Cash-strapped British consumers being spurned by mainstream bank lenders are flocking to doorstep financiers and sub-prime credit card providers such as Provident Financial, which today reported booming annual profits fuelled by the economic downturn.

In its first set of results since it sold off its insurance arm and demerged its international business, Provident Financial reported a 10.7 per cent increase in pre-tax profits to £115.2 million.

The lenders' customer numbers increased to 1.65 million, out of an estimated "non-standard" borrowing market of 10 million. It helped Provident to reward its investors with a 63.5p annual dividend.

Peter Crook, Provident Financial's chief executive, said he expected customers of the firm's consumer credit division, which specialises in home visits, to increase by about 5 per cent over the coming year, in part as a consequence of the retrenchment by high street banks.

The former Barclaycard executive said the annual percentage rate of interest (APR) charged by the consumer division would be "well north of 100 per cent", although he said this reflected the costs of home visits and was not the best measure of charges.

The APR for the card business was 39.9 per cent, he said. This compares with about 16.9 per cent interest charged by more mainstream providers.

Vanquis Bank, which provides credit cards to customers with close to prime credit histories, could see a 20 per cent to 25 per cent increase in customers over the coming year, Mr Crook said.

Hed said: "We are seeing a lot of that. We have got our own research. It is probably more so in Vanquis, which specialises in borrowers higher up the credit curve."

In the wake of a wholesale market financing freeze following the US sub-prime mortgage crisis, traditional providers have increasingly been tightening their terms and withholding credit from beleaguered borrowers.

Citigroup, the Wall Street financial services group that owns Egg, the internet bank, caused a sensation last month when it banned 161,000 customers from running up any additional spending on their credit cards. Also last month, Discover Financial Services, the American financial firm, revealed plans to sell off its Goldfish card brand to Barclays.

Provident's door-to-door debt sales force tends to make smaller loans of £300 to £400 to customers for cash repayments over a year, Mr Crook said.

He said a customer borrowing £300 would be expected to repay at £9 a week, although the lender would be flexible over terms, expecting a default of at least once or twice during the life of the loan because of the financial vulnerability of the customer base.

It came as the Financial Services Authority, the UK City watchdog, gave warning that one in five mortgage borrowers are worried about defaulting on their repayments. The FSA has launched a £2 million advertising campaign to encourage home owners to seek help and advice.

Mr Crook said Provident's customers tended not to have mortgages. All the firm's loans are unsecured, he said.

He stressed that Provident took a very responsible approach to lending. He said it turned down seven out of every ten applicants for a Vanquis card and refused credit on one of every three home visits.

Improvements to the services, including an internet offering, have substantially cut back problem loans, Mr Crook said. Impairments represented 39.7 per cent of revenues at Vanquis last year, compared with 56.7 per cent the previous year.

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