Is Provident Financial plc A Better Buy Than Barclays PLC, Lloyds Banking Group PLC, Standard Chartered PLC And HSBC Holdings plc After Trading Update?

Will Provident Financial plc (LON:PFG) (LSE:PFG.L) outperform Barclays PLC (LON:BARC) (LSE:BARC.L), Lloyds Banking Group PLC (LON:LLOY) (LSE:LLOY.L), Standard Chartered PLC (LON:STAN) (LSE:STAN.L) and HSBC Holdings plc (LON:HSBA) (LSE:HSBA.L)?

Provident Financial plc
Provident Financial plc

Provident Financial plc (LON:PFG) (LSE:PFG.L) has released a trading update for the year to 31 December 2016. It expects to report results for 2016 which are in line with market expectations. Each business unit has met its internal forecast.

Vanquis Bank registered Q4 new account booking ahead of the previous year. Its development of the distribution of its expanded credit card offering has continued. Total new account bookings for 2016 were 406,000 and momentum built during Q4 as new initiatives put in place during the year began to have an effect. Customer numbers were up 9% year on year and when combined with credit line increases to existing customers this produced receivables growth for the year of 14%.

The home credit business saw demand and customer confidence remain robust during the seasonal peak. Sales in Q4 were 3% higher than in Q4 2015, with the Consumer Credit Division’s customer numbers ending the year at a similar level to June 2016. This aided receivables growth of 7%, while collections performance remained stable through Q4.

In the last three months Provident Financial has fallen by 5%. That’s a worse performance than financial services peers Barclays PLC (LON:BARC) (LSE:BARC.L), Lloyds Banking Group PLC (LON:LLOY) (LSE:LLOY.L), Standard Chartered PLC (LON:STAN) (LSE:STAN.L) and HSBC Holdings plc (LON:HSBA) (LSE:HSBA.L). Barclays is up 36%, Standard Chartered is 17 higher, HSBC is 11% up and Lloyds has gained 22%.

In my view, Provident Financial faces a difficult future. Higher inflation could cause interest rates to rise and mean consumer disposable incomes fall on a real terms basis. This may affect the performance of its Collections division. Therefore, I feel its shares may underperform in the short run on a relative basis, so its not a share I’m looking to spreadbet. But in the long run I think it has investment appeal.

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