What to watch: Provident Financial slumps, Danone ousts chairman, traders hopeful for vaccine-led recovery

LaToya Harding
·5-min read
UKRAINE - 2019/03/19:  In this photo illustration, the Provident Financial Group plc company logo seen displayed on a smartphone. (Photo Illustration by Igor Golovniov/SOPA Images/LightRocket via Getty Images)
The company said the probe will focus on “consideration of affordability and sustainability of lending to customers” at the division between February 2020 and February 2021. Photo: Igor Golovniov/SOPA Images/LightRocket via Getty Images

Here are some of the top business, market, and economic stories you should be watching today in the UK, Europe, and around the world.

Provident Financial slumps on FCA investigation

Provident Financial (PFG.L) fell out of fashion with investors on Monday after the doorstep lender revealed it was being investigated by the Financial Conduct Authority (FCA) over its home credit business.

The company said the probe will focus on “consideration of affordability and sustainability of lending to customers” at the division between February 2020 and February 2021.

Provident said an internal review into the business made the company aware of the need to address “rising customer complaint volumes” across the division, which increased by around 200% in the second half last year, compared with the first six months of the year.

It paid out £25m ($35m) to customers compared with £2.5m in 2019 and had processed balance reductions for home credit customers of £11m during the same period.

The group as a whole performed "slightly" better than expectations in the fourth quarter and for the full year as a result.

“When combined with the impact of COVID-19 on its profitability, customer complaints can no longer be treated as part of operating costs,” the company said.

Provident added: "The appointment of investigators does not mean that the FCA has determined that rule breaches or any other contraventions have occurred."

Shares slumped more than a quarter on the back of the news.

Shares slumped more than 25% on Monday on the back of the investigation news. Chart: Yahoo Finance
Shares slumped more than 25% on Monday on the back of the investigation news. Chart: Yahoo Finance

The FCA’s probe is not expected to finish until 2022.

Gary Greenwood, analyst at Shore capital, said: "While underlying trading has been better than expected during the fourth quarter, the disappointing news around rising complaints and the FCA investigation is likely to weigh on the share price in the near-term.

"Nevertheless, we reflect that the valuation remains depressed in a historical context.... CCD aside, we believe that the prospects for the rest of the group remain strong and expect demand for its products to increase as a result of the pandemic."

Danone ousts Faber as chairman

Danone's (BN.PA) board has ousted chairman and chief executive Emmanuel Faber amid growing pressure from shareholders.

Shares in the French food company rose 4% on the back of the news, on course to post its biggest percentage gain in more than four months.

After a board meeting on Sunday night, the company announced Faber’s departure with immediate effect, confirming earlier reports in the Financial Times and Le Figaro.

Activist investors had publicly called for Faber's departure and had been attacking Danone since January for its underperformance compared with larger rival Nestlé (NESN.SW).

READ MORE: Nestlé buys US meal delivery company Freshly in $950m deal

Gilles Schnepp, former chief executive of Legrand, will become the new chairman. Schnepp joined the Danone board in December last year.

Veronique Penchienati-Bosetta, the chief executive of Danone's international business, and Shane Grant, the boss of its operations in North America, will jointly lead Danone while the company searches for a new permanent CEO.

“I am honoured to be appointed as chairman of the board of Danone at this important time for the company. I have tremendous regard for Danone’s history and its contribution to society through its world leading healthy food and beverages, and commitment to sustainability," Schnepp said.

"The priority of the board is now to transition towards an improved governance. This means accelerating the process to recruit a new CEO... I look forward to working with the board to support them in their interim roles, and the wider management team as they accelerate our efforts to create value for all our stakeholders.”

Traders hopeful for vaccine-led recovery

Europe opened with a positive start on Monday. Britain's FTSE 100 (^FTSE) rose 0.36% after the bell, while France's CAC (^FCHI) jumped 0.57% and Germany's DAX (^GDAXI) was 0.26% up.

Traders remain optimistic for a rapid economic recovery thanks to the rollout of the COVID-19 vaccine. Also on Friday, data published by the Office for National Statistics (ONS) showed UK GDP shrank by 2.9% in January, lower than expected.

Economists had forecast a month-on-month decline of 4.9%.The slump was also much smaller than the fall in GDP seen during the first lockdown last year.

READ MORE: Pound under pressure after UK GDP and trade data

Richard Hunter, head of markets at Interactive Investor, said: “Investors continue to anticipate speedy economic recoveries as the powerful forces of accelerating vaccine rollouts and significant financial assistance combine.”

US bond yields hovered near a 13-month peak on Monday as investors bet US economic growth will accelerate after the $1.9tn (£1.36tn) stimulus bill President Joe Biden signed last week.

Michael Hewson of CMC Markets said: “Rising bond yields, with the US 10-year yield now above 1.62%, and at a one year high, have served to cast doubt about the longer-term sustainability of some of the more expensive areas of the US market, and through we did see the Nasdaq break a run of three successive weeks of losses, the continued rise in US long term yields is prompting some anxiety about sky high valuations across a number of areas.”

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