership Council
in September 2021. The National Numeracy Leadership
Council aims to grow the network of organisations and
individuals actively addressing the issue of poor numeracy
and elevate the understanding and importance of the issue
at a national level.
25 6 175
colleagues
took part in
grant panels giving volunteering hours
during work time
Act responsibly and with integrity
2
Provident Financial plc Annual Report and Financial Statements 2021
30
Maintain a secure funding
and capital structure
Our strategy
in action continued
Strategy continued
Capital
At December 2021, PFG had capital resources significantly
in excess of the overall capital requirement. This follows
a successful Tier 2 capital issue of £200m in Q4’21.
PFG retains a credit rating, has extensive wholesale markets
franchise and has observed strong performance in debt
capital markets, providing numerous opportunities for
additional capital to be raised should it be required.
Funding
At December 2021 and early into 2022 the Group had a
highly liquid position, with in excess of £300m held by both
Vanquis Bank and the Group above liquidity coverage
ratio requirements.
During 2021 and into early 2022, we have optimised our funding
maturity profile meaning the Group now has no wholesale
funding maturities until 2023. This activity included:
– refinancing and upsizing Moneybarn’s bilateral
securitisation to at least 2023;
– issuing £200m of Tier 2 subordinated debt capital;
– Vanquis Bank AAA-rated notes were accepted as
eligible collateral for the Bank of England Liquidity
and Funding Schemes;
– continued access to £2bn EMTN Programme, updated
in September 2021;
– repayment of £65m retail bond in September 2021;
– tender and buyback of £71m 2023 Senior Bonds
(previously £175m outstanding); and
– early repayment of the RCF borrowing.
In addition, post year end, we have submitted our application
to the PRA to allow us to use retail deposits to fund different
parts of the Group.
Read more on page 106
PFG funding (£m)
2,281 1,972
Facilities
Retail deposits
Tier 2
TFSME
Senior bonds
Retail bonds
Securitisation
RCF
Undrawn capacity
Dec
20
Dec
21
*
79
69
150
125
175
1,683
275
30
110
60
104
174
200
£598m
£953m
3
1,019
* The undrawn capacity reduced to £50m
on early repayment of the RCF in March 2022.
Provident Financial plc Annual Report and Financial Statements 2021
31
Strategic report
Key performance indicators
Adjusted PBT –
continuing operations (£m)
Statutory PBT –
continuing operations (£m)
Adjusted basic EPS –
continuing operations (p)
Customer receivables –
continuing operations (£bn)
19 19 19
1919
20 20 20
2020
21 21 21
2121
£167.8m
Performance
£142.2m
Performance
55.1%
Performance
57.5p
Performance
£1.7bn
Performance
25.5%
Performance
Adjusted ROE –
continuing operations (%)
Definition
Adjusted profit/(loss) before tax is stated before amortisation of acquisition intangibles,
discontinued operations and exceptional items. Statutory profit/(loss) before tax is stated
before discontinued operations.
Strategic focus
Profits/(losses) which will impact organic investment within the Group or dividend payments
to the Group’s shareholders.
Comment
Adjusted profit has increased by £140.0m and statutory profit by £179.2m. As the credit outlook
has improved, impairment provisions raised following the onset of Covid-19 have been released.
This has been partially offset by increased investment in the Group transformation programme.
Definition
Adjusted PBT for continuing operations
divided by the weighted average number
of shares in issue.
Strategic focus
Demonstrates value generated/(sustained)
per shareholder.
Comment
Profit has increased in the year following
improvements in the macroeconomic outlook
driving lower impairments. Share capital has
remained unchanged.
Definition
Amounts receivable from customers
as reported on the balance sheet for the
Group’s continuing operations representing
gross receivables less impairment provision
calculated in accordance with IFRS 9.
Strategic focus
Amounts receivable from customers in
helping to put them on a path to a better
everyday life.
Comment
Customer receivables have remained stable
with a reduction in credit card receivables as
a result of lower customer spending offset by
growth in vehicle finance.
Definition
Adjusted annualised operating costs as a
percentage of annualised net interest margin
for continuing operations.
Strategic focus
Efficiency of the cost base in delivering returns.
Cost to income ratio is expected to reduce
marginally in FY’22 versus FY’21, including the
remaining transformation investment in the
Group’s businesses. We expect it to reduce to
circa 40% from the end of 2024 onwards as the
Group benefits from operational efficiencies
as a result of its transformation programme.
Comment
Deteriorated cost:income ratio in 2021 largely
due to increased spend on the Group’s
transformation programme.
Definition
Adjusted profit after tax for continuing
operations as a percentage of average equity.
Equity is stated after deducting the Group’s
pension asset, net of deferred tax, and the fair
value of derivative financial instruments.
Strategic focus
Returns generated on equity held show
how efficiently the Group is delivering
for its shareholders.
Comment
Profitability has improved following the release
of impairment provisions as macroeconomic
expectations have improved.
173.6
154.2
Cost:income ratio –
continuing operations (%)
19 20 21
33.9
38.6
55.1
2.0
1.7
1.7
27.8
(37.0)
11.7
57.5
25.5
4.7
17.1
49.2
167.8
142.2
RR
R
R
The key performance indicators (KPIs) represent the principal metrics reported to Group management
on a monthly basis to support the strategic decision making across the Group.
Grow customer-centric businesses
1
Provident Financial plc Annual Report and Financial Statements 2021
32
Employee numbers (‘000) Dividend per share (p)
Customer satisfaction
Employee engagement (%)
Community investment (£m)
19 19
19 19
1920 20
20 2120 20
2021 21
21 21
21
2.5k 12p
Performance
Credit
cards
4.7
Vehicle
finance
4.4
Feefo rating
(out of 5)
71%
£1.4m
Definition
Number of people working for the Group at
year end under contracts of employment.
Strategic focus
Number of employees delivering
for all stakeholders.
Comment
Employee numbers continued to decrease
following the decision to close CCD.
Definition
Dividends declared in the period.
Strategic focus
Dividend returns provided to our shareholders
from the value generated by the Group. Subject
to market conditions the Group expects to move
to a dividend pay-out ratio of circa 40% of
adjusted earnings from FY’22 onwards.
Comment
2021 dividend represents a pay-out ratio of
adjusted continuing earnings of approximately
30%. Adjusted earnings of £98m in 2021 is defined
as profit after tax from continuing operations
before amortisation of acquisition intangibles
and any exceptional items including one-off
provision releases.
Definition
The rate at which surveyed customers were satisfied
(or more than satisfied) with the service they have been provided.
Strategic focus
Demonstrates how happy our customers are with the service they
are receiving.
Comment
Customers participating in the customer surveys have continued
to demonstrate they are satisfied with the service being provided.
Definition
The number of employees who responded
to the Colleague Pulse Survey, divided by the
number of employees who were asked to
respond to the survey.
Strategic focus
Employees feeling engaged at work and
wanting to provide their views to improve
the Group.
Comment
Survey response rate decreased, but still
provides a strong representative sample
for decision making.
Definition
The cash cost of contributions provided
to community projects or charities.
Strategic focus
Investments in the communities we serve
to improve our customers’ lives.
Comment
The Group has committed to invest 1%
of returns in the communities it serves.
This has resumed growth as the Group
has returned to profitability.
4.9
4.2
2.5
4.5
4.6
4.7 4.6
4.5
4.4
1.7
1.2
1.4
74
71
9
12
—
Act responsibly and with integrity
2
Key performance indicators continued
Provident Financial plc Annual Report and Financial Statements 2021
33
Strategic report
Funding headroom (£m)
CET1 ratio (%) Total capital ratio (%)
19
19 19
19
20
20 20
20
21
21 21
21
£290.2m
Performance
29.1%
Performance
40.6%
Performance
32.6%
Performance
Adjusted RORE -
continuing operations (%)
Definition
Available cash reserves and funding on
committed facilities to fund the non-bank
group businesses.
Strategic focus
Demonstrates liquidity immediately available
to fund the non-bank group.
Comment
Funding headroom has increased as a
result of refinancing actions taken to move
contractual maturities on the Group’s
borrowings to 2023 and beyond, together with
the issuance of £200m of Tier 2 debt capital
that pre-funds future balance sheet growth.
Definition
The ratio of the Group’s Common Equity Tier 1
(CET1) to the Group’s risk-weighted assets
measured in accordance with the Capital
Requirements Ratio (CRR).
Strategic focus
Demonstrates the Group’s ability to withstand
financial distress.
Comment
CET1 ratio has decreased in the year reflecting
the losses sustained from discontinued
operations and the scheduled unwind of the
IFRS transitional relief, partly offset by a 12%
reduction in risk-weighted exposures.
Definition
The ratio of the Group’s total regulatory capital
(own funds) to the Group’s risk-weighted
assets measured in accordance with the CRR.
Strategic focus
Demonstrates the Group’s ability to withstand
financial distress and the ability to facilitate
future growth in risk-weighted assets.
Comment
Total capital ratio has increased in the year
reflecting the £200m issuance of Tier 2 debt
capital, notwithstanding the decrease in CET1.
Definition
Adjusted profit/(loss) after tax for continuing
operations divided by the Group’s monthly
average PRA regulatory capital requirement
including PRA buffers for the period.
Strategic focus
Demonstrates how well the Group’s returns
are reinvested and is an indicator of its
growth potential.
Comment
Profitability has increased in the year partially
offset by a reduction in regulatory capital.
93.4
143.7
290.2
31.6
31.6
25.7
34.2
34.2
6.3
29.1
40.6
32.6
Maintain a secure funding and capital structure
Key
Links to remuneration
R
Read more on pages 169 to 191
See pages 271 to 274 for
an explanation of relevance
as well as their definition
Certain alternative
performance measures
(APMs) have been used
in this report
R
R
R
3
Provident Financial plc Annual Report and Financial Statements 2021
34
Market overview
We understand
our markets
Market developments Market compositionMarket overview
We specialise in supporting the
one in five adults (10 to 12 million
people) in the UK who are not well
served by mainstream lenders.
These consumers’ needs and
circumstances typically change
over time, resulting in the market
being relatively fluid; circa 1 to 2
million consumers move in and
out of the market each year.
We believe our market could
increase in the short to medium
term as more consumers find
their access to mainstream
lending restricted, due to the end
of government and regulatory
support provided during the
pandemic and a return to normal
levels of consumer spending
and borrowing, coupled with a
continued reduced risk appetite
from mainstream lenders.
Our market is highly and robustly
regulated, primarily by the FCA
and PRA, with regulation subject
to ongoing evolution and change.
There are three main categories
of products in our market:
– revolving credit accounts,
including credit cards;
– secured loans, where an
asset is used as security
for the loan; and
– unsecured loans, including
personal loans, home
credit and online high-cost
short-term lending.
Average customer credit risk score
Higher
Lower
Risk
Credit cards
Personal loans
Vehicle finance
Note: Bubble size is proportionate to debt outstanding in the market at December 2021.
Provident Financial plc Annual Report and Financial Statements 2021
35
Strategic report
The products we offer
Decline/unable to lend
Revolving credit Unsecured loans Secured loans
APR
>20%
APR
>100%
APR
>50%
Credit card,
store card
and retail
credit accounts
Personal loans
and retail point-
of-sale finance
Vehicle
finance
Over-
drafts
Buy
now,
pay
later
Guarantor loans
Salary finance
Salary
advance
1st and
2nd
charge
mort-
gages
Pawnbroking
Lines of credit
Decreasing APRs
Prime/mainstream
We will continue to evolve our product offering through 2022, enabling us to support more consumers on their credit journey.
In particular:
– We will continue to develop our unsecured loans
product offering via both the Vanquis and Sunflower
brands for existing customers and customers in the
open market, including broadening the range of APRs
offered and broadening our loan sizes and terms.
– Within vehicle finance, we continue to review our
product proposition, including loan sizes, terms, APRs
and asset classes. For example, today we cover cars,
motorbikes and LCVs, but we aspire to broaden this to
enable us to support more customers’ needs.
Provident Financial plc Annual Report and Financial Statements 2021
36
Market overview continued
Macro trends
affecting our industry
We remain vigilant in analysing
the trends in our industry to
ensure we employ the correct
strategy, either by maintaining
course or through adaptation.
The end of furlough, whilst
important symbolically, has had
a muted impact on our industry.
Many changes brought about
by Covid-19 continue to have an
impact on the way people live
their lives (for example through
continued home working for
many), meaning that we have
had to adapt to this ‘new normal’.
Finally, the rising cost of living
(driven by high inflation) is
expected to have an impact on
households across the country
and is something we maintain a
watching brief on to ensure we
continue to lend to customers in
a way that is suitable, affordable
and sustainable as prices rise.
1
2
3
Links to strategy
Grow customer-centric businesses
Act responsibly and with integrity
Maintain a secure funding
and capital structure
Find our full list
of key risks on page 92
Links to risks
Read more on our strategy
on pages 148 to 171
The end of furlough
Short-term trend
Covid-19 and GDP
Medium-term trend
Inflationary pressures
Medium-term trend
2
P4
P9
1
2
P5
1
2
P4
P5
P9
– The furlough scheme, which
supported employers to keep
people in work during the worst of
the pandemic, ended in September
2021. The scheme disproportionately
covered people on lower or less
stable incomes, particularly in the
hospitality industry.
– Covid-19 continues to affect the
economy and change consumer
behaviours. For example, people
continue to do a large proportion
of their shopping online post-
Covid-19 and the travel industry
is yet to recover to the levels seen
prior to the pandemic. GDP has
recently returned to pre-Covid-19
levels; however, future GDP growth
is expected to be muted (circa 1%)
due to slower growth in demand for
goods and rising energy prices.
– The UK is currently experiencing a
higher than targeted rise (the Bank
of England targets inflation of up to
2% per annum) in the cost of goods.
In particular, the price cap on utility
bills has risen by around 50% and
may increase further, fuelled by the
current geopolitical situation. This
is squeezing household incomes as
wages don’t keep pace.
11.7m
Number of
people that
have been
on furlough
1.1m
Number of
people on furlough
by the end of
the scheme
1.8%
Year to Q1’23
forecast
GDP growth
1.1%
Year to Q1’24
forecast
GDP growth
7.3%
Peak 2022
CPI forecast
5.4%
Year to Q1’23
CPI forecast
Impact on our industry
– There were companies that
could unfortunately no longer
support employees that had been
on furlough when the scheme
ended, resulting in job losses and
a significant change in the lives
of those consumers.
– However, the overall impact
of ending furlough on the market
has been muted.
Impact on our industry
– Consumers have changed the
way they prefer to borrow and to
spend through the pandemic with
an increasing preference for online.
This has led to changes in product
constructs to meet rising consumer
digital expectations.
– Consumers have ever increasing
digital expectations as their lives
moved online during the pandemic.
Impact on our industry
– The affordability challenges
potentially facing consumers
through 2022 as inflation peaks
has led some mainstream lenders
to tighten their assessments,
increasing the non-prime
lending market.
– Customers may begin to experience
difficulties in repayment as a result
of the rising cost of living.
How we are responding
– Throughout the pandemic we used
indicators to identify customers who
may be experiencing repayment
difficulties due to furlough or
job loss.
– We offer tailored support to any
customer experiencing repayment
difficulties, regardless of reason.
How we are responding
– We continuously assess and
refine our product offerings, both
in terms of propositional features
and products offered.
– We are investing heavily in the
development of our digital
channels, with a particular focus
on the redevelopment of the
Vanquis app.
How we are responding
– We are actively reviewing and
tightening our affordability
approach where required to ensure
all our lending remains suitable,
affordable and sustainable.
– We monitor our customers
performance and use early
warning indicators to highlight
potential changing circumstances
where tailored support may
be required.
– We continuously review our product
offering to ensure we’re meeting our
customers’ needs.
P
Provident Financial plc Annual Report and Financial Statements 2021
37
Strategic report
0.0
1.0
2.0
4.0
3.0
8.0
7.0
6.0
5.0
%
9.0
Q2’00
Unemployment
Q2’01
Q2’02
Q2’03
Q2’04
Q2’05
Q2’06
Q2’07
Q2’08
Q2’09
Q2’10
Q2’11
Q2’12
Q2’13
Q2’14
Q2’15
Q2’16
Q2’17
Q2’18
Q2’19
Q2’20
Q2’21
0
40
20
60
80
100
120
Retail sales volumes (indexed to 2019)
Q1’00
Q1’01
Q1’02
Q1’03
Q1’04
Q1’05
Q1’06
Q1’07
Q1’08
Q1’09
Q1’10
Q1’11
Q1’12
Q1’13
Q1’14
Q1’15
Q1’16
Q1’17
Q1’18
Q1’19
Q1’20
Q1’21
UK unemployment increased following the onset of Covid-19, albeit it
remained at historically low levels and has subsequently dropped again.
It reached 4.1% in the three months to December 2021, its lowest level
since the start of the pandemic. It is forecast to improve further as the
labour market continues to tighten, with job vacancies at a record high
(1.2 million in the three months to December 2021). A strong labour market
is positive for our customer base.
Retail sales volumes have recovered well from the beginning of Covid-19
and numerous UK lockdowns. Volumes fell slightly (by 0.9%) in December
2021 but remain 2.6% higher than pre-Covid-19 levels. We view strong retail
sales as a positive indicator of the return of consumer confidence and a
return to more normalised levels of consumer spending and borrowing.
The end of furlough
Short-term trend
Covid-19 and GDP
Medium-term trend
Inflationary pressures
Medium-term trend
2
P4
P9
1
2
P5
1
2
P4
P5
P9
– The furlough scheme, which
supported employers to keep
people in work during the worst of
the pandemic, ended in September
2021. The scheme disproportionately
covered people on lower or less
stable incomes, particularly in the
hospitality industry.
– Covid-19 continues to affect the
economy and change consumer
behaviours. For example, people
continue to do a large proportion
of their shopping online post-
Covid-19 and the travel industry
is yet to recover to the levels seen
prior to the pandemic. GDP has
recently returned to pre-Covid-19
levels; however, future GDP growth
is expected to be muted (circa 1%)
due to slower growth in demand for
goods and rising energy prices.
– The UK is currently experiencing a
higher than targeted rise (the Bank
of England targets inflation of up to
2% per annum) in the cost of goods.
In particular, the price cap on utility
bills has risen by around 50% and
may increase further, fuelled by the
current geopolitical situation. This
is squeezing household incomes as
wages don’t keep pace.
11.7m
Number of
people that
have been
on furlough
1.1m
Number of
people on furlough
by the end of
the scheme
1.8%
Year to Q1’23
forecast
GDP growth
1.1%
Year to Q1’24
forecast
GDP growth
7.3%
Peak 2022
CPI forecast
5.4%
Year to Q1’23
CPI forecast
Impact on our industry
– There were companies that
could unfortunately no longer
support employees that had been
on furlough when the scheme
ended, resulting in job losses and
a significant change in the lives
of those consumers.
– However, the overall impact
of ending furlough on the market
has been muted.
Impact on our industry
– Consumers have changed the
way they prefer to borrow and to
spend through the pandemic with
an increasing preference for online.
This has led to changes in product
constructs to meet rising consumer
digital expectations.
– Consumers have ever increasing
digital expectations as their lives
moved online during the pandemic.
Impact on our industry
– The affordability challenges
potentially facing consumers
through 2022 as inflation peaks
has led some mainstream lenders
to tighten their assessments,
increasing the non-prime
lending market.
– Customers may begin to experience
difficulties in repayment as a result
of the rising cost of living.
How we are responding
– Throughout the pandemic we used
indicators to identify customers who
may be experiencing repayment
difficulties due to furlough or
job loss.
– We offer tailored support to any
customer experiencing repayment
difficulties, regardless of reason.
How we are responding
– We continuously assess and
refine our product offerings, both
in terms of propositional features
and products offered.
– We are investing heavily in the
development of our digital
channels, with a particular focus
on the redevelopment of the
Vanquis app.
How we are responding
– We are actively reviewing and
tightening our affordability
approach where required to ensure
all our lending remains suitable,
affordable and sustainable.
– We monitor our customers
performance and use early
warning indicators to highlight
potential changing circumstances
where tailored support may
be required.
– We continuously review our product
offering to ensure we’re meeting our
customers’ needs.
Provident Financial plc Annual Report and Financial Statements 2021
38
Market overview continued
Trends in
our market
We take a holistic approach
to analysing the trends in our
market and use these insights to
determine our strategic priorities.
The digital revolution is changing
how customers expect to be
served. We are able to adapt
quickly to changes in the macro-
environment and the competitive
landscape as both evolve and
the impact of Covid-19 unwinds.
Sustainability is of increasing
importance to our stakeholders
and aligns to our Group
Purpose and we continually
review our business model to
ensure our lending remains
suitable, sustainable and
affordable for customers,
in line with our regulatory
and social responsibilities.
1
2
3
Links to strategy
Grow customer-centric businesses
Act responsibly and with integrity
Maintain a secure funding
and capital structure
Find our full list
of key risks on page 92
Links to risks
Read more on our strategy
on pages 148 to 171
Key trend Narrative How we are responding Annual Report reference
Digital revolution
1
3
P9
– Consumer expectations continue to rise in the
digital space, driven by the broad array of mobile
banking applications and digital-first lending
businesses which are continually raising the bar
for speed and convenience of customer journeys.
As a result, consumers now expect a frictionless
experience in all channels, including mobile.
– This trend accelerated through Covid-19 as later
adopters became more accustomed to interacting
digitally.
– Within Vanquis, we are investing in our mobile app and self-service capabilities,
enabling customers to interact digitally where this is their preference.
– Within Moneybarn, considerable improvements have been made to our customer
onboarding journey, removing friction and making the process clearer and
simpler from the outset.
– Within the personal loans business, the proposition has been developed
with significant consideration provided to ensuring consumers can interact
with us digitally.
– Page 28: Our strategy in action –
grow customer-centric businesses
Macroeconomic
factors
2
3
P4
– The cost of goods is currently increasing at rates
considerably above the Bank of England’s 2%
target. This is squeezing household incomes
as wages do not keep pace.
– The Bank of England is now forecasting peak
CPI inflation of 7.25% in 2022.
– We are well placed to serve customers who may be excluded from
mainstream lending due to a deterioration in the economy as we have
significant experience in lending to underserved markets and specialist
affordability and credit risk assessments.
– We also have a broad risk appetite, offering products across a range of price
points and increasing financial inclusion across the market.
– In addition, we are monitoring customer performance and have the necessary
controls in place to ensure we can quickly respond to changing customer
circumstances and offer tailored support.
– Pages 200 and 201: Impairment
accounting policies
– Pages 36 and 37: Trends in our industry
Competitive
landscape
1
2
P2
– A number of competitors in our sector have
been constrained by funding or have entered
administration due to an inability to adapt
to evolving regulation.
– This trend accelerated through Covid-19 and could
worsen through 2022 as the cost of living crisis
impacts consumers.
– We have a strong balance sheet and access to low-cost retail deposit funding
through Vanquis Bank. We have submitted an application to the PRA to enable
us to utilise this deposit funding more broadly across the Group.
– In addition, we are constantly exploring opportunities to diversify our retail
offering as well as considering commercial funding options.
– A reduction in supply presents an opportunity for us to meet consumers’ unmet
credit needs where it is sustainable, suitable and affordable for the consumer,
with our broad range of products.
– Page 40: Credit card market
– Page 43: Vehicle finance market
– Page 46: Personal loans market
Sustainability
2
3
P6
P9
– There is increasing consumer, investor and political
expectation that firms will conduct their operations
in a sustainable manner.
– We welcome the increased focus on sustainability and have a Corporate
Responsibility Programme focused on making a positive contribution towards
addressing key issues that fit with our Purpose.
– We have set long-term objectives which relate to five of the UN’s Sustainable
Development Goals and the Task Force on Climate-related Financial Disclosures.
– We work with charities and partners in the communities we serve to address
issues such as debt advice, financial education and other consumer
vulnerability matters.
– Pages 12 and 13: PFG’s contribution to the
UN’s Sustainable Development Goals
– Pages 48 to 74: ESG
– 2021 Corporate Responsibility Report
Regulatory
environment
1
2
P5
P9
– Firms need to continue to adapt as the regulatory
environment continues to evolve.
– The regulators’ focus is on ensuring all lending
is sustainable, suitable and affordable.
– We support regulation that protects consumers and maintains a fair and
effective market. We continually review our business model to ensure our
products remain sustainable, suitable and affordable for customers.
– We have an ongoing transparent dialogue with our regulators and have built
a good relationship with them.
P
Provident Financial plc Annual Report and Financial Statements 2021
39
Strategic report
Key trend Narrative How we are responding Annual Report reference
Digital revolution
1
3
P9
– Consumer expectations continue to rise in the
digital space, driven by the broad array of mobile
banking applications and digital-first lending
businesses which are continually raising the bar
for speed and convenience of customer journeys.
As a result, consumers now expect a frictionless
experience in all channels, including mobile.
– This trend accelerated through Covid-19 as later
adopters became more accustomed to interacting
digitally.
– Within Vanquis, we are investing in our mobile app and self-service capabilities,
enabling customers to interact digitally where this is their preference.
– Within Moneybarn, considerable improvements have been made to our customer
onboarding journey, removing friction and making the process clearer and
simpler from the outset.
– Within the personal loans business, the proposition has been developed
with significant consideration provided to ensuring consumers can interact
with us digitally.
– Page 28: Our strategy in action –
grow customer-centric businesses
Macroeconomic
factors
2
3
P4
– The cost of goods is currently increasing at rates
considerably above the Bank of England’s 2%
target. This is squeezing household incomes
as wages do not keep pace.
– The Bank of England is now forecasting peak
CPI inflation of 7.25% in 2022.
– We are well placed to serve customers who may be excluded from
mainstream lending due to a deterioration in the economy as we have
significant experience in lending to underserved markets and specialist
affordability and credit risk assessments.
– We also have a broad risk appetite, offering products across a range of price
points and increasing financial inclusion across the market.
– In addition, we are monitoring customer performance and have the necessary
controls in place to ensure we can quickly respond to changing customer
circumstances and offer tailored support.
– Pages 200 and 201: Impairment
accounting policies
– Pages 36 and 37: Trends in our industry
Competitive
landscape
1
2
P2
– A number of competitors in our sector have
been constrained by funding or have entered
administration due to an inability to adapt
to evolving regulation.
– This trend accelerated through Covid-19 and could
worsen through 2022 as the cost of living crisis
impacts consumers.
– We have a strong balance sheet and access to low-cost retail deposit funding
through Vanquis Bank. We have submitted an application to the PRA to enable
us to utilise this deposit funding more broadly across the Group.
– In addition, we are constantly exploring opportunities to diversify our retail
offering as well as considering commercial funding options.
– A reduction in supply presents an opportunity for us to meet consumers’ unmet
credit needs where it is sustainable, suitable and affordable for the consumer,
with our broad range of products.
– Page 40: Credit card market
– Page 43: Vehicle finance market
– Page 46: Personal loans market
Sustainability
2
3
P6
P9
– There is increasing consumer, investor and political
expectation that firms will conduct their operations
in a sustainable manner.
– We welcome the increased focus on sustainability and have a Corporate
Responsibility Programme focused on making a positive contribution towards
addressing key issues that fit with our Purpose.
– We have set long-term objectives which relate to five of the UN’s Sustainable
Development Goals and the Task Force on Climate-related Financial Disclosures.
– We work with charities and partners in the communities we serve to address
issues such as debt advice, financial education and other consumer
vulnerability matters.
– Pages 12 and 13: PFG’s contribution to the
UN’s Sustainable Development Goals
– Pages 48 to 74: ESG
– 2021 Corporate Responsibility Report
Regulatory
environment
1
2
P5
P9
– Firms need to continue to adapt as the regulatory
environment continues to evolve.
– The regulators’ focus is on ensuring all lending
is sustainable, suitable and affordable.
– We support regulation that protects consumers and maintains a fair and
effective market. We continually review our business model to ensure our
products remain sustainable, suitable and affordable for customers.
– We have an ongoing transparent dialogue with our regulators and have built
a good relationship with them.
Provident Financial plc Annual Report and Financial Statements 2021
40
Credit Card Division
Credit cards
Vanquis Bank has been operating in the UK credit card market since
2003 and has been the largest part of the Group, on a receivables
basis, since 2013. It is a key player in the credit card market for
consumers not well served by mainstream lenders, offering a range
of card products across a broad range of price points to reflect
consumers’ varied risk profiles.
Model
– Credit card providers typically offer low initial limits and
responsibly grow these through credit line increases.
– Consumers are predominantly acquired online, with
affiliates (e.g. ClearScore, Totally Money, etc.) becoming
increasingly used by consumers who want guaranteed
acceptance before applying. Mobile apps have become
the principal way to manage an account.
– New advancements in credit cards include the increasing
use of open banking to assess affordability and digital/
virtual cards.
Market characteristics
– The credit card market is large and stable. It reduced
slightly in 2020, driven by lower consumer spending, but
has rebounded strongly through 2021.
– Competition in the market remains stable with key
competitors including Capital One, NewDay own-brand
cards and the Barclaycard Forward card.
– There have been a few new entrants in recent years
(Zopa and Level), although these providers are yet to reach
significant scale.
– Vanquis is the only specialist, covering the broadest range
of risk categories in the market.
Market appeal
– Credit cards have high cultural adoption and acceptance
in the UK, meaning a substantial and established
domestic market.
– There is an ongoing customer relationship as credit cards
have everyday utility as a means of transacting.
– Credit cards are growing in importance as a means
of transacting given the additional protections credit
cards provide to consumers (through section 75 of the
Consumer Credit Act).
Malcolm Le May
Vanquis Bank Managing Director
Non-prime credit card
market (stock)*
Dec
20
Dec
21
£4,640m
£4,820m
25%
21%
Vanquis
share
* Internal analysis of TransUnion
debt outstanding data as at
December 2020 and 2021.
21%
Vanquis share
Provident Financial plc Annual Report and Financial Statements 2021
41
Strategic report
Credit card adjusted PBT improved significantly
year-on-year; customer spend trends improved during Q1’22
– The Group’s credit card business reported adjusted PBT
for the year of £173.9m (FY’20: £39.5m) which was ahead of
internal plans and significantly better than last year driven
by lower impairment year-on-year.
– New customer bookings for the period were 199k (FY’20:
241k) reflecting the ongoing implementation of tighter
underwriting criteria in response to Covid-19. The total
number of customers at the end of December stood at
1.54m (FY’20: 1.67m), which was driven by the closure of
approximately 114k dormant customer accounts broadly
offsetting lower charge offs during the period owing to the
benefits of furlough and payment holidays.
– Customer credit card expenditure trends continue to
track closely with industry trends. At the end of December,
spend on a per customer basis was approximately 12%
higher year on year. This notwithstanding, when combined
with lower customer bookings year on year and payments
per active customer remaining stable, receivables at the
end of December stood at £1,063m (FY’20: £1,075m).
– Total Group liquidity at the end of December was £1.0bn,
including c.£0.8bn held by Vanquis Bank in retail deposits.
Credit cards – financial performance
Credit card KPIs
Revenue
yield
Impairment
rate
38.8%
19.3%
0.3%
39.1%
20
21
– The annualised impairment rate at the end of December
was 0.3% (FY’20: 19.3%) reflects the benefit of impairment
provision releases during the period and the lower level of
charge offs as a result of Covid-19 customer support and
furlough. As a result, the risk-adjusted net interest margin
improved to 36.0% (FY’20: 17.0%).
– For the first quarter of 2022, credit card expenditure
improved gradually from February onwards, as travel
restrictions eased, and core delinquency trends remained
favourable. Receivables balances at the end of the quarter
stood at c.£1.1bn.
The Group’s credit card
business is a leading
specialist lender in the large
and established credit card
market with strong capital
and liquidity positions
Provident Financial plc Annual Report and Financial Statements 2021
42
Credit cards
The Group’s credit card business is a leading specialist in
the large and established credit card market with strong
capital and liquidity positions. For 2021, the business reported
adjusted profit before tax of £173.9m (FY’20: £39.5m) and
receivables at the end of the period of £1,063m were broadly
flat versus the prior year (FY’20: £1,075m).
New customer bookings for the year were 199k, down from 241k
in 2020, as a result of tighter underwriting standards originally
put in place during Q2’20 not being relaxed during 2021 and
reflecting the cautious approach to rebuilding the receivables
book. The credit card business launched a brand advertising
campaign during 2021 (the ‘Walk Tall with Vanquis’ campaign)
which contributed approximately 20k customers through
direct channels. Approximately 100k inactive customers had
their account closed during Q1’21, following communications
to them in November 2020 that their account would be closed
if there was no activity within 60 days. As a result, credit card
customer numbers reduced to 1,541k as at December 2021
(FY’20: 1,667k).
During 2021, Credit Line Increases amounting to approximately
£170m were issued to customers, which was approximately
£30m higher than the previous year. At the end of December,
the average utilisation rate was approximately 52%, which
remains below levels seen pre-Covid. This reduction has been
driven by customer deleveraging throughout the pandemic.
Receivables ended the period at £1,063m (FY’20: £1,075m),
broadly flat year-on-year. However, receivables increased
versus the level seen at the end of June 2021 (H1’21: £977m)
as customer spend increased in-line with the wider market.
During 2021, customer spend was tracking ahead of levels
seen in 2020 and, for certain periods, ahead of levels seen
in 2019. Towards the end of the year, customer spend was
curtailed by the spread of the Omicron Covid variant which
impacted customers’ ability to visit retail and leisure facilities.
The credit card business generated revenue of £389.5 during
the year, versus £472.4m in 2020, as a result of lower average
receivables. There was a slight moderation in the revenue
yield to 38.8% (FY’20: 39.1%), which reflects the ongoing annual
reduction in ROP income, a focus on higher quality customers
on average and changes to late & over limit fees charged
to customers.
Funding costs decreased to £24.9m during the year, versus
£33.7m in 2020, reflecting lower average funding requirements
during the year, lower funding rates related to funds accessed
through the Bank of England’s TFSME and interest income
generated from the intercompany loan to Group of £70m
in August 2020.
The impairment charge for 2021 was £3.7m (FY’20: £233.3m),
a significant reduction year-on-year, which equated to an
annualised impairment rate of 0.3% (FY’20: 19.3%) at the end
of December. The decrease in impairment reflects benefit
of impairment provision releases, as a result of more benign
macroeconomic conditions, and lower levels of charge off
activity driven by Covid-19 and furlough schemes. The lower
impairment charge was sufficient to more than offset the
marginally lower revenue yield to produce a risk-adjusted net
interest margin improvement to 36.0% (FY’20: 17.0%).
12 months ended 31 December
2021 2020
£m £m Change
Customer numbers (‘000) 1,541 1,667 (7.6%)
Period-end receivables 1,063 1,075 (1.1%)
Average receivables
1
1,003 1,207 (16.9%)
Revenue 389.5 472.4 (17.5%)
Interest (24.9) (33.7) 26.1%
Net interest margin 364.6 438.7 (16.9%)
Impairment (3.7) (233.3) 98.4%
Risk-adjusted net
interest margin
360.9 205.4 75.7%
Costs (187.0) (165.9) (12.7%)
Adjusted profit before tax
2
173.9 39.5 340.3%
Annualised revenue yield
3
38.8% 39.1% (0.3%)
Annualised impairment rate
4
(0.3%) (19.3%) 19.0%
Annualised return
on required equity
5
41.9% 9.1% 32.8%
1 Calculated as the average of month end receivables for the 12 months
ended 31 December.
2 Vanquis Bank profits reflect an adjustment for £1.0m of redundancy costs
in 2021 and the release of a ROP provision (£8.3m) in 2020.
3 Revenue as a percentage of average receivables for the 12 months
ended 31 December.
4 Impairment as a percentage of average receivables for the 12 months
ended 31 December.
5 Adjusted profit after tax as a percentage of average equity for the 12 months
ended 31 December.
Costs increased to £187.0m during the year versus £165.9m
in 2020 and £174.0m in 2019 reflecting investments made to
improve the operational capability of the business during the
period, such as the Vanquis customer app, the advertising
brand campaign and discretionary accruals which did not
occur in 2020.
The profitability of the card business recovered significantly
during 2021 and it has maintained its strong capital and
liquidity positions. It remains focused on enhancing its
customer and digital propositions, including a new Vanquis
mobile app, and improving its range of price points
for customers.
Certain alternative performance measures (APMs) have
been used in this report. See pages 271 to 274 for an
explanation of relevance as well as their definition.
Credit Card Division continued
Credit cards – financial performance continued
Provident Financial plc Annual Report and Financial Statements 2021
43
Strategic report
Vehicle Finance Division
Vehicle finance
Moneybarn was acquired by the Group in 2014, enabling us to
broaden our offering into secured motor finance. Moneybarn
has since become a leading player in the market. In addition,
Moneybarn’s expansion into the near-prime motor finance market
in 2021 provides further opportunities for Moneybarn to support more
consumers excluded from mainstream lending.
Non-prime vehicle
finance market (stock)*
20 21
£8,583m
£9,189m
Moneybarn
share
9%
9%
David Shrimpton
Moneybarn Managing Director
Model
– Motor finance is typically on three to five-year secured
hire purchase contracts.
– Consumers in this market are not accessing finance with
the manufacturer or with their bank and are typically
acquired through intermediaries.
– There are typically small levels of repeat loans with
the same lender.
– The technology in this market is evolving from a manual
process to increased digitisation and smoother customer
onboarding (e.g. auto-affordability and ID verification).
Market characteristics
– Motor finance is a secured product. Secured finance is a
well-established and culturally accepted way to purchase
big ticket items, such as a car, with opportunity for further
growth in used car acquisition.
– Customers have an incentive to maintain their repayments
due to the utility of the vehicle (e.g. a car is needed to
get to work).
Market appeal
– The non-standard motor finance market is large and growing.
– Only 30% of used car sales are on finance, offering
attractive growth prospects for lenders as finance
penetration develops.
– There are numerous providers that span over a range
of risk appetites (e.g. Advantage, MoneyWay and
Close Brothers).
– Moneybarn has the broadest coverage of APRs in the
non-prime market and its expansion into near-prime
lending enables utilisation of existing capabilities to
support more consumers requiring access to finance
in order to purchase a vehicle.
– Moneybarn’s access to lower cost funding provides
a significant competitive advantage over a number
of competitors.
* Internal analysis of TransUnion
debt outstanding data as at
December 2020 and 2021.
9%
Moneybarn share
Provident Financial plc Annual Report and Financial Statements 2021
44
12 months ended 31 December
2021 2020
£m £m Change
Customer numbers (‘000) 93.9 91.4 2.7%
Period-end receivables 586.2 566.6 3.5%
Average receivables
1
593.8 533.1 11.4%
Revenue 137.9 134.0 2.9%
Interest (27.1) (24.6) (10.2%)
Net interest margin 110.8 109.4 1.3%
Impairment (44.6) (72.7) 38.7%
Risk-adjusted net
interest margin 66.2 36.7 80.4%
Costs (37.3) (25.8) (44.6%)
Adjusted profit before tax
2
28.9 10.9 165.1%
Annualised revenue yield
3
23.2% 25.1% (1.9%)
Annualised impairment rate
4
(7.6%) (13.6%) 6.0%
Annualised return
on assets
5
7.6% 5.4% 2.2%
1 Calculated as the average of month end receivables for the 12 months
ended 31 December.
2 Adjusted profit before tax is stated before the amortisation of acquisition
intangibles of £7.5m (FY’20: £7.5m) for 2021.
3 Revenue as a percentage of average receivables for the 12 months ended
31 December.
4 Impairment as a percentage of average receivables for the 12 months
ended 31 December.
5 Adjusted profit before interest after tax as a percentage of average
receivables for the 12 months ended 31 December.
Vehicle finance – financial performance
Vehicle finance adjusted PBT improved year-on-year
whilst average credit and customer quality remains high
– The Group’s vehicle finance business delivered adjusted
PBT for the period of £28.9m (FY’20: £10.9m) which
represents significant growth year-on-year. The increase
was driven by a reduction in impairment owing to Covid-19
support schemes and furlough.
– At the end of December, there were 94k vehicle finance
customers (FY’20: 91k) and receivables of £586m (FY’20:
£567m). Growth in customers and receivables year-on-
year was moderated by higher than anticipated early
customer settlements driven by a buoyant second hand
car market.
– Credit issued during 2021 was £287m, flat year-on-year,
despite new business volumes decreasing marginally to
37k (FY’20: 38k).
– The annualised impairment rate decreased to 7.6% (FY’20:
13.6%) driven by lower arrears rates and provision releases
as a result of a more benign macroeconomic backdrop
during the period. As a result, the risk-adjusted net interest
margin improved to 11.1% (FY’20: 6.9%).
Vehicle finance
The Group’s vehicle finance business is one of the leading
suppliers of vehicle finance to non-prime customers in the
UK. For the twelve months to the end of 31 December 2021,
Moneybarn generated adjusted profit before tax of £28.9m
(FY’20: £10.9m) and receivables at the period end were £586m
(FY’20: £567m).
New business volumes during 2021 were broadly flat versus
2020 at 37k (FY’20: 38k) despite tighter underwriting standards
which were implemented during Q2’20 and which have since
remained in place. Consequently, the vehicle finance business
ended the year with 93.9k customers versus 91.4k in 2020. As
a result of its focus on higher quality customers on average,
and the strong pricing environment seen in the used-car
market throughout 2021, the average loan size increased to
approximately £9k whilst maintaining average Loan To Values
consistent with 2020, which drove total credit issued to over
£287m after unwinds (FY’20: £287m). For the year as a whole,
approximately 33% (FY’20: 38%) of Moneybarn’s new lending
was to people classified as key workers.
At the end of December, receivables stood at £586.2m
(FY’20: £566.6m), driven by new business volumes and the
average loan size increasing. During the second half of the
year, the business started to experience higher levels of early
settlement from customers which impacted the year end
receivables outcome.
Revenue during 2021 increased to £137.9m (FY’20: £134.0m) as
the business focused on higher quality customers, including
the launch of a 14.9% APR product. The annualised revenue yield
has decreased to 23.2% from 25.1% in 2020. This partly reflects
the Group’s focus on higher quality customers and partly
because of furlough support schemes and provision releases.
Interest costs increased during the year to £27.1m from £24.6m
in 2020 reflecting a higher receivables balance throughout
the period. As a result, the net interest margin at the end
of December stood at 18.7% versus 20.5% a year earlier.
Impairment decreased significantly during the year to £44.6m
(FY’20: £72.7m) as a result of impairment provision releases,
driven by a more benign macroeconomic backdrop, and
furlough support schemes. As a consequence, the annualised
impairment rate decreased to 7.6% from 13.6% in 2020. This
resulted in the risk-adjusted net interest margin improving
to 11.1% (FY’20: 6.9%).
Costs increased during the course of the year to £37.3m
(FY’20: £25.8m), reflecting the continued cost of supporting
colleagues to work remotely, together with significant spend
on change and transformation to enable the business to
continue on its growth trajectory.
For 2022, the vehicle finance business will continue to evaluate
the expansion of its offerings to customers with products and
services that will strengthen its relationships and provide for
evolving customer preferences.
Vehicle finance KPIs
Revenue
yield
Impairment
rate
23.2%
13.6%
7.6%
25.1%
20
21
Certain alternative performance measures (APMs) have been
used in this report. See pages 271 to 274 for an explanation
of relevance as well as their definition.
Vehicle Finance Division continued
All text from last year, to be updated
Customer case study - Leah’s story
My name’s Leah, I’m from Stoke on Trent and I live by myself.
I work as a UK Support Manager for a company called Food
Hub, looking after our UK clients. I make sure that they’re happy
and I run a team in our Stoke-on-Trent office.
For fun I like to go on road trips, always jumping in the car,
going down the coast and looking for a beach. I like weekends
away, shopping and spending time with family and friends –
anything I can do to get out and about.
The day I passed my test I wanted to get a new car, so I drove
to a showroom, I had a nice deposit with me and I told them
I wanted a black or red car with bluetooth and a cupholder,
and that’s what they had there. The process was so simple;
I went for a test drive down the road, decided that was the car
I wanted, we did the paperwork when I got back and I drove
away in my new car that day!
Being with Moneybarn has really helped me change my life.
You don’t realise till you get a bit older that what you did in
your younger years with credit can have an effect on you later
on. So it’s been really good for me having the opportunity with
Moneybarn, for someone to see that yes I’ve got a good job,
yes I can afford to do this and not just be turned down straight
away because you have a bad history.
The people at the end of the phone at Moneybarn are lovely.
It’s just like talking to a friend. I’d recommend Moneybarn to
everyone, and not just people with a poor credit history. I think
the level of service that you get and the ease of using the
service is second to none.
Being with Moneybarn has
really helped me change
my life. I’d recommend
Moneybarn to everyone,
and not just people with
a poor credit history.
Leah
UK Support Manager
Watch Leah’s full interview at
www.providentfinancial.com/who-we-are/
our-customers/meet-leah
Strategic report
Provident Financial plc Annual Report and Financial Statements 2021
45
Provident Financial plc Annual Report and Financial Statements 2021
46
Personal loans
We launched two personal loans pilots in 2021, one via the
Sunflower brand and one via the Vanquis brand. These are in
addition to our existing credit card customer personal loans
offering which has been in place since 2016. Initial results from the
loans pilots are very positive and lending volumes continue to rise.
Model
– We offer personal loans over one to five years across
a broad range of APRs.
– Personal loans are typically taken to meet a specific
one-off need.
– Customers are acquired increasingly through internet
affiliates, with customers then typically managing their
account through an online login or mobile app.
Market characteristics
– The market is of a substantial size and growing.
– The launch into the open market via two brands across
a broad range of APRs has significantly increased PFG’s
addressable market.
– Providers operate at a range of price points (circa 15–100%
APR) enabling consumers with a broad range of risk
profiles to access unsecured loans.
– There have been a number of new near-prime entrants
(e.g. Lendable and Chetwood Financial) in recent years.
Market appeal
– The non-prime personal loans market is substantial in size
and growing.
– Personal loans have high cultural adoption and
acceptance in the UK.
– Offering personal loans provides the opportunity to
leverage core skills in loans and allows Vanquis Bank
to meet more of its existing customer needs.
– In addition, PFG has strong access to funding, low cost
of funds and considerable capital strength versus
competitors in this market, providing an opportunity for
PFG to meet a greater level of the demand in the market.
Non-prime personal
loans market (stock)*
20 21
£2,917m
£3,086m
1% 1%
Vanquis
share
Personal Loans Division
Hamish Paton
Personal Loans Managing Director
* Internal analysis of TransUnion
debt outstanding data as at
December 2020 and 2021.
1%
Vanquis share
Provident Financial plc Annual Report and Financial Statements 2021
47
Strategic report
12 months ended 31 December
2021 2020
£m £m Change
Customer numbers (‘000) 19.9 18.5 7.6%
Period-end receivables 28.1 19.1 47.1%
Average receivables
1
18.9 26.6 (28.9%)
Revenue 7.2 9.0 (20.0%)
Interest (0.8) (0.7) (14.3%)
Net interest margin 6.4 8.3 (22.9%)
Impairment (2.1) (6.6) 68.2%
Risk-adjusted net
interest margin 4.3 1.7 152.9%
Costs (13.0) (3.2) (306.3%)
Adjusted loss before tax (8.7) (1.5) (480.8%)
Annualised revenue yield
2
38.1% 33.8% 4.3%
Annualised impairment rate
3
(11.1%) (24.8%) 13.7%
1 Calculated as the average of month end receivables for the 12 months
ended 31 December.
2 Revenue as a percentage of average receivables for the 12 months
ended 31 December.
3 Impairment as a percentage of average receivables for the 12 months
ended 31 December.
4 Adjusted profit after tax as a percentage of average equity for the
12 months ended 31 December.
Personal loans – financial performance
Personal loans business established; pilot phases
have started encouragingly
– Over recent years, PFG has established a personal loans
business, which will be led by Hamish Paton (Managing
Director). The business will incorporate loans branded as
Vanquis Bank Loans and Sunflower Loans, both of which are
currently in pilot phases that have started encouragingly.
– The two products will target distinct customer segments,
based on different affordability criteria and average credit
scores, and initially the loans will range from £1-5k over a
period of 12 to 48 months.
– PFG invested in a new IT infrastructure platform, known
as ‘Gateway’ in order to support the new personal loan
product. It is a brand new IT platform which is capable of
housing multiple products over time. Ultimately, it will provide
customers with a single, holistic view of PFG product offerings.
The personal loans business is an important part of PFG’s
strategy to diversify its product offering and to cater to
customer demand.
Personal loans
Over recent years, PFG has established an personal loans
business to diversify its product offering to new and existing
customers. Its products, which will be branded as either Vanquis
Loans or Sunflower Loans, will be positioned within the mid-
cost credit segment of the market, and initially will offer loans
of between £1 - £5k over one to four years. The typical personal
loan customer will be similar in nature, and average credit
score, to existing credit card and vehicle finance customers.
The addressable market for the loan business is estimated to
be approximately £2.9bn as at December 2020 representing a
significant opportunity for customer and receivables growth.
New business volumes during 2021 were 12.8k, versus 7.8k in 2020,
as the business moved from offering loans to existing credit card
customers only. The business started offering loans via an open
market pilot scheme from October onwards which has started
encouragingly. The pilot scheme will be assessed at the end of
Q1’22. As a result of these new customer bookings, the personal
loans businesses ended the year with 19.9k customers versus 18.5k
at the end of 2020. At the end of December, receivables stood at
£28.1m versus £19.1m at the end of 2020, driven by new business
volumes increasing year-on-year.
The personal loans business generated revenue of £7.2m during
2021 (FY’20: £9.0) as a result of lower average receivables year-
on-year driven by lower new business volumes in 2020 because
tightened underwriting criteria. The revenue yield for the year was
38.1% versus 33.8% in 2020 as the business broadened the product
offering with a wider range of pricing during H2’21, supported by a
new scorecard used for existing customer decisioning.
The impairment charge for 2021 decreased to £2.1m, from £6.6m
in 2020, as the business developed its score cards, established
its underwriting approach to new customers and because
of impairment provision releases as a result of a benign
macroeconomic backdrop. This equated to an impairment rate
for the year of 11.1% (FY’20: 24.8%). This resulted in the risk-adjusted
net interest margin improving to 22.8% versus 6.4% for the
prior year.
Interest costs for the year were broadly flat at £0.8m, versus
£0.7m in 2020, equating to an interest margin of 4.2% versus 2.6%
in 2020. Costs increased during the course of the year to £13.0m
(FY’20: £3.2m) reflecting the investment in the new IT infrastructure
platform known as Gateway.
For 2022, the personal loans business will continue to expand
its open market distribution efforts, continue to focus on
growing lending to existing credit card customers and pursue
opportunities to broaden its product offering.
Personal loans KPIs
Revenue
yield
Impairment
rate
38.1%
24.8%
11.1%
33.8%
20
21
Certain alternative performance measures (APMs) have been
used in this report. See pages 271 to 274 for an explanation of
relevance as well as their definition.
Provident Financial plc Annual Report and Financial Statements 2021
48
Creating better
everyday lives
Environmental, Social and Governance
At PFG, we are committed to delivering products
and services that help put our customers on a
path to a better everyday life. In order to do this,
we need to be financially sustainable. We also
need to take account of the wider role that PFG
plays in society and the ESG issues that matter
to our key stakeholders. This is why we have a
sustainability strategy which not only focuses
on responsibly serving our customers, but also
underlines our commitment to taking action on
issues such as climate change, inequality and
poverty, and creating a truly sustainable business.
This strategy is integral to our long-term success
and the value we create for all our stakeholders,
and frames the way we manage and report our
ESG responsibilities.
Malcolm Le May
Chief Executive Officer
Our commitment to ESG-related matters
Our sustainability strategy is aligned with our Purpose and
enables us to manage and report material ESG-related
matters. This strategy centres on the following two areas:
– Operating our business of lending to our customers in
a responsible manner – we provide our customers with
credit products that meet their particular needs, deliver
fair outcomes throughout their journeys with us, and put
them on a path to a better everyday life.
– Acting responsibly and sustainably in all our stakeholder
relationships – we respond to the needs of our
stakeholders by creating a fair, inclusive and diverse
workplace, supporting our local communities, taking
action on climate change, treating suppliers fairly, and
engaging with investors on ESG-related matters.
Governance and management of the ESG agenda
Overall responsibility for the delivery of PFG’s Purpose, and
the sustainability strategy that it is closely aligned with, rests
with the Provident Financial plc Board generally and Malcolm
Le May, the Chief Executive Officer (CEO), specifically. The PFG
Executive Committee also plays an important supporting
role as it reviews and approves aspects of the responsible
business programme and its budget.
The Board’s CCE Committee also continues to play a key
role in providing oversight of matters that relate to the
sustainability agenda. The Committee is now chaired by
non-executive director Graham Lindsay and its members
in 2021 include other non-executive directors Elizabeth
Chambers, Margot James and Robert East (resigned 13
January 2022).
We also have a Climate Risk Committee to provide oversight
and drive implementation of the TCFD recommendations
and help to deliver the Group’s wider climate risk strategy,
and an Inclusion Steering Group, which supports the delivery
of the Group’s inclusion and wellbeing strategy.
The day-to-day delivery of the PFG Corporate Responsibility
(CR) Programme is carried out by the Group’s CR team,
which is supported by colleagues from across the business.
This includes the colleagues who sit on the various working
groups we have in place and oversee the management of
environmental and community investment matters.
Strategic report
Provident Financial plc Annual Report and Financial Statements 2021
49
Lending responsibly
Our customers
– Provide our customers with the credit products that
meet their particular needs and deliver fair customer
outcomes throughout their journey with us
Read more on pages 52 and 53
Acting sustainably
Our investors
– Engage with the investment community
on sustainability matters
Read more on page 54
Our regulators and government
– Remain a responsible taxpayer
Read more on page 55
Our colleagues
– Create an inclusive and engaging workplace
Read more on pages 56 to 59
Our suppliers
– Ensure that we treat our suppliers fairly
Read more on pages 60 and 61
Our communities
– Support our Purpose through
our Social Impact Programme
Read more on pages 62 to 67
Our environment
– Taking action on climate change
Read more on pages 68 to 73
Our sustainability strategy
Our Purpose
Helping to put people on a path to a better everyday life
To help us to identify and prioritise the ESG risks/
issues that are most material to our business and
our key stakeholders, we undertake a materiality
assessment every two years.
These assessments are carried out in accordance with ESG
reporting best practice, and involve conducting interviews
with internal and external stakeholders and taking account
of the outcomes of any existing stakeholder engagement
activities (for example, our investor perception audit reports,
colleague engagement surveys and supplier due diligence
assessments). Having carried out our last materiality
assessment during April and May 2021, the following material
ESG risks/issues were identified:
– Environmental issues: climate change.
– Social issues: customer vulnerability, financial inclusion,
Covid-19, community contributions, living standards
and macro social trends.
– Governance/management issues: accountability and
transparency, customer satisfaction and care, diversity
and inclusion, ethical business conduct, Future of
Work, governance and management, mental health
and wellbeing, responsible lending practices and
responsible procurement.
These ESG risks/issues have been plotted on the matrix
below according to their relative importance to both our
business and key stakeholders.
Materiality matrix
EnvironmentSocialBusiness
Importance to the business
Importance to stakeholders
Macro social trends
Responsible procurement
Community contributions
Living standards
Customer vulnerability
Customer satisfaction and customer care
Accountability and transparency
Responsible lending practices
Ethical business conduct
Governance and management
Diversity and inclusion
Financial inclusion
Future of Work
Covid-19
Climate change
Mental health and wellbeing
Provident Financial plc Annual Report and Financial Statements 2021
50
Stakeholder Strategic stakeholder engagement objectives
Customers
Our businesses employ a wide range of techniques (e.g. customer satisfaction surveys)
to engage with customers throughout their time with us. In addition to continuing to use
these methods, we will:
– convene more customer panels/groups;
– involve customers in the inclusive design of products and services so that they can
be designed to be accessible to, and usable by, as many of them as possible from the
outset; and
– ensure that existing collaborative initiatives (e.g. Vanquis’ partnership with IncomeMax)
are accessible to other PFG businesses where appropriate.
Colleagues
We will continue to engage with colleagues in order to maintain and encourage
a supportive and inclusive workplace culture by:
– using a range of communications channels (e.g. our PFG-wide intranet, face-to-face
meetings and remote platforms) to provide colleagues with business-related updates
and to encourage them to provide feedback or, for example, participate in community
investment activities;
– encouraging colleagues to get involved in the PFG Inclusion Community (which
comprises five Affinity Groups based around Disability, Ethnicity, Gender Balance, LGBTQ+
and Social Mobility) to help the Group shape related policies and ways of working, and
push to educate colleagues across our businesses; and
– utilising Colleague Forums, which have a designated non-executive director, to engage
collaboratively with colleagues across PFG on key issues affecting the Group.
Regulators
We will continue to focus on maintaining open and trusting dialogue with our regulators
and policymakers by:
– ensuring that our regulatory responses (e.g. our contributions to consultation exercises
and correspondence on specific issues) continue to be channelled through a single
team so that they are coordinated;
– engaging with our regulators through our trade association memberships;
– where possible, contributing to, or participating in, multi-stakeholder forums involving
our regulators and other businesses within the financial services sector;
– identifying opportunities to inform and educate our regulators about aspects of our
business models, including collections, complaints, income and expenditure, etc; and
– participating in discussions and events on a broader range of issues that are material to PFG.
Environmental, Social and Governance continued
Our stakeholder engagement strategy
Interest from many of our stakeholders in our ESG credentials
and performance, along with our responses to this interest,
continues to rise. To be able to respond to this interest we
need to have effective stakeholder relationships and engage
in meaningful dialogue. This enables us to understand and
prioritise the ESG-related views and concerns that our key
stakeholders have with regard to their relationships with PFG;
it also helps us to respond appropriately to stakeholders’
interest and supports our ongoing compliance with the
requirements of s.172 of the Companies Act 2006 (see pages
75 to 86 for more information).
We have identified our key stakeholders as being our
customers, colleagues, communities, suppliers, investors
(both debt and equity), regulators and government, as well
as the environment. We engage with these stakeholders on
an ongoing basis to ensure that we understand any views
and concerns they may have, making sure to factor them
into decision making processes as and when it is appropriate
to do so. There are also a number of other stakeholders with
which we engage on a more periodic basis. These include,
the media, the money advice sector, claims management
companies, trade associations, debt collection agencies,
consumer forums and competitors.
To guide our approach to stakeholder engagement, we
have established a range of strategic objectives within our
approach to how we engage with each group so that we can
systematically seek stakeholders’ perspectives and expertise,
and understand, address and manage their expectations
with regard to a range of ESG matters. By doing this, we can
identify opportunities, manage and enhance our corporate
reputation, reduce risk and comply with regulatory and
voluntary standards. These objectives are set out below:
Provident Financial plc Annual Report and Financial Statements 2021
51
Strategic report
Stakeholder Strategic stakeholder engagement objectives
Government
We will continue to engage with the Government at the CEO level, and through our think
tank partners and participation in multi-stakeholder forums and government-sponsored
initiatives and schemes. In addition, we will engage with the Government by:
– participating in discussions and events on a broader range of issues that are material
to PFG (e.g. with the Bank of England with National Numeracy).
Investors
(debt and equity)
Given that we are required to comply with disclosure obligations which relate to the
transparency of information we will continue to engage with investors using the methods
already employed.
Strategic priorities in terms of engaging with our investors include:
– attending broker conferences and other events with a view to meeting prospective
shareholders;
– using existing channels (e.g. presentations and meetings) to engage with our investors
on our ESG strategy;
– publishing thought leadership articles on topics that would be of interest to investors
on social media and other channels; and
– engaging more with our debt investors (with the help of the PFG Treasury team)
to promote our ESG credentials with that audience.
Suppliers
We will continue to develop and embed our Supplier Relationship Management Framework,
ensuring that tools, processes and procedures are aligned across PFG.
We will also engage with our suppliers on other issues (e.g. the climate-related risk and
opportunity agenda).
The environment
Climate change represents a priority ESG issue for our business, particularly in the context
of managing material climate-related risks and meeting the recommendations of the
TCFD. Given the work we have delivered during 2021 which has enabled us to meet these
recommendations (i.e. established a new Climate Risk Committee), our stakeholder
engagement activities will focus on:
– continuing to include TCFD updates in our Annual Report and Accounts and CR Reports;
– including TCFD content in investor relations materials (e.g. presentations) and
regulatory-related documentation (e.g. VBL’s ICAAP);
– informing and involving colleagues by engaging them on climate-related matters
(e.g. through e-learning, intranet-based campaigns and involvement in working groups);
– profiling relevant activities (e.g. our support of the Grange Festival/WWF project and the
UN’s Business Ambition for 1.5°C pledge) via the intranet and social media channels; and
– ensuring that regular updates on our climate change-related work are provided to the
CCE Committee, Risk Committee, Group ExCo and business unit boards/committees.
Read more on pages 75 to 86
Provident Financial plc Annual Report and Financial Statements 2021
52
Environmental, Social and Governance continued
Our customers
Serving our customers responsibly
Our Purpose is to help put people on a path to a better
everyday life. To do this, we provide customers with
opportunities to borrow a sensible amount in a transparent,
responsible and sustainable way. PFG’s core business is to
provide tailored and responsible products, services and
partnerships that help put our customers on a path to a
better everyday life. The 1.6 million customers we are proud
to serve come from all across the UK. We offer credit cards
through our Vanquis brand and vehicle finance products
via Moneybarn and have a growing personal loans business
with both our Vanquis and Sunflower Loans products.
Credit cards
4.7/5
(2020: 4.6/5)
(CSat score)
Vehicle
finance
4.4/5
(2020: 4.5/5)
(Feefo rating)
Delivering customer satisfaction
We continue to monitor customer satisfaction rates across
our businesses to ensure that we are providing our customers
with products, services and partnerships that meet their
particular needs, and which help put them on a path to a
better everyday life. Information on customer satisfaction is
collected through a variety of methods such as online forums,
and phone and face-to-face surveys, as well as focus groups.
Our businesses have supported our customers throughout
the pandemic by continuing to lend to existing customers
where appropriate and activating forbearance measures
where needed. This has enabled us to maintain high customer
satisfaction ratings across credit card and vehicle finance
products. The overall customer satisfaction rates in 2021 for
each of our products are set out below.
Strategic report
Provident Financial plc Annual Report and Financial Statements 2021
53
Handling customer complaints responsibly
We are committed to ensuring that we keep customer
complaints to an absolute minimum as we believe that doing
so is a good indicator that we are treating our customers fairly
and that our products, services and partnerships meet their
specific needs. Understanding the reasons behind complaints
also helps us to improve the services we offer. We have well-
established complaint handling processes, procedures and
timescales to guide our Customer Relations teams in resolving
issues in a professional and timely way. Vital to resolving
customer complaints satisfactorily is ensuring colleagues
are trained well enough to deliver excellent customer service
whether face to face, on the telephone or via email. The total
amount of hours colleagues spent on customer-focused
training in 2021 was 39,509 (2020: 55,229).
We provide the contact details of the Financial Ombudsman
Service (FOS) to all our customers, so they have another option
if they feel we have been unable to resolve their complaint to
their satisfaction.
During 2021, the total number of customer complaints that
were received by PFG was 66,516 (2020: 90,264). This figure
includes 38,282 complaints (2020: 66,694) that relate to our
Consumer Credit Division which was closed in December 2021.
The total number of customer complaints received in 2021 for
each of our products are set out below. Also, during the year,
13,313 complaints (2020: 13,736) were referred to the FOS, with
8,581 referred complaints (2020: 8,933) being upheld in favour
of the customer.
Supporting customer vulnerability issues
A key pillar of our Group-wide Social Impact Programme
focuses on providing grants to charities and specialist
partners to address issues such as customer vulnerability,
product accessibility and financial difficulties. The
organisations we support also guide and advise our
colleagues to support our customers when addressing
these kinds of issues.
We understand that our customers can find themselves, at
times, in financially challenging situations due to unforeseen
circumstances such as ill health, loss of income, family
bereavement or other significant life events. Therefore, we
ensure that our call centre colleagues are trained in recognising
signs that might indicate a customer could be classified as
‘vulnerable’, or may be facing financial difficulty, whether in the
short or long term. In 2021, this involved continuing to deliver our
programme of work with the charity Surviving Economic Abuse
which involves delivering training to frontline colleagues to build
their capacity to recognise the signs of economic abuse.
In addition to ensuring that our customer-facing colleagues
are equipped with the skills they need to support our
customers throughout their journeys with us, we are able
to draw on the relationships we have developed over the
years with organisations in the money advice and financial
education sectors. By supporting these organisations, our
customers can also access free independent and personal
financial advice and support if they are facing financial strain.
The organisations we support include the Money Advice
Trust, Money Advice Scotland, The Money Charity, Advice
UK, Christians Against Poverty, StepChange, IncomeMax,
the Institute of Money Advisers, and the Money Advice
Liaison Group (see pages 31 and 32 of our 2021 CR Report
for more information).
Credit cards
19,517
(2020: 17,177)
Vehicle
finance
8,717
(2020: 6,393)
IncomeMax case study
Our credit card business continues to work with IncomeMax,
through an innovative partnership that began in 2015, to
support customers who are experiencing financial difficulties.
IncomeMax is a community interest company that helps
people to maximise their household income by providing
them with independent advice and support to navigate the
complex welfare system, allowing individuals to take control
of their finances. The advice provided by IncomeMax helps
individuals and households to increase their income, reduce
household bills, apply for white goods, switch utility tariffs and
access specialist support services such as debt advice should
this be required. IncomeMax can find tens of thousands
of pounds of back dated income that clients are entitled
to and eligible for in some cases.
During 2021, the credit card business has invested further
in IncomeMax, working closely with it to support its digital
proposition development. Recognising that customers’ digital
capacity is evolving and that a growing number may now
prefer to engage digitally, this will provide even better access
to specialist advice.
By providing funding for core costs, the new platform will
benefit Vanquis and non-Vanquis customers, improving
access for a wider community of individuals who may be
facing financial difficulties. The digital platform is planned
for launch in 2022.
Currently we are also working on making additional resources
available to customers through access to the IncomeMax
telephone referral service as well as online tools which
we will be launching in partnership in early 2022.
Provident Financial plc Annual Report and Financial Statements 2021
54
Our investors
Engaging with investors and the major
rating agencies
PFG is committed to continuing to build not only a financially
stronger and sustainable business but also a better company
that balances profit with our Purpose. In order to deliver on
this commitment it is important that we are transparent in
our engagement with investors regarding a range of key ESG
issues including our exposure to material climate-related risks
and advancing inclusion and diversity, as well as that we are
a responsible taxpayer.
The main means by which we inform our investors of our
ESG-related performance is through the publication of our
annual CR Report. We also inform and listen to investors
through the submissions we make to the main sustainability
investment indices and rating agencies.
In 2021, we were recognised for our ESG efforts,
with highlights including:
– Dow Jones Sustainability Indices (DJSI): Inclusion in the
DJSI Europe means that PFG is in the top 20% of the largest
600 European companies in the S&P Global BMI based on
long-term economic, environmental and social criteria.
– FTSE4Good: PFG remains a constituent of the FTSE4Good,
an extra-financial market index, which measures the
performances of over 800 companies against a range
of ESG criteria.
Environmental, Social and Governance continued
– CDP: Following the submission made in the summer to
CDP, the largest climate change-focused data collection
and assessment programme which, each year, requests
information from companies on greenhouse gas emissions,
energy use and the risks and opportunities from climate
change, PFG was notified in December 2021 that it had
been given a B- score (up from a D score in 2020). This reflects
progress made by PFG in meeting the recommendations
of the TCFD (go to pages 68 to 72 for more information).
Plans for 2022
During 2022, we will continue to make annual submissions to
the indices and rating agencies mentioned here and respond
to ESG-related enquiries from our equity investors. In doing so,
our focus will include explaining how the ESG agenda affects
our key stakeholders, in particular our customers. We will also
seek to engage with our debt investors to promote our ESG
credentials with that particular audience.
We’re proud that we were awarded a
CDP rating of B- for our climate risk
efforts over the past 18 months. It reflects
the great work we’ve delivered in
meeting the recommendations of the
TCFD, which underlines our commitment
to being transparent in our approach to
managing climate-related risks and
opportunities across our business.
Muhrah Alsultan
Corporate Responsibility Manager
Provident Financial plc Annual Report and Financial Statements 2021
55
Strategic report
Our regulators and government
Engagement with our regulators
The nature of our market and customer base means building
and maintaining an open dialogue with our policymakers
and regulators is a critical part of our business model. These
include the Prudential Regulation Authority (PRA) and Financial
Conduct Authority (FCA). For information on the key regulatory
developments that relate to our business activities, go
to page 100.
We engage with both the FCA and PRA via regular planned
meetings and calls, and by responding to consultation
exercises regarding, for example, proposed changes to the
regulatory rules that relate to our sector. We also engage with
our regulators through our trade association memberships
and by participating in multi-stakeholder events (e.g. at
conferences). We have also started to publish thought
leadership articles on topics that might be of interest to our
regulators and policymakers on our social media and other
communication channels. An example of this in 2021, is the
article published by PFG’s CEO, Malcolm Le May, on the need
for Buy Now Pay Later products to be regulated.
Engaging with policymakers
To help ensure we stay up to date with regulatory matters,
PFG’s businesses are members of the Finance and Leasing
Association and UK Finance. We also retain a specialist
consultancy firm to provide the Group with policy advice.
However, this firm does not arrange meetings with ministers
or regulators and does not attend meetings with ministers or
regulators. PFG also does not make any monetary contributions
or allocate any spending to political campaigns, political
organisations, lobbyists or lobbying organisations and/or
other tax exempt groups.
Being a responsible taxpayer
We are committed to being a fair and responsible taxpayer.
We operate in an open, honest and straightforward manner
in all tax matters and we are fair and reasonable in all our
dealings with tax authorities. As such, we seek to make sure
that we comply with all tax rules and regulations in the places
where we operate. This helps to safeguard our reputation as
a responsible taxpayer, while recognising that we also have a
responsibility to protect shareholder value by managing and
controlling our tax liabilities.
Our tax strategy, which was last updated and approved
by our Board in December 2021 and can be accessed at
www.providentfinancial.com, follows our Purpose and is
aligned with HMRC’s Code of Practice on Taxation for Banks
(the Code), which sets out the principles and behaviours
expected of banking groups with regard to tax, and we have
unconditionally adopted the Code. To read more about what
makes us a responsible taxpayer and to see comprehensive
details on the total direct and indirect tax contributions we
pay on an annual basis, go to pages 79 to 83 of the PFG 2021
CR Report which can be found at www.providentfinancial.com.
Provident Financial plc Annual Report and Financial Statements 2021
56
Our colleagues
The colleagues who work for PFG are critical to the long-term
success of our business, from those who develop our products
and serve our customers, to those who keep our operations
running and make sure that the technology we use works.
This is why we are committed to building and sustaining a
culture for our colleagues that is inclusive, open and caring.
And it is why we provide our colleagues with access to
training and development opportunities so that they can
develop the skills they need and promote a healthy and safe
working environment where they can be themselves and
feel engaged.
Colleague engagement
An important element of the workplace culture we aspire
to build and sustain relates to engaging in effective
communication with colleagues and providing them with
opportunities to provide feedback and raise concerns and
feel that they have been listened to and had their views taken
into account.
Covid-19 continued to have an impact on colleagues
throughout 2021 which meant that we had to adapt how we
engaged with our teams so that we could communicate with
both those who were working in our offices and remotely from
home. During 2021, we continued to use video conferencing
platforms, our ‘Blueprint: Stay Connected’ magazine and
video blogs from our CEO and other members of the senior
management team to ensure that all colleagues were kept
Environmental, Social and Governance continued
up to date on PFG’s strategy and operational developments.
Alongside this, colleagues were encouraged to develop a
sense of community using a variety of tools, including the PFG
‘Stay Connected’ intranet. This has enabled them to host a
range of events, from ‘pub’ quizzes to book clubs, and baking
sessions to wellbeing talks.
We also conducted our third Group-wide annual colleague
engagement survey in November which covered a range
of topics relating to our Purpose, leadership, management,
roles and responsibilities of colleagues, working together and
development and reward. This year, 71% of colleagues from
across the Group took their time to respond to the survey,
down marginally by 3% on the previous year. Our overall results
show that we have maintained good levels of engagement
throughout what has been a difficult and challenging year
with the backdrop of the pandemic and significant change
across PFG including launching the Scheme of Arrangement
and closure of CCD. Our overall colleague engagement
score (which comprises five questions relating to loyalty and
advocacy) dipped slightly to 68% (2020: 72%). The headline
results from the 2021 survey are set out opposite.
As we have done in previous years, the results from our 2021
survey will be shared and discussed by our Colleague Forums
and the individual teams within our divisions throughout the
first half of 2022 to inform and develop collective action plans
and to address any specific issues.
We know that by bringing
colleagues from across PFG
together and celebrating our
differences in an inclusive working
environment where our Blueprint
behaviours are understood and
lived, we can achieve better
business results and a better
everyday life for our people.
Cheryl Ball
Chief Human Resources Officer
Provident Financial plc Annual Report and Financial Statements 2021
57
Strategic report
69+16+15+N
65+18+17+I
Your
role
69%
65%
16%
18%
15%
17%
65+22+13+N
61+22+17+I
Doing the
right thing
for customers
65%
61%
22%
22%
13%
17%
63+25+12+N
65+23+12+I
Our
Purpose
63%
65%
25%
23%
12%
68+32+N
72+28+I
Overall
colleague
engagement
68%
72%
64+19+17+N
61+20+19+I
64%
19%
20%
17%
Working
together
61%
19%
54+27+19+N
52+27+21+I
Leadership
19%
21%
27%
54%
52%
27%
78+13+9+N
9%
74+15+11+I
Your
manager
11%
13%
15%
78%
74%
52+24+24+N
51+25+24+I
Your
development
and rewards
24%
24%
52%
51%
24%
25%
Favourable response
2021 2020
Neutral response
2021 2020
Unfavourable response
2021 2020
28%
32%
12%
Colleague responses to key areas across the Group
Provident Financial plc Annual Report and Financial Statements 2021
58
Be Yourself – inclusion and diversity at PFG
PFG’s ambition is to create a truly inclusive workplace.
To achieve this, we need to build a diverse and balanced
workforce that reflects the customers we serve. We believe an
inclusive culture celebrates difference, allowing our colleagues
to bring their true selves to work and always feel they belong.
We also believe a culture of this nature to be intrinsically linked
to our Group Purpose, informing what we do and how we do it,
as we help put people on a path to a better everyday life.
What we have delivered in 2021
– Successfully launched our Group-wide Inclusion Community
through five aligned Affinity Groups: Disability, LGBTQ+, Gender
Balance, Ethnicity and Social Mobility. Our Affinity Groups
currently have 125 active and representative members, as
well as an extensive network of Affinity Group allies.
– Monthly inclusion and diversity (I&D) steering meetings
which are led by our Inclusion Chairs and deliver quarterly
progress updates to the PFG Executive Committee.
– Agreed and incorporated a new ‘Be Yourself’ I&D index into
our annual colleague engagement survey. This represents
a new set of questions designed to support and measure
the efficacy of our I&D programme. We are pleased
to report a positive response from 71% of colleagues
on questions relating to I&D (+3% on the overall
engagement score).
– Implemented a self-disclosure data capture process in
Moneybarn and Vanquis; this will be expanded to include
the wider Group in 2022.
– Targeted training for our Inclusion Community members
through our partnership with Inclusive Employers. We also
rolled out localised ‘unconscious bias’ training sessions
to the Inclusion Community through our Learning and
Development teams.
– A Be Yourself inclusion calendar and intranet homepage.
These allow colleagues across the Group to celebrate,
learn about and increase their awareness around an
extensive range of I&D-related events, including Pride,
Inclusion Week, Living with Autism and Black History Month.
– Peer Circles across the business via our Affinity Groups,
and a consistent I&D statement for use on recruitment
advertising and offer letters. The Affinity Groups have also
worked with our HR teams to draft a new PFG I&D policy,
Disability guide, Menopause guide and Transgender guide,
all of which we plan to launch in 2022.
Inclusion and diversity data as at 31 December 2021*
Environmental, Social and Governance continued
81%
73%
45%
21 21 21 21 21 21
20 20 20 20 20 20
2,280
1,952
7
27
1,362
1,173
6
25
20
53
142
207
121
100
1,106
826
Total staff Directors Senior
management
Middle
management
First-level
management
Other
colleagues
46%
54%
19%
27%
59%
41%
55%
43%
57%
79%
21%
Female Male
19%
(2020: 11%)
Ethnic background
Percentage of colleagues from an
ethnically diverse background
6%
(2020: 7%)
Sexual orientation
Percentage of colleagues
who disclose they are LGBTQ+
19%
(2020: 5%)
Disability
Percentage of colleagues who
disclose they have an impairment,
health condition or learning difference
43%
(2020: 39%)
Caring responsibilities
Percentage of colleagues
who disclose they have
caring responsibilities
* This data is based on colleagues’ voluntary self-declaration via our
November 2021 colleague engagement survey. It accounts for 71%
of the PFG workforce.
Our colleagues continued
Gender diversity across colleague levels as at 31 December 2021
73%
18
49
27%
133
221
62%
38%
53%
158
177
47%
1,948
1,594
45%
55%
46%
54%
Women in Finance Charter: 2021 update
As of 31 December 2021, we had 27% (2020: 27%) female representation in our senior management population. We continue
to focus our attention on working towards having 40% female representation in the Group’s senior management population
by December 2024. Key actions we have delivered over the past 12 months to help us to achieve our target have related to:
– updating and aligning all equal opportunities wording provided on job application processes, so that it encourages more
females to apply for roles at all levels and in all disciplines across the Group;
– introducing Peer Circles (run exclusively by colleagues) to encourage peer support for a range of issues. Some examples
of the issues that have been covered in the sessions that have been delivered to date, which specifically support females,
include; pregnancy, interview techniques, performance reviews and menopause support; and
– placing a focus on gender data by introducing the voluntary capture of inclusion and diversity data to support better
knowledge of women in roles from Black, Ethnic and LBGTQ+ backgrounds. We intend to be able to focus more on females
in senior positions/promotion opportunities once we understand our data more effectively across PFG.
Along with other companies, PFG is required to publish any difference in the average pay of male and female colleagues.
Further details for PFG are available in our Gender Pay Reports (see pages 42 and 43 of our 2021 CR Report for more information).
Strategic report
Provident Financial plc Annual Report and Financial Statements 2021
59
Focus on gender diversity
The PFG I&D strategy that we have in place centres on creating
and maintaining a fair, diverse and inclusive culture for our
colleagues and other stakeholders. A key focus of this strategy
is about achieving a better gender balance in our senior
management population. Improving female representation at
senior management and director level is extremely important
for the long-term sustainability of PFG.
Set out below are some of the actions PFG has put in place
over the past 12 months to support achieving a better gender
balance in our senior management:
Commitment: PFG signed up to the HM Treasury Women in
Finance Charter, a government initiative to improve gender
diversity in senior positions within the financial services sector,
in March 2019.
Targets: On becoming a Charter signatory, we set ourselves
a target to have 33% or more female representation in the
Group’s senior management population by December 2020,
a target that was not met because of the disruption we
encountered in 2019, and 40% female representation in the
Group’s senior management population by December 2024.
Raising awareness: Through the ‘Be Yourself’ programme we
have facilitated panel discussions and delivered regular vlogs
and events to profile events such as International Women’s
Day and National Inclusion Week.
Balanced short-lists: Ensuring we have 50/50 gender balance
short-lists when we recruit for senior leadership roles across
PFG. We work in partnership with the recruitment agencies we
use to ensure they are clear on our expectations regarding our
I&D commitments.
Strengthening our talent pipeline: Delivering our Next
Generation Women’s Leadership Programme to high-potential
women from across PFG to help strengthen the female talent
pipeline at the senior/middle management level. This supported
the appointment of Jo Simms as CRO, in our vehicle finance
business. In 2022, we will build on this Programme and start
to deliver an inclusive leadership programme to PFG’s wider
management population to cement equality, diversity, and
inclusion as a central pillar of their professional lives and PFG’s
long-term success.
Colleague health and wellbeing
At PFG, we believe that supporting the mental wellbeing of our
colleagues is just as important as looking after their physical
health and safety. We recognise the importance of doing this,
both in terms of individual welfare and the impact it can have
on our business. Now more than ever, mental wellbeing is a key
contributor to our colleagues’ health and safety, their social
wellbeing and their ability to fulfil their potential at work.
Throughout 2021, our network of Mental Health First Aiders ran
mental wellbeing awareness campaigns that lined up with
external activity, giving us an opportunity to highlight specific
mental health issues and signpost the relevant support
available to all colleagues. In partnership with the Bank Workers
Charity, we delivered a series of webinars exploring key topics
around improving and maintaining mental wellbeing.
All PFG colleagues and their families have access to free
confidential mental health and wellbeing support, available
24/7 through our Employee Assistance Programme (EAP).
EAP features include:
– a dedicated helpline with calls answered by experienced
in-house counsellors and legal and financial
specialists; and
– a smartphone app and personalised online wellbeing
content, including videos, webinars, mini health checks
and health coaching.
Provident Financial plc Annual Report and Financial Statements 2021
60
Our suppliers
Supply chain responsibility
In 2021, PFG’s annual procurement spend was £200m. Most
of the Group’s tier one suppliers are based within the UK.
These suppliers range in size and scale from small and
medium-sized enterprises, to large multinational corporations.
The highest area of spend for the Group is on professional
services (consultants, contractors, etc.), postage, credit card
processing, customer referrals, data centre hosting, credit
score checking services and consultancy and legal fees.
Other areas of high spend include software licences and
support, contractor sourcing and recruitment, and property
and facilities management.
Environmental, Social and Governance continued
We are committed to engaging with all our suppliers in
a responsible manner and are opposed to slavery and
human trafficking in both our direct operations and in the
indirect operations of the supply chains we have. As such,
the Group will not knowingly support or do business with any
organisation involved in slavery or human trafficking. This
commitment is underpinned by the Group’s Corporate Policy
on Human Rights and Modern Slavery which endorses the
United Nation’s Universal Declaration of Human Rights and
the International Labour Organisation’s (ILO’s) Declaration
on Fundamental Principles and Rights at Work. The Group
also acknowledges the United Nation’s Guiding Principles on
Business and Human Rights as the recognised framework for
the Group and its divisions to respect human rights in their
own operations and through their relationships with other key
stakeholders (e.g. suppliers) and is a signatory to the United
Nations Global Compact.
In accordance with the requirements of the Modern Slavery
Act 2015, our most recent statement on modern slavery and
human trafficking, dated March 2022, sets out the actions
that the Group is taking to ensure instances of modern
slavery or human trafficking are not occurring directly in
our businesses as well as indirectly in the supply chains
that we use to procure goods and services. The statement
also communicates the measures we have taken to
improve internal understanding and awareness around
modern slavery and human trafficking and can be found
at www.providentfinancial.com.
Prompt payment of suppliers
We are committed to the prompt payment of our suppliers,
and endeavour to pay all invoices within agreed terms and
in accordance with requirements of the UK Government’s
Prompt Payment Code. PFG has been a signatory to this Code
for almost a decade and is committed to paying all suppliers
within 60 days of receiving an invoice, and paying 95% of
invoices from small suppliers within 30 days.
Strategic report
Provident Financial plc Annual Report and Financial Statements 2021
61
21
20
92%
99%
Group corporate office
21
20
99%
99%
Vehicle finance
21
20
100% 99%
Credit card
Percentage of suppliers paid in 60 days in 2021
Percentage of suppliers paid in 30 days in 2021
21
20
84%
81%
Group corporate office
21
20
98%
96%
Vehicle finance
21
20
100%
94%
Credit card
Provident Financial plc Annual Report and Financial Statements 2021
62
Environmental, Social and Governance continued
Our communities
87+12+1+N
87+12+1+I
Total
£1,369,442
2020: £1,190,332
Cash
2021: £1,230,677
2020: £1,035,984
Management costs
2021: £126,649
2020: £143,129
Value of employee time
2021: £12,116
2020: £11,219
Our 2021 community investment figures
Delivering a positive social impact
Our Purpose of helping to put people on a path to a better
everyday life underpins our reason for being and the role we
play in the lives of our customers, it also informs the choices
we make in our community investment activities. This is why
we launched the PFG Social Impact Programme in 2019.
Through the knowledge and understanding of our customers,
and the market we have served since 1880, we have been able
to develop our approach to community investment which
focuses on investing in activities and initiatives which seek to
address some of the key factors which, on their own or acting
together, can reduce social and/or financial inclusion. These
factors include lack of literacy or numeracy skills; disabilities
and/or mental health issues; unemployment or under-employment;
low levels of educational attainment; and low, uncertain or
fluctuating incomes. The three core themes of our Social
Impact Programme strategy are set out on page 63.
In 2021, we committed a total of £1.4m (2020: £1.2m) to fund a
range of activities through our Social Impact Programme.
Supporting customer and colleague wellbeing
We continue to support the customer and colleague wellbeing
agenda through a dedicated workstream of the Group’s Social
Impact Programme. The focus of this workstream is twofold:
supporting charities and specialist partners to address issues
such as money/debt advice, customer vulnerability and
financial difficulties (details of some of the money/debt advice
organisations are set out on page 53) and ensuring that all
our colleagues can access support and tools to help them
maintain positive mental health and wellbeing (see page 59
for more information).
Provident Financial plc Annual Report and Financial Statements 2021
63
Strategic report
Through this pillar of our programme, we worked with The
Money Charity during 2021 to produce a number of videos
to help engage people of all ages across the UK with
financial wellbeing and financial education. These videos
were produced in response to Covid-19 and were designed
to help people of all ages to develop the skills, knowledge,
attitudes and behaviours they need to manage their money
better every day and achieve their financial goals. The
videos explored the themes of ‘Financial Education for Young
People’, which followed the charity’s Young People’s team as it
delivered money management workshops in schools, colleges
and community organisations throughout the UK. In addition,
the ‘Financial Wellbeing in the Workplace’ and ‘Financial
Wellbeing in the Community’ videos show how its work with
adults brings financial wellbeing workshops and webinars
to a wide range of commercial and charitable settings.
Supporting our colleagues to get involved
in our communities
Despite the challenges of the Covid-19-related restrictions we
have had to deal with throughout 2021, we have continued to
use our Social Impact Programme to provide our colleagues
with volunteering and fundraising opportunities. Through our
Volunteering and Matched Funding Policy, colleagues are able
to take a full day’s paid leave to volunteer for a community
organisation or charity of their choosing. We also offer a
range of Company-led opportunities to colleagues. This is
an important aspect of the PFG Social Impact Programme
because it enables colleagues to use their career journeys,
backgrounds and experiences to inspire children and young
people and help them on their own journeys, develop their
own skills, and give something back to the many communities
we serve across the UK.
Core themes What we do We do this by Why we do this
Customers
and colleagues
Invest in activities
and initiatives that
seek to address key
factors which may
affect customer and
colleague wellbeing.
– Ensuring colleagues have the
skills to deal with customers’
additional needs.
– Funding independent
research into financial
decision making and
supporting the delivery of
financial education, including
for hard to reach groups.
– Funding a range of debt
advice organisations.
– Helping customers and
colleagues to maintain
positive mental health
and wellbeing.
– To ensure our customers and
colleagues have access to
appropriate financial services
and wellbeing support. Where
they do not, to help them
recognise and overcome the
barriers to financial inclusion
and support their health
and wellbeing.
– To ensure help is available
to those with additional
needs, for example, those
in financial difficulty.
Education
Support children,
young people and
adults to boost their
education, skills and
aspirations, in order to
participate in society
and secure a brighter
financial future.
– Providing support for
programmes to boost the
literacy and numeracy of
children, young people
and adults.
– Offering young people
and adults insights into the
world of work and the skills
that will help them secure
opportunities, including
employment.
– The right skill set is essential
for social inclusion. Those
who live in disadvantaged
communities can lack
confidence, as well as
awareness of where and how
they might acquire skills or
boost those they have.
– Developing skills promotes
personal confidence,
aspirations and the potential
to participate in society.
Community
Support community
projects in areas
where people are
more likely to face
social and financial
exclusion.
– Providing grants to grass
roots organisations and
charities through community
foundations which will
support local people in
improving aspects of their life.
– To help people overcome
personal difficulties that
might be preventing them
from feeling socially or
financially included in the
communities in which they
live and work.
Provident Financial plc Annual Report and Financial Statements 2021
64
The Purpose of our business is to help put
people on the path to a better everyday life.
One of the ways we do this is through our
education programme. We support children,
young people, and adults from disadvantaged
areas in their learning as well as providing
them with insights into the world of work. It’s all
about raising aspirations and giving them a
future in which they’re included in society. It’s
also a great way for colleagues to develop
their own skills.
Cathy Prior
PFG Social Impact Manager (Education)
Hearing from the Headmaster
about how much the project means
to the children gave context to what
we were doing and why, and made
us want to do a really great job to
finish off the play areas that they
had so brilliantly started. I feel very
proud of what we achieved
together as a team.
Amber Bibi
PFG Company Secretarial Assistant
Community team challenge in Bradford
In November 2021, a number of colleagues in the PFG
corporate office braved the elements to deliver a team
challenge with The Venturists, a project at The Academy at
St James primary school in Allerton, Bradford. The Venturists
is a unique project designed for primary schools, in particular
for 9 to 11 year olds, which gives them the opportunity to
understand and explore issues in their community and what
they might do to help to resolve them. Many of the pupils
at the school face challenges at home, often related to
different forms of disadvantage, and may therefore be more
likely to disengage from their education. The Venturists is an
innovative project which gets them interested and involved
in their own communities, whilst also helping their personal
development, confidence and resilience. As part of the
challenge, the PFG team helped to build an upcycled play
area and new wildlife garden.
Building children’s aspirations
During the year, colleagues from across PFG have supported
children and young people to develop their literacy skills and
prepare them for the world of work through a programme we
have established with the Ahead Partnership.
This has seen them volunteer to take part in:
– Careers panels: Colleague volunteers shared their career
journeys, the roles they do and what it is like to work for an
organisation like ours.
– Mock interview sessions: Colleague volunteers helped
students practice speaking about themselves and their
strengths before they leave school to move to a real-life
work situation.
– Work insight days: Colleague volunteers hosted virtual work
insight days where students learned about delivering excellent
customer service, and renting and buying commercial
property and even pitched ideas to our Digital Dragons’ Den.
– Reading partnerships: Colleague volunteers helped younger
children to practise reading to improve their literacy skills,
develop a love of stories and feel confident about their
own ability.
Environmental, Social and Governance continued
Our communities continued
Provident Financial plc Annual Report and Financial Statements 2021
65
Strategic report
Delivering positive social impacts in our communities
PFG has well-established Social Impact Funds with
Community Foundation Wales and Foundation Scotland,
as well as with the Community Foundations for Hampshire
and Isle of Wight, Kent, Leeds and London. These community
foundation partnerships have been established in areas
of the country where our main business premises, and
therefore colleagues, are based in Bradford, Chatham,
London and Petersfield, and in parts of the UK where we have
traditionally had high numbers of customers. The funds we
have with our community foundation partners are referred
to as ‘immediate grant-making’ funds where the full value
we donate to them on an annual basis is immediately made
available for grant making. The criteria for the funds we have
established focus on:
– improving people’s personal finance capabilities
(debt and financial advice/education);
– improving physical and/or mental health;
– providing support which enhances, creates and sustains
positive family relationships;
– addressing issues of low educational attainment
and improving learning outcomes; and
– providing people with opportunities to reduce inequality,
exclusion and disadvantage, including projects which
increase access to employment.
Grant panels which are made up of colleagues from across
PFG and facilitated by representatives from the community
foundations with which we have funds play a key role in
reviewing the grant applications. They meet throughout the
course of the year to agree which of them will be awarded a
grant. In 2021, these funds disbursed grants totalling almost
£307,000 to 51 small community organisations. Details of the
organisations our grants supported during 2021 are set out
on page 66.
These kinds of panels are really unique
because PFG colleagues are involved
in the decision-making process too. It’s
wonderful that colleagues can bring their
own diverse personal experiences and
input to the panel, which encourages
healthy discussions.
Bruce Topham
Grants Manager, Kent Community Foundation
I feel honoured to have taken part in
the grant panel. We assessed many
applications, and it was inspiring to see the
amazing work so many charities do, and
the outreach they have in our community.
Knowing I work for a company that helps
our communities is one of the many
reasons I’m proud to work for PFG.
Lara Hoban
Compliance Officer, Moneybarn
Boosting the education, skills and aspirations
of children and young people
We believe that by supporting the education agenda we
can help to put the people who live and work in the many
communities we serve across the UK on a path to a better
everyday life. Through the PFG Social Impact Programme, we
have developed an education programme to help children,
young people and adults to acquire or boost their skills and
aspirations in order to participate in society and progress in
education, the workplace or the communities they live in.
By supporting bespoke and targeted initiatives delivered
by expert partners, our education programme takes a
wide-ranging approach to education and skills acquisition.
We support both literacy and numeracy interventions, as well
as opportunities to gain insights into the world of work and
acquire crucial life skills that contribute to social mobility. We
also recognise that it is important for support to be delivered
in different ways and in different locations, such as schools,
workplaces and community settings, in order to better match
the needs of those who would benefit most from participation.
The solutions we support under this workstream are delivered
by eight key partners: National Numeracy, The Money Charity,
the National Literacy Trust, Social Mobility Business Partnership
and Outward Bound Trust operating on a nationwide basis
and Leading Children, the Ahead Partnership and School-Home
Support operating locally in Bradford and Chatham, where
we have some of our main offices.
Becoming a Numeracy Champion programme:
Maths mindset and money
In addition to again being lead supporter of National
Numeracy Day on 19 May 2021, one of the areas where we
have provided support to National Numeracy has been in
relation to the development and roll-out of new Family Maths
resources. This enhanced National Numeracy’s Supporting
Children’s Numeracy work, which has been more important
than ever due to the impact of school closures on children’s
education. The new resources are curriculum-linked maths
activities for children to complete with their families or other
adults who support them. They explore financial capability
and growth mindset in open-ended activities for ages 4 to 16,
with information sheets provided for adults about developing
their own and children’s confidence with numbers.
Organisations given the resources to use within their
community settings include past and current PFG partners
Sedbergh Community Centre, Scholemoor Beacon, School-Home
Support, One in a Million, and Christians Against Poverty. The
resources are also now part of the popular Family Maths Toolkit,
an integral part of National Numeracy’s Parental Engagement
Programme, which equips the adults involved in children’s
care to support the building of positive attitudes and skills.
In 2021, around 11,000 children, families and teachers from
19 schools in areas of need in the West Midlands, London
and Ayrshire have been supported through this programme
and offered those resources.
Provident Financial plc Annual Report and Financial Statements 2021
66
Environmental, Social and Governance continued
Projects supported through our PFG Social Impact Programme funds
Our communities continued
To read more detail on the projects that we support,
view our Corporate Responsibility Report at:
www.providentfinancial.com/sustainability/
corporate-responsibility-report-2021
Foundation Scotland London Community Foundation
– I Am Me Scotland
– Rise Against Abuse
– Home-Start Renfrewshire & Inverclyde
– Greenock Glenpark Harriers
– Magic Torch Comics
– Man On! Inverclyde
– Autus
– Dadihiye Somali Development Organisation
– Havelock Family Centre
– Kurdish and Middle Eastern Women’s Organisation
– Lewisham Multilingual Advice Service
– Ripe Enterprises
– The Women’s Centre Sutton
– Youth Legal Resource Centre
Leeds Community Foundation Hampshire and IOW Community Foundation
– Bradford Community Broadcasting
– Flourished Minds
– Impact Hub Bradford
– Keighley Association for Women & Children’s Centre
– Leeds Gypsy and Traveller Exchange
– Meridian Centre
– Participate Projects
– Café West Healthy Living Centre
– Hollings Youth Association CIC
– Mary Magdalene CIC
– The Valley Project
– Frontline Petersfield
– Home-Start Butser
– Wet Wheels
– Gosport & Fareham MS Society
– Making Space
– Interim
– Moving On
– Y Services
– Marvels & Meltdowns
– Love Outdoors
– Disabled Sailors Association
Kent Community Foundation Community Foundation Wales
– Cornerstone City Church
– Gillingham Baptist Church
– Great Leaps Adventure CIC
– Kent Savers Credit Union
– Maidstone Mediation
– Medway Education Business Partnership
– Medway Puzzles
– Medway Watersports Trust
– Refocus
– Walderslade Together CIC
– Bethel Trust Port Talbot
– Horn Development Association - ‘Go Girls’
– Llanelli LGBTQ+
– St Paul’s Family Centre
– Swansea Music Art Digital
Provident Financial plc Annual Report and Financial Statements 2021
67
Strategic report
Delivering a positive social impact in the future
Given the changes that have taken place at PFG during 2021,
we took the view that it was appropriate for us to review and
update our approach to community investment. This was
done to help us to ensure that it is better aligned with our
Purpose but also that it supports our focus on becoming a
broader banking group which provides credit to underserved
customers in the mid-cost markets.
We also believe that we have a duty to add a ‘legacy’
component to our approach so that PFG can continue to
provide some of the local communities we have served for
over 140 years with meaningful, ongoing financial support
to help put them on a path to a better everyday life and
tackle the social exclusion issues that disproportionately
impact some of the people that live, work and study
in these communities.
In 2022, we will therefore replace the PFG Social Impact
Programme with a new PFG Foundation. By structuring our
approach under a Foundation model, we will be able to
coordinate our community investment activities under one
banner, establish signature programmes which are targeted
specifically at supporting children and young people, and
allocate sufficient time, capability and investment.
Under this new model, we will develop signature programmes
which focus on:
1
Supporting educational partners and grass roots charities
and community organisations in the communities where
our main offices are based, and where our customers live
and work, to help address a range of social and financial
exclusion issues facing children and young people. This
will involve us continuing to support our UK-wide partnerships
with National Numeracy, the National Literacy Trust, the
Outward Bound Trust and Social Mobility Business Partnership
which deliver benefits to stakeholders and have become
more aligned with our business objectives. It also includes
maintaining the funds we have with our community
foundation partners in the areas of the country where
our main business premises, and therefore colleagues,
are based.
2
Establishing a new flagship initiative which will deliver a
programme to further inspire and support children and
young people to access education, and boost their skills
and aspirations.
3
Providing repayable finance to voluntary, charity and
social enterprise sector organisations which deliver products
and services to address a range of issues which benefit
children and young people.
Kurdish and Middle Eastern Women’s
Organisation (KMEWO)
KMEWO has been providing specialist support
services for Kurdish, Middle Eastern and North
African women for over 21 years. It provides
specialist violence against women and girls
(VAWG) services and crisis intervention to some
of the most vulnerable minoritised women
who are survivors of domestic violence and
harmful practices, forced marriage and ‘honour’
based abuse. Its approach is a combination of
individual and group holistic activities designed
to help survivors of VAWG through recovery.
Our funding is enabling KMEWO to provide digital skills
training, English for Speakers of Other Languages (ESOL)
support and employment coaching to 15 marginalised
ethnic minority women over six months in North London,
through its ‘Breaking Digital and Personal Barriers to
Employment’ project. The project works with women
to break down the barriers they face in achieving their
personal goals including poor digital skills, childcare,
caring responsibilities, language, self-esteem, self-worth,
low confidence and lack of support.
Workshops and training include one-to-one advice and
guidance sessions to identify barriers; digital skills learning
(how to keep safe online, emails, setting up, accessing
and installing apps, virtual meetings, using social media
and skills to create documents); ESOL for employability;
coaching and career-building workshops to prepare
women for volunteering or employment opportunities;
and personalised one-to-one employment support
including online job searching and CV creation.
PFG’s funding will cover the core costs of an Employability
Support Worker for six months to coordinate the project
and work individually with each woman to support goal
setting and access to support, advice and counselling.
It will also be used for tutor costs for digital skills, ESOL
and employability workshops.
Provident Financial plc Annual Report and Financial Statements 2021
68
Our environment
Protecting the environment and taking action
on climate change
We recognise that the long-term success of our business
depends on the resilience of our operations, supply chains,
and the communities where our customers and colleagues
live and work. This means that it is essential that we minimise
our environmental impacts and work with others to take
action on the globally important issue of climate change
which means embracing the Paris Agreement and keeping
global warming to 1.5°C above the temperature set before
the beginning of the Industrial Revolution. The future of PFG
depends on this.
Managing our impact on the environment
We continue to actively work to reduce our environmental
impacts through the environmental management system
(EMS) we have in place at our Bradford head office, Vanquis
Bank’s business premises in London and Chatham, and
Moneybarn’s offices in Petersfield. Our EMS helps us to identify,
assess and reduce key environmental risks and impacts; set
and deliver against environmental targets; and ensure our
legal compliance. Our EMS is independently audited each year
against the requirements of the international management
standard ISO 14001:2015. Following the audit that was carried
out in 2021, all our business premises continue to be certified
to ISO 14001:2015, which means that all PFG’s main premises
are accredited to an internationally recognised environmental
management standard.
Managing climate change-related risk
Our TCFD update: PFG’s climate-related risk disclosure
To deliver on our stated net-zero carbon emissions ambition
by 2040 (which relates to the scope 1, 2 and 3 emissions that
arise from PFG’s operations) and achieve the goal of the 2015
Paris Agreement to hold the increase in the global average
temperature to well below 2°C above pre-industrial levels, and
ideally to 1.5°C, we recognise the importance of understanding
and reporting the actual and potential impacts of climate
change-related risks and opportunities on PFG. This requires
PFG to report in line with the recommendations of the TCFD.
PFG has reported against the TCFD recommendations. As
such, PFG complies with the FCA’s Listing Rule 9.8.6R(8) and has
Environmental, Social and Governance continued
published a disclosure that is consistent with the 2017 TCFD
recommendations and recommended disclosures. We will
ensure that the future disclosures we publish in line with the
TCFD recommendations annually consider relevant TCFD
guidance and materials and evolving best practice.
Set out below is an update on the work undertaken by PFG
during 2021 in meeting the recommendations of the TCFD.
TCFD is built around four overarching pillars: governance, risk
management, strategy, and metrics and targets, which in
turn include 11 recommendations to support the development
of meaningful climate-related financial disclosures. Taken
together, these provide a consistent framework for companies
to report on their exposure to material climate-related
risks and opportunities, and a means to communicate
decision-useful information to investors, regulators
and other stakeholders.
Context
PFG is a FTSE 250 company listed on the London Stock Exchange.
With approximately 2,500 UK-based colleagues, the business
serves 1.6 million people through the provision of credit cards,
vehicle finance and personal loans. The approach taken by
PFG to determine its exposure to material climate-related risks
and opportunities is from the perspective of a listed company
whose business model is affected by climate-related risks and
opportunities and whose operational activities can have both
direct and indirect impacts on climate change.
Recommendation 1
Governance: Disclose the organisation’s governance
around climate-related risks and opportunities
1.a The Board’s oversight of climate-related risks
and opportunities:
The Provident Financial plc Board takes overall accountability
for the delivery of PFG’s strategy and reviews the Group’s
sustainability performance, including matters which relate
to the climate change agenda. The Board’s CCE Committee
supports the Board in providing oversight of the Group’s
approach to managing and reporting its impact on the
environment, which includes impacts related to climate
change. The CCE Committee provides an update to the
Board on climate-related matters annually. The Board’s Audit
Committee also reviews PFG’s TCFD disclosures.
PFG’s CEO, with support from the Executive Committee, provides
management oversight of the progress being made by the
Group in managing its strategic ESG objectives, including those
that relate to climate change. This includes reviewing and
updating associated risk management policies, and setting
and monitoring climate-related performance objectives.
1.b. Management’s role in assessing and managing
climate-related risks and opportunities:
Ongoing management of the climate risk agenda, is provided
by PFG’s Climate Risk Committee (CRC) which was established
in April 2021. This senior management committee, which is
chaired by PFG’s Chief Risk Officer, consists of representatives
from a range of business lines and function teams across the
Group including Risk, Finance, Operations, Compliance and
Sustainability to provide oversight and drive implementation
of the TCFD recommendations and the Group’s wider climate
risk strategy. The Committee reports to senior management
on PFG’s response to the issue of climate change biannually.
These reports cover PFG’s approach to climate-related
risks and opportunities within the business, and ensure the
Group’s public commitments on the TCFD recommendations
are upheld.
Provident Financial plc Annual Report and Financial Statements 2021
69
Strategic report
Key climate-related risks
Risk
Description
Potential
financial impact
Time horizon
Transition
The imposition of new climate-related regulations,
policies and taxes could add to PFG’s operational and
compliance costs. They could also discourage PFG’s
customers from accessing its products and services
through their impact on levels of disposable income.
Finally, failure by PFG to respond to changing consumer
preferences could reduce demand for products
and services.
Increased
expenses
or reduced
revenues
Short and
long term
Physical
Adverse climate-related events (e.g. floods, droughts,
storms, etc.) could impact PFG’s operations as well
as key stakeholders such as customers, colleagues
and suppliers.
Increased
expenses
Long term
Reputational
Failure to respond to legislative requirements and
the needs of stakeholders could lead to regulatory
or financial censure and/or reduced customer loyalty
and shareholder divestment.
Reduced
revenues
Short and
long term
Key climate-related opportunities
Opportunity
Description
Potential
financial impact
Time horizon
Resource
efficiency
Through its sustainability strategy, PFG seeks to operate
its business in way that has minimal impacts on the
environment and improves operational efficiencies.
This provides PFG with opportunities to implement
initiatives and programmes that support the Group’s
journey to net zero (e.g. by using 100% renewable
energy and reducing waste and greenhouse
gas emissions).
Reduced
expenses
Short and
long term
New products
and services
There will be increased demand amongst consumers
for financial products and services that align with
their climate-related needs (e.g. that support
energy efficiency). This could present PFG with
revenue-generating opportunities.
Increased
revenues
Short and
long term
The CRC is supported by a newly established Climate Risk Working Group (CRWG). The CRWG assists the CRC in the process of
analysing the risks and opportunities that climate change presents to PFG’s operations and stakeholders. The analytical work
that the CRWG undertakes assists the CRC to provide guidance and direction for the assessment and management of climate
change-related risks and opportunities, and supports the Group’s ongoing compliance in meeting the recommendations
of the TCFD.
The remuneration of the executive directors is partly linked to our progress in building a more sustainable future and is aligned
with a number of environmental, social and governance (ESG) objectives. More information on these objectives is set out in the
Directors’ Remuneration Report on pages 177 to 191.
Provident Financial plc Annual Report and Financial Statements 2021
70
Environmental, Social and Governance continued
Protecting the environment and taking action
on climate change continued
Managing climate change-related risk continued
Recommendation 2
Strategy: Disclose the actual and potential impacts
of climate-related risks and opportunities on the
organisation’s businesses, strategy, and financial
planning, where such information is material
Our strategy to understand the potential for future climate
change to impact PFG, involves undertaking a scenario analysis
which is a forward-looking projection of risk outcomes that
focuses on: identifying physical and transition risk scenarios;
linking the impacts of the scenarios to financial risks;
assessing any sensitivities to those risks; and extrapolating
the impacts of those sensitivities to calculate an aggregate
measure of exposure and potential losses. In the first instance,
our approach to doing this has involved undertaking a
forward-looking, qualitative scenario analysis which will
allow us to explore relationships and trends in the absence
of reliable numerical data. It is recognised that, by using this
approach, qualitative scenario narratives have been used
to help PFG to explore the potential range of climate change
implications for the Group. Over the course of 2022, our
scenario analysis methodology will evolve to use quantitative
information to enhance our assessment of the potential
financial impacts of climate change on PFG, and to improve
future TCFD reports.
Following consultation with the PFG CRC, three climate-related
risks and two opportunities for the short term (1-5 years) and
the long term (5-10 years) have been identified as being most
material to the Group (these are set out on page 69).
2.a. The climate-related risks and opportunities the
organisation has identified over the short, medium,
and long term.
2.b. The impact of climate-related risks and opportunities
on the organisation’s businesses, strategy, and
financial planning.
2.c. The resilience of the organisation’s strategy, taking into
consideration different climate-related scenarios, including
a 2°C or lower scenario:
The TCFD recommends that organisations use different
climate-related scenarios, including a 2°C or lower scenario.
As we acknowledge the overwhelming scientific evidence of
the UN Intergovernmental Panel on Climate Change (IPCC)
experts and agree with the need to keep the temperature
increase below 2°C, we have therefore adopted the following
two scenarios in line with this recommendation. The sources
for these scenarios are the Fifth Assessment Report of the IPCC
and International Energy Agency (IEA):
Scenario 1 – Alignment (transition risks, major; physical
risks, minor): There is strong international alignment to limit
the global temperature increase to below 1.5°C in an orderly
manner. This sees strict product and regulatory standards,
high carbon pricing and strategic investment in low-carbon
technologies, and consumers who are, by and large, on board.
Scenario 2 – Fragmentation (transition risks, minor; physical
risks, major): Progress towards a low-carbon economy is
fragmented and inconsistent, leading to a global temperature
increase of between 2°C and 4°C. It is assumed that physical
risks will increase, with an intensification of natural disasters
associated with, for example, rising sea levels and more
frequent abnormal weather events.
During 2021, our qualitative scenario analysis work has focused
on the potential for climate-related transition risks to impact
our operations and customers, specifically how increases
in the price of wholesale gas, an accepted transition fuel
which is already subject to the Climate Change Levy in the
case of business energy use and other environmental and
social taxes in the case of domestic energy use, could impact
PFG’s operating costs and the income and expenditure of
our customers. The analysis also acknowledges that the
introduction in the UK of a ban on the sale of new petrol and
diesel cars and vans by 2030, with all new vehicles required to
be 100% zero emissions from 2035, as a material consideration
for the Group. However, it is recognised that the list price of
the majority of used electric vehicles is currently a barrier to
ownership for many middle and lower income consumers. We
will therefore continue to develop further insight into the used
electric vehicle market. Finally, our analysis has also focused
on determining whether PFG’s operations are exposed to
any material climate-related physical risks. Our qualitative
scenario analysis work has fed into Vanquis Bank’s Internal
Capital Adequacy Assessment Process (ICAAP).
Scenario analysis summary results
Scenario 1
PFG’s exposure to climate-related transition risks under this
scenario is considered to be primarily indirect, with such risk
principally having the potential to affect future revenues and
expenses (as opposed to assets and liabilities). For example,
forecasted energy price rises are recognised as being a
material issue for customers in this context. As such, our
businesses will continue to review, and where appropriate
adjust, their affordability assessments to ensure that these
increases are taken into account.
In terms of PFG’s exposure to physical risks, although it is
accepted that extreme weather events will increase in
number and severity compared to the present, they are
unlikely to be as severe as those expected under Scenario
2. Also, the direct financial impacts associated with these
events are considered to be minimal for PFG because its four
main offices are leased, and insurance is in place to help
mitigate the impacts of such physical risks. Furthermore, PFG
Our environment continued
Provident Financial plc Annual Report and Financial Statements 2021
71
Strategic report
maintains and tests business continuity plans to ensure the
continuity of its operations in a range of situations, including
those where an extreme weather event occurs, and having
successfully operated throughout the Covid-19 pandemic,
the business has shown that it can work productively and
effectively remotely.
In the long term, we would expect that a transition scenario,
where there is strong international alignment to limit the global
temperature to below a 1.5°C increase in an orderly manner,
will result in better outcomes for PFG and its customers than
in scenarios which involve physical risks. This is because the
severity of the physical climate-related risks will be reduced,
resulting in more stable economic conditions in the long term.
In the meantime, PFG will continue to manage the transition
risks that are short and medium term by continuing to deliver
its business strategy in line with its stated ambition and other
environmental commitments.
Scenario 2
It is assumed that government policy and regulations
will not be tightened as much as under Scenario 1, and
therefore the impacts of responding to transition risks will be
comparatively lower.
It is also expected that physical risks will increase, and the
damage caused by extreme weather events and other natural
disasters will be more severe than under Scenario 1. However,
as described above, it is considered that, for PFG, the direct
financial impacts associated with such events would be
minimal. This is because PFG’s four main offices are leased,
insurance is in place to help mitigate the impacts of such
physical risks and business continuity plans are maintained
and tested to ensure the continuity of PFG’s operations in a
range of situations, including those where an extreme weather
events occurs. If climate change progresses and extreme
weather events and natural disasters occur on an increasing
scale this could have a negative influence on the UK economy
which, in turn, has potential to impact consumers. These
impacts will continue to be monitored to determine the
potential for them to cause PFG customers to, for example,
lose income.
In preparing the Group’s financial statements (see pages 192
to 275), we have considered the impact of the results of our
qualitative scenario analysis and climate-related risks on
our financial performance, and while the effects of climate
change represent a source of uncertainty, there has not been
a material impact on our financial judgements and estimates
due to the physical and transition climate-related risks in the
short to medium term. We are committed to understanding
and assessing the risks associated with climate change and
the impact on PFG’s financial results and will continue to update
our approach to scenario analysis as more business-related,
economic and climate data becomes available.
Recommendation 3
Risk management: Disclose how the organisation
identifies, assesses, and manages climate-related risks
3.a. The organisation’s processes for identifying and
assessing climate-related risks:
Climate change has been designated as a principal risk
within the Group’s Risk Management Framework. This is
because PFG is committed to minimising its environmental
impacts, along with determining the short, medium and
long-term risks that climate change poses to the business,
its customers and stakeholders as part of the Group’s wider
ESG strategy. The Group has also adopted a ‘risk cautious’
appetite for exposure to climate risk and is committed to
setting and working towards science-based targets in line
with our other obligations to combat climate change which
will be submitted to the Science Based Targets initiative for
approval. In 2021, we introduced a Group Climate Principal Risk
Policy which sets out clear expectations regarding how we will
understand, review, and address our exposure to climate risks,
meet our commitments on climate targets and report in line
with relevant government legislation and recommendations,
and seek new opportunities arising from climate change.
3.b. The organisation’s processes for managing
climate-related risks:
As with all principal risks, the PFG Risk Management Framework
sets out the high-level control principles that are in place and
those responsible for managing both the overall risk and the
relevant mitigating controls (go to pages 87 and 99 for more
information). All risks are monitored and reviewed throughout
the course of the year to identify changes that could impact
the risk profile. Day-to-day management responsibility of
climate-related risks is dispersed across PFG depending
on the nature and likely impact of the risk. For example,
the memberships of both the CRC and CRWG described
above include representatives from a range of functions (for
example, from PFG’s Finance, Risk, Procurement and Building
Management teams) which enables any material climate-
related risks to be identified, assessed and managed.
3.c. Processes for identifying, assessing, and managing
climate-related risks are integrated into the organisation’s
overall risk management:
PFG will stress test the risks and their impact across the Group
once metrics are identified and approved by the CRC.
Provident Financial plc Annual Report and Financial Statements 2021
72
Environmental, Social and Governance continued
Our environment continued
Protecting the environment and taking action
on climate change continued
Managing climate change-related risk continued
Recommendation 4
Metrics and targets: Disclose the metrics and targets
used to assess and manage relevant climate-related
risks and opportunities where such information
is material
4.a. The metrics used by the organisation to assess
climate‑related risks and opportunities in line with its
strategy and risk management process:
PFG has set an overarching target to achieve net-zero carbon
dioxide emissions by 2040 (which relates to the scope 1, 2 and
3 emissions that arise from PFG’s operations). To support this
long-term target, we will set a science-based target and other
related interim targets by September 2023 that will enable
us to transition to net zero. This target will be submitted to
the Science Based Targets initiative for approval. To support
our commitment to do this, we have signed up to the UN’s
Business Ambition for 1.5°C pledge.
4.b. Scope 1, scope 2 and, if appropriate, scope 3 greenhouse
gas (GHG) emissions and the related risks:
PFG has measured and reported its GHG emissions since
2007 and currently reports this information in accordance
with the UK Government’s Streamlined Energy and Carbon
Reporting (SECR) policy that has been implemented through
the Companies (Directors’ Report) and Limited Liability
Partnership (Energy and Carbon Report) Regulations 2018.
Details of our scope 1 and 2 GHG emissions in tonnes of carbon
dioxide equivalent (CO
2
e), along with a relevant intensity
ratio (i.e. kilograms of CO
2
e per customer) and information
on underlying energy use for 2021, are set out opposite. Our
2021 disclosure covers the GHG emissions and energy use
for the Group and its operating divisions – Vanquis Bank,
Moneybarn and the Consumer Credit Division (see page 73 for
more information). In addition, we report scope 3 emissions
which relate to business travel by colleagues, operational
waste and water use and the production, transportation
and distribution of fuels used by the transport and utilities
providers that the Group uses. In 2021, we reviewed how
we can capture the other scope 3 emissions that occur in
our value chain and have, for the first time, calculated and
reported the scope 3 category associated with purchased
goods and services. The capture and reporting of additional
scope 3 categories will be explored where data and
methodologies permit. PFG’s GHG emissions data has been
subject to a limited assurance by Corporate Citizenship
in accordance with the ISAE 3000 Assurance Standard.
Corporate Citizenship’s full assurance statement is available
on PFG’s corporate website at www.providentfinancial.com.
We continue to offset some of the direct and indirect GHG
emissions that make up PFG’s operational carbon footprint.
We do this by financing sustainable development projects
which help to mitigate the effects our operations have on the
climate. This year we offset 10,000 tonnes of carbon through
the purchase of carbon offset certificates in two wind power
projects; one in Thailand and one in Vietnam (see page 73
for more information). Both carbon offset projects are
accredited to the ‘Gold Standard to Global Goals’ scheme.
4.c. The targets used by the organisation to manage
climate‑related risks and opportunities and performance
against targets:
CDP, the largest climate change focused data collection
and assessment programme which, each year, requests
information from companies on GHG emissions, energy use
and the risks and opportunities from climate change, notified
PFG in December 2021 that it had been given a B- score (up
from a D score in 2020). This reflects the work carried out by
PFG during 2021 to meet the recommendations of the TCFD.
Relevant metrics include consumption of water and energy,
and waste management. GHG emissions are calculated in line
with the GHG Protocol.
Our environmental performance
Further details on our approach to managing our environmental
performance are set out on pages 18 and 19 of our 2021
Corporate Responsibility Report at www.providentfinancial.com.
Our carbon footprint (tonnes of CO
2
e)
Our business activities have an impact on the environment,
whether this occurs directly as a result of the energy that is used
by our offices and by our people when they travel, or indirectly
through the activities in our supply chains. We are committed to
minimising our environmental impacts, in particular to reducing
the GHG emissions associated with our business activities,
thereby lessening our contribution to climate change.
This year, we are reporting an increase in our carbon footprint
compared to last year as we have increased the breadth of
our scope 3 GHG emissions reporting. This has seen us include
new elements to measure our carbon footprint as we commit
to reporting in line with the Science-Based Targets initiative by
2023. With regards to our scope 3 emissions, we have included
the emissions from Category 1 ‘Purchased Goods and Services’,
which also covers the emissions from Category 2 ‘Capital Goods’
and Category 4 ‘Upstream Transportation and Distribution’. We
have also included emissions from hotel stays and paper usage
under the emissions resulting from Category 6 ‘Business Travel’
and Category 1 ‘Purchased Goods and Services’.
Provident Financial plc Annual Report and Financial Statements 2021
73
Strategic report
2021 2020
Scope 1 (tonnes CO
2
e)
Gas use
†
200 230
Diesel and petrol
†
111 178
Scope 2 (tonnes CO
2
e)*
Electricity use (market-based emissions) 125 Not measured
Electricity use (location-based emissions) 928 1,113
Scope 3 (tonnes CO
2
e)
Scope 1 and 2 associated ‘well-to-tank’ emissions
†‡
409 327
Scope 3 associated ‘well-to-tank’ emissions
‡
74 475
Business travel 269 2,271
Purchased goods and services** 17,579 —
Waste collection and management 15 102
Water 4 24
Downstream leased assets*** 0 Not measured
Total energy consumed (kilowatt hours)**** 5,460,285 10,768,000
Scope 1 and 2 (and associated scope 3) emissions
intensity ratio (kg of CO
2
e/per customer) 1.02 0.88
† Mandatorily reported emissions to meet the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013.
†‡ Our emissions are reported in accordance with WRI/WBCSD Greenhouse Gas (GHG) Protocol. We use a financial control approach to account for our GHG
emissions and use emission conversion factors from Defra/DECC’s GHG Conversion Factors for Company Reporting 2021. Our GHG emissions are calculated
using energy use data accessed via meters and energy suppliers, and from records of fuel use, business travel bookings and waste management data.
Where challenges have occurred in obtaining data, estimates have been used and assured by our assurance provider. All GHG relates to UK only emissions.
‡ GHG emissions associated with the production, transportation and distribution of fuels used by transport and utilities providers.
* When calculating electricity emissions, we have applied both market and location-based methods. Where electricity suppliers can provide us with the
relevant conversion factor, we implemented the market-based method; otherwise, we used the location-based method. We also calculated the average
electricity and gas consumption in December 2021 for one of the Vanquis Bank offices as the invoices for that period are still outstanding at the time of reporting.
** When calculating the suppliers’ carbon emissions using the spend-based method, we used the US EEIO factors. Although these factors are calculated based
on the US economy, they are more recent (from 2018) and detailed than the UK ones which we find more accurate and transparent to our reporting. The exchange
rate at the time of calculation is £1 = $1.36 (18 January 2022); these calculations are conducted based on the assumption that suppliers have no climate-
related strategy. In 2022, we aim to improve our methodology and plan to communicate directly with suppliers to implement the suppliers-specific method.
*** We used the market-based method to calculate the electricity emissions related to an operating lease that PFG runs.
****All energy consumed relates to the UK only.
1+0.5+4.5+2+1+1.4+87+1+1+D
Scope 1: 311
(2020: 408)
Scope 2: 928
(2020: 1,113)
Scope 3: 18,350
(2020: 3,199)
Total
19,589
(2020: 4,720)
Offsetting our GHG emissions
We continue to offset our direct operational carbon footprint.
We do this by financing renewable energy projects around the
world which help to mitigate the effects our operations have on
climate change. During 2022, we offset 10,000 tonnes of CO
2
e,
which accounted for over half of the Group’s 2021 carbon footprint.
These emissions were offset through the purchase of
carbon
offset certificates in two projects. We reduced 9,800 tonnes
of CO
2
e
through producing electricity from wind power in Northeast
Thailand, and 200 tonnes of CO
2
e in a wind power generation
project in Bac Lieu Province, Vietnam.
In addition to producing electricity from renewable sources,
these two projects also deliver a range of additional positive
environmental and social impacts, including:
– These two projects will generate a combined of 820,000
MWh of renewable electricity every year and feed it into
Thailand and Vietnam’s national grids, helping to bridge
the gap between supply and demand that currently exists.
– By replacing electricity generated from fossil fuel fired
power plants with renewable electricity generated
using wind power, these wind farms will prevent around
250,000 tonnes of CO
2
and 143,000 tonnes of CO
2
from
being emitted into the atmosphere every year in Thailand
and Vietnam, respectively.
– These projects provide around 180 jobs to local people
who operate the wind power plants, as well as providing
local support, development and activities annually,
including community festivals, educational projects,
and sports days.
Provident Financial plc Annual Report and Financial Statements 2021
74
Environmental, Social and Governance continued
Find out more in our
2021 Corporate
Responsibility Report
Our 2021 CR Report is designed to provide a balanced account of how PFG’s Purpose and strategic
drivers are aligned to the Group’s responsible business strategy, as well as further details of the
progress that has been made during 2021 in delivering against this strategy. The report relates to the
non-financial aspects of Provident Financial plc and our key stakeholders: customers, colleagues,
shareholders and debt investors, regulators, communities, suppliers and the environment. It provides
information and updates on our CR activities, performance and achievements from 1 January to
31 December 2021 unless otherwise stated and has been independently assured by Corporate
Citizenship in accordance with the ISAE 3000 Assurance Standard.
For further details on
our approach to corporate
responsibility, visit
www.providentfinancial.com
Provident Financial plc Annual Report and Financial Statements 2021
75
Strategic report
Our regulators
and
government
(and other
b
odies)
Our
investors
(equity
and
debt)
Our
suppliers
O
ur
communities
O
ur
environment
O
ur
colleagues
O
ur
customers
We engage
with our stakeholders
Section 172
Statement regarding section 172 of the Companies Act 2006
Who does the Board deem to be the Group’s
key stakeholders?
We define our stakeholders as individuals or groups who have
an interest in, or are affected by, the activities of our business.
We recognise fourteen stakeholders, seven of which we
identify as key stakeholders and, following the outcome of our
materiality assessment, we have grouped them into the two
categories illustrated above. You can read about why and how
we engage with them in our ESG overview on pages 8 to 13.
You can also read about how we create value for our
stakeholders in our business model on pages 24 and 25; how
we build a sustainable Group on pages 26 and 27; our strategy
in action for our stakeholders on pages 28 to 31; and how we
understand our market and the products we offer on page 35.
The needs of our stakeholders can change over time and we
explain more about how we respond to the trends in our industry
and market on pages 36 to 39 and the environmental risks to
our climate on page 69.
To understand more about how our Board operates, and the
way in which it reaches decisions, including the matters it
considered during the year, please see pages 120 to 122. We
explain how we track and monitor stakeholder metrics in our
Customer, Culture and Ethics (CCE) Committee Report on
pages 150 to 152. Implicit in its decision making the Board pays
consistent regard to the Group’s reputation for high standards
of business conduct. The desire to do the right and best thing
for the Group’s stakeholders in a balanced and pragmatic
way is demonstrated throughout, and particularly within the
principal decisions.
Building upon the Group’s stakeholder mapping exercise
conducted in 2020, a stakeholder materiality assessment
was completed in the year, designed to assist the Group in
understanding the ESG-related matters most important to
its stakeholders and to prioritise them accordingly. You can
see the results on pages 51 which were reported to the CCE
Committee. Our Stakeholder Engagement Strategy and
associated strategic stakeholder engagement objectives
were developed and approved by the CCE Committee and are
set out on pages 49 to 51. The Board oversaw that the strategy
and objectives: a) were aligned to the Group’s priorities; b)
accounted for stakeholder interests; and c) promoted the
long-term success of the Group. More about the Board’s
role in stakeholder engagement can be found on pages 127
to 133. This work has supported the Board to ensure that the
Group has continued to meet the requirements of s.172 of
the Companies Act 2006 (CA 2006). More detail about the
stakeholder engagement objectives, and our progress against
these objectives, is within our 2021 Corporate Responsibility
Report, available at www.providentfinancial.com.
C
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Key stakeholders
Other stakeholders
Provident Financial plc Annual Report and Financial Statements 2021
76
Section 172 continued
Statement regarding section 172 of the Companies Act 2006 continued
Principal decision – the CCD Scheme of Arrangement
Strategic options
The Group announced on 15 March 2021 its intention to pursue a
Scheme of Arrangement (the Scheme), under Part 26 of the Companies
Act 2006, in relation to potential redress claims arising from customer
creditworthiness complaints based on historical lending in CCD prior to
17 December 2020. During the second half of 2020, industry dynamics
had changed the operating environment materially for CCD, making it
untenable to treat customer complaints as part of ongoing operating
costs. The number of complaints referred to the Financial Ombudsman
Service (FOS) across the home credit market in this period had
increased by circa 200% compared to the first half of the same year,
primarily driven by claims management companies.
External advice
The Board considered viable alternatives to the Scheme and was
focused in its deliberations on fairly considering the requirements of
all stakeholders, which it recognised as differing, and potentially at
odds. The Board commissioned legal advice of the factors it should
consider when determining whether to support the Scheme, including
a summary of the key considerations in relation to its duties under
English company law. Interrogation of this analysis supported the Board
to ensure robust and thorough consideration of all relevant factors.
The Group had supported CCD financially for some time in efforts to
return CCD to profitability and appointed
Ernst & Young to undertake
an independent valuation assessment of the division. Furthermore,
the Board commissioned independent advice regarding the future
prospects of the high-cost credit and home credit markets. The
outcome of these reviews concluded that for the Group the only credible
alternative to the Scheme was to commence insolvency proceedings for
CCD, an option which attracted less cost for the Group in the short term.
However, in those circumstances CCD’s customers would have received
no compensation. With administration confirmed as the only viable
alternative and giving consideration to the Group’s Purpose, reputation
and long-term position within the market, the Scheme was decided
upon by the Board because it provided certainty to stakeholders and
ensured customers with legitimate claims would receive fair access
to redress payments.
Regulatory engagement
In considering the Scheme, and if there were any other viable alternatives,
the Board engaged directly and constructively with the FCA and FOS to
determine, as far as possible, their views about repeat lending and their
non-objection or otherwise to such a Scheme. Throughout this period, the
Group CEO, Malcolm Le May, undertook several meetings and engaged
in regular correspondence with the FCA, maintaining an emphasis on
openness and transparency in line with the Group’s cultural Blueprint.
Feedback from the FCA was reported to the Board regularly during the
period and the Board listened to and sought input from the FCA in its
efforts to resolve its concerns. The Board considered the potential impact
of the Scheme and insolvency on its other subsidiaries and engaged with
the PRA directly to provide reassurance with regard to Vanquis Bank and
its credit card and retail deposit customers. Other regulatory stakeholders
with whom the Board engaged directly included the HM Treasury
and the FOS.
Financial implications
After close scrutiny of the relevant financial modelling data the Board
agreed to fund legitimate Scheme claims with £50m and allocated a
further £15m to Scheme costs, a total commitment that was met out
of the Group’s existing resources. The Board engaged directly with the
FCA on the financial support available for the Scheme, recognising that,
although customers would stand to receive less than the value of their
claims, the figures were based on sound financial analyses and the
decision offered the fairest compromise for all stakeholders. The Board
gave careful consideration of its equity and debt investors, with whom
it engaged directly and provided confirmation of the Group’s continued
ability to meet regulatory capital requirements over the longer term. On
21 June 2021 the Board announced that it would meet any increase in
Scheme administration costs which had in part been incurred to achieve
a higher voter turnout ahead of the Scheme meeting which the Board
agreed was important for the Scheme.
Communication
A comprehensive Scheme meeting communication timeline was
developed and supported the Board to ensure that the appropriate
stakeholder engagement plans had been put in place.
For investors a series of more than 25 meetings were arranged directly
after the announcement with Malcolm Le May and the Group CFO, Neeraj
Kapur, to help explain the Scheme. A number of calls were also arranged
with CMCs to explain the impact of the Scheme. To provide enhanced
support for creditors in June 2021 the Group appointed an independent
and experienced customer advocate who assessed and provided
comment and recommendations for improvement on the proposed
communications around the Scheme with customers, media groups and
consumer bodies. As a direct result of this engagement, and in advance of
the Scheme’s creditors meeting held on 19 July 2021, the Group broadened
its communication methods beyond newspapers to include social media
platforms to ensure that messaging was inclusive and representative of the
customer base. In addition the Group sought to simplify, where possible, the
language in the Scheme’s supplementary explanatory statement and other
communications sent to Scheme creditors. The Board was pleased to note
that following the engagement with creditors 420,000 voted in favour of the
Scheme, representing 98% of the total votes received.
The Scheme was sanctioned by the High Court after the court hearing
held on 30 July 2021 and became binding on 5 August 2021. The deadline
for submission of claims was 28 February 2022 and we are on track to
settle all valid claims and close the Scheme by the end of this year (2022).
19–22 April 2021
Staff comms briefings
22 April 2021
Convening hearing
23 April 2021
Notice of Order published on website
5 August 2021
Scheme effective and Scheme
help video added to website
27 August 2021
Scheme implementation date
27 August 2021
Claims portal opens
3-8 June 2021
Emails to customers who had not yet voted
8 June 2021
‘Voting is open’ follow-up campaign
24 June 2021
Adverts placed in newspapers
6 May 2021
Printing starts for mail activity
13 May 2021
Adverts placed
4–14 May 2021
Customer-facing colleague training, social
media videos and additional FAQs prepared
17–19 May 2021
Email and postal notices sent to customers,
voting portal opens and website updated
with FAQs and videos
14 July 2021
Online voting deadline
19 July 2021
Scheme meeting
30 July 2021
Sanction hearing
Scheme meeting communication timeline
APR JUNMAY JUL AUG SEP
Provident Financial plc Annual Report and Financial Statements 2021
77
Strategic report
Our customers See page 31 for key KPIs
How
The Board has established a customer-centric culture through setting the Group’s Purpose and Blueprint and
recognises that this continues to emerge as the Blueprint embeds throughout the organisation. Responding to
recommendations from the Board effectiveness survey, the Board invited the managing directors of each division to
CCE Committee meetings to provide in-depth reports on their customers and customer strategy. The outcome of this
engagement is an enhanced depth of knowledge for the Board of the intricacies of each customer base, enabling
the Board to oversee and shape the implementation of customer experience strategies within the divisions.
In deciding upon the Scheme and the regrettable wind-down of CCD, the Board considered the impact on its
customers, appointing a customer advocate for the Scheme. You can read more about this and the Board’s
consideration of customers in the wind-down of CCD in our principal decision on page 78. The Board has continued
to monitor key customer data on these programmes, including the collections performance and the number
and root causes of customer complaints. The Scheme is on track to settle all valid claims by the end of 2022.
All outstanding CCD home credit and Satsuma loans were settled on 15 December 2021.
The CCE Committee commissioned a deep dive report on the customer impact of the Covid-19 pandemic 12 months
after it had commenced. At its meeting in March 2021 the CCE Committee received detailed customer feedback
from the customer surveys taking place in each division. The CCE had overseen the introduction of a Customer
Pulse Survey at Vanquis Bank and the customer panel in Moneybarn and both these customer forums had shown
the importance of government and industry support that was made available for customers during the pandemic.
The surveys provided the Group’s businesses with valuable insights into how many of its customers were or had been
on furlough, and for how long, allowing management to plan and tailor customer support services appropriately.
The Board continues to engage indirectly with customers through verbal reports from Graham Lindsay, Chairman
of the CCE Committee, on matters considered at the Committee meetings. The CCE Committee receives Customer
and Blueprint Dashboards that facilitate oversight of key customer metrics including customer service levels,
availability, complaints, customer satisfaction and net promoter scores. For those metrics that require it, independent
assurance is gathered, such as GHG emissions from Corporate Citizenship (see page 72). The CCE Committee
continues its regular customer call listening exercise across the brands, becoming closer to the voice of the customer
and experiencing examples of customer service first hand. The learnings from this engagement support the Board
to comment on and oversee the formulation of new, or development of existing, customer propositions.
In approving the launch of the Sunflower Loans pilot the Board considered the customer segment analysis and
customer need, ensuring that the product was designed to reflect customers’ need for access to flexible, accessible
credit options and was differentiated from the Group’s existing products through loan APR and value.
Topics
The impact of the pandemic on our customers, new and existing products, customer experience and service
performance, customer communication preferences, forbearance options, government support during the
pandemic and access to credit for our chosen customer segments.
Significant
feedback and
value added
Customers had confirmed the importance of the support provided by the Government and industry. That CCD
customers continued to receive high quality of service throughout the wind-down period.
That the market opportunity for an unsecured personal loans product was estimated to be £1bn and that significant
regulatory and governmental intervention had been the most influential factor in the market demand for credit.
The independent assessment of the comments received from Scheme creditors by the Scheme customer advocate.
Recommendation that the relatives of deceased creditors be included in the Scheme.
Key outcomes
– The regrettable decision to exit the home credit market, responding to the changing industry and regulatory
dynamics in the sector, as well as shifting customer preferences. See our principal decision on page 78.
– The effective communication and management of CCD customers’ collections through the wind-down of CCD
and support for customers in their transition to debt collection agencies.
– Successful delivery of the Scheme.
– The necessary dispensations were applied for regarding the Scheme to ensure that all customers with claims
received equal and fair treatment.
– The Board’s expansion of the unsecured personal loans proposition at Vanquis Bank.
– The development and pilot launch of a new, digitally driven, mid-cost loan offering for which customer feedback
will be sought.
Provident Financial plc Annual Report and Financial Statements 2021
78
Section 172 continued
Statement regarding section 172 of the Companies Act 2006 continued
Principal decision – exiting the home credit
market and the managed run-off of CCD
Macroeconomic environment
On 10 May 2021 the Group announced the result of the operational
review of CCD and it was with regret that the Group confirmed
its decision to withdraw from the home credit market and place
the business into managed run-off or consider a disposal. In
commissioning the operational review and assessing the results
the Board acknowledged the terminal decline of the home credit
market and the decreasing relevance of a home credit proposition as
customers had transitioned towards digital transactions (a preference
accelerated by the Covid-19 pandemic) as well as an unsustainable
trajectory of complaints driven by Claims Management Companies.
During a joint meeting between the FOS, the FCA and consumer credit
lenders in November 2020, the expectation of repeat lending was
clarified such that the traditional home credit business model was
no longer sustainable for the Group.
Reviewing our options
The operational review of CCD was commissioned by the Board in
November 2020 and was conducted by Hamish Paton, Managing
Director of CCD. It considered a number of options including whether
an economic return could be made in home credit following the
changes in the macroeconomic environment and regulatory approach
and provided the Board with a comprehensive comparison of
implications for stakeholders on a full wind-down basis and also on
the basis of a continuance of a minimum viable business-as-usual
operating model. Alternative scenario forecasts interrogated by the
Board did not indicate a return to profitability and recognised the
historical, complex and increasingly costly operating model. The Board
also commissioned an independent legal and regulatory opinion on
high-cost credit (HCC) which summarised the regulatory scrutiny of the
high-cost short-term credit (HCSTC) market, and the increasing focus
on HCC, including home credit. The FCA’s recent activities had included
the introduction of a daily cost cap, a default charge cap and total cost
cap for consumers; and a focus on enforcement action against HCSTC
firms for any practices deemed as unfair. The Group had proactively
engaged directly with the FCA on these and other similar topics. Taken
together the Board recognised the pace of change, the expected
further regulation, the decreasing popularity and relevance of a home
credit product and that there was extensive evidence to suggest that
it would become more difficult to operate a sustainable profitable
business in the market.
Planning for change
Ahead of making its decision the Board acknowledged the impact of
the potential closure of CCD on its stakeholders, including approximately
2,000 colleagues and 300,000 customers. There were societal implications
of the exit in the communities in which the Group operated and
potential uncertainty for suppliers both of which could pose
reputational risks for the Group. Prior to the announcement on 10 May
2021, the Board considered management’s detailed communication
plans with customers, colleagues, suppliers, investors and regulators.
The Board approved a four-pillar plan which had been designed by
management to be cost effective and mitigate risk. Detailed stakeholder
communication plans were presented to the Board setting out potential
stakeholder concerns and the possible implications of the wind-down
upon existing relationships and proposing suitable management
actions to address the same, including a supplier engagement plan.
The Board recognised the ways in which management proposed to
address stakeholder concerns in its communication plan and set
the tone for external communications, emphasising its regret and
recognising the important role that CCD had performed for customers
in the underserved segment throughout its long history.
Communicating with empathy
The Board ensured that customers were supported, fully understood
their options and were reassured about how the change would impact
them, including how their existing loans would be collected and managed.
Careful consideration was given to the use of debt collection agencies
and the Board challenged management to ensure that good service
quality was maintained for customers, whilst they paid down their
balances, through effective supplier management. The Board oversaw
engagement with debt advisory bodies recognising these as important
sources of information and support for CCD customers. The low number
of customer queries received about the wind-down to date indicates that
customer communications have been well positioned and understood.
Colleagues’ concerns were a priority for the Board and the Colleague
Forums were utilised to assist in the gathering and disseminating of colleague
feedback. Communication principles, such as tone, timing and methods
of engagement, were agreed and a colleague content hub published on
the intranet provided a consistent colleague experience and fully accessible
self-service support. The Board’s Designated Non-Executive Colleague
Champion, Graham Lindsay, attended several Colleague Forum meetings
to share messages from the Board and listen to colleagues’ concerns,
and reported back to the Board on his engagement. The CCE Committee
commissioned and received a detailed report setting out the colleague
impact of the wind-down of CCD. The CCE Committee recognised issues
raised by colleagues and oversaw the adaptations in approach in response
to colleague feedback, where possible, such as management directly
addressing one of colleagues’ main concerns that redundancy terms
would be honoured in the event of the division falling into administration
(should the Scheme not be approved). Every effort was made to minimise
redundancies and job opportunities elsewhere in the Group were shared
with CCD colleagues, including those across multiple locations, made
possible due to new hybrid working arrangements. 10% of colleagues at
risk were redeployed elsewhere in the Group. Impacted colleagues were
provided with outplacement support that included support plans,
one-to-one career coaching, and access to materials and resources
to assist them in finding new employment as well as to support their
emotional and financial wellbeing.
Valuing our relationships
A review of all suppliers had been completed by management with
the results and subsequent supplier engagement plan reported to
the Board. The Board recognised the varying impact on suppliers of
the wind-down of CCD, many of whom provided important services
to other divisions. The Board ensured that suppliers were contacted
directly by management following the announcement of the wind-
down of CCD and was pleased to note the continued confidence of
suppliers in the Group, demonstrating positive relationships and the
successful execution of the supplier engagement plan. PFG’s Purpose
of helping to put people on a path to a better everyday life drives the
Board to ensure that the products and services the Group provides are
sustainable, responsible and commensurate with the Group’s strategic
ambition to be the specialist leading bank to the underserved mid-cost
market. The Board’s decision to exit the home credit market and wind
down the CCD business, whilst difficult and regrettable, was necessary
to adapt to the macroeconomic environment with a view to securing
the long-term future of the Group. You can read more about how we are
becoming a bank for the underserved on pages 20 and 21. The Board
continued to oversee and monitor the execution of the wind-down
plan and, with customer collection rates having consistently exceeded
expectation, CCD took the decision to write off all outstanding home
credit and Satsuma loans on 31 December 2021.
Provident Financial plc Annual Report and Financial Statements 2021
79
Strategic report
Our colleagues See page 32 for key KPIs
How
Colleague engagement was extensive in 2021, particularly as stricter Covid-19 pandemic restrictions were reintroduced
in the early part of the year and as the Board shaped the Future of Work programme. The Future of Work comprised
assessments of the success and value of the adaptations adopted during the pandemic and gave consideration as
to how they might be incorporated into existing workforce policy and practices. You can read more about the Future
of Work programme in our principal decision on page 80. Communications were primarily via email and the intranet
with links to frequent vlogs by the CEO, Malcolm Le May. Colleagues received quarterly video updates on the Group’s
results from the CFO, Neeraj Kapur, and other important news via the colleague newsletter, ‘Stay Connected’.
Following the regrettable announcement of the wind-down of CCD on 10 May 2021 a comprehensive colleague
communication and support plan was executed. Colleagues were briefed in advance of any direct customer
communications to allow time for them to absorb the news on a personal level and prepare more effective
conversations with customers, and the well-established Colleague Forums, attended by Graham Lindsay, were used
to support the colleague consultation process for impacted CCD colleagues. You can find more detail about this in
our principal decision on page 78.
The Group is continuing to develop its approach to colleague engagement regarding executive director (ED) pay
and, to this end, two engagement sessions were held with HR colleagues representing a mix of divisions, levels and
areas within HR. The sessions took place in November and December 2021 and were run by Graham Lindsay together
with Andrea Blance, our Senior Independent Director. Colleagues provided direct feedback on topics including ED
remuneration, the ED scorecard and objectives, performance management, communication, the link to colleagues’
own personal objectives and overall Group strategy. The output identified opportunities to improve colleague
communication, and in particular to enhance visibility of the ED scorecard, amongst other actions which will be taken
forward by HR. You can read more about this in our Remuneration Report starting on page 169. It was agreed that the
feedback sessions had been successful in sharing colleague views with the non-executive directors and the exercise,
when completed again, would be extended to a broader range of colleagues.
In September 2021 the Board visited the Chatham office to meet directly with colleagues and experience first hand
the Vanquis Operations teams. The Board noted how internal talent had been identified and nurtured to deliver
enhanced capability in operations and how colleague engagement had increased by 3% overall in the team
since 2020. Topics discussed by the Board and colleagues included technology, the Future of Work and an open
Q&A session.
At its November 2021 meeting the CCE Committee received a follow-up paper on the Future of Work and considered
the Group’s updated workforce policies. In addition the CCE Committee considered the results of a comprehensive
review of the effectiveness of the Colleague Forums which confirmed that they had benefited hugely from the
attendance of Graham. The allocation of time for Graham to update colleagues on Board decisions and issues was
well received by the Forums. A number of recommendations arose from the review which were supported by the
CCE Committee and will be progressed by management. Updates on the CCE Committee’s consideration of these
matters were provided to the Board by the Chairman of the CCE Committee.
The Board engaged directly with colleagues through its participation in Affinity Group activities. Over 125 colleagues
are members of the Group’s inclusion network and our Board members have participated in a number of the activities it
has arranged to promote exclusivity and celebrate diversity, such as a virtual cookalong in celebration of world foods.
The CCE Committee has overseen the implementation of a Management and Leadership Development programme.
The Nomination Committee considered the succession framework for senior executives and considered in detail
the implementation of the common Board structure, further details of which are contained in our principal decision
on page 86.
Topics
The wind-down of CCD and support for colleagues at risk of redundancy. Executive director remuneration, the Future
of Work, health and safety and workforce engagement mechanisms. The gender pay gap, diversity and inclusion and
leadership management and development. The management governance structure. The Restricted Share Plan and
its value to participants.
Significant
feedback and
value added
The Board recognised that a majority of colleagues supported a hybrid working model which delivered increased
flexibility and improved work-life balance.
Senior leadership confirmed that productivity had remained stable and business needs continued to be met when
colleagues were working remotely.
Overall colleague engagement through the Pulse survey remained stable at 71%.
To enhance visibility of the ED scorecard for colleagues and consider development of mandatory objectives such
as for inclusion or wellbeing.
Key outcomes
– Engagement with colleagues helped define the Future of Work as outlined in our principal decision on the next page.
– A Board-led consistent tone and messaging for colleagues regarding the wind-down of CCD and a comprehensive
package of colleague support including outplacement support – see our principal decision on the previous page.
– Revisiting the Colleague Forum structure to ensure that the geography and demography of the workforce were
represented fairly and continuous improvement of the Colleague Forums as a two-way form of engagement
between the Board and colleagues.
– In response to colleague feedback catering facilities were reinstated at the Bradford office.
– To provide certainty, assist colleagues in financial planning and support colleague retention earlier than usual
announcements were made by the Group CEO regarding the Board’s confidence that a year-end bonus would be
paid for qualifying colleagues.
– A Group Vaccine Policy and free flu jabs for colleagues.
Provident Financial plc Annual Report and Financial Statements 2021
80
Section 172 continued
Statement regarding section 172 of the Companies Act 2006 continued
Principal decision – Future of Work
The ‘stay at home’ requirement arising from the Covid-19 pandemic
required many companies to revise their operations. We were no
exception and the Board oversaw the transition to home working for
the majority of colleagues in March 2020 which remained in place
throughout the year and for a proportion of 2021. As reported in last
year’s Annual Report, the return to office strategy was recognised as
a key emerging risk by the Board in 2020 and management evolved
the focus on working from home to begin to develop a Future of Work
proposition that capitalised on the lessons learned from the pandemic.
The Board engaged indirectly with colleagues through updates to the
CCE Committee and subsequent reports to the Board from the CCE
Committee Chairman. In January the CCE Committee had assessed
the feedback from colleagues and management which had been
gathered via colleague surveys. The majority of colleagues supported
the introduction of a hybrid working model and a strong majority of
senior leaders confirmed that productivity had remained stable or
improved since colleagues had been working remotely. Senior leaders
also fed back to the CCE Committee their support for a blended way
of working. Through the CCE Committee, and after consideration
of the risks and benefits, support was provided for management’s
proposal to agree hybrid working and a Future of Work programme was
established, sponsored and led by the Group HR Director.
In April 2021 a Future of Work steering committee (Steerco) was set up
to deliver a three-phase plan to introduce a hybrid working model
and arrange a safe return to working in offices for colleagues. In
June the Future of Work programme was considered by both the CCE
Committee and Board which received a report from the Group HR
Director as to management’s progress. The Board engaged indirectly
with colleagues receiving the detailed results from the colleague and
leadership surveys. The Board encouraged management’s continued
consideration of all stakeholders in programme design, emphasising
the importance of retaining productivity and high service quality
for customers, further highlighting culture, health and safety and
colleague wellbeing as important areas of focus.
Following feedback from the Board and CCE Committee the principles
of hybrid working were established which considered the needs of key
stakeholders and included, amongst others things, that there would
be no detriment to customer experience or service and sufficient
supervisions were in place to assist colleagues when dealing with
vulnerable customers or difficult conversations.
From June 2021 and throughout the second half of the year, regular
direct communications were issued to colleagues via email and the
intranet about the Future of Work milestones, to confirm the working
arrangements that were in place at each stage and how they might
apply to a colleague’s personal circumstances and set out how
long they were expected to last. A dedicated Future of Work Hub was
launched on the intranet and housed a new Flexible Working Policy, a
Group Vaccine Policy, management and colleague guides for hybrid
working and guides for working safely both remotely and in the office.
Colleagues returned to working in the office in phases and from 19 July
to the end of August 2021 those colleagues deemed a priority (due to
a personal or business need) returned to the office on a hybrid basis;
all remaining colleagues returned to the office on a hybrid basis from
October until government guidance changed in December 2021 and
colleagues were asked to return to home working. The CCE Committee
emphasised the health and safety of colleagues as a priority for the
Board and colleagues were asked to complete training before returning
to the office. Ongoing feedback was provided regarding hybrid working
arrangements including desk space allocation, parking allocation,
catering, facilities and safety procedures whilst in the office. On 28
September 2021 the Board visited the Chatham office, home to our
Vanquis Bank Operations teams, to meet with Vanquis Bank colleagues
and witness the arrangements that had been put in place. The Board
had an open Q&A session with colleagues and a dedicated session
on the Future of Work including the challenges and opportunities it
presented. HR and management undertook to execute any actions
arising. Separately our non-executive directors have visited the
Moneybarn offices in Petersfield.
You can read more about how we supported our colleagues
during Covid-19 on page 11
Provident Financial plc Annual Report and Financial Statements 2021
81
Strategic report
Our investors (equity and debt) See pages 31 to 33 for key KPIs
How
For more detail about how we engage with our investors through our investor relations programme including our
investor days, market announcements, the AGM and the Annual Report, please refer to pages 132 and 133. The AGM
held in June was pleasingly open for shareholders to attend in person and engage directly with the Board or to follow
remotely and shareholder questions were welcomed in advance. Appropriate social distancing restrictions were in
place commensurate with the Government’s Covid-19 guidance in place at the time.
In the reporting period, and following the relaxation of Covid-19 rules, the Chairman, Patrick Snowball, has engaged
directly with the Group’s top ten shareholders to listen, develop and enrich stakeholder relationships. Key topics for
the conversations included the Group’s strategic direction, corporate governance matters and the macroeconomic
environment. This direct engagement has resulted in investor feedback being front of mind for the Chairman and
woven into the fabric of Board discussions on those topics. The Chairman and Head of Investor Relations provided the
wider Board with feedback from the meetings through an informal update and the Investor Relations Board report.
In May following the announcement of the Scheme and the results of the operational review in CCD, management,
including the executive Board members, ran a series of more than 25 investor meetings. You can find out more on
our principal decision on page 76. The market presentation accompanying the announcement of the Scheme and
release of the Group’s results included an open question and answer session for the market. A recording of this
presentation is available in the shareholder hub on our external website along with all our other announcements:
www.providentfinancial.com/shareholder-hub. Verbatim feedback from investors received by the Board at its Group
Strategy Conference in June indicated that investors had appreciated the engagement and understood the Scheme.
The Board receives regular investor relations update reports through which the progress and execution of the investor
relations programme is overseen and investor feedback is indirectly provided. A comprehensive report on how the
market viewed the future of the Group was provided to the Board at its Group Strategy Conference in June 2021 and
this report included verbatim feedback from institutional investors. The feedback informed management’s business
plan through recognition of the importance to the Group of Vanquis Bank and the future opportunities for growth it
presented. Malcolm Le May, our CEO, talks about this in his review on pages 4 and 5 .
In November 2021 the Board commissioned a further independent Investor Perception Study to offer insights into
how the Group is perceived, clarify areas of focus for investors and identify opportunities to improve investor
communications. There was strong participation in the study, representing 57% of the issued share capital and a mix
of shareholders. The output report provided valuable feedback that was discussed by the Board in December 2021.
In particular the Board noted shareholder expectations about Group performance in the context of the budget. The
Board acknowledged the feedback on key topics and communication and oversaw their integration into the investor
communication plan. The Board reviews and approves all trading and results statements issued to the market and
receives periodic updates on external communications.
The Board has overseen the successful execution of a number of initiatives to implement the Group’s Capital
Funding Plan, approving the Group’s first subordinated Tier 2 debt capital to the external markets since 2005 (the Euro
Medium-Term Note Programme or EMTN). Proactive engagement with debt investors, through roadshows hosted by
the CFO, Neeraj Kapur, ensured that the issuance was successful with the Group’s bond being rated as B+ by Fitch.
Concurrently the Board oversaw the repurchase of some of the Group’s 2023 Senior Bonds, the reduction of the
Group’s revolving credit facility and the refinance of its Moneybarn securitisation programme with £325m committed
funding. The Group now has no contractual wholesale maturities until the second half of 2023, thereby delivering a
very secure, diverse and stable funding profile commensurate with investor expectations.
Topics
The Scheme and closure of CCD, particularly what the Scheme involved, the legal process and expected timelines
for completion. The Group’s strategic direction, subsidiaries, valuation, capital return, results, strategy and progress
towards achieving its ambition to become a specialist bank for the underserved. In addition the funding activities
including the Euro Medium-Term Note Programme (EMTN) prospectus, offering circular, investment quality rating
and the price of the Group’s Senior Bonds. Early in 2022 the Board considered the timeline for publication of this,
and future, Annual Report and Accounts which had been impacted by the Covid-19 pandemic.
Significant
feedback and
value added
The Board received specific shareholder feedback, following the announcement of the Scheme in March 2021, that
shareholders continued to support the product model outlined by the Group at its 2019 Capital Markets Day. The
Board also received confirmation from investors that Vanquis Bank remains a key asset and central to the Group’s
long-term success.
The Board has received indirect feedback via its corporate brokers at the Group Strategy Conference in June about
investor perception of the Group’s overall position in the market, capital position, opportunities for growth and
regulatory matters. The Board received an independent Investor Perception Study in November which reported
shareholder expectations around performance and the importance of shareholder distributions. For more information
about our investor relations programme please see the Investor Relations Report on pages 132 and 133.
For more information on the Scheme see our principal decision on page 76.
Key outcomes
– Approval of all resolutions at the AGM.
– Investor support of the strategy and continued momentum towards the Group’s strategic imperative to establish PFG
as the specialist bank for the underserved operating in the mid-cost market segment.
– Enhanced investor knowledge of the Scheme.
– Support for initiatives forming part of the Capital Funding Plan delivering secure, diverse and stable funding profile.
– Reduction of the revolving credit facility to £90m (previously £148m, and subsequently early repaid in March 2022).
– 6.4% improvement in the Group’s total capital ratio (TCR).
– Key topics incorporated into the investor communication plan.
– A desire to return the publication date of the Annual Report and Accounts to align more with historical norms from 2024.
Provident Financial plc Annual Report and Financial Statements 2021
82
Section 172 continued
Statement regarding section 172 of the Companies Act 2006 continued
Principal decision – Group funding initiatives including the EMTN
and Tier 2 pricing and the Senior Bond tender
In last year’s Annual Report Neeraj Kapur, the Group’s CFO, explained
that a key focus area for 2021 was to retain a strong capital, liquidity and
funding structure to ensure the financial security of the Group, utilising
Vanquis Bank deposits where possible. The Board considered the
Group’s Capital Funding Plan at the Group Strategy Conference held in
June 2021 and received insight from our corporate advisors with regard
to the market perception of the Group. The indirect feedback confirmed
that strong liquidity and the ability to raise deposits through Vanquis
Bank was considered by investors to be a key positive differentiator
for the Group. The Board approved the Capital Funding Plan and the
funding initiatives have been successfully executed in the second half
of 2021 to diversify funding, reduce associated costs and facilitate
efficient intra-group lending.
On 23 September 2021 the Group published an updated offering circular
in connection with the Group’s £2bn EMTN Programme. The Board
approved the publication of the offering circular and the execution
of the amended and restated documentation supporting the EMTN
Programme. The FCA was engaged directly to review and approve the
offering circular and the significant updates that had been made to
it since the previous version which had been published in late 2020,
to reflect the wind-down of CCD and the Scheme.
The Group also announced an issuance of Tier 2 securities. The
proposed transaction was presented to investors by the CFO, Group
Treasurer and Head of Investor Relations through 25 virtual roadshows
in September 2021. The offer was well received and, following strong
demand and demonstrating investor support of the Group’s strategic
objectives, was successful at raising £200m of Tier 2 subordinated debt
capital, with a 10.25-year maturity, callable at 5.25 years, and a coupon
of 8.875%. Concurrently, a partial tender of the Group’s 2023 Senior
Bonds was offered and was also well received by investors. The Group
successfully repurchased £71.5m of the £175m outstanding bonds.
The Board endorsed the activity which was aligned with investors’
expectations as presented in the broker report at the Group Strategy
Conference. The outcome was the improved efficiency of the capital
structure and lower overall cost of capital. Incorporating the £200m Tier
2 debt capital in own funds, at the time of issuance the Group’s total
capital ratio improved by 11% from 32% to 43%. You can read more about
the execution of our Capital Funding Plan on pages 106 to 107.
In July 2021 the Group executed a new warehouse securitisation
programme for Moneybarn which refinanced the initial programme
entered into in 2020 and injected additional drawn funding into the
Group, whilst at the same time reducing its exposure to but extending
the tenure of its revolving credit facility (RCF). In approving these
activities the Board engaged with funding partners to execute the
activities to deliver improved liquidity in the non-bank part of the
Group and eliminated any contractual funding maturities until 2023,
significantly reducing the Group’s funding risks. The RCF has already
been repaid early ahead of its contractual maturity in July 2023 and at
the same time has been cancelled at the discretion of the Group and
as allowed for in the terms of the facility.
A further funding initiative was approved by the Board in January
2021 which saw Vanquis Bank securitise a portion of its credit card
portfolio in order to gain access to the Bank of England’s Term Funding
Scheme with additional incentives for Small and Medium-sized
Enterprises (TFSME).
Taken together the funding activities approved by the Board have
delivered a more robust, diverse and stable funding profile for the
Group as a whole and represent a more cost effective way of funding.
You can read more about how we maintain a secure funding and
capital structure on page 33.
Provident Financial plc Annual Report and Financial Statements 2021
83
Strategic report
Our communities See page 32 for key KPIs
How
The community impact of the wind-down of CCD was recognised by the Board, in particular for those locations
which had a high density of customers or colleagues. A significant proportion of the circa 2,000 colleague redundancies
were based at the Group’s Head Office in Bradford and the Board oversaw the engagement with Bradford Council.
The outcome of this engagement was that a number of local employers advertised opportunities to affected
colleagues, with them also being alerted to job opportunities through social media and being advised of local
community support.
The Board has received regular updates about the Group’s community investment and the execution of the
Group’s Social Impact Programme indirectly through its CCE Committee. The Social Impact Programme, which has
been running for a number of years, is aligned to the Group’s strategy and Purpose and has delivered community
investment focused in three distinct areas: community, customers and education (see pages 64 and 67). It had
served the Group well to deliver an effective programme of support, financial and otherwise, to its chosen community
partners. However, the CCE Committee reconsidered the Group’s Social Impact Programme in June 2021, in light of the
evolution of the Group, and commissioned a review of the aspects of community work undertaken by CCD and how
they might be carried forward following the wind-down.
In November 2021 management presented an alternative to the Social Impact Programme. The new strategy aligned
PFG’s community investment activities under a single ‘PFG Foundation’ and developed a vision, a mission and three
signature programmes all designed to support young people (0-25) from low-income backgrounds. More about the
new PFG Foundation is set out on page 67 and in our CR Report. The views of the Group’s affinity champions have
been built in at the design phase to facilitate good integration of equality, diversity and inclusion into the Group’s
community funding approach. The new community investment strategy was approved by the CCE and recognised
as delivering other benefits to stakeholder engagement including broadening the Group’s opportunities for external
stakeholder communication regarding social matters.
The CCE Committee regularly monitors and reports to the Board the Group’s progress against the long-term targets
linked to the five UN Sustainable Development Goals.
Topics
Key topics have included customer vulnerability, the community foundation strategy and structure, community
contributions and charitable giving. Volunteering activities in the context of the Covid-19 pandemic, and the strategic
review as a result of the evolution of the Group. Redundancy, equality, diversity and inclusion and community
partnerships have also been discussed.
Significant
feedback and
value added
Community engagement with the wind-down of CCD. The alignment of the Group’s approach to community funding
with the broader change in customer base as a result of the closure of CCD, including the restructure of the Social
Impact Programme to become a foundation, was supported by the CCE Committee. Support for the Group to
continue to appropriately fund and promote its social activities, including supporting colleagues in the same.
Key outcomes
– Tailored ESG training delivered for divisional boards.
– A change of community investment structure from Social Impact Programme to a foundation model and a change
of name from Social Impact Programme to the ‘PFG Foundation’.
– Evolved strategy to adopt a targeted approach to community investment activities to support children and young
people (0-25) from low-income backgrounds.
– Funding approved for the School Home Support Charity including matched colleague fundraising.
– The IncomeMax partnership with Vanquis Bank which provides customers with independent personal
welfare advice.
– Closer integration of the community funding approach with equality, diversity and inclusion through involvement
of the Affinity Groups in the design phase.
– The CCE Committee endorsed the Group’s approach to supporting its community partners through
the Covid-19 pandemic.
– The CCE Committee approved the Group’s commitment to the five long-term ESG objectives that were aligned
with both the Sustainable Development Goals and TCFD.
– The Group being the lead supporter for the National Numeracy Day, held in May 2021, and the appointment
of the Group’s CEO, Malcolm Le May, to the National Numeracy Leadership Council.
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Statement regarding section 172 of the Companies Act 2006 continued
Our environment See pages 68 to 73 for key KPIs
How
Throughout the year the Board, via the CCE Committee, has received regular updates about the Group’s implementation
of the Task Force on Climate-related disclosures Financial Disclosures (TCFD). In November the Head of Sustainability
confirmed the integration of climate-related risks into the Group’s Risk Management Framework with a risk appetite
headline and statement having been articulated. The Board approved the ‘risk cautious’ appetite for exposure to
climate risk as recommended by the Risk Committee. Following on from the engagement the Group has established
a Climate Risk Committee and Climate Risk Working Group each with specific responsibilities to support the reporting
requirements for TCFD and the Board will oversee progress in this regard through reporting into its Risk Committee.
Initial work has been undertaken by the Climate Risk Committee to define the climate-related risks that are most
material to the Group which are regulatory, physical and reputational risks. In addition the Climate Risk Committee
has determined the methodology that will be used by the Climate Risk Working Group to undertake scenario analysis
which will enable us to better understand the actual and potential impacts of climate-related risks and opportunities
on our business activities and stakeholders.
In addition the CCE Committee has overseen the Group’s progress toward the commitments made in 2020 to achieve
net zero carbon dioxide emissions by 2040 and against the UN Sustainable Development Goals (SDGs).
The Group continues to manage environmental impacts via the established Environmental Management System
(EMS). This EMS was certified to the international management standard ISO 14001 in July 2021. You can read about our
efforts and achievements to reduce our carbon footprint year on year on pages 68 to 73.
In December 2021 the Group achieved a B- rating from the Carbon Disclosure Project, a significant improvement from
the previous D rating and recognition of the Group’s commitment to sustainability and environmental management.
The CDP report was discussed by the CCE Committee which recognised the Group’s above average scores in
governance and opportunities for improvement in value chain engagement and emissions reduction initiatives.
Topics
Climate change, climate risk and climate risk appetite, strategies to mitigate climate-related risks, details
of greenhouse gas emissions and the achievement of TCFD objectives.
Significant
feedback and
value added
Climate risk was approved by the Risk Committee as a principal risk. Physical, regulatory and reputational risks
were defined as the three most material climate-related risks.
The Board approved the Group’s risk appetite for exposure to climate risk.
Key outcomes
– Climate risk was approved as a principal risk by the Risk Committee.
– A Climate Risk Committee was established with terms of reference approved by the CCE Committee, chaired
by the Group’s Chief Risk Officer.
– A Climate Risk Working Group has been established with specific responsibilities to support the reporting
requirements for TCFD and undertake scenario analysis for climate-related risks.
– The Board approved the Group’s target to reach net zero by 2040.
– The CCE Committee approved the Group’s commitment to the Business Ambition for 1.5°C pledge.
– Our operational carbon footprint is 19,589 tonnes CO
2
e in 2021 (5,493 tonnes CO
2
e in 2020). These emissions have
been partially offset through the purchase of carbon offset certificates in two wind power projects in Thailand.
For further information on the Group’s operational carbon footprint see page 73.
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Our suppliers See pages 60 and 61 for key KPIs
How
The Board has overseen the establishment of a Group Procurement function operating as a central shared service
under the leadership of the Group CFO. The Group Procurement function has implemented a new process for
reviewing major contracts which has enhanced the efficacy of the buying process and delivers a consistent
experience for all suppliers. The process requires Board engagement for those contracts that are of an appropriate
size or value or of strategic importance to the Group as defined in our Group Delegated Authorities Manual. During
the period supplier due diligence processes were reviewed and updated to ensure the Group continues to purchase
products and services from those which operate responsibly.
Supplier engagement activities are conducted through a Supplier Relationship Management Framework. The CCE
Committee discussed and was supportive of a tiered approach to engagement based upon supplier classification,
the outcome of which means that the Group’s most critical suppliers participate in an enhanced engagement
schedule that includes regular touchpoints for executive, relationship and performance review. Through the
CEO and CFO the Board engages directly with some of the Group’s most significant suppliers through meetings
at onboarding and at regular intervals throughout the relationship. Topics discussed include business success,
continual improvement, supplier concerns and contract negotiation. The meetings are attended by the Group Head
of Procurement or their delegate, who plans and executes any actions arising.
In May 2021 the Board approved significant investment in new IT architecture. The Board oversaw the rationale for
vendor selection to ensure the investment delivered modern customer-centric architecture that would allow for
broader application across the Group in support of the Group’s strategy. The Board received independent assurance
over the approach to vendor selection, the vendor selection process itself and the reputation and robustness of the
participating vendors. As part of this process interviews and surveys were undertaken with the potential supplier
stakeholders and the results reported back to the Board. The Board’s approval was provided based on the robust
rationale, the detailed tender and selection process, and the outcome of the assurance reports.
The Board oversaw the effective management of the supplier workstream which formed part of the CCD wind-down
programme. You can read more about this in our principal decision on page 78 .
The Group continues its commitment to fair, consistent treatment and prompt payment for suppliers and the CCE
Committee reviews the Group’s prompt payment performance on behalf of the Board through its monitoring of the
Blueprint Dashboard. The Board approved the Modern Slavery Act Declaration in March 2020.
Topics
The Scheme and managed run-off of CCD. Prompt payment practices, data protection, GDPR and modern slavery.
Vendor selection processes were conducted throughout the year for the provision of share plan administration
and purchase of new IT infrastructure. The efficacy of the vendor selection process and the Supplier Relationship
Management Framework.
Significant
feedback and
value added
Recommendations to the Board following robust vendor selection processes for the provision of new IT architecture
and independent assurance over the same.
Supplier sentiment, including continued supplier confidence in the Group following announcement of the
wind-down of CCD.
Key outcomes
– A well-executed supplier engagement plan resulting in continued supplier confidence through the Scheme
and CCD wind-down and maintenance of services for other divisions.
– Continued prompt payment of suppliers, thereby remaining a signatory of the Prompt Payment Code
and maintaining the Group’s reputation for high standards of business conduct.
– Approval of the Group’s Modern Slavery Statement.
– Commencement of the formal reappointment of Deloitte as the Group’s external auditor, the vendor selection
process for which concluded early in 2021.
– Approval of significant investment in new IT architecture for Sunflower Loans.
– The appointment of a new administrator for the Group’s share plans.
Principal decision – streamlining our corporate governance
and transforming our operating model
On 13 January 2022 the Company announced a restructure of the Board
of Vanquis Bank to substantially align its membership with the Board
of the Company. The decision to streamline the Boards of the two legal
entities has delivered immediate benefits of efficiency and reduced
duplication in the Group’s governance structure. However, the changes
were also an important step in transforming the operating model and
executing the Group’s strategy. You can read more about the Group’s
strategy in our Strategic Report on pages 28 to 32.
The Board began its deliberations in May 2021 and, after giving careful
thought to the implications of the CRD V regulation which introduced
the requirement for financial holding companies to be subject to
supervisory approval and consolidated supervision of the Group’s
structure, commissioned a review of the risks and opportunities
to evolving the Group’s corporate governance arrangements
and operating model.
Integrated operating model
Historically the Group has been organised in a federated model,
by division with the entities operating on a largely separate basis.
Alongside CRD V, direct Board engagement through conversations
with the regulator had reflected that the FCA regarded the Group
and its entities as one and expected the Group as a whole to apply
consistency to areas of key importance such as credit risk.
To address these points the Board contemplated an integrated
operating model which would: a) create an aligned Board structure to
simplify governance; b) develop a shared service model to improve
control and reduce cost; c) use a Treasury function to optimise funding;
and d) create a Group IT capability to enable a single customer view
across multiple products and streamline future technology investment.
The Board discussed stakeholder benefits of an integrated operating
model, which included more varied career progression for colleagues
and enhanced potential to delivery long-term value for shareholders.
The Board approved management’s proposal to further pursue the
benefits of an integrated operating model and you can read more
about the governance changes in our CEO’s Review on page 5.
Activity undertaken to optimise funding includes the EMTN Programme
described in our principal decision on page 82, and progress on our IT
capability in our personal loans update on page 47.
Alignment
The Group assessed its corporate governance arrangements relative
to its peers and noted that other banking groups were run on an
integrated basis. Furthermore, there had been simplification elsewhere
in the Group following the wind-down of CCD which prompted the
Board to reassess the effectiveness of the dual Board structure. Under
the dual Board structure Provident Financial plc and Vanquis Bank
Boards sat separately and had different members. With Vanquis
Bank being the Group’s largest subsidiary, the structure necessitated
duplication of reporting efforts, management time in meetings and
costs. The structure also overcomplicated the management of risk
and distribution of tasks under CRD V.
The Board engaged directly with the FCA and PRA on the proposal to
streamline its governance arrangements and sought independent
professional advice that considered the legal and regulatory
expectations on the companies and implications of any change.
The advice confirmed to the Board that legal and regulatory
considerations favoured the proposed alignment, after which
the Board approved the work to progress.
An independent and thorough process was undertaken to assess the
skills and experience of all the directors after which the necessary
regulatory applications were submitted. You can find out more about
our directors in their biographies on pages 112 to 114, and their roles in
our division of responsibilities on pages 134 to 136 and in our Nomination
Committee Report starting on page 143.
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Section 172 continued
Statement regarding section 172 of the Companies Act 2006 continued
PFG’s contribution
to risk management
and principal risks
Q&A
Q1.
How are we strengthening our risk
management capabilities to support
the delivery of the Group’s strategy?
The Group Risk Harmonisation Programme
(RHP) was established in 2020 with the aim of
providing a more consistent and integrated
approach to risk management across the
Group. During 2021 there has been significant
continued progress in the alignment of risk
management processes for the identification,
assessment and management of the Group’s
principal risks, and in strengthening second
line oversight. This has been underpinned
by a structured programme approach
delivering significant improvements in the
risk strategy, governance, operating model,
process, controls and technology. When
the programme is fully embedded in 2022,
the Group will have an enhanced single
Enterprise Risk Management Framework
(ERMF) and associated policies, tools, systems
and processes which will further enhance
the Group’s capability to consistently and
effectively manage its risks. We have also
strengthened the Group Risk senior leadership
team to ensure we have expert oversight
and coverage for all our Group principal
risks and to make key contributions to
regulatory developments.
Q2.
How are we proactively responding
to the significant changes in our
regulatory environment?
As part of the Group RHP we have re-evaluated
our Group principal risks, which are those
risks most critical to the alignment of the
Group strategy. We have added an additional
three Group principal risks to our Group Risk
Management Framework (GRMF) – climate
risk, market risk and financial risk – to ensure
we drive consistency in the management of
these areas across the Group.
In recognition of increased regulatory scrutiny
around customer outcomes, in particular
the Consumer Duty Consultation and key
themes surrounding affordability and
creditworthiness, vulnerability and financial
difficulty and forbearance, we have replaced
legacy and divisional risk management for
these matters with the Group Conduct Forum
(GCF). The GCF has representation from across
the Group and prioritises the development of
a Group-wide Conduct Risk Framework, and
the enhancement of the Group’s responsible
lending and Group vulnerability policies
and procedures.
Q3.
What is our main risk focus for the next
12 months?
A key part of our focus for 2022 is to further
embed the RHP and continue to develop our
risk management approach, capabilities and
culture to make sure we manage the risks to
which we are exposed to as a Group. We will
continue to influence, support and challenge
the business in managing its strategic risk
pillars by:
– maintaining a secure and efficient capital
and funding structure;
– delivering sustainable growth and returns
to our shareholders;
– optimising our reputation and becoming
the trusted bank for the underserved;
– establishing a strong risk and
customer-led culture;
– maintaining operational resilience
and business capabilities; and
– managing execution risk associated with
strategic and operational change activity.
In order to successfully implement the Group’s
risk strategy, we have defined a purpose and
adopted a set of principles within the Group
Risk function. These principles and purpose
enable us to demonstrate a proactive approach
to the Group’s strategic drivers and expected
behaviours. Group Risk’s purpose is to support
and challenge PFG to help put our customers
on a path to a better everyday life by helping
the business understand its risks and by
building a strong control environment through
insight, influence and assurance. This will
strengthen the Group’s ability to become
the bank for the underserved.
Gareth Cronin
Group Chief Risk Officer
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Risk management and principal risks
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88
Risk management and principal risks continued
Introduction and recent
developments
Introduction/overview
During 2021 the Group significantly strengthened its risk
management capabilities and embedded these into
business-as-usual practices. This has been delivered primarily
through the RHP via further embedding of an enhanced
single Enterprise Risk Management Framework (ERMF)
and associated policies, tools, systems and processes.
The Group’s approach to risk management
Risk management is recognised as an integral component
of good management and governance. In the context of PFG
it is critical to enable us to optimise our shareholder return,
and maximise our business opportunities while maintaining
positive outcomes for all our key stakeholders that include
shareholders, customers, colleagues and regulators. The
GRMF plays an important role in supporting the Group Board
and Executive in the implementation of an integrated business
strategy. The GRMF is based around an ‘enterprise’ approach
that enable a single view of all risks, and managing those risks
in a consistent way up, down and across the enterprise.
We proactively identify and manage our emerging risks,
defined as risks that can arise from external future events
such as political, economic, social or environmental issues.
Emerging risks are typically those of which the timing and
impact are uncertain and which are generally beyond
our control. They are subject to the same enterprise risk
management activity as our Group principal risks, which
includes risk identification, monitoring and reporting within
the Risk function and the Group’s governance structure.
Risk culture
Our Purpose, strategic drivers and behaviours combine to
drive us to always do the best we can for our customers
and colleagues. We promote a risk culture that supports
appropriate risk awareness, behaviours and judgements
in the level of risk we are willing to take. We have a number
of strategic risk drivers with the overall aim of delivering
sustainable profits as a Group whilst meeting the needs and
requirements of all our key stakeholders including customers,
regulators, investors, colleagues, communities and suppliers.
Our culture is underpinned by an appropriate balance
between risk and reward, with accountabilities reinforced
through the Senior Managers and Certification Regime.
Risk objectives are also included as part of non-financial
measures in Group and divisional executive scorecards and
we have embedded a Risk Adjustment Framework to formally
record the linkage between risk management and reward.
Risk appetite
The Group defines its risk appetite as the amount and type
of risk the organisation is prepared to seek, accept or tolerate
at any point in time, measured over a rolling 12-month
period. Our risk appetite is holistic and covers the 13 principal
risks detailed later in this report. The Board is responsible
for approving the Group’s risk appetite statements at least
annually with the supporting Board-level metrics cascaded
into more detailed business appetite metrics, limits and
thresholds at a divisional level.
Recent developments
The Group has continued to make significant progress on key
initiatives to strengthen and embed its overall risk governance,
frameworks and capabilities:
– We have continued to make significant progress embedding
our RHP with the goal of consolidating the various divisional
frameworks into an integrated single group ERMF. This
incorporates a number of key activities including the
development of a consistent suite of Group-wide Risk
Policies and a risk and control self-assessment (RCSA)
methodology. The majority of this is expected to be
embedded during 2022, led by our newly appointed
Group Head of Enterprise Risk.
– An agreement was signed with an external vendor for a
Group-wide integrated Group risk system. Implementation
of the Group risk system is a significant enabler for risk
harmonisation and will demonstrate delivery against
regulatory commitments to enhance Group-wide risk
capability, improve risk and control effectiveness, and
realise resource efficiencies with the automation of
processes and reporting.
Modern working model
As the Covid-19 pandemic continues to impact the economy
and society, we have continued to respond in a fluid and agile
manner. Our ongoing priorities have been to:
– ensure we continue to deliver fair customer outcomes;
– maintain an optimal capital and liquidity position;
– manage the health and wellbeing of our colleagues
through revised working arrangements, home working
and technology support; and
– maintain strong and proactive relationships with
our regulators, especially where we were needed to
implement significant change, e.g. the closure of CCD
and Scheme of Arrangement.
Many of the changes we made due to the initial impact
of the pandemic have now become business-as-usual
enhancements to our risk management processes and
we will continue to be agile in 2022 and beyond.
We continue to enhance our risk
management capabilities while
harmonising our supporting risk
infrastructure and frameworks through
significant investment in our Risk function.
Gareth Cronin
Group Chief Risk Officer
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Risk governance structure
The Group’s risk governance structure is outlined below. In combination, the various Board, executive and risk
committees strengthen our ability to identify, assess, manage and, as appropriate, escalate risks, while also
supporting the Group in responding to the changing external and regulatory environment.
Group Board
Reviews the Group RMF annually to ensure that it remains fit for purpose and complies with relevant laws
and regulations including the 2018 UK Corporate Governance Code (the Code).
Board committees
Risk Committee (RC)
Board committee responsible for ensuring that there is an
appropriate risk management framework embedded across
the Group, monitoring key risk positions and trends, and
providing oversight and advice to the Board in relation to the
current and potential future risk strategy and exposures.
Customer, Culture and Ethics Committee
Board committee responsible for reviewing the Group’s
culture and business processes to ensure they are focused
on delivering fair customer outcomes, overseeing the
Group’s delivery and embedding of its Blueprint and ensuring
the Board meets its corporate governance requirements
under the Code.
Management committees
Group Executive Committee (Group ExCo)
Executive committee chaired by the Group CEO
responsible for developing, proposing and implementing
Board-approved strategy. In doing so, it is responsible for
managing the Group strategic risks and overseeing divisional
risks. Detailed assessment and oversight of these risks are
delegated to the Group Executive Risk Committee.
Group Executive Risk Committee (GERC)
Executive committee chaired by the Group CRO responsible
for managing the Group’s strategic and emerging risks and
overseeing divisional risks. The GERC receives reports from the
divisional CROs which cover key risks within their respective
divisions. The Group CRO also provides a regular report from
a second line perspective on the enterprise-wide risks facing
the Group, how they are trending, and whether there is an
agreed ‘path to green’ to ensure these are managed within
risk appetite.
Cross-Divisional Risk Forum (CDRF)
Risk Forum chaired by the Group CRO, bringing each of the divisional CROs and Head of Enterprise Risk together. It primarily acts
as a platform for sharing views, coordinating forward-looking risk assessment, identifying new and emerging risks and providing
an independent forum for the divisional CROs to escalate material risks. The CDRF enables the Group CRO to give an independent
viewpoint on both the risks of the divisions and the Group and assists the Chair of the GRC to better understand and prioritise the
key risks of the Group.
Three lines of defence (3LOD) model
The Group operates a 3LOD model to articulate key accountabilities and responsibilities for managing risk
and to support effective embedding of risk management across the organisation.
The first line of defence – line management
Owns the risk and is responsible for identifying, assessing, monitoring and reporting risk within its respective areas whilst ensuring that
appropriate internal controls, processes and systems are in place to deliver against business strategy and objectives.
The second line of defence – Group and divisional risk functions
Sets minimum policy and control standards and establishes effective risk management frameworks, providing independent challenge and
oversight, including agreeing risk appetite, and protecting the Group against non-compliance with laws or regulation.
The third line of defence – Group Internal Audit
Provides independent and objective assurance on the design adequacy and operational effectiveness of internal controls, and overall
effectiveness of the Group’s risk governance and risk management practices, and provides assurance on whether the first and second lines
of defence fulfil their respective responsibilities.
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Risk management and principal risks continued
Risk appetite framework
The Group risk appetite framework creates a clear link between PFG’s business
strategy and its strategic risk objectives. It defines the overarching approach
through which the Group’s risk appetite is established and communicated.
Group strategy and Purpose
We help put people on a path to a better everyday life
Risk appetite framework
Customer
progression
Fighting fit
Human
experiences
Head and
heart decisions
Our principal risks
Credit
Capital
Legal and governance
People
Operational
Strategy
Market
Funding and liquidity
Conduct and regulatory
Climate
Technology and information security
Financial crime
Model
Strategic risk objectives
Maintaining a secure and efficient
capital and funding structure
Delivering sustainable growth
and returns to our shareholders
Optimising our reputation
and becoming the trusted bank
for the underserved
Establishing a strong risk
and customer-led culture
Maintaining operational resilience
and business capabilities
Managing execution risk associated
with strategic and operational
change activity
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Risk appetite headlines
We will maintain sufficient capital,
both in quantity and quality, to meet
regulatory requirements and will hold
a management buffer as agreed with
the Board.
Capital
Conduct and
regulatory
Funding
and liquidity
We will maintain a properly engaged
and skilled workforce which is aligned
to our Purpose and Group culture.
People
The Group will manage our credit risk
exposures through effective underwriting
processes, systems and controls to
support appropriate lending decisions.
We will maintain robust, resilient
technology platforms/systems and
services with strong information security
and data controls to prevent significant
customer detriment, regulatory
breaches or reputational damage.
Technology
and information
security
Credit
We will seek new business opportunities,
both organic and inorganic, which remain
aligned to our customer, regulatory and
commercial objectives.
Strategic
We will limit operational losses as a result
of control failures attributed to people,
processes and systems including those
over external suppliers.
Operational
We will aim to avoid any material
legal breaches. In the event that they
do occur, we will, where possible,
correct them promptly and in all cases
carry out necessary management
to mitigate risks and learn from our
mistakes. We will maintain oversight
of our business through robust and
clearly documented governance
and delegation arrangements.
Legal and
governance
We will operate a strong and risk-proportionate set of systems and controls to detect and prevent financial crime
breaches. In the event that they do occur, we will investigate them promptly and learn from control failings, gaps
or issues. We will maintain oversight of our business through robust and clearly documented governance and
delegation arrangements.
Financial crime
We will ensure that under a severe and
adverse change in interest rates, any
risk to our capital (economic value) or
earnings remains within levels agreed
with the Board and for which Pillar 2A
capital is held.
We will understand, review and address
our exposure to climate risks, meet our
commitments on climate targets and
reporting in line with relevant government
legislation and recommendations, and
seek new opportunities arising from
climate change. We will ensure that our
climate targets are set in line with our
commitment to support the UN’s Business
Ambition campaign to hold the increase
in global temperatures to 1.5°C above
pre-industrial levels.
Market Climate
Through strong governance all
material models will perform in line
with expectations.
Model
We will deliver fair outcomes for our
customers at all stages of the customer
lifecycle. We will aim to avoid any material
regulatory breaches and, in the event
that they do occur, we will correct them
promptly and learn from our mistakes.
Our funding risk appetite is to maintain a
stable and prudent funding profile without
any significant reliance on any single
source of funds, retaining a sufficient level
of unencumbered assets and unutilised
funding sources as contingency.
Our liquidity risk appetite is to maintain
sufficient liquidity resources to be able to
meet our liabilities as they fall due, whether
in normal conditions or stress, while also
meeting our regulatory requirements.
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Key risks
Principal risks
Minor Moderate Major
Critical
Remote Unlikely Possible
Probable
Probability
Impact
Capital
P1
Strategy
P5
Funding and liquidity
P2
Climate
P6
Market
P3
Legal and governance
P7
Credit
P4
Financial crime
Technology and
information security
P8
P11
Conduct and
regulatory
Operational
P9
P12
People
Model
P10
P13
Residual risk
Gross risk
Risk management and principal risks continued
Increased
Stable Decreased
Change during the year
Links to strategy
Grow
customer-centric
businesses
Act responsibly
and with integrity
Maintain a secure
funding and
capital structure
1
2 3
Minor
Risk rating after mitigation
MajorModerate Critical
!
P6
P2
P11
P4
P7
P1
P12
P8
P10
P8
P6
P5
P7
P2
P9
P4
P11
P12
P1
P3
P13
P10
P3
P5
P9
P13
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Principal risks
Principal risks are risks which are inherent to the Group’s strategy and business model, and
have formally been articulated as part of the Group’s risk appetite framework. Principal risk
categories and associated risk appetite statements are reviewed and approved by the
Board on an annual basis, effectively defining the Group’s overall risk appetite.
P1 Capital risk
3
Risk description
The risk that the Group
is unable to maintain
appropriate, minimum
regulatory capital or an
internal management
buffer to cover risk
exposures and withstand
a severe stress as defined
in its risk appetite and in
the ICAAP.
Mitigating activities and other considerations
– The Group and bank operate within a defined capital risk appetite, with thresholds
reported to and monitored by Group and bank Boards. The boards regularly review both
the existing and forecast capital position to ensure that planned capital resources are
sufficient for planned changes in the balance sheet.
– In line with the PRA’s requirements, the Group’s Internal Capital Adequacy Assessment
Process (ICAAP) is updated at least annually and identifies the levels of capital required
under the regulatory total capital requirement (consisting of Pillar 1 and Pillar 2A risks)
and any PRA and confidential buffers (to the extent that any are required). The 2021
ICAAP evidenced that the Group and bank will continue to be able to meet their capital
requirements including in stress scenarios over a five-year time horizon.
– In line with industry practice, to ensure preservation of capital and support business
stability, the 2019 dividend was cancelled and no dividends were paid by the Group to its
shareholders in respect of 2020. As the macroeconomic outlook has now improved and
in line with the Group’s results, the Group is proposing a dividend in respect of 2021, to be
paid in 2022.
– In October 2021, the Group’s first Tier 2 subordinated bond since 2005 was issued for an
amount of £200m. It has a 10.25-year maturity that is callable at the Group’s discretion
between 5 and 5.25 years, and pays a coupon of 8.875%. The issuance was written from
the Group’s £2bn EMTN Programme and was oversubscribed by around 2 times in the
market. The issuance represents an important milestone as the Group diversifies and
optimises its sources of capital in support of future lending growth. The Group’s risk
monitoring measures have been updated to take account of the Tier 2 issuance.
– At 31 December 2021, the Group’s CET1 ratio was 29.1% (2020: 34.2%) and the total capital
ratio was 40.6% (2020: 34.2%). CET1 decreased over 2021 from £675m to £507m, reflecting
the costs of closing CCD and the scheduled unwind of the IFRS 9 transitional relief in
regulatory capital. Total capital increased over 2021 from £675m to £707m due to the
issuance of Tier 2 debt capital and includes £121m of Tier 2 capital to pre-fund future
balance sheet growth.
– On 13 December 2021, the Financial Policy Committee (FPC) announced an increase to
the UK countercyclical capital buffer rate to 1%, to be implemented by 13 December 2022.
Provided the UK economy continues to recover, the FPC expects to increase the rate
further to 2% in quarter 2 of 2022, to take effect in quarter 2 of 2023. These increases are
absorbed within the capital plans of the Group and bank.
– As previously reported, the Group and bank have elected to phase in the impact of
adopting IFRS 9 over a five-year period. In response to Covid-19, the PRA ratified additional
capital mitigation in 2020 which the Group also fully adopted.
– The Group and bank plans for the unwind of the IFRS 9 transitional adjustment as part
of both regular capital planning and under stress scenarios.
– The Group’s Pillar 3 disclosures contain a comprehensive assessment of its capital
requirement and resources. Pillar 3 disclosures for the year ended 31 December 2021
are published separately on the Group’s website, www.providentfinancial.com.
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94
Risk management and principal risks continued
P2 Funding and liquidity risk
3
Risk description
The risk that the Group has
insufficient liquidity to meet
its obligations as they fall
due, and/or is unable to
maintain sufficient funding
for its future needs.
Mitigating activities and other considerations
– Liquidity and funding risk appetite is established at Group and bank level, with thresholds
reported to and monitored by the Group and bank Boards.
– The Group’s current funding strategy is to maintain sufficient available funds and
committed facilities to pre-fund the Group’s liquidity and funding requirements for at
least the next 12 months, maintaining access to diversified sources of funding comprising:
(i) external market funding, including retail bonds, institutional bonds and private
placements; (ii) securitisation; (iii) retail deposits; and (iv) access to the Bank of England
Liquidity and Funding Schemes at Vanquis Bank.
– The Group continued to utilise its auto loan securitisation warehouse facility, drawing
a further £50m in February 2021, taking its total drawings to £200m. The warehouse
was refinanced and restructured in July 2021 to improve the efficiency of the usage of
collateral such that drawn funding increased to £275m with no significant increase in
asset encumbrance. The facility also provides for a committed but currently undrawn
amount of £50m which provides contingent liquidity.
– As at 31 December 2020, the Group had a multi-currency RCF with a total facility size of
approximately £148m. In line with the Group’s strategy of reducing reliance on the RCF,
some of the new securitisation funds were used to reduce the Group’s RCF commitments,
initially to £90m alongside an extension of the facility to July 2023. In line with the strategy
to reduce its reliance on the RCF as a source of funding, the Group took the decision to
early repay and cancel the facility in March 2022.
– In September 2021, the Group repaid its £65m, 6.0% retail bond in line with its
contractual maturity.
– In October 2021, the Group successfully completed a liability management exercise
involving the partial tender and repurchase of £71.5m of the then outstanding £175m
8.25% senior bonds maturing in June 2023, and the issue of £200m Tier 2 bonds
(described in capital risk above).
– The above actions taken by the Group during 2021 extended the weighted average
maturity of its non-bank funding.
– The bank accepts retail deposits and, in line with its regulatory requirements, maintains
high-quality liquid assets to meet the liquidity coverage ratio (LCR) and its internal stress
tests as stipulated within its Internal Liquidity Adequacy Assessment Process (ILAAP). The
Group and bank monitor and report the LCR to the PRA on a consolidated and solo basis
as applicable.
– The bank maintained a significant surplus of liquidity against its regulatory and internal
requirements throughout 2021, and is managing this down in a prudent manner as the
uncertainty arising from the pandemic is reduced.
– In January 2021, the bank completed its inaugural issue from its newly established credit
card receivable master trust. The transaction has been rated (AAAsf/Aaa(sf)/AAAsf) by
Fitch Ratings, Kroll Bond Rating Agency and Standard & Poor’s. The bonds are listed on
the London Stock Exchange. These notes have enabled access to the Bank of England’s
Liquidity and Funding Schemes. The majority of the senior rated notes have now been
pledged to the Bank of England to support borrowing of £174m from the Term Funding
Scheme with additional incentives for Small and Medium-sized Enterprises (TFSME).
Principal risks continued
Increased
Stable Decreased
Change during the year
Links to strategy
Grow
customer-centric
businesses
Act responsibly
and with integrity
Maintain a secure
funding and
capital structure
1
2 3
Minor
Risk rating after mitigation
MajorModerate Critical
!
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P3 Market risk
3
Risk description
The risk to the Group’s
current and prospective
capital and income position
arising from adverse
movements in interest rates.
Mitigating activities and other considerations
– The Group and bank have established interest rate risk appetites, with thresholds
reported to and monitored by Group and bank Boards.
– The Group and bank do not actively seek to take significant unmatched positions
and do not operate a trading book.
– Analysis of an interest rate sensitivity gap is principally used to assess the Group’s
exposure to interest rate risk by identifying unmatched duration positions.
– The Group and bank report their exposure to interest rate risk considering earnings at
risk (EaR) and market value sensitivity (MVS). Risk appetite is assessed against a 100bps
and 200bps parallel shock to interest curves respectively. Risk appetite has also been
established for economic value of equity (EVE) which is monitored against a 200bps
parallel shift in rates, as well as the six standardised shocks prescribed by the Basel
Committee on Banking Supervision (effective from the 31 December 2021).
– The Group and bank also monitor their exposure to basis risk, with the Bank of
England base rate and SONIA the only external reference rates for on-balance sheet
positions. The Group no longer has any exposure to LIBOR having refinanced the RCF
and Moneybarn’s securitisation facility in 2021, which included revision to the external
reference rate to SONIA.
P4 Credit risk
1
2
Risk description
The risk of unexpected credit
losses arising through either
adverse macroeconomic
factors or parties with whom
the Group has contracted
failing to meet their
financial obligations.
Mitigating activities and other considerations
– The Group has continued with a cautious approach to credit risk through the pandemic.
Arrears have remained low as consumers continued to receive support via government
initiatives, including the furlough scheme.
– Vanquis Bank has implemented a number of pre-emptive measures to manage
exposures as government support is withdrawn. These include a limit decrease strategy
for the up-to-date, active book and restriction of credit lines where external indicators
of increasing financial stress are present.
– The Group has maintained prudent post-model adjustments in its provision calculations
to compensate for the muting of credit risk indicators, driven by government support
measures through the pandemic.
– Concentration risks arising from the pandemic have been considered by the Group’s
divisions. Populations likely to be impacted by the pandemic have been identified and
are subject to ongoing monitoring. The Group has continued to acquire additional data
sources to support the identification of customers experiencing income shocks or other
adverse financial impacts. This data has been integrated into lending decisions for our
new and existing customers.
– Performance of risk models is being closely monitored, with adjustments implemented
where any deviation from expected performance is evidenced.
– The Group continues to pursue opportunities to supplement existing data sources
to enhance both credit and affordability risk, i.e. open banking.
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96
Risk management and principal risks continued
Increased
Stable Decreased
Change during the year
Links to strategy
Grow
customer-centric
businesses
Act responsibly
and with integrity
Maintain a secure
funding and
capital structure
1
2 3
Minor
Risk rating after mitigation
MajorModerate Critical
!
P5 Strategic risk
1
2
3
Risk description
The risk of making poor
strategic decisions related
to acquisitions, products,
distribution, etc. as a result
of ineffective governance
arrangements, processes
and controls.
Mitigating activities and other considerations
– The Board and its sub-committees make risk-based decisions in the formulation
of business strategy, in line with the delegated authority framework and subject
to independent oversight from the Risk function.
– Strategic redirection from high-cost to medium-cost lending following the closure of CCD
and SOA to cap potential liabilities that would adversely affect the Group.
– Board governance manual and Delegated Authorities Manual (DAM) in place to provide
framework for key decision making at all levels across the Group and divisions.
– Executive director scorecards in place with reward incentives based on a combination
of financial and non-financial measures.
– Group risk appetite framework in place with agreed measures and thresholds approved
by the Group Board.
– Strategic and emerging risks reported to the GERC and GRC on any areas of concern.
– Risk overlay completed annually by the Group CRO on behalf of the RemCo to provide
recommendations on adjustments to variable reward where governance has failed.
P6 Climate risk
2
Risk description
The physical risk of the
impacts of climate change
and the business risk
posed to the Group and
its counterparties related
to non-compliance
costs and financial loss
associated with the
process of adjusting to
a low-carbon economy.
Mitigating activities and other considerations
– Climate risk adopted as a Group principal risk, with supporting risk appetite established
to provide greater focus on compliance with the Task Force for Climate-related Financial
Disclosures (TCFD) recommendations, forming the basis for the development of
science-based targets from 2022 onwards.
– Group-wide climate strategy and policy in place to ensure appropriate governance,
controls and processes are in place to support compliance with TCFD recommendations
and broader ESG strategy (including net-zero targets).
– Climate Risk Committee operational, supported by Climate Risk and Environmental
Working Groups, facilitating integration of climate considerations into the Group’s
broader Risk Management Framework through its reporting lines into the Customer,
Culture and Ethics Committee and Group Executive Committee.
– New scenario analysis and stress testing framework in development to drive enhanced
monitoring of PFG’s exposure to material short and long-term impacts of transition and
physical climate-related risks, and to inform forward-looking strategy. ICAAP activity continues
to take account of material climate-related financial impacts, meeting PRA requirements.
– Monitoring of material supplier emissions and colleague and customer impacts, such as
altered commuting activity and changes to living costs, including energy price increases.
– Continued offsetting of direct operational (scope 1 and 2) greenhouse gas emissions
via investment in sustainable development projects and all the Group’s main premises
certified to the environmental management standard ISO 14001:2015.
Principal risks continued
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Strategic report
P7 Legal and governance risk
2
Risk description
The risk that the Group
is exposed to financial
loss, fines, censure or
enforcement action due
to failing to comply with
legal and governance
requirements as a result of
ineffective arrangements,
processes and controls.
Mitigating activities and other considerations
– Board governance manual and Delegated Authorities Manual (DAM) in place to provide
framework for key decision making at all levels across the Group and divisions.
– Board effectiveness is assessed on annual basis with action plans in place to promote
a culture of continuous improvement.
– Explicit approval from the Group Board is required before decisions and actions that
could result in risks outside of appetite are made.
– Conflicts of Interest Policy and processes in place to ensure all employees meet their
fiduciary responsibilities.
– All regulatory interactions are recorded and tracked, with regular reporting through
our executive and Board committees to ensure consistency and read across through
a Group lens.
– The Group proactively engages with regulatory authorities and industry bodies
on forthcoming regulatory changes.
P8 Financial crime risk
2
Risk description
The risk that the Group’s
products and services are
used to facilitate financial
crime against the Group,
customers or third parties.
Mitigating activities and other considerations
– The Group is committed to operating a strong and risk-proportionate set of systems
and controls to manage the risk within appetite.
– Financial crime improvement programme in Vanquis, primarily focused on implementing
enhanced surveillance technology, has largely been completed.
– Financial crime risk appetite statement and metrics refreshed providing improved insight
of the key risks to senior management.
– Regulatory actions and notifications are managed/monitored in line with relevant
timescales and regular horizon scanning is in place to identify relevant and significant
regulatory change.
– New financial crime risk assessment methodology implemented which will enhance
identification of financial crime risks and threats and how these are mitigated through
the organisation. This has begun with Vanquis and will be rolled out across the Group.
– System investment for PSD II and better decision making science within the ruleset
resulting in less losses and victims of fraud within Vanquis.
P9 Conduct and regulatory risk
1
2
Risk description
Conduct risk: The risk
of customer detriment
due to poor design,
distribution and execution
of products and services
or other activities which
could lead to unfair
customer outcomes or
regulatory censure.
Regulatory risk: The risk
that the Group is exposed
to financial loss, fines,
censure or enforcement
action due to failing
to comply with laws or
regulations (including
handbooks, codes of
conduct, and statutory
and regulatory guidance).
Mitigating activities and other considerations
– Conduct risk appetite refreshed providing greater focus on outcome measures.
– New Conduct Risk Framework is being developed to provide improved monitoring of
customer outcomes across all high-risk interactions including lending, forbearance,
vulnerability and complaints.
– Conduct policies and procedures in place at a divisional level to ensure appropriate
controls and processes that deliver fair customer outcomes.
– New Group Responsible Lending Policy has been developed providing overarching
principles for all the divisions in response to the changing regulatory environment
and requirements around sustainable lending.
– During the pandemic we have ensured that our customers continue to receive the
service they need during these difficult times, in particular the provision of payment
deferrals in line with FCA guidance.
– A number of regulatory programmes remain under close management, most notably
Persistent Debt and PSD II (SCA). Projects are in place to oversee delivery and updates
provided to the regulators as required.
– Establishment of Group Complaints Forum and reporting to ensure we are learning from
complaints trends across the divisions, including any FOS referrals or upholds and actions
of claims management companies. This has resulted in a number of strategic changes
outlined in our emerging risks ‘Threats to our business model’ and ‘Responsible lending’.
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98
Risk management and principal risks continued
P10 People risk
2
Risk description
The risk that the Group fails
to provide an appropriate
colleague and customer-
centric culture, supported
by robust reward and
wellbeing policies and
processes, effective
leadership to manage
colleague resources,
effective talent and
succession management,
and robust controls to
ensure all colleague-related
requirements are met.
Mitigating activities and other considerations
– Harmonisation of People and Human Resource functions into central shared service.
– Move to Group-consistent framework for performance management including
the roll-out of ‘Be Better’ objective setting.
– Succession plans completed and in place for all executive and senior management.
– Balanced scorecards introduced and aligned across the Group and divisions with clear
frameworks and evaluation criteria established through RemCo for variable pay.
– A number of ongoing communications have been and continue to be shared with
colleagues at a Group and divisional level to keep them informed of business changes
to support wellbeing.
– Full health and safety risk assessment completed of all our key work locations
with mitigating actions completed.
P11 Technology and information security risk
2
Risk description
The risk arising from
compromised or
inadequate technology,
security and data that could
affect the confidentiality,
integrity or availability of the
Group’s data or systems.
Mitigating activities and other considerations
– An IT First Line Controls Review (FLCR) is in progress which will baseline and standardise
risk management and control across the Group’s IT functions.
– Group-wide security improvement programme has been initiated to deliver an ISO 27001
aligned framework.
– The investment and development of a new Group IT platform capable of housing multiple
products, the new Sunflower Loans business being the first, and addressing technical
debt/legacy issues being faced/experienced across the Group.
– Data Protection Officer (DPO) reporting transferred to the Group Risk function to reinforce
independence of office covering oversight arrangements.
– Group governance and centres of excellence/communities of interest have been
established for security, architecture, resilience and risk (GRC).
Principal risks continued
Increased
Stable Decreased
Change during the year
Links to strategy
Grow
customer-centric
businesses
Act responsibly
and with integrity
Maintain a secure
funding and
capital structure
1
2 3
Minor
Risk rating after mitigation
MajorModerate Critical
!
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Strategic report
P12 Operational risk
2
Risk description
The risk of loss resulting
from inadequate or failed
internal processes, people
and systems or from
external events.
Mitigating activities and other considerations
– The 3LOD model throughout the Group ensures there are clear lines of accountability
between management which owns the risks, oversight by the Risk function and
independent assurance provided by Internal Audit.
– Operating arrangements put in place in response to the Covid-19 pandemic have
become business-as-usual practice as we continue to operate in an agile manner.
– Risk Harmonisation Programme launched to build out single ERMF including control
self-assessment, consolidated risk policy taxonomy, and risk reporting.
– The operational risk and control self-assessment methodology has been enhanced
and expanded to cover the full suite of risks facing the Group with more timely reporting,
monitoring and escalation.
– Vanquis Risk Enhancement Programme to enhance first line risk and control activity
established and significantly progressed against its objectives.
– Group Transformation function has been established to provide central change
and programme management capabilities.
P13 Model risk
2
Risk description
The risk of loss as a
consequence of decisions
that are based on incorrect
or misused model outputs
and poor governance or
errors in the development,
implementation, or use
of models.
Mitigating activities and other considerations
– Further embedding of the new Group Model Risk Management Framework and Model
Risk Policy as well as the development and implementation of necessary supporting
modelling standards.
– Material models across the Group are independently validated as required in the policy
and as per the independent model validation plan.
– Group model inventory, containing key models across the Group, is reviewed and
updated on a regular basis and has all the necessary information to enable effective
model risk reporting and planning.
– High-risk issues and findings on material models are addressed urgently and
outstanding model risk issues and findings are monitored and reported to relevant
governance forums across the Group.
– Group Model Governance Forum meets regularly and effectively provides model risk
oversight and drives standardised approach to model development and governance
across the Group.
– Model risk target operating model delivered including the recruitment of additional
resources to enhance the current model validation and governance capability.
Strong relationships
with our regulators
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100
Relations with regulators
Key regulatory interactions
– Strong proactive relationships with regular lines
of communication are in place with both the FCA
and the PRA.
– We are not aware of any part of the Group and divisions
currently being placed on any regulatory watchlist.
– In March 2021, CCD was notified by the FCA enforcement
team that it will be starting an investigation into the
affordability and sustainability of lending to customers,
as well as the application of an FOS decision into the
complaint handling process in the period between
26 February 2020 and 11 February 2021. We have supplied
all the information that has been requested.
We have continued to focus on maintaining strong
and proactive relationships with our regulators.
We believe maintaining an open, constructive and trusting dialogue with policy
makers and regulators (the Prudential Regulation Authority (PRA) and Financial
Conduct Authority (FCA)) is critical. We work closely with our regulators to ensure
we meet all regulatory standards and contribute to a safe and robust banking
system. As the bank of the underserved we do have unique insights into those
sections of the market and frequently share these views with our regulators
with a view to make the underserved credit market work effectively for all.
In accordance with the 2018 FRC Corporate Governance Code,
the directors confirm that they have a reasonable expectation
that the Group will be able to continue to operate and meet
its liabilities as they fall due over the next three years to
31 December 2024 (the Viability Period). The Viability Period
represents the period over which the Board has a reasonable
degree of confidence over anticipated events whilst also
providing an appropriate longer-term outlook.
In making the Group viability statement, the directors have
made an assessment of the Group’s current financial position
and prospects, as outlined within the Strategic Report, together
with the principal risks and other factors likely to affect the Group’s
future performance and development. This assessment
is made following consideration of a wide range of
information, including:
– the Group’s five-year corporate plan, which sets out
financial, capital, liquidity and funding projections,
together with an overview of relevant risks for the period
from 2021 to 2026;
– the principal and emerging risks which could impact
the performance of the Group;
– a severe but plausible stress testing scenario, which
is designed to assess the potential impact of certain
underlying risks on the Group’s capital and funding
resources, together with the availability and effectiveness
of mitigating actions; and
– reverse stress testing analysis, which is designed to assess
the point at which Group is no longer a viable concern.
The Group’s five-year corporate plan was approved by the
Board in December 2021. The Group’s annual planning process
takes into account the Group’s strategic objectives and
business model. The business model focuses on relatively
short-term lending to consumers and operates conservative
underwriting. The plan makes certain assumptions about
the regulatory environment, future economic conditions and
anticipated changes within the markets in which the Group
operates and also makes an assessment of the Group’s ability
to fund new business growth.
The Board obtains independent assurance from Group Risk
over the alignment of the corporate plan with the Group’s
strategy and the Board’s risk appetite. Specific focus is placed
on capital risk as well as liquidity and funding risk. The
assessment also considers the key risks which may impact
delivery of the Group’s operating plan. The Group’s principal
risks are included on pages 92 to 99.
The current corporate plan is based on a macroeconomic
scenario which was in line with market consensus estimates
and which envisages a continuation in the recovery of the
UK economy following the Covid-19 crisis. In particular, the
plan assumes that the UK unemployment rate peaks in
December 2021 at approximately 4.9% before a gradual
decline thereafter. The corporate plan makes an assumption
that the Group’s future funding requirements are pre-funded
12 months in advance. The Group does not have any external
capital or funding requirements within the 12 months following
this statement.
Board approval of the five-year corporate plan follows a
number of specific reviews of the plan provided by Group and
divisional management, together with other regular briefings
on and discussion of new strategies, business developments
and current financial performance. These reviews consider a
range of market opportunities and developments, together with
associated risks from within the Board’s risk appetite framework.
The five-year corporate plan has been stress tested using a
severe macroeconomic scenario which is broadly consistent
with the PRA’s 2021 Solvency Stress Test. The stress test
scenario envisages a severe shock to the UK economy in
2022 which results in an increase in the UK unemployment
rate, peaking at approximately 12%. The stress test scenario
takes into account the availability and effectiveness of
mitigating actions which could be taken by management to
avoid or reduce the impact of the macroeconomic stress.
The corporate plan has also been reverse stress tested to
the point of non-viability after reflecting available mitigating
actions. The viability assessment concluded that the Group’s
viability only comes into question under an unprecedented
macroeconomic scenario in which the UK unemployment rate
reaches a peak of 20%.
The directors also considered it appropriate to prepare the
financial statements on the going concern basis, as set out
on page 168 and page 198.
Group
viability statement
Viability statement
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Strategic report
Provident Financial plc Annual Report and Financial Statements 2021
102
Financial review
Building a more
sustainable business
The Group made great strides
during 2021 and I am pleased to
report that the Group delivered
against many of its strategic
ambitions, including its plan to create
a more sustainable organisation.
The closure of the Consumer Credit
Division (CCD), including a Scheme of
Arrangement for CCD customers, and
the significant enhancements to our
capital and funding positions serve
to strengthen the Group’s already
strong operating platform. The Group
is well positioned to face any future
challenges including any related
economic uncertainty. However, we
are well placed to deliver attractive
and sustainable returns for our
shareholders over the
medium term.
Neeraj Kapur
Chief Finance Officer
Income statement
2021
£m
2020
£m
Income 534.6 615.4
Funding costs (49.1) (61.2)
Net interest margin 485.5 554.2
Impairment (50.4) (312.6)
Risk-adjusted net interest margin 435.1 241.6
Costs (267.3) (213.8)
Adjusted profit before tax –
continuing operations 167.8 27.8
Amortisation of acquisition intangibles (7.5) (7.5)
Exceptional items – continuing operations (18.1) (57.3)
Statutory profit/(loss) before tax –
continuing operations 142.2 (37.0)
Loss for discontinued operations (138.1) (76.5)
Group profit/(loss) before tax 4.1 (113.5)
Tax – continuing operations (7.6) —
Tax – discontinued operations (28.6) 30.1
Loss after tax (32.1) (83.4)
Certain alternative performance measures (APMs) have
been used in this report. See pages 271 to 274 for an
explanation of relevance as well as their definition.
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103
Strategic report
Trading performance
Detailed analysis of the trading results of the Group’s three
operating divisions can be found on pages 40 to 42 for credit
cards, 43 and 44 for vehicle finance and 46 and 47 for
personal loans.
Profit before tax
As a result of a release of impairment provisions no longer
required, partially offset by lower revenue and higher costs
arising from investment in the transformation programme,
the Group reported adjusted profit before tax from continuing
operations of £167.8m (2020: £27.8m). The Group’s statutory
profit before tax from continuing operations was £142.2m
(2020: loss of £37.0m). Including amortisation of acquisition
intangibles, CCD discontinued operations and exceptional
items, the Group profit before tax was £4.1m (2020: loss before
tax of £113.5m).
An exceptional cost of £18.1m was recognised in 2021.
This includes:
– corporate costs including CCD closure (£11.5m);
– additional Scheme costs (£5m);
– senior bond buy-back costs (£3.9m); and
– pension credit (£2.3m).
This compares to an exceptional cost in 2020 of £57.3m as a
result of: (i) the complaints provision and associated costs in
relation to the CCD Scheme (£65m); (ii) a release of provisions
following completion of the ROP refund programme at Vanquis
Bank (£8.3m); and (iii) a gain in respect of the redemption of
the £75m senior bonds (£1.3m); offset by (iv) costs of reshaping
the Group and creating the intermediate holding company
PF Holdings Ltd (£1.2m); and (v) pension charges in respect
of GMP equalisation (£0.7m).
Discontinued operations
Discontinued operations represent the home credit and
Satsuma loans businesses within the CCD division, which
meet the criteria for classifying as discontinued operations
for 2021 following the decision to withdraw from the home
credit and high-cost short-term credit markets entirely and
close those businesses. Any remaining balances in relation to
customer receivables were written off at the end of 2021 as no
further collection activity was being performed. Discontinued
operations reported a loss after tax of £166.7m (2020: loss after
tax of £46.4m) driven by lower revenue and lower costs as the
business lines were wound up during 2021. Impairment in 2021
of £59.6m was higher than prior year (2020: £47.5m) with any
loans remaining being fully written off at the end of the year.
Discontinued operations exceptional items include
redundancy costs of £24.8m, other costs associated with the
wind-up of the business of £12.8m, and costs in relation to the
CCD enforcement provision of £5m.
Earnings per share (EPS)
The £171.6m increase in profit after tax from continuing
operations of £134.6m (2020: loss of £37.0m) has resulted
from the £262.2m reduction in impairment provisions no
longer required, partially offset by higher costs of £53.5m
from investment in the Group’s transformation programme
and exceptional costs reducing by £39.2m in 2021, largely
due to the £65.0m exceptional complaints provision
recognised in 2020.
As a result, basic earnings per share from continuing
operations increased from a loss per share of 14.6p in 2020
to earnings per share of 53.7p in 2021. The adjusted basic
earnings per share from continuing operations increased
from 11.7p per share in 2020 to 57.5p in 2021.
Gross revenue margin
Revenue represents interest and fee income and is made up
of interest income charged on credit cards, vehicle finance
and loans across the Group, and fee income, charged
primarily on credit cards.
Revenue was £534.6m in 2021, a reduction of 13.1% from 2020
(2020: £615.4m), which exceeds the 8.6% reduction in average
receivables from £1,767.1m in 2020 to £1,616.0m in 2021. The
revenue yield reduced from 34.8% in 2020 to 33.1% in 2021,
which reflects the reduction in the higher risk credit card
revenue yields from 39.1% to 38.8% as lower fees have been
recognised following a reduction in ROP, default and over-limit
fee income. In vehicle finance, the revenue yield has reduced
from 25.1% in 2020 to 23.2% in 2021 due to the shift in the make-up
of the lending book away from higher risk, higher APR loans
towards near-prime and lower APR loans.
Funding costs
Funding costs are made up of retail deposits and funding from
the Bank of England’s Term Funding Scheme with additional
incentives for Small and Medium-sized Enterprises (TFSME)
in Vanquis Bank, combined with non-bank group funding
through bonds and bank borrowings. The funding cost
reduced from £61.2m in 2020 to £49.1m in 2021, a decrease
of 19.8% as a result of successful progress against a number
of the Group’s funding objectives during 2021.
Net interest margin (NIM)
The Group’s NIM reduced by 1.4% from 31.4% in 2020 to 30.0%
in 2021 reflecting the reduction in new business volumes in
vehicle finance and lower revenue yield from the change
in mix of the lending book, partially offset by an increase in
average receivables. NIM in credit cards remained static
year on year at 36.3%.
Provident Financial plc Annual Report and Financial Statements 2021
104
Financial review continued
Group total
capital ratio
(%)
40.6%
20 21
Years
Cost:income ratio –
continuing operations
(%)
20 21
Years
Adjusted RORE –
continuing operations
(%)
20 21
Years
Receivables – continuing
operations
(£bn)
20 21
Years
Impairment rate
During the second half of 2021 the Group implemented new
IFRS 9 models to further refine provision requirements based
on market driven metrics. The Group’s impairment rate has
decreased from 17.7% to 3.1% in the year primarily due to a
release of impairment provisions no longer required in credit
cards, which were built up during 2020 following the onset
of Covid-19.
The macroeconomic environment, particularly lower than
expected unemployment, and a less than expected impact
of Covid-19, together with strengthening credit metrics of the
credit card receivables, has resulted in a circa £100m release
of core model calculated provision for credit cards, plus a
further release of in-model and post-model adjustments
amounting to circa £15m. Accordingly, the provision coverage
ratio for credit cards has reduced from 30.2% at December
2020 to 24.8% at December 2021.
The Moneybarn impairment coverage ratio has increased
from 27.6% at June 2021 to 30.4% at December 2021 due to
refinements reflected in the new IFRS 9 model and, to a lessor
extent, some roll-over of accounts into Stage 3.
Risk-adjusted NIM
The risk-adjusted NIM has increased from 13.7% in 2020
to 26.9% in 2021 as a result of the release of impairment
provision in credit cards, together with lower impairments
in vehicle finance.
Cost:income ratio
The cost:income ratio has increased 16.5% in the year from
38.6% to 55.1% as a result of the £68.7m (12.4%) reduction in
net interest margin reflecting the 8.6% reduction in average
receivables, and the 25.0% increase in costs to £267.3m. The
cost base has been inflated by the additional investment
across the Group to commence a significant transformation
programme including building a new loans platform.
Returns
Investing in capital-generative businesses remains central
to the Group’s business model. The Group now calculates
returns based on return on required equity and return on
tangible equity:
– Adjusted return on required equity (RORE) – profit after
tax for continuing operations, prior to the amortisation
of acquisition intangibles and exceptional items, divided
by average required equity. Average required equity is
stated on a risk-weighted basis in line with PRA reporting
requirements. The Group’s target is to deliver an RORE
of between 20% and 25%.
The Group’s adjusted RORE for continuing operations has
increased from 6.3% in 2020 to 32.6% in 2021. The average
required equity has reduced by £29.3m year on year. The
increase in RORE reflects the release of impairment provisions
no longer required.
– Return on tangible equity (ROTE) – Profit after tax for
continuing operations, prior to the amortisation of
acquisition intangibles and exceptional items, divided by
average tangible equity. Average tangible equity reflects
average equity over the period less intangible assets
and goodwill.
Consistent with the increase in RORE, the Group’s ROTE has
increased from 5.2% in 2020 to 27.7% in 2021. The average
tangible equity has reduced by 9.3% year on year.
Dividend policy
The Board is proposing an interim dividend in respect of 2021
of approximately 30% of adjusted continuing earnings, which
equates to a dividend per share of 12p. Adjusted continuing
earnings of £98m in 2021 is defined as profit after tax from
continuing operations before amortisation of acquisition
intangibles and any exceptional items including one-off
provision releases. Going forwards, the Board anticipates
moving towards a pay-out ratio of circa 40% of adjusted
earnings from FY’22 onwards.
Tax
The tax charge for 2021 represents an effective tax rate of 5.3%
(2020: nil) on statutory profit before tax which results in a tax
charge of £7.6m being recognised in the year for continuing
operations (2020: £nil) which principally reflects:
– the mainstream corporation tax rate of 19.0% on the Group’s
profit before tax from continuing operations generating a
tax charge of £23.7m (2020: tax credit of £1.8m);
– the mainstream corporation tax rate of 19.0% on Group
exceptional items generating a tax credit of £15.3m
(2020: tax charge of £2.5m); and
– the mainstream corporation tax rate of 19.0% on the
amortisation of acquisition intangibles generating a tax
credit of £0.8m (2020: £0.7m).
The low effective tax rate is principally the result of:
– the revaluation of deferred tax assets and liabilities for
the change in the mainstream corporation tax rate from
19.0% to 25.0% from 1 April 2023 which results in a tax credit
of £5.0m and, in the case of 2020, the change in the
mainstream corporation tax rate to 19.0% from 1 April 2020
following the cancellation of the previous reduction in rate
to 17.0% which results in a tax credit of £2.5m;
– the impact of transfer pricing adjustments between the
profits of continuing and discontinued operations which
results in a tax credit of £0.6m (2020: tax charge of £4.4m);
34.2% 38.6% 6.3%
55.1% 32.6% £1.7bn
£1.7bn
Provident Financial plc Annual Report and Financial Statements 2021
105
Strategic report
– the beneficial impact of tax losses of discontinued
operations being surrendered as Group relief to continuing
operations at a discounted price which gives rise to a tax
credit of £6.5m (2020: £nil);
– the beneficial impact of prior year adjustments which
gives rise to a tax credit of £7.8m (2020: tax credit of £7.7m)
and relates principally to transfer pricing adjustments
between continuing and discontinued operations in the
prior year and the impact of the discontinued operations
surrendering prior year losses to the continuing operations
at a discounted price (in 2020, the tax credit of £7.7m in
respect of the prior year represents the benefit of claiming
deductions for the costs incurred in 2019 in connection with
the defence of the unsolicited offer from NSF, for which no
tax deduction was assumed in the previous year, along with
a release of part of the provision for uncertain tax liabilities);
– the impact of the release of the exceptional complaints
provision in CCD following the implementation of the Scheme
of Arrangement (2020: increase in the exceptional complaints
provision in CCD) which is taxable (2020: tax deductible)
in discontinued operations but which on consolidation is
recognised in continuing operations (£12.4m);
– the adverse impact of the bank corporation tax surcharge
of £12.2m (2020: £2.1m); and
– in 2020 the benefit of using in-year and brought forward
capital losses to offset the capital gain arising in Vanquis
Bank on its conversion and disposal of the ‘B’ preference
shares in VISA Inc.
Summarised balance sheet
2021
£m
2020
£m
Assets
Cash and balances at central banks 717.7 917.0
Amounts receivable from customers 1,677.7 1,660.8
Pension asset 112.2 79.7
Goodwill and other intangibles 123.5 115.3
Other assets 93.9 117.5
Discontinued operations 0.3 187.8
2,725.3 3,078.1
Liabilities
Retail deposits 1,018.5 1,683.2
Bank and other borrowings 845.2 520.0
Trade and other payables 77.1 22.6
Other liabilities 121.5 78.6
Discontinued operations 31.8 126.0
2,094.1 2,430.4
Assets have decreased by 11.5% to £2,725.3m. This was driven
by the 21.7% reduction in cash and balances held at central
banks, which reflects a return to more normalised levels of
liquidity for Vanquis Bank following steps taken to increase
liquidity resources in response to Covid-19 in 2020.
Liabilities have decreased by 13.8% to £2,094.1m. Retail
deposits decreased by 39.5%, offset by non-bank group
funding increasing by 62.5%, the latter due to proceeds from
the issuance of Tier 2 bonds in October 2021 and the funding
through the Bank of England TFSME scheme.
Amounts receivable from customers
– Group amounts receivable from customers increased
by £16.9m (1.0%) in the year from £1,660.8m in 2020 to
£1,677.7m in 2021.
– Credit card receivables reduced by 1.1% to £1,063.4m
(2020: £1,075.1m) as a result of lower customer spending,
a reduced credit line increase programme and a focus
on promoting uptake of our loan product.
– Vehicle finance receivables continued to show growth
and increased by 3.5% to £586.2m (2020: £566.6m) largely
as a result of continued portfolio growth driven by new
business volumes.
– Unsecured loans receivables increased by 47.1% to £28.1m
(2020: £19.1m).
The Group’s coverage ratio has reduced from 28.8% at
December 2020 to 26.8% at December 2021 reflecting the
improvement in the macroeconomic environment and the
associated release of provisions.
Credit cards
H2’20
30%
32%
25%
Vehicle finance
26%
28%
30%
Continuing Group
29%
30%
27%
Coverage ratios
H1’21 H2’21 H2’20 H1’21 H2’21 H2’20 H1’21 H2’21
Provident Financial plc Annual Report and Financial Statements 2021
106
Funding
The Group’s current funding strategy is to maintain sufficient
available funds and committed facilities to pre-fund the
Group’s liquidity and funding requirements for at least the
next 12 months, maintaining access to diversified sources
of funding comprising: (i) external market funding, including
retail bonds, institutional bonds and private placements;
(ii) securitisation; (iii) retail deposits; and (iv) liquidity and
funding facilities at the Bank of England.
Retail deposits and access to the Bank of England facilities
are used to fund Vanquis Bank, and the other sources of
liquidity generally fund Moneybarn and central operations
(the non-bank group).
Group borrowings at the end of 2021 were £1,863.7m
(2020: £2,203.2m), including £10.8m (2020: £15.7m) of interest
accrued on borrowings and short-term overdrafts (net of
amortising fees). Vanquis Bank accepts retail deposits and,
at 31 December 2021, had retail deposit funding of £1,018.5m
(2020: £1,683.2m). Retail deposit funding in Vanquis Bank has
fallen during the year, reflecting a more normalised funding level
relative to lending and access to alternative funding through
the Bank of England’s Term Funding Scheme with additional
incentives for Small and Medium-sized Enterprises (TFSME).
In 2021, the Group delivered on a number of its funding objectives:
– In January 2021, Vanquis Bank completed its inaugural
issue from its newly established credit card receivable
master trust. The senior notes in the transaction have been
rated (AAAsf/Aaa(sf)/AAAsf) by Fitch Ratings, Kroll Bond
Rating Agency and Standard & Poor’s respectively and
the bonds are listed on the London Stock Exchange. The
rated notes were accepted as eligible for use in the Bank
of England’s Liquidity and Funding Schemes, providing
access to a low cost of funds and a source for contingent
liquidity where unutilised. The majority of the senior rated
notes have been placed with the Bank of England to
support borrowing of £174m from the TFSME.
– The Group continued to utilise its auto loan securitisation
warehouse facility, drawing a further £50m in February
2021 taking its total drawings to £200m. The warehouse
facility was refinanced and restructured in July 2021 to
improve the efficiency of the usage of collateral such
that drawn funding increased to £275m. The facility also
provides for a committed but currently undrawn amount
of £50m which provides contingent liquidity.
– The Group had a multi-currency RCF with a total facility
size of approximately £148m as at 31 December 2020. In
line with the Group’s existing strategy of reducing reliance
on the RCF, some of the new securitisation funds were
used to reduce the Group’s RCF commitments, initially to
£90m alongside an extension of the facility to July 2023.
As at 31 December 2021, the Group has drawn £30m,
with a further £60m undrawn.
– In September 2021, the Group repaid the 6.0% retail bond
in line with its contractual maturity.
– In October 2021, the Group successfully completed a
liability management exercise involving: the partial tender
and repurchase of £71.5m of the then outstanding £175m
8.25% senior bonds maturing in June 2023, and the issue
of £200m Tier 2 bonds.
– The above actions taken by the Group during 2021
extended the weighted average maturity of its non-bank
funding and increased non-bank liquidity from £144m to
£290m. There are no contractual maturities of the Group’s
wholesale funding until June 2023.
In line with the Group’s funding strategy to place less reliance
on this source of funding the Group exercised its contractual
option to early repay the RCF on 30 March 2022, ahead of
its contractual maturity in July 2023. The Group does not
require the funding and did not plan to renew the facility. The
headroom on committed facilities of £110m at 31 December 2021
would have reduced to £50m after repayment of the facility.
The Group continues to adopt a prudent approach to
managing its funding and liquidity resources within risk
appetite, and will optimise these resources when new
opportunities become available to the Group.
Liquidity
The Group uses a number of measures to manage liquidity.
These include:
– the Overall Liquidity Adequacy Rule (OLAR), which is
Vanquis Bank’s view of the liquidity needs as set out in
the Internal Liquidity Adequacy Assessment Process
(ILAAP) at the Vanquis Bank solo level. Liquid resources
must be maintained above the OLAR. The Group is in the
process of enhancing the ILAAP to include a consolidated
Group OLAR; and
– the liquidity coverage ratio (LCR), which is a regulatory
measure that assesses net 30-day cash outflows as a
proportion of high-quality liquid assets (HQLA).
As at 31 December 2021, the HQLA amounted to £414.8m
(2020: £833.3m). The decrease during the year reflects a more
normalised level of liquidity for Vanquis Bank following steps
taken to increase liquidity resources in response to Covid-19
in 2020. HQLA have been in significant surplus to the minimum
requirements throughout 2021. Vanquis Bank currently holds its
liquid assets buffer, including other liquid resources, solely in a
Bank of England reserve account.
As at 31 December 2021, the Group, on a consolidated basis,
and Vanquis Bank, on an individual basis, had an LCR of 2,073%
(2020: 2,830%) and 587% (2020: 1,498%) respectively.
Capital
The Group, incorporating Vanquis Bank, Moneybarn and
central operations, is the subject of consolidated supervision
by the PRA by virtue of Provident Financial plc being the parent
company of Vanquis Bank, which is regulated by the PRA. The
PRA sets requirements for Vanquis Bank as an individual entity
and the consolidated Group in respect of capital adequacy,
liquidity and large exposures.
The Group’s regulatory capital currently consists of CET1 and
Tier 2 debt capital. CET1 comprises shareholders’ funds, after
adding back the IFRS 9 transition adjustment, and deducting
the defined benefit pension asset and intangible assets
(including goodwill), all of which are net of deferred tax.
In October 2021, the Group’s first Tier 2 subordinated bond
since 2005 was issued for an amount of £200m, with a
10.25-year maturity that is callable at the Group’s discretion
between 5 and 5.25 years, and that pays a coupon of 8.875%.
The issuance was written from the Group’s £2bn EMTN
Programme and was well subscribed by around 2 times in the
market. It represents an important milestone as the Group
diversifies and optimises its sources of capital in support
of future lending growth.
At 31 December 2021, the Group’s CET1 ratio was 29.1% (2020: 34.2%)
and the total capital ratio was 40.6% (2020: 34.2%). CET1
decreased over 2021 from £675m to £507m, reflecting the
costs of closing CCD and the scheduled unwind of the IFRS 9
transition relief in regulatory capital. Total capital increased
over 2021 from £675m to £707m due to the issuance of Tier 2
debt capital.
Financial review continued
Provident Financial plc Annual Report and Financial Statements 2021
107
Strategic report
The Group’s risk-weighted assets have reduced by £230m,
largely reflecting the £175m reduction in risk-weighted
exposures in respect of customer receivables.
The leverage ratio is defined by the Capital Requirements
Regulation as Tier 1 capital divided by on and off-balance sheet
asset exposure values, expressed as a percentage. The UK
leverage ratio framework sets a minimum ratio of 3.25%. The
Group’s leverage ratio at 31 December 2021 of 18.1% (2020: 20.8%)
remains comfortably above the minimum requirement.
Capital resources
The Group has elected to phase in the impact of adopting
IFRS 9 over a five-year period ending 31 December 2022, as
permitted by regulation. This is achieved by applying add
back factors of 95%, 85%, 70%, 50% and 25% for years one to
five respectively to the initial IFRS 9 transition adjustment (net
of attributable deferred tax) plus any subsequent increase in
expected credit losses (ECL) in the non-credit-impaired book
from transition to the end of the reporting period. The PRA
ratified additional capital mitigation proposed by the Basel
Committee, in response to Covid-19, with these measures
coming into force from 27 June 2020. The new measures allow
for the increase in ECL in the non-credit-impaired book arising
after 31 December 2019 to be fully added back in 2020 and 2021
(the ‘quick-fix’ measures). This relief is then phased out over
the following three years on a straight-line basis, ending
31 December 2024 (2022: 75%, 2023: 50%, 2024: 25%).
The Group’s capital headroom, at 31 December 2021, does
not include any benefit as a result of the quick fix measures as
consolidated provisions were below 31 December 2019 levels.
Further information on the impact of the IFRS 9 transitional
arrangements is provided in the Group’s Pillar 3 disclosures
available on the Group’s website, www.providentfinancial.com.
Capital and capital resources
31 December
2021
31 December
2020
CET1 ratio 29.1% 34.2%
Total capital ratio 40.6% 34.2%
Leverage ratio 18.1% 20.8%
CET1 £506.5m £674.8m
Tier 2 capital £200.0m —
Total regulatory capital £706.5m £674.8m
Risk-weighted exposures £1,740.6m £1,973.5m
Capital requirements
The Group operates the standardised approach to credit
risk, whereby risk weightings are applied to the Group’s on
and off-balance sheet exposures. The weightings applied
are those stipulated in the Capital Requirements Regulation
(CRR). The Group’s Individual Capital Adequacy Assessment
Process (ICAAP) includes a summary of the capital required
to mitigate the identified risks across the Group and the
amount of capital that the Group has available. The Group has
complied during the year with all of the externally imposed
capital requirements. The overall capital requirement, set by
the PRA, includes both the calculated requirement derived
using the standardised approach and the additional capital
derived in conjunction with the ICAAP. In addition, capital is
held to cover buffers set at a macroeconomic level by the
PRA. The capital conservation buffer has been held at 2.5% of
total risk exposure since 1 January 2019. The UK countercyclical
capital buffer (CCyB) was reduced by the PRA to 0% during
2020 as part of its response to Covid-19. On 13 December 2021,
the Financial Policy Committee (FPC) announced an increase
to the UK CCyB rate to 1%, to be implemented by 13 December
2022. Provided the UK economy continues to recover, the
FPC expects to increase the rate further to 2% in quarter 2
of 2022, to take effect in quarter 2 of 2023. These increases
are absorbed within the capital plans of the Group and
Vanquis Bank.
The Group operates within a defined capital risk appetite,
with thresholds reported to and monitored by Group Board.
The Board regularly reviews both the existing and forecast
capital position to ensure that planned capital resources
are sufficient for planned changes in the balance sheet.
Pillar 3 disclosures
As part of the regulatory supervision by the PRA, the Group,
consistent with other regulated financial institutions, is
required to make annual Pillar 3 disclosures which set out
information on the Group’s regulatory capital, risk exposures
and risk management processes. A considerable amount of
the information required by the Pillar 3 disclosures is included
within the 2021 Annual Report and Financial Statements. The
Group’s full Pillar 3 disclosures can be found on the Group’s
website, www.providentfinancial.com.
Neeraj Kapur
Chief Finance Officer
6 April 2022
Provident Financial plc Annual Report and Financial Statements 2021
108
Chairman’s
introduction
Board leadership and Company Purpose
I am continually impressed by
the adaptability and dedication
of our colleagues, who have worked
tirelessly to deliver significant
progress towards the Group’s
strategic objectives.
Patrick Snowball
Chairman
Page
Code
principle
Board leadership and
Company Purpose
108
Chairman’s introduction 108
Our Board 112 A
Setting our strategy 116 C
Promoting long-term sustainable success:
Board activities 120 A
Our culture 123 B
Stakeholders and investor
relations
127
Stakeholder engagement 127 D, E
Effective engagement with shareholders
and stakeholders: investor relations 132 D
Division of responsibilities 134 F, G, H, I
Page
Code
principle
Composition, succession
and evaluation
139
Board composition 139 J, K
Induction for new directors 140
Board evaluation 141 L
Nomination Committee Report 143 J, K
Customer, Culture and
Ethics Committee Report
150 B, D
Audit, risk and internal control 153
Audit Committee Report 153 M, N
Risk Committee Report 158 O
Directors’ Report 162
Remuneration Report 169 P, Q, R
Compliance with the UK Corporate Governance Code
For the year ended 31 December 2021 the Board considers
that the appropriate corporate governance standards were in
place. For the period under review, the Company complied in
full with the provisions of the UK Corporate Governance Code
(the Code).
This report explains the main aspects of the Company’s
governance structure to give a greater understanding of how
the Company has applied the principles and complied with the
provisions in the Code. The Corporate Governance Statement
also explains compliance with the FCA’s Disclosure Guidance
and Transparency Sourcebook. The UK Corporate Governance
Code is published by the Financial Reporting Council (FRC)
and is available on its website, www.frc.org.uk.
Further information on the Company’s corporate governance
arrangements and compliance with the Code can be found
as follows:
Provident Financial plc Annual Report and Financial Statements 2021
109
Governance
Dear fellow shareholder,
I am pleased to introduce the Corporate Governance Report
for 2021.
As we announce our 2021 results we are facing into yet more
uncertainty around the cost of living pressures in the UK and
the eco political uncertainties in Europe. Whilst the Board is
extremely pleased with the progress made in 2021 we need
to be aware of these uncertainties as we consider our growth
plans for 2022/2023.
As another challenging year comes to a close, I am mindful to
reflect on the incredible resilience of our colleagues and wider
stakeholders in this increasingly uncertain and ever changing
business environment. The significant progress we have made
towards our vision, Purpose and strategy would not have been
possible without their continued support.
I particularly want to recognise the commitment and integrity
of our CCD colleagues following the Group’s withdrawal from
the home credit market and consequent wind-down of the
division. The Board did not take this difficult decision lightly,
but considered it necessary to protect the long-term interests
of the Group and deliver sustainable value. In reaching this
conclusion, the Board was cognisant of all our colleagues and
sought to minimise the impact upon them as far as possible
by offering employment and other support. You can read
more about this on page 78.
We were pleased to receive approval from the High Court
Scheme of Arrangement (the Scheme) in August 2021 which
provided certainty to stakeholders and ensured customers
with legitimate claims would receive fair access to redress
payments. Please see page 76 for more details. Approval of
the Scheme has allowed the Board to focus its attention on
winding down CCD in a controlled manner, driving the Group
towards the next step in its 1PFG journey and the pursuance of
opportunities to deliver long-term sustainable growth to our
stakeholders as outlined to the market at our Capital Markets
Day in 2019.
The Covid-19 pandemic continues to impact our customers
in their daily lives. The Group has robust contingency
plans in place, supported by strong capital and liquidity
positions. I am therefore confident that we can deliver our
strategic objectives and capitalise upon opportunities for
sustainable growth.
Purpose and culture
At the heart of everything we do is our Purpose of ‘helping
to put customers on the path to a better everyday life’. This
is why the Board is progressing with the Group’s transition
towards becoming the leading specialist bank focused on
underserved markets. We have made some progress in this
regard and you can read more about this from page 20. You
can also read more about our Purpose and how this drives our
strategy on pages 14 and 116.
Our Blueprint underpins everything we do at PFG. It is our
reason for being, supported by our strategic drivers, our
behaviours and our desired culture. The Colleague Survey
results (reported on pages 16 and 57) revealed that our
colleagues see evidence of the Blueprint behaviours driving
positive change in our culture. Furthermore, colleague
performance and reward frameworks have been closer
aligned with our Blueprint in 2021 to reinforce our culture.
Please see page 123 to read how the Board has continued to
support the embedding of the Group’s culture and Blueprint.
We are also continuing to foster a culture of accountability
and openness through our Speak Up culture initiatives and
the development of a Speak Up Dashboard of metrics to
monitor our culture and ensure we are positioned to correct
any misalignments; please see page 125 for more information.
Our Customer, Culture and Ethics Committee (CCE) continues
to monitor metrics relating to our culture and further details
of its work are located on pages 150 to 152.
Sustainable growth through the execution
of strategy
At the Capital Markets Day in 2019 we outlined our ‘vision for
the future’ and growth ambitions. The Group has made good
progress this year towards these objectives, as summarised
below and detailed on pages 118 and 119.
We have implemented various initiatives during the year to
focus on responsible growth, supported by cost efficiency,
and on delivering products from the most efficient capital
structure. You can read about these initiatives in the Financial
Review section from page 102. The Board’s oversight over
change spend has been enhanced as a result of revised
governance processes and reporting processes implemented
by our Group Transformation function. The second and third
lines of defence provide assurance over change projects,
including audit memos issued by Group Internal Audit that
are reported to management and the Audit Committee and
include culture indicators.
The Board’s approval of the Sunflower Open Market Loans and
Vanquis Open Market Loans pilots represents the next phase of
our vision to becoming a specialist bank for the underserved
mid-cost market. These products aim to facilitate the provision
of credit to a broader range of underserved customers. You
can read more about these products on pages 46 and 47.
We have moved closer to our objective of establishing a single
view of our customer through simplifying our governance
structure with the design of a new target operating model.
This will create a better customer experience, drive cost
efficiencies across the Group and lead to a more sustainable,
capital generative and better governed business. Please see
the following page for more information.
Provident Financial plc Annual Report and Financial Statements 2021
110
Board leadership and Company Purpose continued
Chairman’s introduction continued
Target operating model and changes
to the Board’s responsibilities
As reported in our announcement of 13 January 2022, a
common Board structure for Provident Financial plc and
Vanquis Bank was implemented as part of our new target
operating model (see page 86). With external support from
PwC, the Nomination Committee considered and approved
the new combined Board composition and governance
structure prior to it being implemented. Further details can
be found in the Nomination Committee Report on page 143.
Following a comprehensive review of the Board governance
arrangements, a number of documents were revised
and approved by the Board to support the successful
implementation of a combined Board, such as the Matters
Reserved for the Board, Board and committee terms of
reference, Delegated Authorities Manual and division
of responsibilities between the Chairman and CEO. Our
Conflicts of Interest Policy was also enhanced to support
Board member independence and the successful execution
of their statutory duties as directors.
A new Board meeting schedule with annual cyclical business
items has been designed with the support of specialist board
management consultancy firm Board Intelligence. A Board
training plan has also been created for the new combined
Board which includes training and deep dives to address
development areas identified in the 2021 Board evaluation
and specific areas relevant to the directors of a regulated
bank. Further, the Board member induction plan is under
review and will be updated in 2022.
I am confident that the streamlined governance
arrangements will ensure that the Board and its committees
are best placed to operate effectively under the new target
operating model.
Stakeholder developments
I am proud of how management has adapted our working
practices and policies this year to deliver certainty for
stakeholders and safeguarded their interests, as we learn
to live and work in a Covid-19 environment. We utilised the
Colleague Forums to garner colleagues’ views on the Group’s
response to Covid-19 and our Future of Work programme
prior to adopting a hybrid working model and undertaking
a Group-wide Workforce Policy review. Please see our
stakeholder engagement section from page 127 for further
information on our colleague engagement mechanisms
during the year.
I have personally enjoyed returning to the office and
engaging face to face with Board members and colleagues
alike as we adopted our hybrid working model. This was
a great achievement made possible by the effective risk
management and governance processes that were put in
place to support the programme. You can read more about
how the Board maintained appropriate oversight of the
Future of Work programme in the CCE Committee Report
on page 150.
I am pleased to report that the CCE Committee approved
a Stakeholder Engagement Strategy following a stakeholder
mapping exercise and external materiality assessments. The
CCE Committee Report can be found on page 150 which also
details how we have kept close to and protected the interests
of our suppliers during the year; further details can also be
read on pages 60, 61 and 85.
The 2021 United Nations Climate Change Conference
reaffirmed the importance of firms operating responsibly and
sustainably. We have committed to five of the UN Sustainable
Development Goals and established arrangements that have
enabled the Group to meet the recommendations of the Task
Force on Climate-related Financial Disclosures (TCFD). You can
read more about how we will achieve these in our Sustainability
Report starting from page 68 and in our standalone Corporate
Responsibility Report available on our website.
Although we had to make adjustments to the way our AGM
was held due to UK Government restrictions, I was glad that we
could invite shareholders to attend in person, and provide the
opportunity to follow the meeting remotely via a live webcast
and submit questions to the Board in advance of the meeting.
I look forward to meeting shareholders in person at our next
AGM, provided we are able to do so safely and responsibly.
Board composition, succession and effectiveness
I continue to believe that the Board’s composition is
appropriate to fulfil its role effectively. Furthermore, the
Board has functioned well as a team to deliver key strategic
initiatives and make effective decisions in challenging and
uncertain circumstances. As such, I am pleased to report
that there are no proposed changes to the composition of
the Board this year. As part of the Board structure changes
under our new target operating model (see page 86 for
more details), Robert East stepped down from the Board with
effect from 13 January 2022. I would like to thank Robert for his
support and contributions as a member of the Group Board
and for his chairmanship of Vanquis Bank.
Provident Financial plc Annual Report and Financial Statements 2021
111
Governance
The Nomination Committee continues to support the Board in
ensuring it is composed of the appropriate mix of individuals
and you can read more about the Committee’s work on
page 143.
Our Nomination Committee has continued to focus on
diversity and inclusion as part of the Group HR’s talent and
succession planning. The Committee has reviewed our talent
and succession plans, inclusion and diversity initiatives and
the diversity of our talent pipeline. Further information can be
found on page 147.
This year’s Board evaluation was internally facilitated by Group
Company Secretariat and 360-degree feedback was sought
from the executive team and those in regular contact with the
Board in order to strengthen relationships and accountability.
The process and the findings of this year’s evaluation can be
found on pages 141 and 142, together with progress achieved
against our 2020 evaluation actions.
Effective risk management and governance
The assessment and management of risk is integrated into
the Board’s decision making processes via the inclusion of
a risk assessment within the Board’s reporting templates.
Additionally, full risk assessments were conducted on strategic
initiatives by the Risk Committee and we have put in place
second and third line assurance of key projects.
As a result of the 2020 Board evaluation results, enhancements
have been made to the Board’s oversight and monitoring
of risk including the regular reporting of risk to the Board by
the Group Chief Risk Officer (CRO). Further details on these
enhancements can be found in the Board evaluation section
on page 141.
Significant progress has been made this year on delivering
our Risk Harmonisation Programme which the Board has
continued to monitor and oversee through its Risk Committee.
The programme will provide a more consistent and integrated
approach to risk management across the Group, delivering
efficiencies and maximising capabilities across the divisions.
The programme is being led by our Group CRO, Gareth Cronin,
who transitioned to the role in May 2021 from being the Group
Chief Internal Auditor.
This year the Board has determined climate change to be
a principal risk and consequently we have enhanced the
management and oversight of climate change risk with the
establishment of a Climate Change Forum, chaired by the
Group CRO, and development of a Climate Risk Appetite
Statement. Please see the Risk Management and Principal
Risks section starting on page 87 and Risk Committee Report
on page 158.
Dividend
I am delighted to report that the Board has proposed a
dividend of 12p per share to shareholders in respect of 2021
after taking into account regulatory capital requirements,
levels of sustainable receivables growth and the resultant IFRS
9 impairment provisions. Our Board is focused on delivering
stable and sustainable dividends in future periods.
Patrick Snowball
Chairman
6 April 2022
Governance
Our Risk Harmonisation
Programme is a key
illustration of how the Group’s
strategy is supported,
underpinned and driven by
effective risk management
and governance processes.
Patrick Snowball
Chairman
Provident Financial plc Annual Report and Financial Statements 2021
112
Board leadership and Company Purpose continued
Our Board
Patrick Snowball
Chairman
N
Appointed: 21 September 2018
Tenure: 3 years
Career and experience:
Patrick was CEO of Suncorp Group Limited,
an ASX 20 Australian financial services
group, between 2009 and 2015 where
he successfully led the turnaround of
the group following the global financial
crisis. Before joining the Board, Patrick
was Chairman of IntegraFin Holdings
plc between 2017 and 2018 and was
Chairman of Sabre Insurance Group plc
until September 2020. Prior to this Patrick
was a Non-Executive Director at Jardine
Lloyd Thompson Group plc from 2008 to
2009, Deputy Chairman at Towergate
Partnership between 2007 and 2009 and
a member of the FSA Practitioner Panel
from 2006 to 2008.
Patrick’s contribution to the Board,
key strengths, skills and reasons
for re-election:
Patrick’s unique career and experiences
bring a wealth of skills to the Board. In
particular, as Chairman, his previous
leadership and demonstrable success in
driving change, strengthening governance,
creating strong and effective boards, and
instilling stability through a positive culture
are key strengths he brings to the Board.
– Experienced chairman, non-executive
director and chief executive officer.
– Extensive experience of the
financial services industry and
the regulatory environment.
– Wealth of knowledge of the challenges
faced by the financial services sector,
acquired over a 30-year career.
– Long track record in leading companies
to develop and deliver growth plans.
– Change project management, typically
involving digital transformation and
brand building.
– Building strong customer relationships,
leveraging data and insights, as well
as leading and developing wider
stakeholder engagement.
Current external appointments:
– Director at The Old Dove Dairy Limited.
– Chairman designate at AMP Capital’s
private markets business.
Malcolm Le May
Chief Executive Officer
D
Appointed as CEO: 1 February 2018
Tenure: 8 years
Career and experience:
Malcolm joined the Group as an
Independent Non-Executive Director
in 2014, becoming Interim Executive
Chairman in November 2017. Malcolm
provided effective leadership to the
Board, working with it to redefine roles
and responsibilities, and initiated a
process to ensure the Board had the right
mix of skills, experience and diversity.
Prior to joining the Group, he held several
senior positions within banking, including
as Co-Head of Banking for Barclays in
New York, Head of European Investment
Banking at UBS and Deputy CEO at Morley
Fund Management (now Aviva Investors).
Malcolm’s contribution to the Board,
key strengths, skills and reasons
for re-election:
Malcolm’s extensive career, his deep
knowledge of various businesses
and sectors, his understanding of the
regulatory environment and turnaround
situations and his proven leadership
skills are considered by the Board to be
invaluable qualities that make him best
placed to lead the business, as well as
effectively contributing to the Board.
– A deep knowledge and experience
of the financial services industry
and regulatory environment.
– Relationships with key stakeholders,
such as investors and the Group’s
banks, enabling the Group access
to funding.
– The strengthening of the Group’s
governance framework and the
realignment of the Group’s culture
more closely to the developing needs
of the customer.
Current external appointments:
– Director at IG Group Holdings plc.
– Trustee at the Grange Festival.
– Trustee at Peace at the Crease.
– Director at IG Markets Limited.
– Chairman at IGNA.
Neeraj Kapur
Chief Finance Officer
D
Appointed: 1 April 2020
Tenure: 2 years
Career and experience:
Neeraj was Group Chief Financial Officer
of Secure Trust Bank plc, a UK retail and
SME bank. He is an experienced chief
financial officer with a strong retail banking
background, including consumer finance
and savings products expertise. He brings
versatility and intellectual agility to the
Board and Group Executive Committee.
Neeraj’s contribution to the Board,
key strengths, skills and reasons
for re-election:
As a qualified accountant, Neeraj is
technically strong and has a diverse
background that has included time as
a pilot in the RAF and an entrepreneur
running his own business and working
in a large-scale regulated bank. Neeraj
has a strong retail banking background,
including consumer finance and savings
products expertise, and has experience
in accounting, finance, professional
services, governance, operations,
marketing and risk.
– Experienced chief financial officer.
– Significant experience in leading
end-to-end finance functions,
including for a bank and other
corporates, as well as managing
accounts for individuals and small
business owners.
– Proven ability to build effective working
relationships with key stakeholders,
including regulators, investors
and analysts.
– Deep understanding of, and strong
experience in, the Group’s sector.
Current external appointments:
– Trustee at Edgeborough
Educational Trust.
– Trustee at The Worshipful Company
of Chartered Accountants.
Committee key:
Nomination Committee
N
Audit Committee
A
Risk Committee
Ri
Remuneration Committee
Re
Customer, Culture
and Ethics Committee
Disclosure Committee
C D
Committee Chairman
During the year the Company directors except Elizabeth Chambers were appointed
as directors of the Vanquis Bank Board, with effect from 13 January 2022.
Provident Financial plc Annual Report and Financial Statements 2021
113
Governance
Andrea Blance
Senior Independent Director
(SID)
N A Re
Appointed: 1 March 2017
Tenure: 5 years
Career and experience:
Andrea has extensive board and financial
services experience. She spent her
executive career at Legal & General Group
plc, where she was a member of the
group executive committee and held a
range of senior leadership roles, including
Divisional Chief Financial Officer, Group
Financial Controller, Group Chief Risk
Officer and Strategy & Marketing Director.
Andrea’s past non-executive roles include
Senior Independent Director and Audit
Committee Chair at Reassure Group plc,
Risk Committee Chair at Scottish Widows
plc and Lloyds Banking Group Insurance,
Non-Executive Director at The Mentoring
Foundation and a member of William &
Glyn’s pre-IPO board.
Andrea’s contribution to the Board,
key strengths, skills and reasons
for re-election:
Andrea brings a wealth of relevant
experience, including her understanding
of governance, the regulatory
environment and conduct risk. She has
extensive experience of strategy and
customer marketing, complex change,
finance and reporting, investor relations
and stakeholder management.
– Experienced senior independent
director, non-executive director, board
committee chair and senior leader.
– Deep understanding of the financial
services industry.
– Track record of working with businesses
at different stages of development
and supporting both growth and
recovery strategies.
Current external appointments:
– Non-Executive Director at Hargreaves
Lansdown plc.
– Non-Executive Director at Aviva plc.
Elizabeth Chambers
Independent Non-Executive
Director
N Ri C
Appointed: 31 July 2018
Tenure: 3 years
Career and experience:
Elizabeth is an experienced board
director, senior financial services
executive, strategist and marketing
leader in the UK and globally. Her previous
board experience includes being a
Non-Executive Director at Hastings Group
plc, Dollar Financial Group, Hibu plc
(formerly Yell Group) and The Home and
Savings Bank. Elizabeth served on the
board of Western Union International Bank
and boards relating to consumer finance
joint ventures between Barclaycard and
other brands, such as Argos and Thomas
Cook. She has extensive executive
experience through roles including
Chief Marketing Officer at Barclays
and Barclaycard.
Elizabeth’s contribution to the Board,
key strengths, skills and reasons
for re-election:
Elizabeth brings more than 25 years of
experience in strategy, marketing and
product development across a range
of financial services. As an executive,
she has a long track record of driving
revenue growth and solving complex
business challenges at major global
financial institutions. In various roles she
has led businesses through brand and
reputation transformations, strengthened
customer acquisition and engagement,
built innovative digital businesses, and
led major business turnarounds.
– C-suite marketing and
communications executive, board
director and strategist.
– Proven people leader.
– Broad and deep knowledge of financial
services, including credit cards and
payments products, a wide range
of customer loan segments and
marketing in a regulated environment.
– Substantial expertise in turnarounds,
as well as M&A and cultural change.
– Wide exposure to international
operations and the unique challenges
of leading them.
Current external appointments:
– Non-Executive Director at TSB Bank Plc.
– Non-Executive Director at Tilney Smith
& Williamson Ltd and subsidiaries.
– Non-Executive Director at University
of Colorado Anschutz Medical
Campus (non-profit).
– Operating Partner to Searchlight
Capital Partners and its
portfolio companies.
Paul Hewitt
Independent Non-Executive
Director
N A Ri
Appointed: 31 July 2018
Tenure: 3 years
Career and experience:
Paul is an experienced chief financial
officer, chairman, non-executive director
and audit committee chair who operates
in a number of different sectors. Paul’s
past non-executive director roles include
chairing the audit committees of Tokio
Marine, Kiln, NEST Corporation, Tesco Bank,
Collins Stewart Hawkpoint, Charles Taylor
Plc and GMT Global Aviation. He began his
executive career in finance, working for over
20 years as a finance director of various
companies, culminating in becoming
Deputy Group Chief Executive and CFO
of the Co-operative Group between
2003 and 2007.
Paul’s contribution to the Board,
key strengths, skills and reasons
for re-election:
Paul’s varied and wide-ranging career is
built on a successful career in finance. He
has a track record of creating and realising
value for shareholders and has worked
across a number of sectors including
financial services, technology, healthcare,
retail and business services, including good
understanding of corporate governance.
Through his non-executive roles, he has
helped several management teams adapt
their business models to respond to, and
anticipate, changes in their competitive
and regulatory environments. In both his
executive and non-executive career, he has
had extensive experience of transactions
and ensuring that businesses have an
appropriate financial structure.
– Experienced non-executive director,
chairman and chief financial officer.
– Broad experience of the financial services
industry and the regulatory environment.
– Strong track record in delivering good
returns for shareholders.
– Extensive experience of transactions.
– Broad experience as both an executive
and a non-executive of developing
and challenging business strategies.
– Has helped several management
teams adapt business models in
anticipation of changes in their
environments and markets.
Current external appointments:
– Non-Executive Director at ICNH Limited
(trading as Dr Doctor).
– Non-Executive Director at Feebris Limited.
– Non-Executive Director at The
Ombudsman Service Limited.
– Non-Executive Director of E-Negotiation
Ltd (trading as Amicable).
Provident Financial plc Annual Report and Financial Statements 2021
114
Board leadership and Company Purpose continued
Our Board continued
Angela Knight
Independent Non-Executive
Director
N RiA
Appointed: 31 July 2018
Tenure: 3 years
Career and experience:
Angela has extensive experience in both
the public and private sectors. Prior to
joining the Board, Angela was CEO at
Energy UK, British Bankers Association (BBA,
now UK Finance) and APCIMS (now Personal
Investment Management and Financial
Advice Association). She was previously
a Member of Parliament and Treasury
Minister between 1992 and 1997 and was the
Chairman of the Office of Tax Simplification
from December 2015 to March 2019.
Previously Angela was also a Non-Executive
Director at Taylor Wimpey plc and Senior
Independent Director at TP ICAP plc.
Angela’s contribution to the Board,
key strengths, skills and reasons
for re-election:
Her experience in the public sector means
Angela has a strong understanding of
the expectations of regulators and other
public stakeholders. This combination
means she is a skilled director who knows
how to manage organisations and how
to challenge management to deliver.
Angela’s thought leadership, technical
and policy skills, as well as a deep
understanding of the financial sector, are
demonstrated through her leadership
of the repositioning of Energy UK in the
energy sector and of the BBA through
the banking crisis.
– Experienced Government Minister, CEO,
chair and non-executive director.
– Wealth of knowledge of the financial
services sector.
– Deep knowledge of regulated industries.
– Adept at solving difficult problems with
effective solutions.
– Understanding of public presentation,
in particular as a proficient
public speaker.
Current external appointments:
– Non-Executive Director at Arbuthnot
Latham & Co.
– Non-Executive Director at Encore
Capital Group, Inc.
– Director at Froggatt Trustee Limited.
– Chair at Pool Reinsurance
Company Limited.
Graham Lindsay
Independent Non-Executive
Director
N Re C
Appointed: 1 April 2019
Tenure: 3 years
Career and experience:
Graham has held a number of senior
executive roles, including responsibility
for the Lloyds branch network and as
Corporate Responsibility Director. Graham
joined the Wonga UK board in 2016 as part
of the new leadership team engaged to
improve the business and deliver change.
Graham sat on the Board of the Institute
of Banking & Financial Services and on the
Professional Standards Board. He is Senior
Independent Director at One Family,
a mutual life assurance business.
Graham’s contribution to the Board,
key strengths, skills and reasons
for re-election:
Graham brings to the Board extensive
experience in commercial and retail
banking following a 40-year career
at Lloyds Banking Group and a deep
understanding across various distribution
channels. Graham has had demonstrable
success in focusing organisations on their
customers, ensuring they are at the heart
of decision making and product design.
Graham also has a strong appreciation
of the Group’s regulatory environment.
– Extensive customer knowledge, strong
customer focus and a track record of
enabling and overseeing businesses
to ensure that they put the customer
at the heart of what they do.
– Significant stakeholder
engagement experience.
Current external appointments:
– Senior Independent Director
at OneFamily.
– Vice Chair and Trustee at the Brain
Tumour Charity.
– Director at Family Assurance Staff
Pension Scheme Trustees Limited.
Margot James
Independent Non-Executive
Director
N Re C
Appointed: 27 July 2020
Tenure: 1 year
Career and experience:
Margot served as a Member of Parliament
between 2010 and 2019 and has held a
number of ministerial offices, latterly as
Minister of State for the Department of
Digital, Culture, Media & Sport, where she
championed the interests of both industry
and consumers in the digital world. In her role
as Parliamentary Under Secretary of State
at the Department for Business, Energy &
Industrial Strategy, Margot had responsibility
for small businesses, consumers and
corporate governance, including labour
markets and the retail sector.
Margot’s contribution to the Board,
key strengths, skills and reasons
for election:
Margot has a wide-ranging successful
career in both the public and private sectors.
Her public-sector experience provides
Margot with a strong understanding of
the expectations of regulators and other
public stakeholders, as well as strong
knowledge of corporate governance,
labour markets and the UK’s technology
and retail sectors. She has a track record
of driving value for shareholders and has
a demonstrable record as a successful
entrepreneur and CEO.
– Experienced Government Minister
and Member of Parliament.
– Results-focused entrepreneurial
business owner.
– Strong track record as a CEO
and business leader.
– Non-executive director
and chair experience.
– Deep governance knowledge.
– Strong relationships with wider
stakeholders in a variety of sectors.
Current external appointments:
– Executive Chair at the Warwick
Manufacturing Group.
– Governor Emeritus of the London
School of Economics.
– Chair at Internet Matters Ltd.
– Chair at Taso Advisory.
Committee key:
Nomination Committee
N
Audit Committee
A
Risk Committee
Ri
Remuneration Committee
Re
Customer, Culture
and Ethics Committee
C
Disclosure Committee
D
Committee Chairman
The Company directors, except Elizabeth Chambers, were appointed as directors of
the Vanquis Bank Board, with effect from 13 January 2022.