1 July 2016 1 Agenda Highlights Management team Vision and - - PowerPoint PPT Presentation

1 July 2016

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Agenda

• Highlights
• Management team
• Vision and strategy
• Market and economy
• Customer profile
• Agents
• Products
• Customer recruitment
• Further lending
• Collections
• Risk and compliance
• Technology

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• Established in 1938, Loans at Home has over 77 years of experience in the

Home Collect market

• Operates from 44 branches throughout England, Wales and Scotland
• Previously a subsidiary of S&U PLC, a UK listed speciality finance lender
• Business acquired in August 2015 for £82.4m
• National infrastructure and platform for future growth and business

development

• Has over 300 employees and over 800 self-employed agents
• Home Credit not covered by FCA price cap (payday/high-cost-short-term credit)
• Loans at Home operating under interim permissions, full license application

submitted by vendor on 30 June 2015 meeting FCA timetable. Revised Regulatory Business plan submitted December 2015

• Regulatory due diligence on Loans at Home was undertaken by Walker Morris

Net loan book £28m Average loan size (individual) £272 Average loan size (customer total) £550 Total customers 92,892 Total households 85,393

Loans at Home highlights

As at 31/12/15

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Post acquisition actions

• New management team recruited
• Review of accounting policy
• Review of all regulatory and compliance matters
• New suite of policies and procedures
• Strategy and vision developed
• Growth plans in place
• Increase number of agents and customers – fill the void left by PFG
• Investment in technology and systems
• Secure debt finance for loan book

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A highly experienced management team

Mark Bardsley CEO

Lindsay Banbridge Risk Director Paul Gill Compliance Director (Interim) Jono Gillespie CFO Chris Graham Commercial Director Neil Lewis National Operations Manager

Jonathan Hague Head of Credit Risk Sam Beardsley Head of Operational Risk Manjeet Bhogal Management Accountant Chris Pearson Head of FPA Jamie Place Head of IT Kat Hackett Head of Marketing David Thompson Head of Central Operations Christine Rangeley Head of HR

Contact Centre Help Desk Field Admin Policies Procedures 2 senior Credit Controllers 21 Credit Controllers Risk Management Compliance Manager Customer care & compliance managers Marketing Products Acquisitions Corp Comms Strategy Company Secretary Regional Managers Area Managers Business Managers Agents

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Loans at Home management team

Mark Bardsley

Chief Executive Officer – joined August 2015

• Mark has 30 years’ experience in home credit.
• The last 20 years have been spent as CEO/MD of home credit businesses overseas

(Czech Republic, Poland, Russia for International Personal Finance plc) and in the U.K (Morses & Shopacheck Financial Services (SFS)).

• He has extensive experience of operating in highly regulated financial services

environments with successful records of balancing good customer outcomes with financial returns.

Lindsay Bainbridge

Risk Director – joined August 2015

• Lindsay has over 10 years’ risk experience ( 6 years in home credit)
• She has worked for a variety of financial institutions including HSBC, National

Australia Group, SFS and Provident Financial.

• She has extensive experience of developing and implementing risk and financial

crime decision and control environments which balance customer outcomes against profitable return.

Chris Graham

Commercial Director – joined August 2015

• Chris has 25 years’ experience in financial services across retail banking, insurance

and consumer credit.

• He has worked in home credit for almost 20 years with 10 of those as Director either

at Provident Financial or SFS.

• He has significant experience of growing home credit businesses in particular

through online customer acquisition

• His responsibilities at SFS included overseeing the implementation of a programme
• f activity in preparation for FCA regulation.

Paul Gill

Interim Compliance Director – joined 1st February 2016

• Paul has almost 20 years’ experience in Financial Services covering a variety of roles

a number of retail banks, consumer credit providers and Building Societies.

• He has held senior management positions within Risk and Compliance at Deloitte

and, most recently, at Metro Bank.

• He has significant experience interacting with the FCA

Jono Gillespie

Chief Financial Officer – joined January 2016

• Jono has almost 20 years’ experience in home credit
• He joined Provident Financial in 1997 as Management Accountant, progressing

through a series of promotions to Finance Director of their Home Credit Division

• For the last 5 years he has had responsibility for the significant IT and Change

programmes that has seen Provident Financial introduce mobile technology into their field operations

• Jono has responsibility for both Finance and IT at Loans at Home

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Vision

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• To become the second largest, and best, home credit

company in the UK

• To put good customer outcomes at the heart of

everything we do and have an outstanding regulatory and compliance culture

• To treat customers, agents and employees fairly
• To become the home credit company of choice

for customers, agents and employees

Strategy & Supports

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Loans at Home objective and strategy

Objective To double the size (customers and receivables) of the business within 4 years and achieve return on assets of 20%+ Strategy

• Build and grow home credit business through significantly growing our customer numbers and agents
• Attract experienced home credit agents and management to our business by being THE best business to work

for

• Continue to drive customer recruitment by existing agents building on recent momentum
• Develop online lead generation to complement more traditional customer recruitment channels
• Lend more, where appropriate, to our best customers
• Acquire quality HC businesses where suitable opportunities arise

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Loans at Home strategy

Key Strategic Supports

• Highly effective business culture that is founded on openness, compliance, achievement, fairness

and with attractive rewards making us the best business to work for

• Introduce modern technology, including mobile devices to support processes, service and compliance
• Introduce technology automation and decision science to support agents in making good lending

decisions

• Develop industry-leading online customer acquisition capability
• Provide training and career opportunities for all staff

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Market & Economy

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Changes in household income by income percentile 2007-08 to 2015-16

• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 10% 12% 14% 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

Cumulative change in household income Percentile point

2007–08 to 2015–16

Source: IFS

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Unemployment falling & consumer credit growing

0.0 2.0 4.0 6.0 8.0 10.0 12.0 Mar-May 1992 Apr-Jun 1993 May-Jul 1994 Jun-Aug 1995 Jul-Sep 1996 Aug-Oct 1997 Sep-Nov 1998 Oct-Dec 1999 Nov-Jan 2001 Dec-Feb 2002 Jan-Mar 2003 Feb-Apr 2004 Mar-May 2005 Apr-Jun 2006 May-Jul 2007 Jun-Aug 2008 Jul-Sep 2009 Aug-Oct 2010 Sep-Nov 2011 Oct-Dec 2012 Nov-Jan 2014 Dec-Feb 2015

% Unemployment rate Consumer credit

Seasonally adjusted

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• Around 3 million regular users of which 1.5m to 2.0m borrow at any one time.
• Customer incomes approximately £10,000 to £15,000 in C2, D and E socio-economic groups.
• Customers by market participant:
• Typical loan size £100 to £1,000.
• Weekly collections from the customer's home.
• Regulated by the FCA from 1st April 2014 (formerly OFT).

UK home credit market

c.0.9m c.0.2m c.0.1m c.0.5m Others

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Regulatory

• 576 home credit companies applied for full permission:
• 403 authorised
• 22 withdrawn
• 31 withdrawn from home credit
• 2 refused
• Our own Full Permission expected in H2 2016
• Thematic review into home credit – “FCA state no plans to undertake”
• FCA Business Plan highlights reviews which might have a bearing on home credit:
• Early arrears
• Financially vulnerable customers
• Staff remuneration

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Customer Profile

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Customer profile

• 95% have a mobile phone
• 88% have online access
• 86% have a bank account
• 22% overdraft facility
• 15% have direct debit loan
• 19% have goods on credit
• 20% use other home credit
• c.80% aged 21-50
• c.70% female
• c.95% C2DE
• c.50% have employed person in household
• 89% rent
• 61% receive benefits excl. child benefit
• Average annual household income £14,500 pa

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Customer profile

Use of loan

• 27% home improvement
• 26% presents
• 9% holidays
• 5% car expenses
• 5% baby/child expenses

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Customer satisfaction

93 94 95 96 97 98 99 100 Very/Quite Satisfied Use next Time Need to Borrow

%

Customer Satisfaction

Source: Customer research undertaken by PCP Market Research among 400 customers Other NPS scores taken from Satmetrix.com – UK consumer net promoter benchmark

10 20 30 40 50 60 70 80 90 Loans at Home First Direct Santander (credit card) Prudential (health ins.)

Net Promoter Score

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Agent Value Proposition

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Why agents choose us

At Loans at Home we really value agents. We know that they are key to our long term success. We believe that we’re the best home credit company that an agent can work with. Here are some reasons why:

• We have a Management Team with over 184 years’ experience in Home Credit.
• We have exciting and ambitious growth plans - we’re looking to build and grow our business; not just rationalise

and cut costs.

• We’re investing in technology to support our agents and allow them to maximise their own earning potential
• We have highly competitive and straight forward commission rates. We pay flat commission based on what is

collected providing agents with certainty regarding their income, avoiding any nasty surprises.

• All size of journeys and agencies are welcome - an agent doesn’t have to have hundreds of customers to be a

good agent. We want our agents to have successful businesses but we also know that one size doesn’t fit all.

• We’re committed to great customer service and being fair and clear to our customers, our agents and our

people.

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Agents

• All agents self-employed
• Majority are female – reflecting customer base
• Many have come to us from competitors
• All agents DBS checked and credit searched
• Rigorous 12-week induction programme with support from existing agents and managers
• Additional ongoing training via Learning Management System
• Agents earn 10% of collections (8% on cards) – no commission is paid on sales
• Earn reward for new customers – reflecting time and cost involved
• Weekly meetings with managers to discuss and support
• Managers undertake dual visits
• Agencies grew from 557 in August 2015 to c.700 in February 2016 and over 800 now

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Products

All loans issued in cash in customer’s home No default fees or default interest charged on any loans Term in Weeks Charges per £100 Total Payable Weekly Rate APR 24 £60 £160 £6.67 732.70% 33 £65 £165 £5 433.40% 45 £80 £180 £4 340.00% 75 £87.50 £187.50 £2.50 163.80%

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Why customers use us

• Customers like accessible and inclusive nature of product
• Like to deal with people who take time to understand their circumstances and treat them as an

individual

• Product gives customers total control – unlike problems people sometimes encounter with revolving

credit

• No default fees or default interest give customers certainty and means they have no fear of spiralling

debt

• Ability to budget weekly means repayments affordable
• Home service is convenient
• Customers grew from 87k in August 2015 to 92k in February 2016 and are over 97k now

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Customer recruitment

Agent activity Recommendation Online

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Digital plans & new website

• Complete redesign of website
• New site is fully responsive
• Paid search and search engine optimisation in development
• Developing relationships with third parties to further drive customer reach
• We will start slowly and build over time – tracking and refining marketing and credit decisions

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New website

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Customer recruitment process

Agent generates lead Agent calls contact centre with customer details Decision in principle Agent visits customer, assesses affordability, final decision Customer calls contact centre Decision in principle Lead allocated to agent Agent visits customer, assesses affordability, final decision Customer applies

• nline

Decision in principle Lead allocated to agent Agent visits customer, assesses affordability, final decision

AGENT TELEPHONE ONLINE

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Decision in principle process

1) Collect customer name, address, date of birth 2) Check against internal data: Current/previous customer Previous write off Out of area 3) Callcredit data pull 4) Scorecard + check for bankruptcy, sequestration, DMA, IVA 5) Decision in principle

• Decision engine produces result in seconds
• Continual process of scorecard improvement
• Affordability and sustainability assessment involves individual income and expenditure check

which is validated and documented 6) Affordability assessment by agent in home

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Further lending to current customers

• Most customers visited weekly by agents
• 75% of lending to existing customers
• Opportunity to discuss any needs
• Customer must meet strict payment performance criteria to receive a further loan
• Behavioural scoring will be introduced to further support agent decisions
• Affordability assessment is documented and validated for every loan
• Agent always makes final decision – company may say ‘no’, but never ‘yes’

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Collections

• Loans collected weekly in cash by agents at customers’ homes. In some circumstances card

payments may be accepted

• Agents receive 10% of cash collected as commission (8% on cards)
• Agents attend weekly meetings with managers to discuss customer performance
• If customer misses a payment there are no additional charges and there is no default interest – built-

in forbearance

• If a customer is identified as suffering financial difficulty e.g. missing multiple payments or telling an

agent their circumstances have changed, a new affordability assessment will be undertaken and a formal payment arrangement made

• Home credit is uniquely positioned to identify and understand vulnerable customers. Loans at Home

has clear vulnerable customer policies and procedures and all staff and agents are trained in identifying and managing vulnerable customers

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Support

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Risk & compliance developments

• FCA took control of Consumer Credit regulation on 1 April 2014
• Committed to ensuring Risk & Compliance resources and processes keep pace

with growth of the business

• Management of risk and compliance is central to the long term success of the business
• Risk & Compliance Committee
• Branch assurance and thematic reviews undertaken
• Three lines of defence embedded in business
• Compliance reporting developed
• Transfer of complaint handling and reporting to Customer Services
• Monthly training for all colleagues via Learning Management System
• Policy review

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Mobile technology developments

Stage 1 – Collections

All collections will be keyed directly into central systems by agents via mobile device Increased efficiency Instant access to customer status – quicker decisions Reduce manual errors Remove paper collecting lists

Stage 2 - Balancing

Centralisation of remaining administrative tasks in Customer Service Centre Reduction/removal of unnecessary balancing and reconciliation tasks currently undertaken in Head Office

Stage 3 - Lending

Ability to lend via mobile device Electronic agreements, request to call forms and affordability assessment forms Greatly enhanced agent and customer experience Processes built to ensure regulatory compliance

Stage 4 - Integration

All fully integrated with new application process via website, brokers and Customer Service Centre Decision engine rules built into new application process

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Mobile technology examples

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Sharon Stone 41 Tommy Ave, Widnester, WA9 OTB

Mick Mouse

Summary

• Successful acquisition
• Initial post-acquisition stabilisation and compliance assurance activities undertaken
• Significant market opportunity
• Most experienced management team in home credit recruited
• Clear, differentiated proposition for agents
• Very high satisfaction among customers – supports customer recruitment and retention
• Implementing best in class compliance standards and processes
• Product has built in forbearance
• Sector uniquely positioned to recognise and support vulnerable customers
• Online developments will support customer growth
• New credit decision engine marries sophisticated decision science with agent knowledge, experience and
• insight. Home visit facilitates affordability assessments
• Mobile technology deployment will improve efficiency, compliance and service

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