Loan firm Wonga in red due to £100m slide in profits
Wonga has insisted it can survive a clampdown on payday lenders despite slumping into the red following a £100m slide in revenues.
The controversial business posted a loss of £37.3m due to a significant reduction in UK consumer lending while it attempts to clean up its tarnished image.
Revenues declined to £217.2m in the period. Wonga said that the number of active customers it has fell back to 575,000.
The company, which grew to become Britain's biggest payday lender, previously had more than one million active customers.
The company reported that lending volumes fell by 36% to £732m last year, from £1.1bn in 2013. It made 2.5m loans in the UK last year against 3.7m in 2013.
However, its default rate improved from 6.9% to 6.6%.
The lender's reputation has been battered by a series of scandals, which emerged as a stricter regime was imposed on the industry by the regulator, to prevent people being trapped in spiralling debts.
In January, payday loan customers saw the fees and interest they pay capped across the industry, meaning borrowers who cannot pay their debt on time will never pay back more in charges than the sum they initially wanted to borrow.
Wonga, which earlier this year announced plans to cut 325 jobs, has reviewed its business to ensure it is lending only to customers who can reasonably afford to repay their loans.
It now accepts around 50% of loan applications from new and existing customers, compared with a previous acceptance rate of 80%.
The company said this reflected the tougher affordability checks it now carries out and its changed appetite for risk.
Asked if it is still possible to run a profitable payday loan business under the new industry regime, Wonga's executive chairman Andy Haste said: "Yes. Our issues are legacy issues... Could you start a payday business today within the cap and be profitable? Yes."
Wonga said as part of its plans to build a "sustainable and successful business", it plans to launch new products to reach out to a broader number of customers, details of which will be revealed in due course.
The lender's research suggests around 13 million people across the UK are "cash and credit constrained" and being under-served by mainstream financial services.
Mr Haste, who joined Wonga last July, said that, in the past, bosses had discussed the possibility of the company changing its name to repair its reputation.
But he said: "It's hugely important that we can demonstrate that Wonga can change from within."
Last year Wonga was ordered to pay compensation of £2.6m by the Financial Conduct Authority after sending fake legal letters to 45,000 customers, in a case described by consumer campaigners described as a "shocking new low" for the payday industry.
Wonga said more than 90% of the customers who are eligible have been contacted and about 40% have been compensated so far.