* Provident will no longer offer expensive products
*Reports 2020 loss to prior year profit
* Looking to place CCD in a managed run-off or sell it (add CEO comments from call, industry info, update share move)
May 10 (Reuters) – Provident Financial called on Monday to quit its home loan division, putting 2,100 jobs at risk, as the pandemic hit recovery efforts at a company that survived the Wall Street crash of 1929 and the global financial crisis.
The company, a subprime lender since its inception in 1880, said it planned to put the managed business into liquidation or consider a sale if there was interest. The exit is expected to cost Provident up to 100 million pounds ($141 million).
Shares in Provident slid 6% to the bottom of the UK mid-cap index at 0840 GMT.
Provident had been trying to revive the business after it botched a revamp in 2017 when it sought to replace its army of freelance door-to-door collection agents with direct employees.
But his efforts, including a plan for the unit to break even last year, have been derailed by the COVID-19 crisis, which has hammered loan volumes and pushed up costs.
UK subprime lenders, which serve low-income households with poor credit profiles, have struggled to meet funding costs during the pandemic, making it difficult for them to meet growing demand for loans from their clients.
“We believe the mortgage market is in irreversible decline,” Malcolm Le May, chief executive of Provident, said on a media call.
Rising complaints from claims handling companies, the financial impact of COVID-19 on the lending division and the changing regulatory environment have made the business commercially unviable, he said.
Several of these companies, including payday lenders Wonga and Quickquid, have closed in recent years due to complaints and regulatory scrutiny of their business model.
‘MORE SUSTAINABLE MODEL’
Provident, which rebuffed a takeover attempt by smaller rival Non-Standard Finance in 2019, said it plans to build on its existing expertise in unsecured personal loan products in 2021, in the ” at average market cost.
The company, which has a banking license, said the unsecured lending business was an important step towards its plans to become a broader banking group for the financially underserved customer.
Panmure Gordon analysts said: “This (guidance) implies a lower rate of receivables growth but a more sustainable pattern.”
Goodbody analyst John Cronin said the new initiative would likely be channeled through Provident’s credit card business, Vanquis.
Provident presented a £50million plan in March to settle a rise in complaints and claims against the subprime unit and said the firm was also under regulatory investigation over conduct issues.
A British court has cleared the settlement plan, with a meeting of the company’s creditors scheduled for July, Provident said Monday.
Provident posted a pre-tax loss of £113.5million in 2020 compared to a profit of £119million a year ago. ($1 = 0.7107 pounds) (Reporting by Muvija M in Bengaluru, Editing by Jane Merriman, Sayantani Ghosh and Emelia Sithole-Matarise)