PCF Group: Trading Update & Impact of COVID-19

27th April 2020 | PCF Group plc

Further to market updates on 6 March and 7 April 2020, the Group today reports a trading update for the period from 1 October 2019 to 31 March 2020 and an update on the early impact of Covid-19 on the Group. Our priority through this challenging period is to support and protect our customers, employees, capital and the long-term value of our business for all stakeholders.


  • Business continuity plans have proved resilient and PCF remains open for business to support consumers and SMEs
  • Limited impact of Covid-19 on upcoming Interim Results due to the timing of the crisis, however we anticipate future impacts which are currently uncertain
  • New business volumes down significantly for March and April and customer forbearance requests have increased
  • Short- and medium-term operating income expected to be strong – with £75m of future unearned finance income on the balance sheet
  • Strong balance sheet, resilient business model, diversified and well secured lending portfolio, and experienced management will help ameliorate the effects of Covid-19 on the Group
  • Further update will be made on the release of the Interim Results in June

Operational measures

Our staff are currently remote working and their well-being is our primary concern as they continue to offer a ‘business as usual’ service. Our ability to do this is testament to the dedication and quality of our employees who have quickly adjusted to the current environment. For a number of staff, we have utilised the government’s furlough scheme, and are currently applying a full ‘top up’ of their salaries to 100%. PCF Bank is proud of a culture where past and present financial success is shared across the organisation to support staff and avoid hardship at the most difficult of times.

Our customers have also needed our support, with requests of forbearance and, in some cases, new lending to either honour commitments, take advantage of opportunity, or replace critical assets. We remain open for business to support consumers and SME customers.

Business impact

Prior to any Covid-19 related events, the business had operated in line with the Board’s expectations for the period from 1 October 2019 to 31 March 2020, with strong balance sheet growth and increasing profitability. New business origination in the six-month period to 31 March 2020 was 26% ahead of the comparative period last year at £153m (2019: £121m). We are also pleased to report that the quality of originations has been maintained with over 80% (2019: 76%) of originations being in our prime credit grades. The lending portfolio has grown by 45% to over £400m as at 31 March 2020 (2019: £276m) and this is supported by retail deposits of £340m (2019: £204m). The Covid-19 disruption had a minimal effect on this trading period. However, it is anticipated there will be a material effect in respect of a revised outlook for impairment modelling. These economic and probability of default assumptions will be detailed in our Interim Results.

As with all banks, the Covid-19 crisis has had an immediate downward impact on the demand for lending in our product segments and we have seen a significant increase in the number of requests for payment forbearance by our customers. New business originations were 26% down against target in March and with a limited pipeline, are trending to be 65% down on target in April. The broadcast, entertainment and transport sectors have seen the sharpest decline. Approximately 25% of our customers have made forbearance requests which represents 32% of our portfolio by value.

The Group has the resources, processes and most importantly the experience to deal with the Covid-19 crisis and all government and regulatory advice to assist customers is being adhered to including reduced payments and payment holidays of up to 3 months. The quality, spread of risk and collateral-backed nature of the portfolio will mitigate these business impacts but it is still too early to quantify the effect on the Group’s performance in H2 and the medium-term effect on the business.

Balance sheet strength and business model

PCF entered this crisis in a strong financial position. The Group has access to the retail deposit market, wholesale debt markets and Bank of England funding mechanisms such as the new Term Funding Scheme. In addition, the Group reports a strong capital ratio of 17% as at 31 March 2020 and has headroom available on its Tier 2 capital facility.

We have built a diversified lending portfolio of £400 million, consisting of receivables focussed on prime credit quality, which continues to generate cashflow and income. The balance sheet contains £75 million of future unearned finance charges providing quality of operating income in short to medium-term.

Commenting on current events, Chairman Tim Franklin said:

“The short-term trading and economic environment is very uncertain. While there will be challenges ahead, we have an experienced management team, strong capital base and high levels of liquidity which position us well. As a prudent business, we continually assess the risks and sensitivities of adverse economic corrections as part of business risk planning. This was partly behind our decision to become a bank and focus on prime lending markets following the challenges posed at the time of the last financial crisis. This decision has provided us with improved resilience and strong growth which will stand us in good stead throughout this current period and beyond.

“I would like to express my thanks to all staff for their considerable effort in difficult circumstances as they have worked tirelessly to support our customers and safeguard our business.

“We will further update the market at the time of our Interim Results in early June when more will be known on performance and outlook.”