Vanquis Banking Group (LSE:VANQ) reported a return to statutory profitability in 2025, marking a significant turnaround from the prior year as loan growth, tighter cost control and improving credit performance strengthened results.
The specialist lender posted profit before tax of £8.3 million, compared with a £138 million loss in 2024. Performance was supported by a 22% increase in gross customer interest-earning balances to £2.82 billion, driven primarily by expansion in second charge mortgages and renewed momentum in credit card lending. The group also continued to scale back its vehicle finance portfolio ahead of the launch of a new operating platform.
Capital strength improved during the year following the issuance of Additional Tier 1 securities, leaving the bank with a CET1 ratio of 16.5% and providing capacity to support further growth initiatives.
Operating expenses fell sharply, declining by roughly one-third to £265.5 million. The reduction was aided by £28.8 million in transformation-related savings as well as a notable drop in complaint-related costs, helped by fewer unmerited claims following revisions to the Financial Ombudsman Service fee structure.
Risk-adjusted income increased 5% to £273.8 million as the cost of risk improved to 7.3%, reflecting enhanced underwriting standards, stronger credit models and resilient customer repayment behaviour. Liquidity remained robust, with a liquidity coverage ratio of 306%, while retail deposits accounted for nearly 90% of total funding, highlighting the stability of the group’s funding base.
Vanquis reported limited exposure to the Financial Conduct Authority’s proposed motor finance compensation scheme, recording only a £3 million provision due to the absence of discretionary or tied commission arrangements within its lending practices.
Management also pointed to significant progress in its “Gateway” technology transformation programme, which is already improving credit decisioning and operational efficiency. The platform is expected to support scalable, profitable growth while enabling the bank to expand lending to underserved customers.
The company has introduced a strategic framework centred on “Serve More, Serve Responsibly and Scale Profitably,” guiding capital deployment, risk management and operational execution. Following the 2025 turnaround, management expressed confidence in delivering materially higher returns on tangible equity over the next two years.
While operational momentum has improved, the overall investment outlook remains influenced by historic financial weakness, including prior losses, revenue pressures and elevated leverage. Positive technical indicators, including share price strength relative to key moving averages, provide some support, though valuation metrics remain constrained by a negative price-to-earnings profile and lack of dividend yield. Capital optimisation measures are viewed as constructive but secondary to sustained profitability improvements.
More about Vanquis Banking Group
Vanquis Banking Group is a UK-based specialist lender focused on customers underserved by mainstream banks. Its core products include credit cards, second charge mortgages and vehicle finance, supported primarily by a stable retail deposit base that funds balance sheet growth and long-term capital deployment.
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