There’s A New Sub-Prime Crisis, Another Housing Meltdown Is Now A Certainty

There’s a new sub-prime crisis, but it’s not what you think

  •  The struggles of Provident Financial have fuelled concerns about a new sub-prime crisis
  •  Buyers of Provident’s car loans are up to their eyeballs in debt
  •  Regulation has discouraged big banks from offering affordable credit to the poor

A decade on from the financial crisis, the reports today about the sub-prime lender Provident Financial have given us a nasty case of déjà vu. Within the space of a year, its loan repayment rates have fallen from 90 per cent to 57 per cent – leading to profit warnings, the departure of its chief executive, and a collapse in its share price.

It feels like a frighteningly familiar story. Overstretched customers at the bottom of the economic food chain rack up unaffordable loans from greedy financiers. When the music stops, the credit failures cascade upwards, bringing down lender after lender until the whole financial edifice comes apart.

capx.co/theres-a-new-sub-prime-crisis-but-its-not-what-you-think/?omhide=true&utm_source=CapX+Newsletter&utm_campaign=2fe4994fa0-EMAIL_CAMPAIGN_2017_07_17&utm_medium=email&utm_term=0_dcdc78d804-2fe4994fa0-241772733
Provident Financial sees nearly 1.7bn wiped off stock market value
www.theguardian.com/business/2017/aug/22/provident-financial-dives-second-profit-warning-peter-crook

The company, which specialises in lending to people in financial difficulty, issued its second profit warning in two months, parted company with its chief executive and cancelled a dividend for shareholders.
It also announced that it is facing a regulatory probe by City watchdog the Financial Conduct Authority into the sale of a product that allowed people to freeze their credit card debt.
The perfect storm of bad news for investors sent shares in the sub-prime lender plummeting more than 66%, from more than £17 to 589.5p, wiping nearly £1.7bn off its stock market value.
The rapid deterioration in Provident’s performance, less than two years after it entered the FTSE 100, comes after a botched attempt to overhaul its 130-year-old business model by cutting staff numbers and ramping up its use of technology.

Provident’s Share Price from January to August this year.

View post on imgur.com


Will others follow suit?

Chart of the Day: New Homes Sales Falter—-At Levels Still Below Those First Hit In 1963!

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Gregory Mannarino: Another Housing Meltdown Is Now A Certainty: You Have Been Warned

HANSON: House Price Bubbles 2.0 in Pictures

mhanson.com/8-21-hanson-house-price-bubbles-2-0-pictures/

The Market Is Already Heeding Dalio’s Warning on Risk

  • Volatility in stock, bonds and forex markets has bottomed out
  • Small-cap stock decline may signal wider rally is tiring

www.bloomberg.com/news/articles/2017-08-22/dalio-warnings-on-risk-find-market-already-heeding-his-advice
 
 
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