PROVIDENT Financial shares have taken a hit after the lender revealed that its results for 2018 will be at the lower end of expectations.

The firm says it expects to report profits for 2018 of £159 million.

The news led to an 18% fall in the share price from 647p to 505p before they recovered slightly to 528p.

The Bradford-based company recorded a loss in 2017 of £123m after a nightmare year which included the loss of its chief executive and the poorly executed migration to the new operating model.

Last February the subprime lender announced a £331 million investor call after being ordered to pay almost £171 million in fines and compensation over mis-selling one of its products.

The Financial Conduct Authority (FCA) fined credit card lender Vanquis Bank £2 million and ordered it to pay £168.8m in compensation for failing to disclose charges of its popular repayment option plan (ROP).

Provident announced the rights issue and cover the cost of the Vanquis settlement, as well as an expected £20m hit from an ongoing investigation into its car financing arm, Moneybarn, over affordability checks.

In the trading report released on Tuesday, the company said it had refunded one million Vanquis customers at a cost of £160m in cash refunds and balance reductions and would be reimbursing the remaining 200,000 in 2019.

The report said Moneybarn continues to assist the FCA in its investigation into affordability, forbearance and termination options and is working towards concluding the matter in the first half of 2019.

It said Moneybarn has continued to perform well with fourth quarter new business volumes showing year-on-year growth of 21%. Customer numbers ended the year at 62,000, representing year-on-year growth of approximately 24%. CCD has performed in line with internal plans during the last quarter of the year while Vanquis Bank has delivered further customer and receivables growth with 1,773,000 customers, representing year-on-year growth of 3.1%, although impairment has been modestly higher than expected.

The group expects to report exceptional costs of approximately £55m in 2018, of which £37m were incurred in the first half.

Commenting on the final quarter of the year, Malcolm Le May, chief executive officer, said: “I am very pleased with the progress we have made in 2018 on delivering against the operational objectives we set ourselves at the start of the year.

"The FCA authorisation of CCD and the substantial completion of the ROP refund programme in Vanquis Bank have been major milestones for the group. In addition, we have made good progress on the FCA investigation at Moneybarn and are working towards concluding this matter in the first half of 2019.

"We have been progressively tightening our underwriting standards throughout the group in anticipation of the current uncertain UK economic environment we are facing. We will continue to monitor underwriting standards in light of any changes in customer behaviour.

"The group has strong funding and capital positions and the actions we have taken over the last 18 months have established a solid foundation for continuing to deliver on our strategic aim of being the leading provider of credit products to the 10 to 12 million consumers who are not well served by mainstream lenders.”

Provident Financial are the leading provider of credit products to those consumers who are not well served by mainstream lenders.

Preliminary results for 2018 which will be announced on February 27.