- Proactive business response to Covid-19, providing continuous service to customers throughout 2020.
- Strong performance from TBI Bank. Online business re-focused on core products & markets.
- Solid capital and liquidity position with no maturities in 2021.
26 February 2021. 4finance Holding S.A. (the ‘Group’ or ‘4finance’), one of Europe’s largest digital consumer lending groups, today announces unaudited consolidated results for the twelve months ending 31 December 2020 (the ‘Period’).
Operational Highlights
- Strong customer repayment dynamics observed since the summer enabled underwriting criteria and acceptance rates to be restored close to normal levels for new and existing customers in most products during H2 2020.
- Proactive operational response to Covid-19 throughout the year enabled continuous service to customers and market share gains in some countries.
- Support made available for customers whose finances have been disrupted, with early and proactive measures including discounted or free payment deferrals. Regulatory-driven programmes now largely finished, with no adverse effect seen in performance of customers coming out of payment deferral periods in relevant markets (Czech Republic and TBI Bank) compared to the rest of the portfolio.
- Subprime loan issuance in Q4 was slightly up on Q3, with issuance volumes of continuing products reaching pre-Covid levels. However the market-wide demand for credit remains subdued, particularly since the reinstatement of 'lockdowns' in many markets towards the end of the year. Investment in marketing remains quite selective in this environment.
- Near-prime portfolio growth continues in Lithuania, Latvia and Denmark, with issuance in the Period up 9% year-on-year (25% in the online business and 7% in TBI Bank) reflecting strong customer demand and the expanded product range. Issuance levels in 2021 will be closely linked to ability to fund via TBI Bank.
- TBI Bank loan issuance volume during the Period grew by 4% year-on-year to €349.8 million from €336.7 million in the prior year period, with increased issuance in the third and fourth quarters in all products.
Financial Highlights
- Interest income of €307.9 million in the Period, down 28% from €424.9 million in the prior year period. The significant reduction in online loan issuance in the spring due to Covid-19 resulted in a lower level of interest income, although issuance and income from continuing products recovered somewhat post summer. Product and market exits have counterbalanced this, so interest income has been similar from Q2 to Q4 at just over €70 million per quarter.
- Cost to income ratio for the Period was 56.9%, vs. 51.3% in 2019, due to the lower interest income, despite bringing down operating costs down 21% year-on-year. Costs were reduced in each quarter of the year, reflecting cost discipline across the Group, the reduction of marketing spend and savings in personnel costs.
- Adjusted EBITDA was €75.1 million for the Period, down 39% year-on-year. The full interest coverage ratio as of the date of this report is 1.8x. The Q4 quarterly EBITDA contribution of €23.1 million was up significantly from Q2 and Q3.
- Post-provision operating profit for the Period was €21.8 million, with a loss before tax of €0.3 million.
- Net receivables totaled €526.4 million as of 31 December 2020, down 9.1% year-to-date. During the fourth quarter, TBI Bank grew net receivables further and the small reduction in online business portfolio was due to run-off products.
- Overall gross NPL ratio at 17.0% as of 31 December 2020 (19.2% for online), compared with 20.7% as of 31 December 2019 (24.9% for online). The resumption of debt sales in most markets in the autumn drove the significant reduction in NPL ratio during the third and fourth quarters. Online NPL ratio helped by increased proportion of near-prime loans.
- Overall cost of risk was 14.2% for the Period, improved from 17.1% in 2019. For the online business it was 24.2% for the Period, compared to 27.5% in 2019, and in TBI Bank it was 6.1% for the Period, compared to 4.6% in 2019.
- Strong funding position, with €80.5 million of online cash at the end of the Period and no debt maturities until 2022, and solid liquidity and capital adequacy at TBI Bank.
Strategic Highlights
- Refocusing online business on core seven markets and products where the Group’s strong brands and experience can deliver superior unit economics.
- At the end of 2020, the near-prime segment (including TBI Bank consumer and online) represented 62% of net receivables, up from 48% at the end of 2019. Single payment loans represent only 13% of the Group’s net receivables.
- TBI Bank performed well throughout 2020, with its strong points-of-sale relationships and market leading digital options helping to grow consumer loan issuance volumes in Q4. However given the regulatory environment, the Group does not expect dividends from TBI to resume until H2 2021 at the earliest.
- Good progress on efficient wind-down of exit markets. Further effort to simplify corporate structure by reducing number of legal entities initiated in December.
- Costs were further reviewed across the Group in Q4 alongside budgeting process, with a focus on efficiency and ensuring our operating approach is consistent with the reduced footprint. Lower cost base going into 2021.
- Closer cooperation with TBI Bank to develop near-prime lending across the business. Initial sales of Lithuanian near-prime loans to TBI Bank planned in March following receipt of formal lending passport in mid February.
Kieran Donnelly, CEO of 4finance, commented:
“We’re seeing the results of a sharper focus, a resilient business model and a return to normality in terms of borrower behaviour. The actions we are taking to right-size our cost base and focus on seven markets with the best return on investment are delivering results.
"Our leaner, more efficient team is optimising our subprime business and developing near-prime in lock-step with TBI Bank and the funding opportunities it presents.
"Strong liquidity, improving NPL ratios in our online business, and continued growth at TBI Bank set us up to take advantage of the emerging recovery and put us in a strong position to grow our share as other providers leave the market.”
