Cattles, the sub-prime and doorstep lender, has been forced to admit that its application for a banking licence from the Financial Services Authority (FSA) is "proceeding at a slower pace" than expected, after its shares sank more than 20 per cent today.

Shares in Cattles fell 22.3 per cent to 28.75p on speculation surrounding the lender's application for a banking licence.

Companies applying for a licence have to prove to the FSA that they have enough capital adequacy to qualify and in April this year Cattles raised a further £200 million through a heavily discounted rights issue to help it meet the regulator's demand.

The year before, Cattles tapped its investors for £133 million to fund its expansion.

As a bank, Cattles had been hoping it could draw in around £1 billion in retail saving deposits by 2010 to reduce its reliance on the wholesale funding market, where banks lend to each other and have all but frozen in the current climate.

Cattles is currently in talks with its lending banks, led by Royal Bank of Scotland, to renegotiate a £500 million credit line due to expire next July.

In today's statement, Cattles said it was "dealing with a number of requests for further information" from the FSA.

"Given the current banking environment and market conditions, the FSA is proposing more stringent tests for firms, particularly relating to liquidity and stress testing, on which the FSA has recently issued consultative papers," it said.

"As a result, Cattles' application is proceeding at a slower pace than the Company had previously anticipated."

A formal decision from the FSA on the licence application is expected by February 2009 at the latest.

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