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PCF Group expects profit growth to accelerate thanks to operational gearing

The net interest margin (NIM) edged up to 8.4% at the halfway stage from 8.3% last year. "We have seen competitive pressure on margins in both our divisions and we expect our NIM to fall in time, as the prime portfolio forms a larger part of our total lending portfolio," PCF said.

Piggy bank
From a standing start in July, PCF Bank's retail deposits now stand at around £108mln

Specialist bank PCF Group Plc (LON:PCF) said its new blanking platform has delivered increased profitability.

The group said in its results statement for the six months to the end of March that trading has been in line with market expectations and the strategy for the business is on track.

READ: PCF Group's retail bank hits £100mln retail deposits milestone sooner than expected​

Reported profit before tax rose 20% to £2.1mln from £1.7mln, which the group hailed as a strong performance as it incorporates, for the first time in a financial period, the full costs of operating as a bank.

The investment in setting up PCF Bank has led to a reduction in the company's return on equity to 8.7% from 10.5% in the corresponding period a year earlier but management is confident this will be a short-term impact, while the benefits of the banking model have already started to accrue with lower funding costs, the ability to reach and retain a wider range of customers, greater flexibility to diversify the business, access to the Sterling Monetary Framework and a reduction in risk from relying solely on wholesale funding.

The reporting period saw a return to growth for the Consumer Finance Division with originations up 81% to £28mln (2017: £16mln).

Earnings per share for the group was maintained at 0.8p but management held out the prospect of delivering increasing profitability as the lending portfolio grows against a largely fixed cost base.

“This has been a rewarding period. We set ourselves ambitious targets for our first year as a bank and have made excellent progress towards achieving those objectives,” declared Scott Maybury, the chief executive of PCF.

“We came into this financial year with a significantly higher cost base but have still delivered good growth in profitability. We expect this to accelerate through operational gearing, as we scale our portfolio and continue to put the new capital and infrastructure to work," he added.

The shares have almost doubled over the last year and saw a bit of profit-taking this morning, easing a penny to 41.5p.

Quick facts: PCF Group Plc

Price: 33.5 GBX

AIM:PCF
Market: AIM
Market Cap: £83.82 m
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