Vanquis Banking : Interim results for the half-year ended 30 June 2025 (Vanquis Banking Group 2025 Interim Results Announcement)

Vanquis Banking Group interim results for the six months ended 30 June 2025 Profitable and growing

London - 7 August 2025 - Vanquis Banking Group plc ('the Group' or 'Vanquis') today published its interim results for the six months to 30 June 2025.

Ian McLaughlin, Chief Executive Officer, commented: "The turnaround of Vanquis remains firmly on track and is gaining momentum. The Group delivered two consecutive quarters of profitability in the first half and has grown gross customer interest-earning balances over the last three quarters.

Credit quality remains robust, with customers continuing to demonstrate financial resilience. Risk-adjusted income improved, supported by a lower cost of risk.

Operating costs remained well controlled, with all necessary actions taken to deliver the additional £15 million in transformation savings committed by year-end 2025. Our technology transformation programme, Gateway, is progressing as planned-enhancing efficiency, scalability, and unlocking long-term cost benefits.

Complaint costs were meaningfully lower year-on-year, partly reflecting the revised Financial Ombudsman Service (FOS) fee structure implemented on 1 April 2025. Since then, negligible Vanquis-related Claims Management Company (CMC) complaints have been referred to the FOS.

The recent Supreme Court judgment provides much-needed clarity, and we acknowledge the FCA's decision to consult on a motor finance compensation scheme. Vanquis did not participate in discretionary commission arrangements. Our position is clearly differentiated from the unfair relationship decision in the Johnson case, supported by stronger disclosures, much lower average commissions and clear customer consent.

Vanquis plays an important role in UK banking, and I am pleased with the momentum we are building. We remain focused on supporting our customers while delivering sustainable and profitable growth for all stakeholders."

Executive Summary

The Group returned to profit in 1H25, while delivering balance growth to drive long-term sustainable profitability. Management remains focused on operational efficiency and deploying capital in the most accretive opportunities to generate higher returns.

• Profitability: The Group was profitable in both quarters of 1H25, delivering a statutory profit before tax from continuing operations of £6.2m (1H24: loss of £46.1m) and was capital accretive with a statutory return on tangible equity (ROTE) of 3.1% (1H24: (18.9)%), in line with the guidance of low single digit ROTE for 2025.
• Balance growth: Gross customer interest-earning balances grew 7% in 1H25 to £2,459m and the Group now expects to achieve greater than £2.6bn of balances by the end of 2025 (c.£2.6bn previously).
• Increased risk adjusted income: Improved credit quality drove a reduction in cost of risk to 6.6% (1H24: 8.5%), resulting in a 7% increase in risk adjusted income to £143.6m.
• Cost discipline: Further transformation cost savings, lower complaint costs and the non-repeat of notable items improved the statutory cost: income ratio to 62.5% (1H24: 79.3%), and the Group remains on track to achieve a high 50s percent cost: income ratio for FY25.
• Complaints: Complaint costs reduced 36% year-on-year to £16.1m, with FOS fees reducing £8.6m to

  £4.5m. 1Q25 complaint costs were in line with expectations, with a lower run rate from 2Q25, as expected following the implementation of the revised FOS fee structure. The Group expects 2H25 complaint costs to be lower than 1H25.

• Vehicle Finance commission disclosures: Vanquis did not participate in discretionary commission arrangements (DCAs), so the Group would not be in scope for this element of any Financial Conduct Authority (FCA) motor finance compensation scheme. Whilst the FCA intends to consult on the inclusion of certain non-discretionary commission arrangements following the unfair relationship Supreme Court decision in the Johnson case, Vanquis believes its position is clearly differentiated on a number of grounds. These include, but are not limited to, the fact the Group provided significantly better commission disclosures than those in Johnson, with substantially lower average commissions relative to the charge for credit. Vehicle Finance customers also signed pre-contractual documentation confirming that a commission would be paid. As a result, and in accordance with IAS 37, the Group has not provided for this matter but has disclosed a contingent liability.
• Robust liquidity, funding and capital: The Group remained highly liquid, with a Liquidity Coverage Ratio (LCR) of 366% (December 2024: 359%), was 84.6% (December 2024: 85.6%) retail funded, a core strength of the Group, and had a Tier 1 capital ratio of 18.5% (December 2024: 18.8%), with sufficient capital for future growth.

Group financial results

Income Statement (£m)	1H25	2H24 1H24 (Re- (Re- presented1) presented1)	HoH Change %	YoY Change %
Interest income	274.9	273.9 276.0	-	-
Interest expense	(72.7)	(73.3) (68.7)	(1)	6
Net interest income	202.2	200.6 207.3	1	(2)
Non-interest income	17.5	19.0 19.5	(8)	(10)
Total income	219.7	219.6 226.8	-	(3)
Impairment charges	(76.1)	(92.3) (93.0)	(18)	(18)
Risk-adjusted income	143.6	127.3 133.8	13	7
Operating costs	(137.4)	(219.2) (179.9)	(37)	(24)
Profit/(loss) before tax from continuing operations	6.2	(91.9) (46.1)
Tax (charge)/credit	(1.3)	6.8 10.6
Profit/(loss) after tax from continuing operations	4.9	(85.1) (35.5)
Profit/(loss) after tax from discontinued operations	0.7	1.6 (0.3)
Statutory profit/(loss) after tax	5.6	(83.5) (35.8)
Balance Sheet (£m)	Jun-25	Dec-24 Jun-24	HoH Change %	YoY Change %
Gross customer interest-earning balances	2,459	2,308 2,252 2,208 2,201 2,416 2,361 2,155 2,010 358 371 362 382 2H24 1H24 (Re- (Re- presented1) presented1)	7 6 6 8 1 (-) HoH Change	9 6 9 16 (3) (5) YoY Change
Average gross customer interest-earning balances (excluding Personal Loans)	2,339
Gross receivables	2,570
Net receivables	2,325
Closing tangible net asset value (TNAV)10	362
Average tangible equity8	361
Selected key metrics (%)	1H25
Asset yield2	21.8	22.4 23.2	(0.6)	(1.4)
Net interest margin (NIM)3	17.4	18.1 18.9	(0.7)	(1.5)
Total income margin (TIM)4	18.9	19.8 20.7	(0.9)	(1.8)
Cost of risk5	(6.6)	(8.3) (8.5)	1.7	1.9
Risk-adjusted margin (RAM)6	12.4	11.5 12.2	0.9	0.2
Statutory cost: income ratio7	62.5	99.8 79.3	(37.3)	(16.8)
Statutory ROTE8	3.1	(45.9) (18.9)
Selected per share metrics (p)			HoH Change %	YoY Change %
Basic earnings per share (EPS)9	2.2	(32.6) (14.1)
Dividend per share	-	- -	-	-
TNAV per share10	142	140 146	1	(3)

Notable items (£m)	Account line	Jun-25	Dec-24	Jun-24
Goodwill write-off	Operating costs	-	(71.2)	-
Transformation and other exceptional costs	Operating costs	-	(8.6)	(15.5)
Amortisation of acquisition intangibles	Operating costs	-	(2.0)	(4.2)
Vehicle Finance receivables review	Income	-	(1.4)	(3.1)
	Impairment	-	(5.4)	(9.7)
Other one-off cost items	Operating costs	-	-	(10.2)
Total notable items		-	(88.6)	(42.7)

1H25 Financial Highlights

Income Statement

All commentary relates to year-on-year performance unless otherwise stated.

Income

• Net interest income decreased 2% to £202.2m and total income reduced 3% to £219.7m, driven largely by higher year-on-year cost of funds.

  • Interest income was broadly flat at £274.9m, reflecting a 6% increase in average gross customer interest-earning balances to £2,339m offset by the mix effect of growing lower-risk and lower-margin Second Charge Mortgages.

    • Asset yield decreased 140bps to 21.8%, reflecting the lower yield on Second Charge Mortgages. Credit Cards yield reduced marginally, reflecting growth in 0% balance transfer (BT) and promotional products, while Vehicle Finance yield improved.

  • Interest expense increased 6% year-on-year to £72.7m, but reduced 1% half-on-half, reflecting a peak in cost of funds in 2H24 when maturing fixed term deposits were refinanced at higher market rates.

  • The combination of these factors drove a reduction in NIM to 17.4% (1H24: 18.9%).

  • Non-interest income reduced 10% to £17.5m reflecting lower fee and commission income.

    Impairment

• Impairment charges reduced 18% to £76.1m driven by the non-repeat of the £9.7m prior year impact of the Vehicle Finance receivables review. Credit risk in the underlying book improved, with reduced adverse stage migrations.

  • Net charge-offs, calculated as gross charge-offs less recoveries, increased 4% to £93.5m.

  • Impairment charges driven by originations increased 21% to £25.7m, reflecting growth in new gross customer interest-earning balances.

  • Net risk movements from stage migrations and changes in post model adjustments (PMAs) resulted in a lower net increase in impairment of £51.9m (1H24: £82.4m). This was partially offset by lower releases from write-offs and debt sales, reducing impairment by £89.4m (1H24: £97.3m).

  • Cost of risk reduced 190bps to 6.6%.

• As a result, risk adjusted income improved 7% to £143.6m, driving a 20bps improvement in risk adjusted margin to 12.4%.

  Operating costs

• Operating costs decreased 24% to £137.4m.

  • This reflected the non-repeat of £29.9m of prior year cost notable items, including £15.5m of transformation and other exceptional costs and £10.2m of other one-off costs largely relating to the write-off of a legacy mobile app.

  • The remaining £12.6m reduction reflected £8.9m lower complaint costs, and continued transformation savings of £7.9m, more than offsetting growth and inflation driven cost increases and accruals for discretionary staff costs.

  • This delivered a statutory cost: income ratio of 62.5% (1H24: 79.3%).

    Profits

• Profit before tax from continuing operations was £6.2m (1H24: loss of £(46.1)m).

• The tax charge of £1.3m (1H24: credit of £10.6m) broadly reflected the mainstream UK corporation tax rate of 25.0% on the profit before tax from continuing operations.

• Profit after tax from continuing operations was £4.9m (1H24: loss of £(35.5)m).

• Profit after tax from discontinued operations was £0.7m (1H24: loss of £(0.3)m), related to the Personal Loans portfolio, the sale of which completed at the end of 1Q25.

• Statutory profit after tax was £5.6m (1H24: loss of £(35.8)m) and ROTE was 3.1% (1H24: (18.9)%).

  Balance Sheet

  £m	Jun-25	Dec-24	Jun-24	HoH Change %	YoY Change %
  Assets
  Cash and balances at central banks	805	1,004	773	(20)	4
  Amounts receivable from customers (net receivables)	2,325	2,154	2,009	8	16
  Pension asset	13	28	34	(54)	(62)
  Goodwill and other intangibles	64	63	133	2	(52)
  Other assets	240	126	136	90	76
  Total assets	3,447	3,375	3,085	2	12
  Liabilities
  Retail deposits	2,464	2,428	1,938	1	27
  Bank and other borrowings	448	410	504	9	(11)
  Trade and other payables	56	46	50	22	12
  Other liabilities	44	50	63	(12)	(30)
  Total liabilities	3,012	2,934	2,555	3	18

  All commentary is relative to the December 2024 balance sheet, unless otherwise stated.

• Gross customer interest-earning balances increased 7% to £2,459m:

  • Credit Card balances increased 6% to £1,355m, all in 2Q25 following stable balances in 1Q25, reflecting both credit line increases of existing customers, and new customer growth following the release of new product variants.

  • Vehicle Finance balances declined 4% to £733m, in line with expectations, ahead of the launch of our new onboarding and servicing platform in mid-2026 as part of the Gateway technology transformation.

  • Second Charge Mortgage balances grew to £371m (December 2024: £217m) driven by long-term forward flow origination agreements with partners.

  • Personal Loan balances reduced to nil (December 2024: £49m) following the sale of the portfolio at the end of 1Q25.

• Net receivables increased 8% to £2,325m, driven by growth in interest-earning balances and a 5% reduction in expected credit losses (ECL) to £245m, reflecting a clearer understanding of the credit risk of the portfolios.

• Total assets increased 2% to £3,447m, driven by the 8% increase in net receivables.

• Cash and balances at central banks reduced 20% to £805m, driven largely due to increased purchases of UK Government securities, as part of our strategy to diversify the Liquid Asset Buffer beyond Bank of