PAY-DAY lender Wonga said it expects that it will be smaller and less profitable in the near term after reporting a 53 per cent drop in pre-tax profits to £39.7m for 2013.

The Newcastle United shirt sponsor blamed remediation costs - money it had to pay back to customers as a result of its own mistakes.

It also says it expects to be "smaller and less profitable" in future, in part due to new controls set by the regulator, the Financial Conduct Authority (FCA).

The payday loan sector has come under fire from politicians, consumer groups and the Archbishop of Canterbury over interest rates charged, which can reach four-figure sums.

Since July 2014, all payday loan companies have had to conform to new rules, which limit roll-overs of loans and force them to increase affordability checks. From January 2015, they will also have their charges capped.

In June this year, the FCA ordered Wonga to pay £2.6m in compensation to 45.000 customers, after sending out fake letters from non-existent law firms.

At the same time Wonga was told to compensate 200,000 customers who were overcharged, as the result of a technical issue.

In total, such issues cost the company £18.8m.

These costs were included in the accounts for 2013, as some of them happened as far back as 2008.