Cattles taps investors for £200m

Home credit specialist Cattles yesterday unveiled plans to tap its shareholders with a £200m rights issue to fund more lending to low-income groups.

The company also said it planned to seek a banking licence with a target of taking £1bn in deposits by 2010 after attempts to gain one through acquiring rivals foundered. The entry of Cattles into the savings market could unnerve existing players. It currently funds its loans through wholesale financial markets but pays about 8 per cent on its borrowings – more than 2 per cent above Libor – the London Interbank lending rate.

It could therefore offer market-leading savings rates to customers of potentially over 7 per cent and still turn a profit, not least because of the high interest it charges to its sub-prime customer base. Analysts gave the statement a positive response and the shares finished the day up 7.75p at 227.25p. The new shares released through the rights issue are priced at just 128p a share.

The £1bn savings targets amounts to about 0.1 per cent of the market, although chief executive David Poste admitted that the company would need to look beyond its traditional customer base for this.