Wonga profits slump by 53% in 2013

Payday lender Wonga saw its profits more than half in 2013 after suffering £18.8m worth of “remediation costs” for sending out fake legal letters to customers.

Profits at the controversial lender dropped by 53 per cent in 2013 to reach £39.7m, down from £84.5m for the previous year.

Wonga was fined £2.6m by the Financial Conduct Authority earlier this year for sending out 45,000 legal letters to its customers from fictitious law firms.

The lender was also required to pay out £10m to customers affected by the issue, with total costs relating to the scandal amounting to almost £19m.

In a statement issued today Wonga cautioned that the firm expects to be “less profitable in the near term.”

Wonga added that ongoing investment in both infrastructure and overseas business had acted as a further drag on profits in 2013.

It said: “The decline in profits was driven by remediation costs related to historic debt collection and systems issues, and continued investment in staff, infrastructure and Wonga’s international businesses.”

Wonga interim chief executive Tim Weller described the firm’s ongoing inward investment as a “key factor” in the decline in profits, stressing that the lender will “continue to invest to build a sustainable business.”

Revenues at the firm edged up by 2 per cent to £314.7m in 2013 from £309.3m in 2012 as the amount lent by the firm also rose to £1.3bn compared to £1.19bn for the previous year.