* Loss at upper end of guidance
* To cut jobs at home credit business
* Still looking for new chief executive (Adds details, share movement, analyst comments)
Jan 16 (Reuters) - Provident Financial expects to report a loss of about 120 million pounds ($165 million) in its consumer credit division for 2017 as it struggles to win back customers following problems at its door-to-door lending business.
Shares in Provident, which provided loans through the Wall Street crash of 1929 and both world wars, were down 3.8 percent to 887 pence by 0900 GMT, the biggest drop on the FTSE Midcap Index. They have fallen almost 70 percent since June.
Provident first warned about problems at its door-to-door lending operation in late June after a botched reorganization led to a shortage of staff. It said in August the situation had deteriorated and the business would lose between 80 and 120 million pounds in 2017.
The doorstep lending business accounted for 115 million pounds of the consumer credit division's loss.
Sub-prime lenders, such as Provident Financial, have seen rapid growth in Britain over the decade since the financial crisis, as banks cut back on risky lending and years of austerity have forced poorer people to borrow more.
But the high interest rates charged for loans has fueled a public and political backlash, leading to a regulatory crackdown.
Adding to its specific problems, Provident is seeking a permanent executive chairman after the sudden death in November of former investment banker Manjit Wolstenholme, who took the helm in 2017 charged with turning round the business.
Interim Executive Chairman Malcolm Le May said the lender had made progress in the search for a new chief.
The lender also said that the home credit business would cut an unspecified number of jobs at its central support functions as it looks to cut costs.
The consumer credit division accounted for 44 percent of Provident's revenue in 2016, according to Thomson Reuters Eikon data.
Analysts expect group pretax profit of 127.9 million pounds in 2017, substantially lower than 343.9 million pounds reported in 2016, according to Thomson Reuters I/B/E/S.
TARGET FOR SHORT-SELLERS
Rivals Non-Standard Finance and Morses Club have both gained from Provident's loss, after recruiting hundreds of its agents and taking on customers.
"The rate of reconnection with those customers whose relationship had been adversely impacted was at the lower end of expectations through the fourth quarter," Provident said on Tuesday.
Short-sellers who were betting Provident's shares would fall enjoyed healthy paper profits on Tuesday.
Lansdowne Partners made paper profits of 1.4 million pounds while AQR Capital Management made 1.3 million pounds as of 0900 GMT, according to a Reuters calculation.
Lansdowne and AQR Capital Management were among 11 hedge funds with outstanding shorts in Provident above a threshold of 0.5 percent, showed filings with the British regulator.
Provident has also contended with lost income resulting from a Financial Conduct Authority (FCA) investigation into the Repayment Option Plan offered by Provident's Vanquis Bank and an investigation into Moneybarn, its car and van financing arm.
Provident Financial said Vanquis Bank and Moneybarn units had both started talking to the FCA with a "view to reaching a resolution to their respective investigations."
Liberum analyst Portia Patel said there was still a way to go towards repairing the business.
"The balance sheet still appears stretched ... In the absence of resolution on the strength of the balance sheet, the FCA's investigation on ROP and the search for a new CEO, our negative stance is unchanged," said Patel, who rates Provident as a "Sell." ($1 = 0.7260 pounds)
(Reporting by Noor Zainab Hussain in Bengaluru and Maiya Keidan in London; Editing by Bernard Orr)