Wonga slides to first annual loss as regulatory crackdown bites

Wonga, the UK's largest payday lender, has slumped into its first annual loss following a regulatory crackdown that threatens to wipe out most of the industry.

The lender, which has come under criticism for charging annual percentage rates above 5,000 per cent, reported a net loss of £42.8m for 2014.

Revenues plunged by 31 per cent to £217.2m on the back of a "significant reduction" in UK consumer lending, the group said.

The decline comes after the Financial Conduct Authority (FCA) imposed tough new rules to crack down on irresponsible lending practices.

The lender was hit by £35m in remediation costs by the watchdog after it agreed to implement a major customer forbearance programme.

Operating costs ratcheted up by 12 per cent to £150.2m over the year, while the group took a software-related impairment of £15.3m after overhauling its risk decision engine.

But falling into the red marks a turning point for the lender, after it made a pre-tax profit of £39.7m in 2013 and £84.5m the year before.

Andy Haste, executive chairman, said on Tuesday: "We said Wonga would be smaller and less profitable in the near term as we focus on creating a sustainable business that lends responsibly and transparently to customers who can afford to borrow from us.

"Today's results are clear evidence of the changes we have made and are continuing to make."

He added that it would "take time" to repair Wonga's reputation and "gain an accepted place in the financial services industry.

However, the lender has been forced to make sweeping changes in order to survive.

It recently revealed it is halving the size of its UK-focused workforce as part of a cost reduction programme that aims to save £25m over the next two years.

Paul Miles, chief financial officer, said last year had focused on addressing "problems of the past", which he warned would continue this year and be reflected in 2015 results.

"In parallel with executing our restructure, and as we build a sustainable and successful business, we will look to launch new products and may seek debt funding in 2016 to support the growth of the loan book," he added.

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