Vanquis Banking Group plc (VANQ) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Vanquis Banking Group plc Investor Presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Ian McLaughlin, CEO. Good afternoon, sir.

Hello, Lilly. Thank you, and hi, everybody. Welcome to our next episode of the evolving story of the recovery of Vanquis. Great to have you with us today. I'm joined with -- by Dave Watts, our CFO, on my right. And James Cranstoun, our Head of IR, is with us as well, who [indiscernible]. Thank you for joining me, folks. So look, I know some of you will be very familiar with the story so far, some possibly less so. So forgive me if I kind of try and pitch it a bit in the middle. The first thing I'd say on this holding slide is you can see our new brand, the slightly tongue in cheek in the bank that's got your back on the back of buses all around the country. So if you're Instagram or Meta favorites, then you'll see the bus watch is alive and well around the country, but getting really good cut through on that as we get a little bit of chips back into Vanquis. In terms of what we talk about today, I'll give you a summary of the results that we presented last Thursday and a little bit on our evolving strategy. I'll then hand to Dave to take you through our financial guidance, and then I'll come back and conclude before we get into your questions, which we're very much looking forward to. So if I skip to the slide that I presented, this is my first slide last Thursday. And look, it's very simple for those of you that have seen it. I mean, basically, the story here is after a very challenging '23 into '24 when we sort of started as the new management team of this business, we laid out a set of guidance for full year '25 that you can see and you can see how we actually delivered against it. And my message was very straightforward. We hit or exceeded every single metric that we put out, which is what you should expect from us. So it has been -- there's a lot of depth behind that, a lot of hard work and blood, sweat and tears by our fantastic teams, but we're now on a path where we are aiming and delivering as a much more predictable institution where the inputs, throughputs and outputs of this organization are lined up and hopefully a lot less surprises. In terms of the actual metrics, I will call out the balanced growth one that is one where we exceeded what we had originally got in the market, and I think that's a sign of life, but we did that while maintaining our margin. If you look at the net interest margin line, you can see the margin is contracting. That is 100% a mix effect of us writing more second charge mortgages, which naturally have a lower margin, but also a lower risk weight density to them, so a profitable line for us. And if you stripped out the new second charge mortgage line, our underlying NIM would actually have gone up in the year. So if you're trying to do a comparison to old Vanquis, that comparison is very favorable. So look, we're on a path now. We still have lots to do, but you can actually start seeing now the results coming through of the work that we've been putting in. I'll let Dave talk a little bit later about capital, but you can see the Tier 1 ratio as well there. But we have the capital that we need to deliver the growth that delivers our plan over this year and next year. Let me drill into that a little bit then on the next slide. And I've touched on some of this in terms of the balance growth. A lot of that was cards and second charge mortgages. Vehicle finance, we actually reduced the book by 8% over the year, though we did slightly strengthen the margin. So there's a sort of offsetting effect there. Why would we do that if we're growing our other lines, you may ask. And the simple answer is because that is still a very inefficient business in terms of the platform it runs on. It's very manual. It's very old. And we are building a new platform through our gateway IT transformation, which I'll talk about a little bit in a minute. But that will go live for vehicle finance in Q3 of this year. And until then, we're going to have to do a migration of customers on the old system onto the new system. Therefore, we're trying to keep the flow into the old system under control while still maintaining the relationships with the valuable motor finance brokers that write business with us. So we don't want to switch off until the new platform comes, but nor do we want to overdo the growth. So you'll see the growth going in the other areas. And look, Gateway and the next point on cost savings kind of interplay. Gateway is an efficiency play. You should think about it more as a business transformation than a technology transformation, but that business transformation starts with the new technology that our fantastic IT team are bringing online for us. And we talked last week about Gateway is substantively delivered. So the data lake, the key functionality that we wanted to put in place was done through the back end of last year. We're now into the phase of getting benefits from that other than the vehicle finance system, which I've already said will come through in Q3 of this year. And the other point, we've done well on costs. We were about a GBP 28 million saving against the GBP 15 million that we had committed to for 2025. So there's another beat on costs to go on top of the GBP 64 million we did in 2024 against the target we put out of GBP 60 million. So there's a bit of a theme there, but we are controlling our costs very tightly, but investing in the parts of the business that we know are critical for the future health and success that we will bring. So I think that's maybe something we can get into a bit as we get into Q&A. And point 4 on this slide is around customer resilience, credit quality and really impairments, all of which are looking good. Now again, a bank like Vanquis will never be complacent about that. But so far, we are operating very much at the left-hand side of our risk appetite ranges that we put out, and you should expect us to continue to do that for the foreseeable future. So pretty encouraging story, I would say. We talked a little bit at the bottom of this slide about our proposition, but let me turn to the next slide, and I'll drill into that in a little bit more detail. So the phrase I used on Thursday's presentation was we got busy. We launched in cards, for example, 66 different product variants, some of which we retired. We have a well-trodden path now of what we describe as test and learn in this business. So rather than bet everything on Red 17 if we were a casino, which we're not, what we do is we do a little bit of experimentation on something see what results we get from it and then we decide to scale up. So of those 66 product variants and cards that we put out, 21 are still live, for example. Some of that is because of seasonality. So there was a travel card in there, for example, that we ran through June, July and August, but there's not as much point doing that sort of November, December, January. So we're constantly experimenting with the book to see where we get the best reaction and the best returns from our customers. Exactly the same on savings. That is now a contributing part of our P&L. We run the liability side of our balance sheet as a business function. And we are expanding the offerings to our customers in there. So much more variable, shorter-dated instant access type savings products than previously we had where we were mainly 1-, 3- and 5-year bonds, rather inflexible. And we have opened an easy access account through Snoop. A big part of what Vanquis exists to do is build financial resilience with our customers. And therefore, you can deposit as little as a pound in Snoop and you can do it almost instantly. It's a very slick process. So we're really pleased about how that's going. And it does mean our cost of funds is decreasing not just because of interest rates, but because we are getting more efficient. Snoop actually as an acquisition tool continues to perform very well. So we've seen, as it says, a 12% increase in Snoop active customers, and we continue to penetrate into the Vanquis customer base with the Snoop functionality, and we'll talk more about that as we talk about our new mobile app, which we're in the process of launching and having customers migrate to at the moment. And we will be increasingly surfacing the Snoop money management functionality that we've already got in this new product into that app as we go forward. The other point here that I'll touch on because I think it's a really important one is the fourth one. And this is -- this goes to what we describe as our not yet proposition, which sounds a bit of a strange thing. So let me just pause on this for a second. Even with our risk appetite as Vanquis, we can't take on every single customer that applies to us. Some are just outside our risk appetite. But what we've worked very hard to do is never say no to a customer. So if they don't fit our current credit risk appetite, what we do is we'll give them Snoop and say, look, here's how you can help manage your finances better and then come back to us down the line so that we've got them in our ecosystem, and we're adding value for them. The other thing that we've done is opened up a partnership with one of the CBFI lenders called Fair Finance, who have a much wider risk appetite than any bank can have. And the first thing that Fair Finance, Faisel and the team over there who are fantastic partners for us. The first thing they do with the customer that we refer over is check whether that customer has any unclaimed benefits that they could be due that they've either not asked for or tried to apply for and the slightly lapping process has kicked them out. And I think this is one of our -- one of the stats that I'm most proud of actually from the innovations that we put in last year. 20,000 of those customers, we've identified GBP 34 million worth of unclaimed annual benefit entitlements through Fair Finance, checking them for them and showing them how to claim them. That's an average of GBP 1,750 per customer per year. Now if you just imagine for a second, you're that customer that's come to Vanquis, you probably tried a couple of other lenders. You've been rejected because of your credit background by all. We passed you to Fair Finance though as part of this, not no, but not yet. So let's get you to someone that might be able to help you in the meantime. We've given them Snoop and the first thing that happens is that they get GBP 1,750 on average so far of unclaimed benefits. For a customer that's under financial pressure, that is a phenomenal contribution to their financial well-being and often their health and well-being generally. So we get fantastic feedback on that. So you should expect us to see us continue down that route of if anyone comes to us, we will help either through our own products if we can or we will get them somewhere that actually they can get the help they need at the time. So very, very pleased about how that's going. And as I said, one that you should expect to see going forward. I just turn to the next page then, which -- and this is tech transformation, operational efficiency, which obviously interplay, as I said, and then our wonderful people. That new mobile app, we've got about 1/4 of our existing cards customers migrated already on to that, and the feedback is very positive. So we'll continue that. We're doing a sort of phased rollout. We've also done a whole range of things under Gateway, starting last February with a significant migration from a range of legacy systems that we had scattered across Vanquis and its various guises into one data lake called Snowflake, if you're familiar with such things, which was a significant amount of data moved across and categorized that we can then start getting business benefit from. So that's gone extremely well and a huge thanks to everyone in our tech teams. That was no small effort. And it drives that basis of operational efficiency improvements that we can then layer on top of the data. And there's a couple of examples on the slide there that shows we've reduced complaint handling costs by some 10% and fraud losses by some 25%. There's a range of other things also that we are experimenting with right through to agentic AI as to how we use that data in a structured way to then layer technology on top, which gives us that benefit forward. So that will be a continuous process for us. Gateway as a tech transformation isn't -- it's not like flicking a switch where it goes from off to on that you done. It's a continuous process that you'll see us run through the next couple of years, but that won't be so much the tech heavy lifting and change. It will be the benefit realization and the layering of other technology on top of the base that we've now got. So we're very pleased about that. There's a reference to -- we are scrubbing every bit of this business. Our property footprint is no exception. You can see that on the second last bullet. But I want to dwell just for a minute on that last bullet because none of what we've delivered through 2024 and 2025 would be possible without the efforts of our amazing teams. And it's been hard, right? This is a business transformation. It's a turnaround that is very difficult for particularly people that have been around here for a little while as we're sort of resetting what good looks like and to have our colleague engagement go up to 73%. That's a 13-point increase in the year and to be accredited as a great place to work for the first time ever is quite an achievement. So we're very proud of that. So you can read into that, that it's not just about delivering results at any cost. We're actually trying to do this in the right way that people feel engaged, feel proud of being part of our purpose and what we do for customers and therefore, with us for the long-term journey as that's where we get real value, and that's where hopefully, people get exciting opportunities to develop their careers. So really, really proud of that as well. Next page, I've touched on some of, but I just wanted to pull out one of the questions that we get quite regularly is, well, what actually is in Gateway? What have we done and what are we still to do? So I'll draw out a couple of these, but again, very happy to take questions on any of this. You can see on the left-hand side, we basically got what have we done so far. single view of customer and Salesforce is the one that I've just referred to. The fourth one down, the new customer security model, very simple sentence, but actually profound impact in terms of keeping our customers safe and helping us to make sure that there's not fraud and risk of data links, et cetera. So lots of the building blocks of a successful business already in place. And then on the right-hand side, we're being very open about this is what we still got to do. There is still new innovation to come through. But the main one is the bottom of the Gateway block there where it says new onboarding and servicing platform for vehicle finance, which is what I talked about at the top when I was referring that we'll have that for Q3. And then the very last one is that sort of little line of AI tools rolled out to all colleagues there's a huge amount to come on that. We are not at the cutting edge of AI right now, but we are doing some really interesting use cases, and we're getting very good feedback from agent force, which is obviously part of Salesforce, about things like agents listening to calls in our call centers and then preparing a transcription of the call so that the agent doesn't actually have to type up what the call covered to go on the CRM system so that when the customer calls the next time that there's continuity. That's delivered for them. They can scan it quickly, make any little changes that they need to, and that saves us a significant amount of time that can then be spent taking interactions with other customers. So just to give you some examples. But look, it says in light blue at the bottom. This is a modern, efficient and scalable platform that will create benefits across this bank for years to come. is already showing that those benefits are coming through and that our people are very excited about and our tech colleagues, I think, are very proud of. So just a couple of highlights on that. I'll skip the next slide, which is around strategy and get into -- let's come up a level then. So this is -- if you've not been with us on the journey so far. What is Vanquis, what are we here for? And what I've covered is a lot of how are we doing it, but actually, this is well worth a bit of time as well. So it is about serving the underserved in the U.K., and I'll come to the stats in a second, but our purpose is something that really resonates here. It is about caring banking and it's about helping our customers access life's opportunities and that often is credit, which I described earlier or being referred to someone like Fair Finance. And our ambition that then comes out of the purpose is to be the most trusted and inclusive specialist bank by helping our customers to unlock that opportunity and get them on a path to positive financial resilience backed up by a company like us that really understands them. We've boiled that down into 3 main pillars that you can see here. So, Serve More, so reach more of the right customers that need us and deepen those relationships. Secondly, Serve Responsibly, so do it in a way that we're making sure that the affordability is calculated correctly. Obviously, that's good for our customers. It's also good for us because it means that we get less complaints or challenge down the line. So that financial resilience that I've talked about. And then the third one comes out of the first 2. So if you're serving more and you're doing it in the right way, you can then scale this business profitably, which is what you're starting to see us do as we move from a GBP 136 million loss in 2024 to an GBP 8.3 million profit in 2025. That's quite a swing, obviously, and we expect to continue at that trajectory. So very exciting. And then if we go to the next slide, which talks a bit about the actual breakdown. I mean, I get a lot of questions on what is your target addressable market? How many customers are there in the U.K. So we played back some of the research that shows us. Now these numbers vary a little bit depending on which source you go to. But broadly, you can accept that there's between a sort of GBP 20 million and GBP 24 million opportunity pool for Vanquis, i.e., customers who can't access credit easily from mainstream lenders at all times. So that means that we've got 1.77 million customers at the minute. So no matter what way you cut that gross number, you can call it a 10x opportunity for Vanquis, which I think is very exciting. And you can see on the right-hand side, some of the sort of drill into that from the various sources. But probably the third one, which is the most shocking is there is in the U.K. just a supply and demand inequality in this market at the minute. There is more demand for customers for less standard lending than there is supply from banks and lenders. And that's why we're so excited about the opportunity for Vanquis. And the fact that there are some 3 million people who borrowed from an unlicensed or unauthorized money lender in the last 3 years according to Fair Finance, frankly, is shocking. So that's something in the work that we're doing with financial inclusion, treasury and regulators. We're really trying to put ourselves in the map to be the poster child for trying to address this and show that you can offer credit responsibly to more of these customers. So they don't have to borrow in that way. And next slide is a bit of the detail on that. But basically, the middle number is the key one. We grew quite strongly last year. We will moderate that a little bit for 2026, but still a 14% CAGR over the next 2 years. So that we're very pleased about. We're guiding to GBP 3.7 billion of a book by 2027. But the most important thing in that is it's not growth at all costs or any growth. It's actually growth that hurdles at the right returns for our deployment of capital, and Dave will talk a little bit more about that in a minute. In fact, I'll hand to David to talk a bit more about that. So hopefully, that's been useful. I'm conscious there's a lot in that, and we, as a team live and breathe this every day. So if there's anything that you want me to expand a bit on, then please do ask questions, and we're very, very pleased to do so. We're very proud of this business. We're proud of what it does for customers. We're proud of the way we're setting this business up to be a great place to work for our colleagues. And hopefully, you can see the progress coming through and that, that should continue. But Dave, talking about continuing, let me pass over to you to cover guidance.

Thanks so much, Ian. those summary you just out slides. The first slide summarizes our financial guidance for 2027. And most important is that we remain on track to deliver our guidance of low double digit for 2026 and mid-teens for 2027. This has not changed. One thing to sit out, we would expect profit to be higher in the second half of the year compared to the first half of 2026 mature and interest income builds up over the period. We've [indiscernible] over balances in 2025. We now expect balances in 2026 to exceed GBP 3.3 billion to increase further to GBP 3.7 billion by the end of 2027. As we look to balance growth with the improved profits we require to deliver the higher that we are now targeting. As Ian covered earlier, with a deliberate change in product mix with a greater proportion of second charge mortgages making up our portfolio, this is going to result in a reduction in NIM to around 15.5% in 2026 and around 14.5% in 2027. Just one thing to add here. Now we've got on the cost of risk and how we look to run our business internally, we've introduced a risk-adjusted margin guidance across the group. This is expected to reduce both in 2026 and 2027, but remain above 9.5% and 9% in respective years. Once again, it's going to be driven by the increasing proportion of second charged mortgages in our portfolio lending. Alongside income growth, we're going to maintain the cost discipline we displayed over the last 2 to 3 years. It's a key improving the profit trajectory over the next 2 years, and we expect that to grow quite significantly. This is going to drive the cost income ratio down from high 50s in 2025 to high 40s in 2026 to the mid-40s in 2027. Let's move on to the next slide, James. Quite comprehensive slide here. But this basically summarizes the statutory ROTE and [indiscernible]. On the left-hand, quite an indicative view of how we expect to deliver mid-teens ROTE by 2027. As you can see in the green bar on the left-hand side, risk-adjusted income growth is going to be a meaningful contributor but continued cost takeout is also a significant lever in meeting this target we're looking to achieve. If you look at the costs, we've got ongoing transformation savings coming through on the GBP 28 million in 2025. We also expect an additional GBP 23 million to GBP 28 million from the completion of Gateway, which will land in 2026 and 2027. And then ongoing cost efficiencies across the organization and related to the tech change, which we hope will deliver further efficiencies across the group. And importantly, we continue to invest in the business, it's on the bottom on left hand, a little drop in there. We must invest as this is going for the [indiscernible] this is in a situation where it's not doing best. Capital management slide. So what you've seen us do in 2025 is to deploy capital for growth in the near term. And we expect to continue to do that in the coming period '26, '27 as Ian highlighted the CAGR growth of 14% is quite a sizable growth year-on-year. On the left-hand side at the top, you'll see how we move from a Tier 1 capital limitation to a CET1 capital limitation and we had to reset the guidance there to show that we operate above 14.5% CET1 ratio basis. This is -- we're going to get it in 3 ways. One, first, the capital optimization transaction that we executed last year, we discussed in one of the prior calls. Secondly, the risk profile of the business it's cleaner, it's steadier, it's more predictable. So we're comfortable in that position and trajectory. And then we've got the outcome of recent regulatory review by our regulator, the triennial CSREP review. I can't give more detail, it looks positive. So it's 3 big drivers behind why we're happy to run with guide as great as 14.5%. Look, with the existing capital capacity we've got, there was a slide in the deck we put out there last Thursday, GBP 107 million of surplus capital over our CET1 regulatory requirements. And with the profits we increasingly going to generate in the next 2 years, this means we are well positioned to deliver the growth we have targeted. Having achieved everything we said we'd do in 2025, we remain laser focused on execution of our plan, and we're totally committed to delivering sustainable long-term value for all our shareholders. With that, Ian, to you.

Dave, thank you. Again, a lot in there, but very happy to drill into any or all of that as we get into questions. So if I just go to the last slide, please, James. Look, when you think about Vanquis, what should you think about? This is sort of almost what's our investment case. And I guess it's pulling together really what we've heard. There is a large underserved market in the U.K. that needs what we offer. And we're tapping into that, but we're doing it in the right way. We've built the right proposition, and we believe we can deepen that to get credit to customers for the things that they want to do and to help them build that financial resilience through savings habits and so on and through things like Snoop that help with money management. That we've got now a very cost-effective funding model, and we've optimized our capital stack through the great work that Dave and his finance team did in our AT1 issuance last year. And that technology platform is -- it's not a hope anymore. It's kind of a real thing. We can tangibly see the benefits of it. We still more to do to monetize all of them. But that is a real transformational underpin to this business' prospects as we look forward. And I'd add 3 other things to this list probably just to bring alive a little bit more. Engaged colleagues, I've mentioned, supportive regulators and some of the external challenges that we had. Many of you will remember the claims management company, spurious claims, the FOS charging changes that have come in and really helped as we've gone through this journey. It's that combination of all those factors that gives us the confidence to put the guidance out that Dave has just talked to. Of course, there will still be challenges. I'm sure there will be bumps in the road in our own plans and delivery, but we've got a bit of momentum and a track record now. So we will find a way to navigate those. Of course, there's things -- you don't need me to tell you what's going on in the last couple of days. You can see the whole market is in a bit of flux as that uncertainty works through. So there will always be those things. We've got the vehicle finance FCA redress scheme to navigate. We'll get hopefully the conclusion of their consultation at the end of this month. But that's peripheral for us. And we've got to keep our great people and keep the great work that they and their teams are doing and of course, keep an eye on our competitors as well. So banking is never a walk in the park, but if you compare where Vanquis is now to where it was this time last year, it's a substantial move forward, which is, as I said, a function of all that great inputs work that you can now start seeing coming through the business and into the numbers. So long will that continue? And with that, Lilly, I will pause there unless James, there's anything you want to add from an IR perspective.

No, I think we can go back to Lilly and tee up the Q&A, please.

Super. Let's do that.

[Operator Instructions] Great I'd like to remind you the recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via investor dashboard. James, could I please hand back to you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end.

Yes. Great. Thanks, Lilly. Let us kick off with one about regulation because Ian, you mentioned that we have a supportive relationship with our regulators. But the question is the fact that the U.K. subprime lending market, at least from a supply perspective has contracted so dramatically. What's the regulator's view on that? Does the regulator think that's a good thing or a bad thing?

Look, I think, firstly, to our relationship, if I pick up on that first, I've used a slightly hearkening phrase of, "you get the regulation you deserve in the end." So if you do the right things, you get very supportive regulation. If you put yourself out of step with that, you should expect the consequences of it. Our focus is to do this in the right way. And we've got very good engagement with both FCA and PRA and indeed with treasury and government. And I think the mood music, and you can never quote this, but there is a general sense of understanding of financial exclusion is a real risk to the U.K. and therefore, to voters in the U.K. Therefore, there is real desire to make sure that we and the industry generally is doing everything that we can to help anyone who needs it to get access to the right solutions for the situation that we're in. I don't think any -- whether it's government minister or a regulator that you speak to would disagree with that. There's a bit of disagreement on the high. And of course, this is a fairly checkered market space that there were a whole range of businesses that ceased trading in the mid and late 20-teens. But we've moved on and we've learned. And this is a new management team in Vanquis with all of that experience to draw on and the regulator that I think is pleased so far with the way we're doing things, but that's our responsibility to continue doing things in the right way so that we continue to get that support. Dave, anything you want to add on that?

No, I think you covered it quite in detail.

Anything from the prudential side?

We've got a good relationship with the potential regulator. I think the outcome of the triennial CSREP review is just a good test that. And we continue to work on a proactive basis with the PRA in the months and years to come.

So look, so far, so good. I think we're working hard to show that we're working hard to do it in the right way. That's the way I would summarize it.

Great. There's 2 questions here around Snoop. I think one for Ian and then one for Dave. First one is broader around the not yet proposition. So what's the typical unclaim benefit? I think the question is in relation to Fed finance. But it also might be helpful, Ian, to talk about what's the sort of average benefit that customers are getting by the Snoop app and the money management tools that are available there.

Yes. Look, 2 good questions. I mean, as I said earlier, this is about helping customers if we can't immediately offer them credit or in the case of Snoop, helping them even if we can offer them credit because we were talking to some investors earlier who were telling us that a very wealthy fund manager had managed to save himself a couple of hundred pounds through downloading Snoop and having a look at it and was delighted with that. So Snoop can help anybody at any stage, Dave, I think you said significant amounts -- I'm not making you quote the number, but on Sky and various utilities, just by looking at the prompts that it offers, I mean, it's a fantastic kit and really leverages both open banking and AI and machine learning and that sort of processing to surface opportunities. So on average, Snoop targets to save average customers about GBP 150 a month. As we all know, there's no such thing that hit averaging customers because they're all unique and brilliant in their own way. But that's sort of the number to hold in your head that it has proven be able to do. And that's really valuable. If you think that the average Vanquis customer earns about GBP 2,000 a month, suddenly GBP 150 every month of a buffer on that is substantial as a percentage and can make a real difference to their financial resilience, their ability to save a bit or even to access credit. So Snoop is working really well. But as part of that not yet ecosystem, straight into kind of consultancy language, but there are a range of support mechanisms that won't directly be owned always by Vanquis. But Fair Finance is our sort of poster child on that. And as I said, it's GBP 1,750 per annum per customer for the 20,000 customers that we've been able to find social security type benefits that they weren't claiming or didn't know how to claim or have tried to and it just hadn't worked. That's an enormous difference. And if you add those 2 things together, you're sort of getting to a significant amount of money for customers that don't always have a huge amount of disposable income that can just make an enormous difference in how they live their lives. So it's something that we talk about ESG when it comes to listed companies. Our Chair said at our Board meeting last week that we're more SEG, so we're social first, which is a really nice way to think about where Vanquis fits in the marketplace. We are helping customers that other people either can't or won't. And we're doing it in a way that is creating great customer feedback. So long way that continue.

Great. Thank you, Ian. Dave, this Snoop question is probably for you. So how scalable do you think the Snoop savings channel is as a structural savings advantage for -- or a structural funding advantage for Vanquis?

Before I answer that question, James, I'll go back to the last question. I'm not shy about saving money. So my consolidation of [indiscernible] BT, Sky, Netflix, et cetera, saving GBP 2,000 over the next couple of years. So if I'm looking to save some money I'm sure someone could do that, it's a decent money. Well, so on Snoop [indiscernible], James, I think it's worth pointing out that our retail having a banking license is a structural advantage for some of our competitors who are credit companies there. So leave that perspective there. Over the last couple of years, we've built up our retail savings deposits to make up over GBP 3 billion of our funding makes up 90% of our funding. This year, it was on 1-year, 2-year bonds. We now introduced [ ISA ] last year. We introduced easy access accounts as well. At the same time, as Vanquis brand, we use the technology capability of our Snoop to build on a savings proposition. It's the first time we actually have a financial product offered through Snoop. That went live in December '24. And in less than 12 months, we went from 0 to GBP 250 million in deposits with Snoop. So the idea is to create a tool for people using Snoop as money management tool to put a bit of a rainy day fund so you can save a bit of money, on pound you could do it straight away instantaneously almost. And you need to use that you can draw down it straight away. So going from 0 to GBP 250 million in just over 12 months, it is definitely scalable. So I think it's a great thing to our armory in terms of our retail deposit advantage.

Great. Thank you, Dave. Next question is around vehicle finance. And I think Ian and Dave, you can both comment on this one. When do you expect the vehicle finance business to turn profitable?

So I think there are steps towards this. I think the -- I mean, it's the question because every single one of our product lines should be profitable on an ongoing basis. So that is absolutely the aim to get vehicle finance to join the other ones. I think one is what will the outcome of the FCA redress scheme consultation that I mentioned earlier, and we should know that within weeks. So that will be interesting. But it is, as I said, it's relatively insignificant for us, but it's still something that I think will affect that market in terms of supply and demand again. Remember, though, in vehicle finance that Vanquis through its Moneybarn brand is very much a niche player in that customer profile that I described earlier that our average car that we help customers to buy is a 9-year-old Ford Focus with 70,000 miles on the clock. So these are not luxury items in any way. These are essential parts of people's lives to get them to work, to get their kids to school, often both. I was talking to a customer about 6 weeks ago, who was an occupational therapist who had trained and studied for 3 years to get qualified as that and have done brilliantly, really done very, very well in terms of that effort and exams and have worked studied around her previous job. And when she came to actually start as an occupational therapist, she got turned down by 3 lenders for vehicle finance and couldn't get a car. So her 3 years' worth of planning for a career change literally stopped in its tracks until she came to us, and we were able to lend to her and now she's able to do that job. And you multiply that by millions of customers those are the stories that really bring the purpose of Vanquis to life. So vehicle finance, the demand in that niche is good. We've managed to strengthen our margins a little bit over the last 12 months. But until we get on to the new tech stack that I described earlier, which will be Q3 this year, our cost-to-income ratio is still too high in that product. So that's the key next step. But Dave, do you want to pick up anything on that?

Yes. I mean we obviously -- a loss of GBP 38 million in 2024 and the loss of 2025 of GBP 12.7 million. We hope to make inroads on that quite a lot in 2026. We clearly [indiscernible] business to be profitable, good improved returns in place to [indiscernible] period to get in there. We're on the journey because we think it's just a fantastic opportunity for us in the future. [indiscernible] specific breakeven. It's not the first time we've been asked that question actually, even today, but we'll come back and hopefully celebrate that when we get to that date. But that's the starting point to drive forward that. We're taking strides we want to take in terms of making sure we're pricing for the risk we're taking on board. And hopefully, they delivered an excellent product into the marketplace for our brokers and dealers for which we can better serve our customer base who will then move us up the channel selection and that should drive probably more greater growth in 2027 than I say 2026, simply it's '27 more than '26.

I completely agree with that. And those numbers, obviously, [ in the quarter are ] specific to vehicle finance.

Great. Just keeping on the product theme, there's a question here on second charge mortgages. So can you explain a little more about the relationship you have with Interbridge and Selina? Are you -- do you have an exclusive relationship with them as the origination partner? Obviously, the growth has been strong as the questioner calls out. But can you give a little bit more indication of the $3.7 billion plus of balances we have in '27, what proportion TCM is or second charge mortgages is likely to be?

I'll maybe get Dave to pick up that last bit about what proportion and size we think this book is. But yes, as your question, James, this has been a real success story for us. We have 2 forward flow arrangements, which means we write the business onto our book, but it is underwritten by our partners. They have between them some 19% of the new business that's being written in the market. And that's quite an achievement. One of them is exclusive to the end of 2029. The other one isn't. So -- but we work equally hard with both, and we've got 2 really good partners there and a business that is running well that has grown very nicely for us. As you can see, we're up to about GBP 600 million of a book, which is very nice from a standing start over the relatively short period that we've been running it. In terms of the market itself, it was about GBP 2.15 billion of lending in 2025. That in itself is a high teens growth. So we're growing in a growing market. So we see this continuing to run. We're writing about GBP 30 million a month of new business. And because it's mortgage and it's relatively new, it hasn't yet matured. So we're not seeing much in the way of redemptions or any impairments in that book. So far, so good. It's worked exactly the way that it should. And it is something that I inherited as an idea from previous management, and we've implemented that very well, and it is performing. So we will continue with it. But I think stepping back from the products specifically, we have a certain amount of capital that we want to deploy into the market to get a return, and we will flex where we deploy that based on the dynamics of each of our lending products at any point in time. And some of that is competitor activity, which we're not directly in control of. So we don't want to be wedded to specific or guide on specific splits or volumes because we will go where we think we can get the best returns and the best volume. So you should expect to see these things move around a little bit. But certainly, so far, second charge mortgages has been a great success for us.

Dave, do you want to add anything on that?

Most important point it's where we deploy capital where we get the best returns simple is that. And so therefore, there is what we [indiscernible] is put on all [indiscernible] second charge mortgages clearing our mid-teens target ROTE in 2027, which is a good thing. So we've grown GBP 30 million per month for second charge mortgages. All things being equal, we should expect the same sort of growth to come through month by month as we go through '26 and 2027. But we like the business. It's a growing business, a growing marketplace. Yes, that's all we...

Great. There's 2 questions here on the cost theme. I'll take them in turn. So the first one is quite specific, but it might be worthwhile commenting on the broader trends we're seeing on complaint costs. But the question reads, what's the status of the claim against the CMC that you have action against around unsubstantiated complaints. But as I said, it's probably worthwhile just commenting on what we've seen on complaints more broadly.

It's an ongoing legal case. I'm not going to say too much. You wouldn't expect me to. What I would say factually looking backwards is that we obviously raised the case. There is a process then that you go through with any case like this where there's a strike out hearing where the other party appealed to have the case through out. They did not win on that. We won. They then appealed that, which again is their right. And we won that appeal as well. So as it stands at the minute, that case is heading to court and quite rightly. So -- but how long will that take? It's the U.K. legal system. I'm not going to comment on that. But it's an important point of principle as people behave badly towards us as an organization, they should expect consequences of that, that we're not just going to roll over and take it. We will punch back. And we'll keep you posted as we hit the various milestones as this progresses. So I'll not say any more than that. I think I mentioned earlier, though the FOS fee charging and the changes, that has had a transformative effect for us. So well done in treasury FOS and everyone that's been involved in making those changes that came in from the 1st of April last year. Dave, do you want to pick up anything from that?

Yes. I mean just to build on that last point is [indiscernible] 2026 was GBP 26 million is [indiscernible] GBP 20 million for the FCA likewise [indiscernible] there. You take that out and you hope that it's taken half of the year, the complaint cost of GBP 7.5 million in the second half of 2025. You start to think about how that plays into 2026. That's also my hope that you set this as a high level -- high watermark number in place. We'd like to obviously beat that given the business we're writing better technology and better underwriting should be in a situation where the outcomes into costs should lead to less complaints than '24. So we hope that come down into the future. But it's no longer the major that existed back in 2024 when we've got quite a few security complaints coming through [indiscernible].

Great. Thank you, both. We've got 2 more questions, as I say, one more on costs and then one on capital. So there's a little bit of preamble to this question, but the crux of it is, how are you ensuring employees are appropriately incentivized as you go through your -- the transformation and execute on your strategy?

Look, great question. And we haven't paid variable comp to our colleagues over the last couple of years. We did manage to do a little for 2025, not as much as we want. But there's -- so you should expect to see us pay market rates for the great efforts and the progress that I've just described that those efforts are making are allowing us to make. But there's also a range of things about how employees feel rewarded. Financial is obviously a major one. But it's also the culture of the place you work, what your line managers like what your operating model in terms of performance management is like, what the tech that you've got to work on is and most importantly, what's the purpose of the organization that you're working in. And we're very proud of the purpose of Vanquis as we've refreshed it and are getting that out to customers. And I think the majority, if not all, of our employees are very engaged with that and want to see this through and be a success, but we want to be fair to them as well. So you should expect to see us to continue to do that. But I mentioned earlier the Great Place to Work accreditation. That is no small thing. It was one of the bigger leaps from where we've been in terms of engagement that the Great Place to Work team had seen. So that's always very pleasing. But we don't take it for granted. We're improving our -- what we call our employee value proposition all the time, and we work through a very simple process of asking our colleagues what they think would make a difference and then taking that away and trying to deliver it back to them as quickly as we can. and we will continue to do that. But it's also having a bit of fun at work. There's nothing in our employment contracts that says you can't have a laugh with your colleagues. And if you're working late, you can't go to the pub afterwards or have a pizza or whatever it happens to be. So that how it feels as well as what have you paid and what are you learning, it's getting that combination right that is usually described as your culture, but we work very, very hard on that to try and make this a really enjoyable place to work and to learn and to build your career.

I mean I think the employee value proposition is actually crucial and I think the team has done a great job enhancing that. The [indiscernible] financial side, whilst we couldn't pay bonuses in '23, '24, we did provide salary increases to our colleagues.

So we do what we can when we can. I mean, James, you are one of those colleagues. What's your own answer to that question? And [indiscernible] says the CEO slightly.

I think all employees have really appreciated the bonus being reestablished this year. So after a number of challenging years, but they also understand that Vanquis is on a journey. We need to improve the financial performance. And -- but at the same time, the broader proposition of Vanquis is what attracts a number of people to the firm, i.e., the social purpose that Ian talked about earlier and serving the underserved. Great. And then finally, the final question is on capital, and I'll let this to the end because obviously, it was a big story of last year. But do you feel that the capital base is now optimized having done the AT1 transaction? Or is there further that you can do to optimize your capital stack?

Dave, I'll probably let you lead that one, and then I'll chime in, but Tier 2 is the obvious one.

Okay. So the starting point is not optimization that we're profitable in 2025. So starting to generate capital. With that, that's the most important thing and the profit is going to increase in '25 and '26 -- sorry, '26 and '27. So we'll have more capital to deploy to grow our lending to marketplace. So last year, as James alluded to, the AT1 issuance of GBP 60 million increased amount of overall Tier 1 that we could utilize the lending marketplace and drove a large part of growth of overall 19% growth of credit cards last year of overall 22% last year in receivables. That was a big thing. At the same time, we bought back GBP 58.5 million of Tier 2, which was basically capital which wasn't used for capital purposes, just expensive funding of swap over 9%. So that brought down the Tier 2 down to GBP 141.5 million, which is still higher than the GBP 60 million we currently utilize our balance sheet [indiscernible]. The current Tier 2 call date is in October this year. Clearly, we'd look to run a transaction around that. I can't say any more about that. That would look to further optimize the amount of Tier 2 we have issuance and also the pricing we might have to pay for that Tier 2. So more to come on that in the coming months. But we're not done yet, we're going to do a lot in 2025, but most importantly, we're actually generating capital for future use.

I think that last point, Dave, capital generative is critical. That's what gives you options to grow faster, to distribute whatever you choose to do. That's our focus is to continue that through this year and through 2027. But a huge thank you, Dave. It was an excellent issuance last year and great feedback from specialists in the market on it as well. So I think that was another big milestone for us.

Great. That's it in terms of questions. There's a few thank yous on the Q&A. But I think with that, [ Lilly ], we hand back to you or should Ian close?

Yes, of course. And thank you for answering all those questions you can from investors. And of course, the company can review all questions submitted today, and they'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you their feedback, which is particularly important to the company, Ian, can I please just ask you for a few closing comments?

Yes. Thanks, Lilly. And just to echo that, your feedback is critical to us. We learn a huge amount from the interactions we have with you. So please, if you've got any thoughts, we are all ears. We didn't turn up with a tablet of stone of how to fix Vanquis. We're learning as we go. But as hopefully, you can see, we are now benefiting from some momentum from the things that we've delivered. So it always makes you more confident looking forward when you can look back and see the things, the AT1 that we just described, but all the things that I've talked about. There's a large customer opportunity here. There's a motivated team. There's some real discipline about both cost and pricing and there's underlying process improvement all the time through the technology. So that's a really nice recipe for, I think, any business that you're looking at potentially investing into or holding your investment with. So thank you for those of you that are already with us, and welcome to those of you that may wish to be. We will get on with running this business as best we can for our colleagues, customers and of course, our investors. So with that, Lilly, I think we'll close there for today.

That's great. Thanks for updating investors today. Can I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This may take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good afternoon to you all.