Vanquis Shares Slump as Return Targets Pushed Back to 2028

Vanquis Banking Group (LON: VANQ), the specialist credit card and lending group, saw its shares plunge more than 20% today after half-year results showed rising profit was being driven by lower-margin lending, forcing management to push back its profitability targets to 2028.

In early trading, Vanquis shares fell heavily to 90.6p, down 21.35% from yesterday’s close of 115.2p, after touching an intraday low of 82p on volume of more than 1.3 million shares.

Vanquis’s interim results, released before market open today, showed statutory profit before tax up 44% to £8.9m, already exceeding the £8.3m booked for the whole of 2025. Balances grew 8% to £3,054m, led by second charge mortgages and credit cards, while cost cuts pushed the cost-to-income ratio down to 53.1% from 62.5% a year earlier. Management also raised its transformation savings target to £30-35m over 2026-2028, up from £23-28m over 2026-2027 previously.

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The market focused instead on margin and guidance. Net interest margin, the difference between what Vanquis earns on lending and pays on funding, fell to 15.0% from 17.4% a year earlier as growth came disproportionately from lower-yielding new customers rather than existing, more profitable accounts. That mix shift is why management now expects return on tangible equity, a measure of profitability against shareholder capital, to stay in the low single digits in 2026 and low double digits in 2027, reaching mid-teens only in 2028. The group also raised its impairment provision by £8.5m reflecting a forecast for peak UK unemployment to be 5.7% (Dec 2025 forecast 5.1%), and impairment charges rose 35% year-on-year to £102.4m, with the cost of risk at 7.0% against 6.6% a year earlier.

Chief executive Ian McLaughlin said: “This will moderate returns in 2026 and 2027, but position the Group for stronger profitability beyond the near term impact. We now expect a low single digit return on tangible equity in 2026, a low double digit return in 2027 and a mid-teens return in 2028.”

The group’s core capital buffer, its CET1 ratio, stood at 15.6% at the end of June, down from 16.5% in December, after it completed a £100m Tier 2 refinancing during the second quarter.