By Maiya Keidan and Noor Zainab Hussain
LONDON (Reuters) - British subprime lender Provident Financial (L:PFG) reported a 22.6 percent drop in first-half pretax profit, hit by continued problems with its drive to switch from using self-employed agents to directly employed ones.
The company, which provides credit to people who do not meet the loan criteria of mainstream banks, billed the reorganisation as a way to create a more efficient and effective home credit business. But it has found it harder than expected to recruit debt collection agents, hitting the business.
Chief Executive Peter Crook told Reuters on Tuesday he was confident of working through the shortage, and added the business had not seen any change at all in the underlying demand, usage or repayment of credit.
The Bank of England this month ordered banks to apply credit rules prudently and prove by September they are not being too complacent about risks to their balance sheets, amid concerns a jump in consumer borrowing could be unsustainable.
Crook said that while there had been big growth in credit card debt, for example, a lot of that was fuelled by zero percent balance transfer offers.
"Some of the debt being put onto credit cards is being consolidated from other places, so I'm not so sure the overall rate of growth is quite as high as it seems," he said.
Provident, which operates Vanquis Bank and consumer credit brands including Satsuma, Provident and glo and Moneybarn, said pretax profit fell to 115.3 million pounds ($150.3 million) in the six months to June 30.
Home credit receivables ended the first half at 471.7 million pounds, down 18.3 million pounds from June 2016, it added, with customer numbers down 11.1 percent to 731,000.
At 0745 GMT, Provident shares were down 3.9 percent at 2,210 pence.
The company, founded in 1880 by an insurance agent who saw working class families struggling to pay for essentials such as shoes, clothes and furniture, said it would maintain its interim dividend at 43.2 pence per share.
"Our focus will be on customer service, embedding the new model and improving collections through the third quarter of the year," Crook said.