- Solid 9M 2021 performance with net profit of €28.1 million and Adjusted EBITDA of €81.1 million
- Growth in net receivables in Q3 in both online and banking businesses, driven by strong loan issuance
- Medium-term capital structure in place following successful 5-year EUR bond issue
Operational Highlights
- Customer repayment dynamics continue to be good, with fundamental asset quality metrics stable across the business.
- Online loan issuance volume of €225.3 million in Q3 2021, up 13% QoQ and up 22% year-on-year. Continued strong performance in Poland and improvements in Spain and Sweden following product and underwriting changes. Market-wide demand for credit improved during Q3 with most Covid-related restrictions lifted, particularly in Latvia and Spain.
- Near-prime portfolio development aligned with ability to fund those loans via TBI Bank. Since March, over EUR 15 million of Lithuanian near-prime loans have been sold to TBI Bank (as of mid-November).
- TBI Bank loan issuance volume during the Period grew by 54% year-on-year to €376.7 million from €245.1 million in the prior year period, with increased issuance in all products.
Financial Highlights
- Interest income of €215.9 million in the Period, down 9% from €237.3 million in the prior year period. Interest income of €77.2 million for the third quarter is 11% up QoQ after a period of stable quarterly income of c.€70 million since Q1 2020. Interest income from continuing products has grown every quarter since Covid impact in Q2 2020.
- The cost to income ratio for the Period improved to 56.6%, vs 57.5% in the prior year period, with a significant improvement in the third quarter (52% vs 59% in Q2) from growth in online interest income delivered alongside a small reduction in cost base. Costs were reduced year-on-year reflecting continued cost discipline and focus on operational efficiency.
- Good fundamental asset quality indicators, disciplined lending and an active NPL debt sales market resulted in a significant reduction in net impairment charges (down 48% YoY) and cost of risk (8.0% for the Period vs 15.2% in the prior year period).
- Adjusted EBITDA was €81.1 million for the Period, up 56% year-on-year, with a post-Covid record quarterly contribution in Q3 of €29.8 million. The full interest coverage ratio as of the date of this report is 2.5x.
- Post-provision operating profit for the Period was €45.6 million, benefiting from the 48% year-on-year reduction in net impairment charges, with a profit before tax of €41.7 million.
- Net receivables totaled €627.5 million as of 30 September 2021, up 19.2% year-to-date. During the quarter, TBI Bank grew net receivables another 12% and the online business portfolio increased 7% QoQ.
- Improved overall gross NPL ratio at 13.9% as of 30 September 2021 (12.3% for online), compared with 17.0% as of 31 December 2020 (19.2% for online).
Liquidity and funding
- Strong liquidity position, with €85.3 million of cash in the online business at the end of the Period.
- Strong capital position at TBI Bank (17.3% capital adequacy ratio) despite continued growth in risk weighted assets.
- Completion of bond refinancing process in October, with new issue of 5-year EUR bonds raising €175.0 million to redeem the remaining USD 200.0 million bonds. Balanced medium-term capital structure in place, with two bond issues of similar sizes, in euros, maturing in February 2025 and October 2026.
Kieran Donnelly, CEO of 4finance, commented:
“Our growth in loan issuance, measured both quarter-on-quarter and year-on-year tell a story of sustained growth and offer a reminder of how far we have come over the past 12-months. We have kept our discipline in both costs and risk management and this has helped our adjusted EBITDA to rebound year-on-year by 56%. The strong results in the third quarter, with the least restrictions on consumers since the pandemic began, shows the post-Covid potential of our current business.
“Last month saw us secure the funding we need to maintain and develop the business through the middle of the decade. We’d like to thank our many long term bondholders for their continued engagement and support for 4finance. We have emerged from the worst of the pandemic with a leaner, stronger and more resilient business that continues to offer creditworthy customers a useful and safe regulated credit option when they need it.”
