March 13, 2019 / 7:44 AM / 4 months ago

UPDATE 2-Provident will not sell home credit unit even as NSF closes in

* Home credit unit will be smaller part of group- CEO

* Swings to profit in 2018

* Vanquis Bank will be engine going forward- CEO

* Reiterates NSF offer not in the interests of all shareholders (Adds CEO, analyst comments, shares, graphic)

By Noor Zainab Hussain and Tanishaa Nadkar

March 13 (Reuters) - Provident Financial will not sell its troubled home credit unit as the subprime lender grows its banking business and stands its ground against a hostile takeover bid by smaller rival Non-Standard Finance, its CEO said.

The company, which provides loans to people who do not meet the lending criteria of mainstream banks, swung to a pretax profit in 2018, helping bolster its defence against the 1.3 billion pound ($1.71 billion) takeover bid.

Provident reiterated that the offer made by NSF, which has the backing of investors Neil Woodford, Invesco and Marathon that together hold over 50 percent of both NSF and Provident, is not in the interest of its shareholders.

“This battle looks set to continue for some time ... We attach a very high — around 75 percent — probability to the proposed deal completing,” Goodbody UK Financials analyst John Cronin said.

Provident has been trying to boost its flagging share price after being hit by a string of bad news, including a botched restructuring of its home credit business, profit warnings and a dividend suspension. Its shares have tumbled more than 55 percent since its problems began in 2017.

The company is trying to turn its business around, focusing on growing its Vanquis Bank unit.

“Clearly the driver of this group will be the bank, both because of its scale and because of the fact that its a regulated entity,” Chief Executive Officer Malcolm Le May told reporters on a call.

“Home credit will be an important part of the group, it will be a smaller part of the group in terms of absolute returns,” he added.

London-headquartered Vanquis Bank has 1.8 million customers and accounts for more than half of Provident’s revenue.

Provident, which has delivered three profit warnings in the past 18 months, posted a statutory pretax profit of 90.7 million pounds ($118.88 million) for the year ended Dec. 31, in line with expectations and compared with a pretax loss of 147.9 million pounds in 2017.

The company declared a dividend of 10 pence per share for 2018 after suspending the payment for the first time ever in 2017.

Provident’s stock was 1.07 percent higher at 569.2 pence at 0950 GMT, significantly higher than NSF’s offer which valued each Provident share at 511 pence. ($1 = 0.7613 pounds)

Reporting by Noor Zainab Hussain in Bengaluru; Editing by Kirsten Donovan

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