S&U PLC (LSE:SUS), the specialist motor and property financier, saw its shares climb 9% to 2,070p on Wednesday after it said its liablilities under the Financial Conduct Authority’s motor finance redress scheme would likely halve compared with previous estimates.
Analysts at Shore Capital identified the company as among the clearest beneficiaries of the regulator’s proposals.
The broker noted that S&U is the first lender to put a number on its likely exposure.
ShoreCap attributed the relatively benign outcome to three structural features of S&U’s motor finance subsidiary, Advantage Finance: it never wrote discretionary commission agreements (DCAs), it did not operate tied arrangements, and the bulk of its loans sit below the FCA’s revised high-commission threshold.
That threshold has been raised to at least 39% of the total cost of credit, up from 35% under the original consultation, while a new small-commission exception covers agreements below £120 for pre-2014 loans and £150 thereafter.
ShoreCap suggested Secure Trust Bank PLC (LSE:STB) and Vanquis Banking Group PLC (LSE:VANQ), which operate in a similar non-prime segment of the market, may also benefit from the same regulatory recalibration.
Unsurprisingly, their shares were also higher on Wednesday.
Secure Trust has provisioned approximately £21 million for redress and administration costs, with a further £6 million potentially required under the original, more punitive proposals now set aside.
Vanquis has set aside just £3 million, reflecting, like S&U, the absence of any DCA exposure.
ShoreCap is awaiting formal responses from a broader group of exposed lenders including Barclays, Close Brothers, Lloyds and Paragon, though it noted the revised rules appear to favour motor manufacturer finance arms over the high street banks.