“In our view, macroeconomic risks will have sharpened the focus on improving lending quality with 80% of origination in PCF’s top-four credit grades during H1 2020 (74% in FY 2019).”
Though the AIM-listed group said lending had tailed off sharply in the past two months, this has removed the need raise additional funds in the near-term and should protect capital ratios said the house broker.
At end-March, the total capital ratio was 17.0%, while the broker estimates the CET1 at 16.2%.
Liquidity is also very strong with coverage ratio more than 10 times minimum requirements, said Shore, while, if needed Bank of England supports could offer a further £100m of incremental liquidity.
PCF is withholding guidance until clarity over the direction of the UK economy improves and Shore said the key question is the performance of forborne loans once government-endorsed payment holidays expire in late September.
Earlier, PCF reported that In the six months to March, new loan originations rose 26% to £153mln with the loan book 18% higher at £401mln and backed by £340mln of retail deposits.
Lending volumes in April and May, though, were 52% below target, PCF said, with its business finance division the most affected.
The bank took a £1.6mln charge for coronavirus-related impairments in its first-half numbers, which meant profits were 21% lower at £2.6mln, all of which was due to the impairment charge.
As of May 29, PCF said customer forbearance was being granted to loans worth £138mln, or 34% of its portfolio, and the group added that it has stopped giving forward guidance until there is more clarity on the situation.
Maybury said: “As one might expect for a financial period affected by COVID-19, there is a nuanced picture in this set of results. What I can say with certainty, however, is that the strengths of our business model are clear to see in both normal market conditions and a more challenging environment.”