divisions of lender Private & Commercial Finance Group
(P&CF) performed “in line [with] expectations” in the six
months to September 30 2008, despite the concurrent upheaval in
financial markets.
Finance receivables grew by 5 per cent over the period to reach
£170m, “including finance charges to be recognised in future
periods of £30m,” P&CF said, while profit before tax is
expected to increase by 15 per cent compared with the corresponding
period in 2007.
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CEO of P&CF, Tony Nelson said of the group’s consumer motor
finance activities: “P&CF predicted last year that there would
be a recession, so we are writing volumes of business that we are
happy with on terms we are happy with.
“Around 70 per cent of applications are auto-declined, with the
remainder looked at by our underwriters. We constantly modify our
terms, with a credit matrix committee meeting regularly.”
He added that the group had seen trouble on the horizon at the
beginning of the year, and had modified its plans accordingly.
“Last year we prudently decided to rein back our new business
volumes because of the outlook for the wider economy. This has
greatly benefited the group because, with demand for our services
significantly exceeding supply, we have been able progressively to
tighten our lending criteria and further increase margins.”
The group has “no appetite” to grow its non-prime motor finance
business, which comprises around 10 per cent of its total loan
portfolio, a proportion which has remained stable since “long
before the start of the credit crunch”. “We currently have a
blended portfolio on terms that suit us,” Nelson said.
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By GlobalDataMarket conditions for motor finance providers will improve “in
the long term”, Nelson predicted: “In the same way that the
mortgage market is moving back to lending on terms which make good
sense to lenders, with lower loans to value and lower multiples of
earnings, I believe that the motor finance market is moving
somewhat closer towards the situation that was in place under the
old HP control orders where borrowers had to put down a good
deposit – say, 30 per cent – and paid over three years, giving
funders better collateral in the vehicle and lower voluntary
termination risks.”
