LOANS company Amigo has seen profits drop sharply as it set aside more money for handling complaints.

The Bournemouth-based sub-prime lender recently launched a strategic review which meant formally putting itself up for sale.

It says “several” potential buyers have expressed an interest.

Amigo Holdings saw pre-tax profits fall by 32.2 per cent to £53.5million, despite attracting more borrowers.

Amigo lends money at 49.9 per cent annual percentage rate to borrowers who have a poor credit history but who can find a friend or relative to act as guarantor.

As of the end of 2019, the company had set aside £26.6m for the costs of redressing customer complaints and had used £7.9m of that money.

Revenue at Amigo rose 8.5 per cent to £218m in the period in question, while the net value of its loan book was up 3.8 per cent to £722.3m.

Nayan Kisnadwala, Amigo’s chief financial officer, said: “Amigo has continued to attract new customers in the period as we provide a, much-needed, mid-cost guarantor loan product.

“The strategic review has led to a change in our risk appetite on new lending, which we are currently trialling, as we steer Amigo towards sustainable, long term growth. While these lending adjustments will result in lower volumes, we expect that they will have a positive impact on impairment levels, yield per account and future complaints costs.

“We have taken a deliberately prudent approach to complaints; with increased resource and an upskilled complaints team. We are committed to delivering fair outcomes to our customers.

“Amigo remains in an offer period, under the Takeover Code, with our strategic review and formal sale process ongoing. We will provide a further update to the market when we are able to do so.”

In its results statement, Amigo says it is trying a “more restrictive” approach to new and repeat lending. It has discontinued loans under £1,000, although these were a small proportion of its loan book.

“While a number of variables could impact the final outcome, the lower risk appetite on new lending being trialled as part of the ongoing Strategic Review could result in a material reduction in future lending volumes and net loan book,” it said.

It noted that the Financial Conduct Authority has launched several reviews of the sector, including reviews of affordability, repeat lending and treatment of vulnerable customers.