Vanquis Banking Group (LON: VANQ) Stock: Q3 2025 Profit, Motor Finance Redress Risk and the Road to 2027 Targets

Vanquis Banking Group PLC’s share price has staged one of the UK banking sector’s sharpest rebounds in 2025, as the specialist lender returns to profit, grows its loan book and navigates a shifting regulatory landscape around motor finance redress. Yet the stock still carries a sub‑investment‑grade credit rating and a complex recent history, leaving investors weighing a high‑beta turnaround story against ongoing regulatory and execution risk. ^[1]

Share price snapshot: a big recovery off the lows

Vanquis Banking Group (ticker: VANQ) trades on the London Stock Exchange and sits in the FTSE All‑Share index within the Financial Services sector. ^[2]

As of 4 December 2025, the Vanquis share price was trading at around 115p, up well over 100% from levels seen a year earlier. MarketScreener data show the stock at 114.9p with a year‑to‑date gain of around 155%, while Hargreaves Lansdown quotes a roughly 140% 12‑month total return and a 52‑week range of about 43p to 130p. ^[3]

The rally comes after a brutal de‑rating in 2023–24, when profit warnings tied to credit card complaints, balance‑sheet clean‑up and restructuring pressure drove the stock to historic lows. ^[4] Even after this year’s surge, the shares still trade well below pre‑2023 levels and around or slightly above some published broker targets, keeping the valuation debate wide open. ^[5]

2024 results: painful reset and new guidance

Full‑year results for 2024, released on 14 March 2025, formally closed out the restructuring phase. Vanquis reported a statutory loss after tax, hit by a comprehensive review of its vehicle finance receivables, higher complaint costs and weaker income. ^[6]

Key points from the 2024 results and guidance: ^[7]

Balance sheet clean‑up: Stage 3 (impaired) loans in vehicle finance were written down, and two debt sales in 2H24 reduced legacy risk. Net receivables were broadly flat at £2.16bn despite a 4% fall in gross interest‑earning balances.
Capital and liquidity: The Tier 1 capital ratio fell from 19.9% to 18.8%, still comfortably above regulatory minima, while the Liquidity Coverage Ratio stood at a very high 359%.
Strategic pivot: Growth is now expected to come mainly from lower‑risk, lower‑margin second‑charge mortgages and repriced credit card portfolios, with more measured growth in vehicle finance.
Medium‑term targets reset:
- Gross customer interest‑earning balances are guided to around £2.6bn in 2025 and £3.0bn in 2026 (lower end of a previously higher range).
- Statutory return on tangible equity (ROTE) is guided to low single digits in 2025, low double digits in 2026, and mid‑teens from 2027.
- Net interest margin (NIM) is guided to >17% in 2025 and >16% in 2026, reflecting a shift toward lower‑yield mortgages.
- The statutory cost‑income ratio is targeted at high‑50s% in 2025, low‑50s% in 2026, and 49% or lower in 2027 as transformation savings flow through.
Dividends suspended: After a token final dividend for 2023, the board decided not to declare a dividend for 2024 and will revisit capital allocation and dividend policy only after the strategy is fully delivered in 2026.

In short, 2024 was framed by management as a “pivotal” clean‑up year that depresses near‑term earnings but is meant to set up a more predictable earnings profile from mid‑decade. ^[8]

H1 2025: return to profit and improving credit metrics

The interim results for the six months to 30 June 2025, published on 7 August, marked the first proof that the new plan is gaining traction. Vanquis reported: ^[9]

Statutory profit before tax from continuing operations of £6.2m, versus a £46.1m loss in H1 2024.
ROTE of 3.1%, in line with guidance for a low single‑digit return for the full year.
Gross customer interest‑earning balances up 7% in the half to £2.46bn, with growth across credit cards and second‑charge mortgages.
Risk‑adjusted income up 7% year‑on‑year to £143.6m, driven by better credit quality and lower impairment charges.
- Cost of risk fell to 6.6% from 8.5% a year earlier.
Cost control: The statutory cost‑income ratio improved sharply to 62.5%, from 79.3% in H1 2024, helped by transformation savings, lower notable items and reduced complaint costs.
Complaints: Complaint costs fell 36% year‑on‑year to £16.1m, with Financial Ombudsman Service (FOS) fees dropping to £4.5m after a change in the fee structure that penalises high‑volume claims management companies (CMCs).
Capital and funding: The Tier 1 capital ratio stood at 18.5%, the Liquidity Coverage Ratio at 366%, and around 85% of funding came from retail deposits, underlining a stable, deposit‑funded model.

Chief executive Ian McLaughlin said the turnaround was “firmly on track”, highlighting two consecutive profitable quarters, sustained balance growth and robust credit quality. ^[10]

Q3 2025 trading: growth, margin pressure and motor finance redress

The third‑quarter 2025 trading statement, released on 5 November, reinforced the profitability trend but also highlighted emerging margin pressure and fresh detail on motor finance redress risk. ^[11]

Loan growth and profitability

Gross customer interest‑earning balances reached £2.65bn at 30 September 2025, up 8% quarter‑on‑quarter and 18% year‑on‑year, driven primarily by credit cards and second‑charge mortgages.
Net receivables rose to £2.51bn, up 8% on the quarter and 21% year‑on‑year, helped by lower impairment coverage on lower‑risk mortgages and further sales of written‑off vehicle finance assets.
The group remained statutorily profitable in Q3 and across the first nine months of the year, with management reiterating guidance for a low single‑digit statutory ROTE in 2025.

Net interest margin mix‑shift

The year‑to‑date net interest margin slipped from 17.4% at mid‑year to 17.0%, down 40 basis points quarter‑on‑quarter and 170 basis points versus the prior year. The statement attributes this to: ^[12]

Growth in lower‑yield second‑charge mortgages.
Increased use of 0% balance transfer and promotional credit card offers.
Partially offsetting factors including improved vehicle finance yields and a lower cost of funds.

As a result, Vanquis nudged up its 2025 balance guidance but trimmed margin guidance: it now expects gross customer interest‑earning balances above £2.7bn (previously >£2.6bn) and a NIM above 16.5% (previously >17%), with net interest income broadly unchanged versus prior expectations. ^[13]

Capital optimisation

The CET1 and Tier 1 capital ratios declined to 17.4% at 30 September 2025, from 18.5% at mid‑year, reflecting capital deployed into new lending. ^[14]
On 1 October, Vanquis issued £60m of Additional Tier 1 (AT1) notes and tendered £58.5m of legacy Tier 2 notes, lifting the pro‑forma Tier 1 ratio to 20.3% and making the capital structure more efficient. ^[15]

Motor finance compensation scheme: limited but real exposure

The most closely watched section of the Q3 statement concerns the UK Financial Conduct Authority’s proposed motor finance compensation scheme. Vanquis, via its Moneybarn vehicle finance arm, is in scope only for certain commission structures, and the bank is at pains to distinguish itself from the high‑profile “discretionary commission” cases at the heart of the Supreme Court’s Johnson ruling. ^[16]

Key disclosures: ^[17]

Vanquis did not participate in discretionary commission arrangements (DCAs) and did not operate tied broker arrangements.
Out of 358,720 historical vehicle finance agreements between April 2007 and November 2024, only 7,133 agreements (around 2%) meet the FCA’s “high commission” threshold.
The group has recorded a £3.0m provision, based on probability‑weighted scenarios for potential redress and costs.
If the consultation proposals were implemented exactly as drafted, management estimates total costs of about £7.0m, including customer redress, interest and the cost of contacting all affected customers.
That implies a potential additional liability of roughly £4m on top of the current provision, mainly related to operational and outreach costs.

Alliance News, summarising the update, noted that Vanquis “sees a chance of a higher motor charge but keeps the provision on hold” until final FCA rules are published, underlining that the numbers may move but look manageable relative to the group’s capital base. ^[18]

Complaints, sanctions and the compliance upgrade

Credit card complaints and FOS fee reform

Vanquis’s recent history has been dominated by a surge in credit card complaints, many driven by a single claims management company. That wave triggered a profit warning in early 2024 and a sharp share price collapse, even though uphold rates on complaints were low. ^[19]

The 2024 results show: ^[20]

Total complaint costs rose 66% to £47.4m, driven mainly by a three‑fold increase in FOS fees to £24.8m.
Vanquis welcomed new FOS fee rules effective 1 April 2025, which charge CMCs an upfront fee per case and reduce the fee paid by lenders where complaints are not upheld. Management expects this to curb speculative complaints and lower FOS‑related costs from 2025 onwards.
Legal proceedings against the main CMC are ongoing.

The drop in complaint costs in H1 2025 and the continuing downward guidance for the second half are early evidence that this pressure is easing. ^[21]

OFSI sanctions breach and remediation

In September 2025 the UK’s Office of Financial Sanctions Implementation (OFSI) published a disclosure notice relating to historic breaches by Vanquis Bank Limited, where an account belonging to a designated person was not frozen promptly. OFSI assessed the case as “moderate” in severity but did not impose a monetary penalty, noting that Vanquis had self‑reported, cooperated and upgraded its systems. ^[22]

The episode nonetheless underlines the reputational and regulatory sensitivity around sanctions compliance for UK lenders.

FinScan and Fiserv: investment in AML and core systems

Vanquis has responded by leaning harder into technology:

In March 2025, the group announced a partnership with FinScan, an anti‑money laundering (AML) platform that provides sanctions screening, risk scoring, data quality and KYC tools. The deal is intended to deliver a “holistic compliance programme” and support growth without sacrificing financial crime controls. ^[23]
In April 2025, Vanquis became the first bank to deploy Fiserv’s Vision Next processing platform, a cloud‑based system for card issuing, fraud protection and data‑driven decisioning. The implementation is a core part of the bank’s “Gateway” technology transformation and is designed to support a scalable, digital‑first platform by mid‑2026. ^[24]

The Q3 trading statement highlights further tech milestones, including an agentic‑AI powered web chat in vehicle finance, new fraud tools and the launch of a revamped mobile app in November 2025. ^[25]

Strategy and brand: targeting the “financially underserved”

Vanquis is positioning itself as a specialist bank for “financially underserved” customers – people who struggle to access mainstream credit but do not fit the highest‑risk profiles of the old doorstep‑lending model.

A June 2025 Marketing Week piece details a new brand strapline, “the bank that’s got your back”, supported by an out‑of‑home and social campaign aimed at speaking more directly to this audience. The bank cites around 1.7 million customers across cards, vehicle finance and the Snoop money‑management app, and sees scope to reach millions more. ^[26]

The operating model now rests on three pillars: ^[27]

Credit cards – repriced and increasingly digital, with new onboarding and decisioning platforms due to go live in 2026.
Secured and vehicle lending – second‑charge mortgages are a core growth engine; vehicle finance growth is being managed cautiously while the new platform and regulatory environment bed in.
Savings and money management – retail deposits fund the loan book, while Snoop provides money‑saving tools, open‑banking insights and a growing savings proposition that is being integrated into the Vanquis app.

The group’s multi‑year Gateway transformation programme underpins all three, targeting a further £15m of transformation savings by end‑2025 and £23‑28m by mid‑2026, alongside a leaner headcount and more digitised customer journeys. ^[28]

Analyst forecasts, ratings and valuation

Broker price targets

Analyst views on Vanquis remain mixed but have turned more constructive as the turnaround delivers profits:

MarketBeat aggregates views from two City analysts, classifying Vanquis as a “Moderate Buy” with an average 12‑month price target of £1.115 (111.5p), in a range from 83p to 140p. ^[29]
Fintel collates a broader set of broker estimates and reports an average target of about 134.6p, implying mid‑teens upside from current levels, with individual targets stretching from roughly 84p to 163p. ^[30]
A US‑focused note from Keefe, Bruyette & Woods, cited by Nasdaq in April, set a target of $1.12 on the thinly traded US ADR (FPLPF), implying around 51% upside from the then‑prevailing price. ^[31]

Taken together, these suggest that while some of the recovery is already in the price after a strong 2025 rally, a number of analysts still see room for further upside if the bank delivers on its ROTE and growth targets.

Growth and valuation screens

Equity research platform Simply Wall St paints Vanquis as a high‑growth but higher‑risk financial name: its models project earnings growth of around 84% per year and revenue growth of roughly 18% per year over the next few years, with ROTE rising above 15% by 2027 as the balance‑sheet expansion matures. The stock screens as cheap versus the UK market on both earnings and book value multiples, though flagged with several risk warnings linked to regulatory and credit uncertainty. ^[32]

Technical analysis site StockInvest.us currently labels VANQ a “hold candidate” after the sharp run‑up, noting the 52‑week range from 42.65p to 130p and a still‑elevated volatility profile. ^[33]

Credit rating

From a debt‑investor perspective, Fitch Ratings affirmed Vanquis’s long‑term issuer default rating at ‘BB‑’ with a Stable outlook in August 2025, having earlier in the year maintained a Rating Watch Negative while it assessed the impact of complaints and capital pressures. The rating reflects the bank’s narrow but focused franchise, reliance on higher‑risk consumer credit and sensitivity to economic downturns, offset by strong retail funding and improving profitability trends. ^[34]

A ‘BB‑’ rating remains below investment grade, signalling that Vanquis has adequate capacity to meet obligations but is more vulnerable to adverse conditions than mainstream UK banks.

Key risks for Vanquis shareholders

Even with the turnaround now visible in the numbers, the investment case for Vanquis Banking Group still carries material risk factors:

Macro and credit risk
Vanquis lends to customers who are more exposed than average to UK cost‑of‑living pressures. A weaker job market or higher‑than‑expected interest rates could squeeze borrowers and push up impairments, challenging the 6.5–7.0% cost‑of‑risk guidance embedded in management’s plan. ^[35]
Regulatory and redress risk
- The FCA’s motor finance compensation scheme remains in consultation. While Vanquis’s disclosed exposure looks limited and provisioned, final rules could still shift the liability or create knock‑on impacts across the industry. ^[36]
- Wider consumer credit regulation and complaint handling rules – including FOS fees and potential future redress themes – remain an overhead for a lender focused on non‑prime customers. ^[37]
Execution risk in transformation and technology
The Gateway programme, new core systems (including Fiserv Vision Next), new mobile app and AI‑enabled operations are critical to the strategy. Delays, cost overruns or operational issues could weigh on costs, customer satisfaction or risk metrics. ^[38]
Capital and funding flexibility
While current capital and liquidity metrics are strong, Vanquis operates with a Tier 1 capital target above 17.5% and a sub‑investment‑grade rating, which can make market funding more expensive or less accessible in stressed conditions. Unexpected regulatory charges or credit losses could narrow the buffer to targets, particularly while the bank is not paying dividends and is focused on asset growth. ^[39]
Reputation and sanctions compliance
The OFSI disclosure notice illustrates that even non‑fined sanctions breaches can attract public scrutiny. As Vanquis grows and digitises, maintaining robust AML and sanctions controls is essential to avoid reputational damage or financial penalties. ^[40]

Outlook: a high‑beta UK banking turnaround

Vanquis Banking Group enters the final weeks of 2025 with:

Two consecutive profitable quarters and a profitable first nine months. ^[41]
Rapid growth in interest‑earning balances driven by credit cards and second‑charge mortgages. ^[42]
Transformational cost savings and complaint‑cost relief starting to show up in the cost‑income ratio. ^[43]
A motor finance redress exposure that looks manageable but still uncertain. ^[44]
A share price that has more than doubled in a year, yet still sits below many pre‑crisis levels. ^[45]

If management hits its low single‑digit ROTE target for 2025, then progresses towards low double‑digit returns in 2026 and mid‑teens thereafter, the current valuation could still leave room for upside, especially if complaint and redress risks continue to fade and the UK macro backdrop remains benign. ^[46]

Equally, the combination of non‑prime customers, regulatory complexity and a still‑fragile credit rating means Vanquis is likely to remain a high‑beta UK financial stock, sensitive to shifts in sentiment, macro data and FCA policy. For investors following UK banks, Vanquis now sits firmly in the “turnaround with momentum” bucket rather than “distressed situation” – but it is still not a low‑risk income play.