Vanquis Banking Group (VANQ) H2 2024 earnings summary

Executive summary

• 2024 marked a pivotal year with strategic transformation, significant cost savings, and improved operational efficiency, despite industry headwinds and elevated complaint costs.

• Cost discipline exceeded targets, achieving over £64 million in savings, with further savings from technology transformation expected to total around £100 million.

• Balance sheet was cleaned up, with a focus on sustainable, profitable growth, a lower-risk profile, and customer-centric digital initiatives.

• Retail funding now exceeds 92% of total funding, strengthening liquidity and customer engagement.

• Technology transformation (Gateway) is on track, enabling AI-driven efficiencies and improved colleague engagement.

Financial highlights

• Adjusted loss before tax was £34.8 million, with statutory loss before tax at £136.3 million, including a £71.2 million goodwill write-off.

• Net interest margin (NIM) was 18.4%, benefiting from repricing, and 18.9% excluding second-charge mortgages.

• Adjusted cost-income ratio was 64.2%–65.9%, within the guided range.

• Retail deposits grew 25% to £2.4 billion; Tier 1 Capital Ratio ended at 18.8%, supporting growth plans.

• Net interest income fell 5% year-over-year to £420.0 million; total income down 6% to £458.5 million.

Outlook and guidance

• Gross customer interest earning balances expected to reach £2.6 billion by end-2025 and £3 billion by end-2026.

• NIM guidance lowered to >17% in 2025 and >16% in 2026 due to higher growth in second-charge mortgages.

• Tier 1 Capital Ratio guidance updated to >17.5%, reflecting a lower risk business mix.

• ROTE expected to be low single digits in 2025, low double digits in 2026, and mid-teens by 2027.

• Board to review capital allocation and dividend policy in 2026; regulatory capital requirements may be re-evaluated.