Vanquis Banking Group (LON:VANQ) reported a return to profitability in its full-year 2025 results call, with management saying performance was “at or better” than the bank’s key commitments for the year following the 2024 turnaround. Chief Executive Officer Ian McLaughlin and Chief Financial Officer Dave Watts also outlined guidance through 2027, highlighting plans to continue growing balances while managing a deliberate shift in product mix toward lower-risk secured lending.
Return to profit and balance growth
McLaughlin said Vanquis returned to profitability in 2025 with profit before tax of GBP 8.3 million, compared with a GBP 138 million loss before tax in 2024. He said the group also accelerated growth in customer interest earning balances to GBP 2.8 billion, ahead of guidance for greater than GBP 2.7 billion and above the original target of greater than GBP 2.6 billion.
McLaughlin also pointed to strengthened capital following an AT1 issuance in the second half of the year, with the Tier 1 ratio rising to 19.3%. He said the group had achieved five consecutive quarters of book growth and four consecutive quarters of profitability.
Cost actions, complaints, and credit quality
Watts said profitability reflected income growth, cost reduction, and the “non-repeat” of notable items recorded in 2024. He reported 5% growth in risk-adjusted income and a 33% reduction in operating costs, while costs excluding notable items were down 9%, which he said produced 11% positive cost-income jaws.
Complaint costs fell sharply following changes to the Financial Ombudsman Service (FOS) fee charging structure introduced in April, which management said reduced claims from claims management companies (CMCs). Watts reported complaint costs down 44% to GBP 26.6 million for the year, including a GBP 3 million provision recognized in the third quarter for potential motor finance redress. Excluding that provision, he said complaint costs in the second half were GBP 7.5 million, which he described as a much lower run rate than previously.
Credit quality was described as robust. The group’s impairment charge was down 2% year-on-year, driven by a 5% reduction in gross charge-offs. Watts said the group cost of risk reduced to 7.3%, within guided expectations across products. Expected credit losses fell 7% despite a 21% increase in gross receivables, with the group coverage ratio decreasing to 8.4%. Management said impairment is expected to increase in 2026 in line with balance growth.
Product performance: cards profitable, vehicle finance improving, mortgages growing
In credit cards, Watts said the business delivered a profit of GBP 38.2 million, up 27%, while interest-only balances grew 19%. He said cost of risk was 10.2%, at the lower end of guidance, with credit card gross charge-offs down 19% to a gross charge-off rate of 12.7%. Asset yield declined 80 basis points to 27.1%, which the company attributed to higher take-up of balance transfers and 0% promotional offers, now 15% of the portfolio. Excluding promotional offers, the weighted average APR increased to 39.6%.
Vehicle finance balances declined 8% as the group managed volumes ahead of a new onboarding and servicing platform planned as part of Gateway. The unit remained loss-making, though the loss improved to GBP 12.7 million. Watts said repricing actions lifted weighted average APR to 29.1%, raising both asset yield and NIM by 0.7%, while cost of risk fell to 5.6%. Operating costs declined 17% to GBP 66.9 million, but management said the cost-to-income ratio of 69.9% remained “far too high.”
Second charge mortgages continued to expand, with balances reaching just under GBP 600 million. Watts said risk-adjusted margin increased to 2.8%, and the business generated a profit of GBP 5.4 million. He cited a combined first- and second-charge weighted average loan-to-value of just over 70%, supporting a low cost of risk.
Funding, capital optimization, and technology progress
Management emphasized liquidity and deposit funding as a strength. The group ended the year with GBP 653 million of excess high-quality liquid assets over the regulatory minimum, and retail deposits grew to nearly GBP 3 billion, representing close to 90% of total funding. Watts said the group diversified its liquid asset buffer, with GBP 250 million invested in UK gilts, and introduced new savings products including fixed and instant access ISAs and Snoop-branded easy access accounts.
On capital, Watts described a capital optimization transaction in the third quarter in which Vanquis issued GBP 60 million of AT1 capital and tendered GBP 58.5 million of Tier 2 capital. He said the transaction did not change the total capital ratio but improved the efficiency of the Tier 1 capital stack and freed up capacity for growth. The CET1 ratio fell 2.3% to 16.5% as net receivables growth drove GBP 304 million of risk-weighted asset growth. Watts said CET1 surplus above the regulatory minimum was 5.2%, equating to GBP 107 million, and the group now expects to operate with a CET1 guidance of greater than 14.5%.
McLaughlin said the Gateway technology transformation program is “substantively delivered” on core capabilities and will complete in 2026, with benefits expected to become structural through fewer systems, streamlined processes, and improved automation. He also highlighted operational initiatives including a reduction of space at the Bradford headquarters by over 70%.
Outlook through 2027
Watts said the group remained on track to deliver “low double digits” statutory return on tangible equity in 2026 and “mid-teens” in 2027. Guidance included balances expected to exceed GBP 3.3 billion in 2026 and rise to greater than GBP 3.7 billion by the end of 2027. The group expects NIM to fall to around 15.5% in 2026 and 14.5% in 2027 as second charge mortgages become a larger part of the mix.
For the first time, Vanquis introduced risk-adjusted margin guidance, expecting it to remain above 9.5% in 2026 and above 9% in 2027, again reflecting the product mix shift. Management also guided for the cost-to-income ratio to move from the high 50s in 2025 to the high 40s in 2026 and mid-40s in 2027, driven by continued cost discipline and expected additional Gateway savings of GBP 23 million to GBP 28 million.
During Q&A, management said second charge mortgage growth was supported by two forward flow agreements covering nearly 20% of the market, while emphasizing it was not “pricing to win” business. On vehicle finance, executives said balance declines are expected to continue into the first half of 2026, with growth resuming toward the end of 2026 as the new platform comes on board and improving further into 2027. Management also described relationships with regulators as constructive, citing the impact of FOS and CMC charging changes and a “positive” review by the PRA in late 2025.
About Vanquis Banking Group (LON:VANQ)
We’re Vanquis Banking Group plc, an FTSE All Share company and a leading specialist bank, established in 1880. We lend responsibly, providing tailored products and services to 1.75 million UK customers through Vanquis, Moneybarn, and Snoop.
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