Vanquis Bank shares drop after revealing £40m hit

Vanquis Bank has seen its share price drop sharply after warning investors that it took a £40 million hit from bad car loans and other unexpected costs.

Shares in the specialist banking group were down by as much as a fifth on Tuesday morning following the update.

Vanquis said it had reviewed its balance sheet and discovered historic costs that needed re-evaluating.

It revealed it found about £29 million worth of car loans that it expects to write off, which can happen when borrowers fall into arrears and struggle to make repayments.

Vanquis offers loans for cars costing up to £35,000 through the brand Moneybarn.

The bank targets people who face difficulty getting loans because of their credit history or personal circumstances and may have been turned away by high-street lenders.

Moneybarn says it believes “everyone should have the opportunity to finance a car, even if your credit score may be less than perfect”.

The £29 million charge includes a £16 million impact on previous years’ financial results, the company said.

Furthermore, Vanquis said it had also identified about £11 million worth of one-off costs, including relating to its old mobile app.

Vanquis bought the money-saving app Snoop last year, where people can connect their bank account to track spending and set budgets.

As a result of the review of its finances, Vanquis said it no longer expects to meet its previous earnings expectations for the financial year.

Ian McLaughlin, Vanquis’s chief executive, said: “While finding these one-off items is disappointing, it does mean that our financial position is now clearer and more stable.”

The bank, which has about 1.8 million customers, said it was on track to make about £60 million in cost savings by the end of the year, as it focuses on technology transformation and becoming more efficient.

Shares in Vanquis were down by 11% on Tuesday afternoon.