- Solid H1 2021 performance with net profit of €14.3 million and Adjusted EBITDA of €51.3 million
- Asset quality metrics remain at a good level, driven by continued strong customer repayment behaviour
- Cancellation of $125 million USD bonds and successful refinancing of EUR bonds adds to strong credit story
Operational Highlights
- Customer repayment dynamics continue to be strong, with fundamental asset quality metrics maintained at a good level across the business.
- Online loan issuance volume of €200.0 million in Q2 2021, up 4% QoQ and up 44% 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 towards the end of Q2 and into the summer as 'lockdowns' were gradually relaxed in most markets.
- Near-prime portfolio development aligned with ability to fund those loans via TBI Bank. Since March, over EUR 6 million of Lithuanian near-prime loans have been sold to TBI Bank (as of mid-August).
- TBI Bank loan issuance volume during the Period grew by 53% year-on-year to €230.2 million from €150.3 million in the prior year period, with increased issuance in all products.
Financial Highlights
- Interest income of €138.8 million in the Period, down 17% from €167.0 million in the prior year period. Interest income for the second quarter was within 2% of Q2 2020. Interest income from continuing products has grown every quarter since Covid impact in Q2 2020. Overall interest income has been stable at c.€70 million per quarter during that time.
- Despite bringing operating costs down 14% YoY, the cost to income ratio for the Period was 59.1%, vs 57.5% in the prior year period, due to the lower interest income. Costs were reduced 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 58% YoY) and cost of risk (7.4% for the Period vs 16.6% in the prior year period).
- Adjusted EBITDA was €51.3 million for the Period, up 54% year-on-year, with another strong quarterly contribution in Q2. The full interest coverage ratio as of the date of this report is 2.2x.
- Post-provision operating profit for the Period was €27.3 million, benefiting from the 58% year-on-year reduction in net impairment charges, with a profit before tax of €22.4 million.
- Net receivables totaled €567.2 million as of 30 June 2021, up 7.7% year-to-date. During the quarter, TBI Bank grew net receivables another 7% and the online business portfolio returned to growth, up 4% QoQ.
- Improved overall gross NPL ratio at 14.5% as of 30 June 2021 (14.4% for online), compared with 17.0% as of 31 December 2020 (19.2% for online).
Liquidity and funding
- Strong funding position, with €68.8 million of cash in the online business at the end of the Period, even after recent buybacks and coupon payments.
- Robust capital position at TBI Bank (18.9% capital adequacy ratio), enhanced with inaugural Tier 2 issuance in July, with good deposit growth in Q2.
- Successful refinancing of EUR bonds via amendment process with new maturity in February 2025.
- $125 million of May 2022 USD bonds cancelled in June following further buybacks, leaving $200m outstanding. The Group intends to address this maturity by year end. The Group is currently evaluating its financing alternatives, which may include a new bond issue.
Kieran Donnelly, CEO of 4finance, commented:
“We have maintained a sharp focus on execution and efficiency throughout the business as we deliver on the plan we set out in March. Our adjusted EBITDA is up 54% year-on-year, and asset quality remains good, backed by strong repayment behaviour across the portfolio. TBI Bank delivered another record quarter of loan growth, enjoying organic growth across both consumer and SME markets.
“We are encouraged to see increases in online loan issuance towards the end of the quarter continuing into the summer as Covid-19 restrictions were gradually eased. Our Polish business continues to perform very well, and recent changes in products and management in Sweden and Spain are seeing those markets served with a renewed energy."
