Peter Crook would go down like a lead balloon in the rarefied atmosphere of an
Islington dinner party. As the chief executive of Provident Financial,
Britain's biggest doorstep lender, the burly Lancastrian lends money to poor
people at stratospheric rates of interest and is proud of it.
“Ninety-five per cent of our customers say that they're satisfied or very
satisfied. Other financial services companies would die for 95 per cent
satisfaction levels in the UK market,” he says. “I think we do a fabulous
job.”
Mr Crook has more than 1.6 million customers who are happy to pay interest
rates of hundreds of per cent to borrow a few hundred quid from the Provvy's
home credit division. They borrow from a 12,000-strong army of agents who go
door-to-door across Britain's housing estates, lending and collecting
repayments each week.
These borrowers need cash to fix broken washing machines, to replace sofas,
buy school uniforms, holidays and Christmas presents. But they are shunned
by the high street banks; 40 per cent are on benefits, many have impaired
credit histories.
The National Consumer Council thinks that poor people should not have to pay
more for credit and two years ago reported the home credit market to the
Competition Commission, to little avail. Vince Cable, the Liberal Democrats'
Treasury spokesman, said recently of one Provvy product: “One should welcome
the fact that people are having access to finance, but not at these terms.”
Mr Crook seems to think that all of this is patronising nonsense. The fact is,
he reckons, people on very low incomes and with bad credit histories pose a
bigger risk to lenders. Lenders are not charities - Provident has a
shareholder register full of income investors who appreciate its healthy
dividend yield of close to 7 per cent - so must charge appropriately. No one
else wants to lend to Britain's poor. And no one is forcing the poor to
borrow. Would critics prefer a nanny state that does not allow poor people
to borrow at all? Or that borrowers were driven in desperation to loan
sharks?
“We think it's a fair price for the risk,” he says. “We don't offer teaser
rates, we don't do free gifts, we don't do loyalty programmes or zero per
cent transfers. We're very clear that this is the price. We don't bring
people in under false premises.”
Provident is forced by consumer credit regulations to express its charges as
an annual percentage rate (APR). A home credit customer who borrowed £300
would repay £504 over 56 weeks, an APR of 183 per cent. This is the kind of
figure that infuriates politicians and consumer groups, but Mr Crook insists
that the charge covers the cost of sending an agent to collect repayments
each week, plus the large number of bad debts that the company gets saddled
with - it writes off £12 in every £100 it lends - and the fact that it never
levies late charges, no matter how far into arrears customers fall.
With agents visiting every customer every week, Mr Crook figures that the
Provvy's underwriting is sharper than that of the high-street banks.
“There's some credit scoring but it's mainly about a face-to-face meeting
with the customer and that's a razor-sharp tool,” he says. “You can see that
person's income, outgoings, circumstances, how secure their job is and you
look round the front room to see whether everything they're telling you
stacks up. That's why we can serve these customers profitably when others
might struggle to do so with a different business model.”
The agents, usually former Provvy customers, have no incentive to lend
irresponsibly because they're paid a cut, usually 7 per cent, of whatever
repayments they collect.
Provident has honed its doorstep lending skills over 128 years. It listed in
1962 and branched out into insurance, estate and travel agencies, computer
training and recruitment, but Mr Crook's predecessor, and now chairman, John
van Kuffeler sold off the extraneous operations, including the disastrous
Yes Car Credit, to return to the core lending business. By 2005, however,
the British home credit division was looking tired, having been used as a
cash cow to support Provident's fast-growing international business. With no
investment, customer numbers had been falling steadily since 2002.
In 2005 Mr Crook, described by analysts as a “hard-core credit professional”,
was brought in from Barclaycard as managing director of home credit to turn
the British business around.
“When I got here, there were no PCs on desks in the branches, they were using
a paper system with an old green-screen computer to do the accounts.” By
mid-2006 he had introduced Provident's first credit-scoring system. He made
home credit loans available on plastic cards so that customers could buy
online - more than half have broadband internet access at home.
“I wanted customers to be able to access the better deals you get online,
which you can't do with £20 notes,” he says. Repayments are still made via
home visits, with the typical pre-paid card worth about £300.
Mr Crook started offering home credit through the internet, mailshots and
brokers. Again, all loans are approved during a home visit by a local agent.
These new channels brought in an extra 186,000 customers in 2007. He also
extended the size of loans that agents could offer, up to £1,500, and is
piloting a product that allows good customers to repay higher-value loans by
direct debit. “We've got some people who've been borrowing from us for 15
years and have repaid every loan on the nail and we really want to keep
them,” he says.
Last year, the international business was spun off and Mr Crook became chief
executive of Provident. Aside from home credit, the Provvy has a credit-card
business called Vanquis Bank. So far more than 400,000 customers have agreed
to pay a typical APR of 39.9 per cent for the luxury of having a credit card
in their wallet. They are usually low earners, with wages up to £25,000 a
year, and with either bad or no credit histories. Set up in 2003, Vanquis
was profitable for the first time last June and made a £3million pre-tax
profit in the first half of 2008.
It has been a crazy year or so for financial stocks and Provident's share
price hit £10.54 last May, only to fall to 700p in January. It was back up
to 897p at Friday's close.
Analysts reckon that it has taken Mr Crook some time to get used to the
rigours of heading a public company. According to one: “In terms of the
business, he's taken to it like a duck to water, but he's probably taken a
little while longer to stop seeing the share-price volatility as a
reflection of the management, when it's more a sign of what's happening in
the wider sector.”
Provident reported a pre-tax profit of £51.3 million for the first six months
of 2008, up 13 per cent on last year. Unlike some of the high street banks,
it has no funding problems, with £384.5 million in undrawn committed
borrowing lines, enough to last it into 2010. In keeping with the
45-year-old chief executive's reputation for no-messing, little of this will
be spent on head office luxuries.
Just over 30 people run the group, with the rest of the 3,000 staff spread
across 300 branch offices. The chief executive's office is undecorated,
although he keeps a Manchester United flag stashed in a cabinet for special
occasions.
“I believe in a thin corporate centre and having MDs running each business who
are accountable for their end-to-end business,” he says. “We don't do shared
services, they have all their resources and are held to account for what
they've promised.”
The home credit agents collect repayments from Thursday to Monday. On Tuesday
they visit their local branch office to hand in their collections and have a
performance review with their field manager. By Wednesday night, the
managers are on the phone to Mr Crook, reporting the week's takings. “I'm
not the sort of person who interferes, [but] I look at the numbers regularly
and if things start to move away from where they should be, then we're going
to have a conversation about it very quickly,” he says.
The present economic climate means that the numbers are likely to remain good.
As mainstream banks tighten their lending criteria, borrowers are driven to
Provident. Some banks that were particularly aggressive in their credit-card
advertising during the good times are now referring unwanted customers who
answer those ads to the doorstep lender, in return for a commission.
Provident believes that there are now 10 million people without access to
normal loans.
At the same time, two of its main rivals - Cattles and London Scottish Bank -
are pulling away from the home credit market. This will add to existing
criticism that there is insufficient competition in home lending - one of
the findings in the Competition Commission's 2006 report. But it is positive
for Provident.
The rise in applications mean that Provident can continue to tighten its
lending conditions and still hit new business targets. The doorstep lender
considers a loan impaired if customers miss more than one week's repayment
in a rolling 12-week period. At the half-year, arrears were up slightly,
from 10.9 per cent to 11.2 per cent. But Mr Crook has faith in his agents'
ability to weed out the “won't pays”. The Provvy, he says, will be
remembered as the financial provider that did not turn its back on its
customers when the going got tough.
“There are other fair-weather friends who lent to them in the good times but
have folded their tents and gone now,” he says. “We're there for them in the
thick and thin. I'm proud of what we do.”
CV
Education: 1985 BSc Economics, Loughborough University;
1988 Institute of Chartered Accountants exams;
1996 MBA from Cranfield. Awarded KPMG prize for top student
Career: 1985-90 chartered accountant, KPMG;
1990-95 various finance positions, Halifax;
1995-97 head of development, Halifax;
1997-99 finance director of group operations and technology, Barclaycard;
1999-2000 finance director, Barclaycard;
2000-04 managing director, Barclaycard;
2004-05 managing director of Barclaycard and consumer finance at Barclays;
2005-07 managing director of UK home credit, Provident Financial;
2007 to present chief executive, Provident Financial
Family: Married with two sons, lives in Northamptonshire
Other interests: Supports Manchester United
Q&A
If you could change one thing in the financial and commercial environment,
what would it be?
Red tape. I'm a very straightforward kind of guy - what you see is what you
get. Sometimes I think that business has too many rules and regulations. We
could do a lot of good by just keeping it simple.
Who is or was your mentor?
I haven't really had one as such. I've never been under someone's wing. There
are one or two people that have helped me at different times in my career,
but no one person that I would call a mentor.
Does money motivate you?
Yes, I'd be lying if I said it didn't, and anyone who tells you otherwise is
either not telling the whole truth or already has a lot of money! But it's
not my sole raison d'être. If it were, I'd be an investment banker or
running a private equity company or family office.
What was the most important event in your working life?
There are two. The first was completing my MBA at Cranfield. Up to that point,
I was a finance guy. Doing an MBA gave me a broader perspective on business.
I met people from different backgrounds with different aspirations. It made
me realise that there was more to life than being an accountant. The second
was becoming managing director at Barclaycard. That was my first general
management job and the first time I took on a P&L accountable position.
It was the cornerstone of the career that has followed.
What gadget must you have?
A mobile phone. I can't imagine a world without it. Being able to communicate
on the move and not be tied to a desk has revolutionised the way that people
do business.
What does leadership mean to you?
In large part, leadership is about communication. It is about being clear
about what is expected of people and how they are achieving against those
expectations. Leadership should bring meaning, clarity and direction to
things that often seem complex and confusing.
Which business person do you most admire?
If I look across the current stock of UK business leaders, the one I admire
most is Sir Terry Leahy. He has consistently achieved great things over an
extended period of time. Anyone can have a good year or two, but he has
consistently delivered, which impresses me.
How do you relax?
I'm a season ticket-holder at Manchester United. I take my kids to all the
home games and as many of the away games as I can.
