13 November 2019. 4finance Holding S.A. (the ‘Group’ or ‘4finance’), one of Europe’s largest digital consumer lending groups, today announces unaudited consolidated results for the nine months ending 30 September 2019 (the ‘Period’).
Continued stable quarterly revenue and ongoing cost discipline deliver adjusted EBITDA of €93.7 million.
Strong receivables growth at TBI Bank and progress in using the bank to fund online loan portfolios.
Year-on-year comparisons remain impacted by product/market exits in mid-2018.
Operational Highlights
- New products launched in Latvia (‘minimum-to-pay’ line of credit) and Finland (shorter-term ‘mini’ instalment loan) generating over 30,000 combined loan applications per month.
- Online loan issuance volume of €775.2 million in the Period, compared with €932.4 million in 9M 2018, mainly reflecting the rationalisation of some products and markets during 2018.
- Instalment Loan issuance volume of €125.1 million in the Period, compared with €152.5 million in 9M 2018, driven by a more focused growth strategy and product reviews in markets including Poland.
- The number of online lending active customerswas 0.35 million as of 30 September 2019, compared with 0.44 million a year ago. The reduction was largely attributable to products and markets that were exited during 2018.
- TBI Bank loan issuance volume during the Period grew by 20% year-on-year to €233.4 million from €194.8 million in 9M 2018.
- TBI Bank had 0.40 million active borrowing customers, down 1% from a year ago, with 0.30 million current accounts as of 30 September 2019, up 23% from a year ago.
Financial Highlights
- Interest income of €319.1 million in the Period, down 12% from €361.5 million in the prior year period. The contribution from largest markets (Poland, Spain, Denmark and TBI Bank) was stable year-on-year. Interest income for Q3 2019 was €105.7 million, down 1% from Q2 2019.
- Year-on-year comparisons remain impacted by markets and products that were rationalised during 2018.
- Operating income was stable quarter-on-quarter at €96.0 million in Q3 2019 (€95.9 million in Q2 2019).
- Cost to income ratio for the Period was 51.5%, vs. 52.0% for 9M 2018, with operating costs down 13% year-on-year, reflecting ongoing cost discipline across the Group.
- Adjusted EBITDA was €93.7 million for the Period, down 18% year-on-year, with interest coverage of 1x. However, following the repayment of the USD 2019 bonds and using the last 12 month pro-forma figures as per our debt covenants, the interest coverage ratio now stands at 2.5x. Q3 2019 Adjusted EBITDA was €31.2 million, down 6% from Q2 2019.
- Profit before tax for the Period was stable year-on-year at €38.3 million from €39.0 million in 9M 2018 (which was impacted by FX losses).
- Net receivables increased by 2.1% during the third quarter to €562.8 million as of 30 September 2019, driven by TBI Bank.
- Overall gross NPL ratio at 20.0% as of 30 September 2019 (23.0% for online), compared with 19.4% as of 31 December 2018 (22.0% for online), with increase during Q3 due to seasonally lower debt sales.
- The annualised cost of risk for the online business was 27.6% for the Period, compared to 23.7% in 9M 2018, and in TBI Bank it was 4.3% for the Period, compared to 8.6% in 9M 2018. The improvement in the TBI Bank ratio reflects the ongoing normalisation of asset quality in the bank’s Romanian portfolio.
Strategic Highlights
- Strong underlying customer demand for Instalment Loans, including Spain, the Czech Republic and the Baltics. More conservative approach to instalment loan issuance in Poland, with a focus on unit economics across all markets.
- Ongoing migration of single payment loan customers to products with more flexible repayment terms, g. ‘minimum-to-pay’ lines of credit or shorter-term ‘mini’ instalment loans with maturities of under 12 months. Single payment loans now represent only 21% of the Group’s net receivables, down from 26% as of 30 September 2018.
- TBI Bank continues to perform well, with strong origination in both consumer lending and its new online SME offering, and good progress with integration of the Bulgarian vivus.bg online business.
- Successfully adapting to new regulation in the Nordics & Baltics region, with encouraging customer reception to new products, including optional fast delivery fees, introduced alongside regulation in Latvia in July and Finland in September.
- Continued strong near-prime origination, with upcoming product adjustments in Spain and Sweden, and new launch in Latvia planned for early in new year.
- Progress on funding diversification projects, with successful first sales of Polish instalment loans to TBI Bank in September.
Oyvind Oanes, CEO of 4finance, commented:
“These results represent another quarter of solid execution and stable financial performance for the Group. This was driven by our largest markets of Denmark, Poland, Spain and TBI Bank, which continue to deliver consistent overall year-on-year interest income. TBI Bank in particular has delivered strong growth in loan origination and we look forward to the seasonally strong last quarter of the year for the bank.
“In the Nordics & Baltics region, the positive initial customer reaction we have seen to our new products in Latvia and Finland is further evidence of our ability to adapt to regulatory changes. We seek to promote balanced regulation across all our markets, and we continue to work with the relevant authorities to ensure we can offer a viable and regulated option for consumers who have a need for short-term credit and can afford to repay.
“We have made good progress internally with our plans for near-prime business development, and will share more details of these alongside our full year results. It was also pleasing to see the initial sale of Polish instalment loans to TBI Bank completed successfully in September. This is an important step for the Group to ensure we can access the bank’s balance sheet to fund near-prime loans for 2020 and beyond.
“We remain excited about the medium term growth opportunities for the Group as we develop into a multi-segment, multi-product, consumer credit specialist and believe we have the right team and strategy in place to capture them.”
