- Encouraging start to 2021 with net profit of €5.6 million and Adjusted EBITDA of €25.1 million
- Improved asset quality metrics driven by continued strong customer repayment behaviour
- Solid credit story, with further deleveraging and increased EBITDA
Operational Highlights
- Strong customer repayment dynamics have continued in the Period, contributing to further improvement in fundamental asset quality metrics.
- Online loan issuance volumes in Q1 2021 for continuing products were slightly up year-on-year despite ongoing Covid restrictions. Strong performance in Poland and improvements in Spain and Sweden following product and underwriting changes. Market-wide demand for credit remained subdued in early Q2 as 'lockdowns' continue in many markets.
- Near-prime portfolio growth continues, closely linked to ability to fund via TBI Bank. Automated sales of Lithuanian near-prime loans to TBI Bank underway since March following receipt of formal lending passport in February.
- TBI Bank loan issuance volume during the Period grew by 42% year-on-year to €109.6 million from €77.1 million in the prior year period, with increased issuance in all products.
Financial Highlights
- Interest income of €69.4 million in the Period, down 28% from €96.6 million in the prior year period. Interest income from continuing products has grown every quarter since Covid impact in Q2 2020. Product and market exits have counterbalanced this, so overall interest income has been stable at c.€70 million per quarter.
- Despite bringing operating costs down 21% YoY, the cost to income ratio for the Period was 58.9%, vs 52.9% in Q1 2020, due to the lower interest income. Costs were reduced reflecting 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 quarterly net impairment charges (down 61% YoY and 36% QoQ) and cost of risk (7.6% for the Period vs 17.4% in Q1 2020). Both metrics are at their lowest levels since the introduction of IFRS9 at the start of 2018.
- Adjusted EBITDA was €25.1 million for the Period, up 8% year-on-year, a strong result delivered despite the reduction in the top line. The full interest coverage ratio as of the date of this report is 1.9x.
- Post-provision operating profit for the Period was €13.6 million, benefiting from the 61% year-on-year reduction in net impairment charges, with a profit before tax of €9.7 million.
- Net receivables totaled €533.1 million as of 31 March 2021, up 1.3% year-to-date. During the quarter, TBI Bank grew net receivables further and the small reduction in online business portfolio was due to run-off products.
- Improved overall gross NPL ratio at 14.9% as of 31 March 2021 (16.7% for online), compared with 17.0% as of 31 December 2020 (19.2% for online).
Liquidity and funding
- Strong funding position, with €96.0 million of online cash at the end of the Period.
- $116 million of USD bonds held in treasury following further buybacks in March and April.
- Strong capital position at TBI Bank (19.0% capital adequacy ratio), with good deposit growth in Q1.
- The Group has two bond maturities in the first half of 2022 and plans to address these during 2021. As such, the Group is reviewing a range of liability management options for both its EUR and USD bonds.
Kieran Donnelly, CEO of 4finance, commented:
“Our core online products have continued to see quarter-on-quarter income growth since Q2 2020, with strong repayment behaviour rooted in sound underwriting and services that our customers value. Sales of these products have returned to pre-Covid levels - despite the continuation of Covid restrictions. TBI has driven substantial growth in loan issuance in its local markets and we are now accessing the bank’s funding for our Lithuania near-prime business.
"Operationally, we have made product and leadership changes in Sweden and Spain that are already showing positive results, while our Polish business has confirmed its market leading position. I want to thank the team who have worked through what is still a challenging environment to deliver this encouraging start to the year: sharpening our focus, improving efficiency and responding to customer needs.”
