Provident concerned at low household income

 a lender to low-income households, reported a 4 per cent rise in first-half profits, but warned its customers were being squeezed by pay cuts and working fewer hours.

The company specialises in lending relatively small sums – typically £400 – to poorer customers on an unsecured basis, with repayments picked up by an agent from the borrower’s home.
Its annual repayment rates, which tend to be 189 per cent or 254 per cent on its most popular product, have attracted criticism from Barnardo’s, the children’s charity.

Provident says its fee structure is transparent and does not penalise borrowers for missed payments, adding that home collection is costly.

In the first half of 2009, the group said its pre-tax profit was £53.1m, up from £51.3m in the first half of 2008. The bulk of its profit came from its doorstep lending, although the contribution from its Vanquis credit card business almost doubled to £5m. Sales rose 8 per cent to £401.2m.

Bad debt impairments were equivalent to 31 per cent of sales, marginally up from 30 per cent in the prior year. An interim dividend of 25.4p has been declared, unchanged from the previous year.

Peter Crook, chief executive, told the Financial Times that he felt unemployment “could easily get to 3m or so”. However, he said “under-employment” – workers being forced to work fewer hours or take pay cuts – was perhaps a bigger issue, eating into the income of poorer households.

Mr Crook said the group had taken a cautious approach to new lending, with about 70 per cent of doorstep loan requests and 83 per cent of credit card requests being declined. Provident shares yesterday fell 7 per cent or 60½p to 794½p.

Euro zone household income ticks up after tax in Q1

FRANKFURT, July 30 (Reuters) - Household disposable income grew slightly in the euro zone in the first quarter of the year, boosted by government outlays, European Central Bank data showed on Thursday.

Household net disposable income -- income available to spend or save after taxes and social security -- grew 0.9 percent in January-March from the first quarter of 2008, after a 2.7 percent rise in the previous quarter, the ECB said in a report on the first quarter.
Disposable income is different to 'discretionary income', which also subtracts normal expenses like rent, utilities and other essentials.

The report also said, however, that households' overall wealth fell 10 percent in annual terms, hit by large falls in stock markets and other asset prices, and that they were spending less and saving more.

In the first quarter, the annual growth rate of net household savings rose to 28.4 percent from 19.8 percent in the previous quarter.

But the ECB said firms had suffered the brunt of the woes. Net income of non-financial corporations fell 23 percent in the first quarter, from a 10.9 percent drop in the final months of 2008.

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Household income drops as less hours worked

Average household income has fallen $80 a month, despite a quarterly rise in pay rates, analysis shows.

The Australian labour price index rose 0.8 per cent in the June quarter, in trend terms, propelled by pay increases in retail sales, hospitality and construction, data released today by the Australian Bureau of Statistics show.

But a cut in the number of hours offered by employers means households' overall earnings suffered a drop in July.

"With labour market conditions not deteriorating as rapidly as we had anticipated at the start of the year, wage growth probably will slow only modestly going forward," said JP Morgan’s Helen Kevans.

"That said, household incomes will suffer due to the sharp fall in the number of hours being worked. The decline in the numbers of hours worked has shaved around $80 per month off average household incomes."

The analysis comes as official data from the ABS show wages increasing 3.8 per cent for the year to June, the slowest pace in almost three years, after a 4.2 per cent rise in the year to March, the ABS said.

The payrise momentum in the public and private sectors continued, but growth in the private sector was more subdued, the ABS data showed.

Private sector wages rose by 0.7 per cent in the quarter compared with 1 per cent for the public sector, the ABS said.

"A divergence in wage trends is evident in second quarter between the public and private sectors, with wage pressures remaining elevated in the public sector, but weakening further in the private sector," ANZ economist Julie Toth said.

"This slowdown in wages growth was expected, given the weakening trends in employment - with little or no jobs growth evident in recent labour market data - as well as the softening inflation outlook," she said.

Unemployment was 5.8 per cent in July, unchanged from June.

However, July labour data showed a loss of 16,000 full time jobs, while part-time jobs soared by 48,200.

The average number of hours worked fell by 0.43 per cent on a monthly basis, seasonally adjusted, to 1.515 million in July from 1.521 in June.

The jobless rate is expected to rise in coming months as more companies cut staff because of falling demand.

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