quarterly - advanzia bank · 2018-06-22 · advanzia bank s.a. quarterly report q3-16 3 highlights:...
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QUARTERLY REPORT Q3-16
Advanzia Bank S.A.
9, rue Gabriel Lippmann
Parc d’Activité Syrdall 2
L-5365 Munsbach (Luxembourg)
Registre de Commerce
et des Sociétés Luxembourg:
B109476
Tel.: +352 263 875 1
Fax: +352 263 875 699
E-mail: advanzia@advanzia.com
BIC (SWIFT): ADVZLULL
www.advanzia.com www.gebuhrenfrei.com www.advanziakonto.com www.cartezero.fr www.free.at
Quarterly Report
For the Quarter ended 30 September 2016
Advanzia Bank S.A. Simplicity, Transparency and Trust
Advanzia Bank S.A. Quarterly Report Q3-16 2
A. Kassen, “River Man”, 2016, Kistefos Museum, Norway. @ Courtesy of the Kistefos Museum. Photo: Frédéric Boudin. River Man (2016) is both a conceptual, performative and sculptural work. The performative element of the work begins as liquid bronze is poured directly into the water. As the bronze hits the water, it immediately sets, creating unexpected and abstract shapes formed by the conditions of the water. Three pours have been made, at three chosen locations along the river at Kistefos, and among hundreds, only three forms, one from each location, have been chosen and cast in bronze on a monumental scale.
Advanzia Bank S.A. Quarterly Report Q3-16 3
Highlights: For the Quarter ended 30 September 2016
Gross credit card loan balance of MEUR 905, growth +8% QoQ and +21% YoY
598 000 active clients , growth +6% QoQ and +23% YoY
964 000 cards in force1, growth +5% QoQ and +21% YoY
Loan loss rate of 4.6% declined by 0.1%-points QoQ and 0.2%-points YoY
Customer acquisition cost of MEUR 5.0, -7% QoQ and +44% YoY
After-tax profit of MEUR 8.6, stable QoQ and YoY
Annualized return on equity of 37.9% vs. 38.8 % in Q2-16
Advanzia continues to show a strong growth in gross loan balance of 21% and a stable net profit YoY.
The difference between the growth in gross loan balance and after tax profit is primarily explained by
the 44% higher customer acquisition cost in Q3-16 of MEUR 5.0 compared to MEUR 3.4 in Q3-15. This is
in line with the strategy of increasing the intake of new clients and subsequently growing the gross credit
card loan balance. YTD the customer acquisition cost has increased from MEUR 10.3 per Q3-15 to
MEUR 15.1 per Q3-16, an increase of 46%. In Q3-16, the net interest income was 20% above the Q3-15
level in line with the growth in gross loan balance. Advanzia has issued 151 400 new active cards YTD
2016 compared to 104 600 YTD in 2015; this represents an increase of 45%.
Strategy: Create long-term value by aggressively increasing the number of customers and the loan
balance. The plan requires substantial investments in customer acquisition and marketing that short-
term will yield a lower growth in profit after tax, due to the client cycle where it takes 2-3 quarters before
new clients start to make a positive contribution and up to three years before the total investments in a
new client are recouped.
Figure 1: YoY growth – loan balance and net interest income
Figure 2: CAGR and YTD growth
Advanzia has since 2010 delivered a CAGR of 39% in net profit, 26% in loan balance and 23% in number of active credit card clients. The aim for the future is to continue this strong growth for an extended period of time.
1 It represents the number of issued cards including active and inactive cards.
CAGR (2010 - LTM*)
YTD 2016 vs. YTD 2015
* Last twelve months
22% 21% 5%
Growth metricsActive credit card
clients
Loans and advances to
credit card clientsProfit after tax
23% 26% 39%
Advanzia Bank S.A. Quarterly Report Q3-16 4
Loan balance development
Figure 3: Loan balance development
Advanzia increased its total gross loan balance by 8% QoQ and 21% YoY. In total the gross loan balance grew with MEUR 63 and net loan balance with MEUR 61. This is the highest nominal growth since inception delivered by Advanzia. At the same time, impairments on delinquent balances showed a lower growth (+7% QoQ and +17% YoY) demonstrating the effectiveness of Advanzia’s risk management.
Active clients/credit cards
Figure 4: Credit card clients
The number of active clients reached 598 000, a growth of 6% QoQ and 23% YoY. The total intake of active clients during the quarter amounted to 52 900, an increase of 6% QoQ and a growth of 47% YoY.
Figure 5: Client/card statistics
The increase in number of clients, driven by the investment in customer acquisition, will form the basis for the loan balance growth in the coming quarters and years, in line with the client cycle.
Key figures (000's)Actual
Q3-16
Actual
Q2-16
QoQ
growth
Actual
Q3-15
YoY
growth
Actual
YTD-16
Actual
YTD-15
YTD
growth
New active cards 52,9 50,1 6% 36,0 47% 151,4 104,6 45%
Germany/Luxembourg 46,9 43,0 9% 33,4 41% 131,2 98,2 34%
France 2,2 3,0 -25% 2,7 -17% 8,0 6,4 26%
Austria 3,8 4,1 -7% - - 12,2 - -
Non delinquent active clients (total, after churn) 598,0 563,5 6% 487,8 23% 598,0 487,8 23%
Germany/Luxembourg 565,8 534,9 6% 470,0 20% 565,8 470,0 20%
France 20,8 19,9 4% 17,8 17% 20,8 17,8 17%
Austria 11,4 8,7 31% - - 11,4 - -
Advanzia Bank S.A. Quarterly Report Q3-16 5
However as earlier reported, in France, Advanzia is expecting a slower growth trajectory in the short-term, reflecting challenges in that particular market. Advanzia has not been successful in France applying a similar strategy and marketing tools as in Germany and Austria. As a consequence of this, the Bank implemented a new strategy, temporarily reducing the spend and focus on the B2C segment and shifting more towards the B2B segment. Advanzia was successful in acquiring new B2B partnerships during the quarter which should yield a growth in customer intake from early 2017. Advanzia remains optimistic that success will be achieved with time in France, even though the results have been lacking so far.
Professional Card Services (PCS)
Key Figures, PCS clients Actual
Q3-16
Actual
Q2-16
QoQ
growth
Actual
Q3-15
YoY
growth
Actual
YTD-16
Actual
YTD-15
YTD
growth
Number of banks 15 14 7% 6 150% 15 6 150%
New active cards 88 292 -70% 175 -50% 449 466 -81%
Total cards 1.112 1.024 9% 615 81% 1.112 615 81%
Turnover (in MEUR) 4,3 3,1 38% 1,8 139% 9,9 3,6 19% Figure 6: Professional Card Services
One new partner bank joined the Professional Card Services (PCS) programme, which Advanzia is continuously developing. Turnover increased by 38% QoQ and 139% YoY, indicating that the programme is used more extensively.
Depositors and deposit balance
As a result of active campaigns, client deposits increased significantly in Q3-16, 21% growth QoQ. Advanzia continues to align the deposits to the prevailing liquidity requirements to efficiently fund the growing loan balance. Total deposits amount to MEUR 1 031 and the number of active depositors is 29 700.
Figure 7: Depositors and deposit balance
Board, management and staff
Eirik Holtedahl stepped down from the executive management committee as Deputy Chief Executive Officer and from the management committee as Chief Financial Officer. His successor in the executive management committee is Gregor Sanner, Chief Operating Officer, and in the management committee Patrick Thilges, new Chief Financial Officer.
As at 30 September 2016, Advanzia employed 117 full-time equivalent employees. Advanzia will increase its staff further, both in order to keep pace with the observed upward shift in business operations as well as to be ready to leverage its future growth potential.
Advanzia Bank S.A. Quarterly Report Q3-16 6
Shareholding
Non-voting shares of one minority shareholder have been transformed into the voting ones during the quarter so currently all Advanzia’s shares have a voting right. Otherwise, there were no movements or changes in the distribution of shares during the quarter. Kistefos AS is the largest shareholder with 60.3%. Other shareholders hold below 10% individually.
Financial statements
Below are the unaudited accounts for Advanzia as at end of the third quarter of 2016. All amounts are in millions of euro (MEUR). Advanzia follows IFRS accounting principles and the figures are presented so that they reflect Advanzia’s actual business activities and operations, which develop favourably.
Figure 8: Unaudited accounts as at 30 September 2016
Assets (MEUR)Actual
Q3-16
Actual
Q2-16
QoQ
growth
Actual
Q3-15
YoY
growth
Actual
YTD-16
Actual
YTD-15
YTD
growth
Cash, balances with central banks 108,0 83,1 30% 50,0 116% 108,0 50,0 116%
Loans and advances to credit institutions 185,7 86,8 114% 85,9 116% 185,7 85,9 116%
Loans and advances to credit card clients 905,3 841,9 8% 745,2 21% 905,3 745,2 21%
Value adjustment (losses) (46,9) (44,0) 7% (40,2) 17% (46,9) (40,2) 17%
Net loans and advances to credit card clients 858,4 797,9 8% 705,0 22% 858,4 705,0 22%
Investments 0,9 0,9 0% - - 0,9 - -
Tangible and intangible assets 5,8 5,2 12% 1,7 244% 5,8 1,7 244%
Other assets 1,7 2,3 -28% 1,3 27% 1,7 1,3 27%
Total assets 1.160,4 976,1 19% 843,9 38% 1.160,4 843,9 38%
Liabilities and equity (MEUR)Actual
Q3-16
Actual
Q2-16
QoQ
growth
Actual
Q3-15
YoY
growth
Actual
YTD-16
Actual
YTD-15
YTD
growth
Amounts owed to credit institutions 0,1 0,0 234% (0,0) - 0,1 (0,0) -
Amounts owed to customers 1.030,6 849,9 21% 740,9 39% 1.030,6 740,9 39%
Other liabilities, accruals, provisions 27,1 23,0 18% 19,1 41% 27,1 19,1 41%
Subordinated loan (AT1) 9,5 9,2 3% 8,9 6% 9,5 8,9 6%
Sum liabilities 1.067,2 882,1 21% 769,0 39% 1.067,2 769,0 39%
Subscribed capital 27,4 26,4 4% 26,4 4% 27,4 26,4 4%
Reserves 13,1 13,1 0% 11,6 13% 13,1 11,6 13%
Profit (loss) brought forward 38,4 38,4 0% 26,7 44% 38,4 26,7 44%
Profit for the financial year (net of interim dividend) 14,3 16,2 -12% 10,2 40% 14,3 10,2 40%
Sum equity 93,2 94,0 -1% 74,8 25% 93,2 74,8 25%
Total liabilities and equity 1.160,4 976,1 19% 843,9 38% 1.160,4 843,9 38%
Income statement (MEUR)Actual
Q3-16
Actual
Q2-16
QoQ
growth
Actual
Q3-15
YoY
growth
Actual
YTD-16
Actual
YTD-15
YTD
growth
Interest receivable, credit cards 36,4 34,1 7% 30,5 19% 103,2 85,9 20%
Interest receivable and similar income, others (0,1) (0,0) 639% 0,0 -409% (0,1) 0,0 -393%
Interest payable and similar expenses (1,7) (1,5) 18% (1,7) 3% (5,1) (5,2) -1%
Interest payable, other (0,1) (0,2) -28% (0,1) -10% (0,4) (0,2) 164%
Net interest income 34,4 32,4 6% 28,7 20% 97,5 80,6 21%
Commission receivable 3,0 2,7 11% 3,3 -7% 8,3 9,1 -9%
Commission payable (2,6) (2,4) 8% (2,2) 15% (7,1) (6,2) 15%
Other financial items/operating income 0,2 1,3 -82% 0,8 -70% 2,0 2,0 -1%
Total income 35,2 34,1 3% 30,5 15% 100,7 85,6 18%
Card acquisition costs (5,0) (5,3) -7% (3,4) 44% (15,1) (10,3) 46%
Card operating costs (3,2) (3,2) 1% (2,5) 31% (9,2) (7,1) 30%
Staff costs (2,8) (2,7) 4% (2,4) 17% (8,2) (7,2) 13%
Other administrative expenses (1,2) (0,7) 87% (0,8) 62% (2,7) (2,2) 22%
Depreciation, tangible + intangible assets (0,4) (0,4) 5% (0,2) 81% (1,2) (0,7) 59%
Sum operating expenses (12,7) (12,3) 3% (9,3) 36% (36,3) (27,6) 32%
Value adjustments (2,9) (1,5) 99% (1,1) 171% (6,3) (3,2) 94%
Write-offs (7,3) (8,1) -9% (7,9) -7% (23,0) (21,4) 8%
Total loan losses (10,3) (9,6) 8% (9,0) 14% (29,3) (24,6) 19%
Profit (loss) on ordinary activities before taxes 12,2 12,3 0% 12,2 0% 35,0 33,4 5%
Income tax and net worth tax (3,6) (3,6) 0% (3,6) 0% (10,2) (9,8) 5%
Profit (loss) for the period 8,6 8,7 0% 8,7 0% 24,8 23,6 5%
Advanzia Bank S.A. Quarterly Report Q3-16 7
Comments to the accounts
In Q3-16, the gross loan balance on credit cards grew by MEUR 63.4, which represents an 8% increase compared to Q2-16 and a 21% increase compared to Q3-15. The customer acquisition costs were MEUR 5.0 in Q3-16 compared to MEUR 3.4 in Q3-15, an increase of 44%. YTD the customer acquisition cost has increased from MEUR 10.3 per Q3-15 to MEUR 15.1 per Q3-16, an increase of 46%.
Overall liquidity increased by approximately MEUR 124 during the quarter (from approximately MEUR 170 to MEUR 294).
Total income in Q3-16 increased by 15% compared to Q3-15, landing at MEUR 35.2 (3% higher QoQ). The main driver is increased interest income due to the larger gross credit card loan balance generated by the higher client base. Commission receivable increased QoQ, but is relatively lower than in previous years mainly due to lower interchange fees driven by regulatory changes within the EU. Other income is lower in Q3 amongst others due to increased provisioning towards FGDL (Luxembourg Deposit Guarantee Fund) required as a result of increased deposit volumes.
Operating expenses increased by 3% compared to previous quarter, mainly a result of higher administrative expenses.
On an YTD basis, the growth in loan losses from 2015 to 2016 (+19%) is below the growth in gross loan balance (+21%) and interest income on credit cards (+20%). This implies that the bank manages credit risk efficiently.
Advanzia’s profit after tax was stable at MEUR 8.6 in Q3-16.
Figure 9: Income and profit development
Note that the Q3-14 total income is influenced by income shift transactions (MEUR 4.2). The Q4-15 total income is influenced by the first provision to the new deposit guarantee fund (MEUR 1.5). Q4-15 is affected by a lower tax expense applicable to the entire year, but recognised in that period (MEUR 4.8).
Advanzia Bank S.A. Quarterly Report Q3-16 8
Key performance indicators (KPIs)
Financial ratiosActual
Q3-16
Actual
Q2-16
QoQ
growth
Actual
Q3-15
YoY
growth
Actual
YTD-16
Actual
YTD-15
YTD
growth
Yield, credit card loans, weighted (%) 17,8% 17,9% -0,1%-p 18,0% -0,2%-p 17,9% 18,1% -0,1%-p
Net interest margin, int. bearing assets, weighted (%) 13,2% 13,7% -0,5%-p 13,9% -0,7%-p 13,3% 13,7% -0,4%-p
Loan loss rate (12 months trailing, credit cards) (%) 4,6% 4,7% -0,1%-p 4,8% -0,2%-p 4,6% 4,8% -0,2%-p
Cost/Income (%) 36,1% 36,0% 0,1%-p 30,5% 5,6%-p 36,1% 32,2% 3,8%-p
Return on equity (%), annualised 37,9% 38,8% -0,9%-p 47,0% -9,1%-p 37,2% 43,5% -6,3%-p
Capital adequacy ratio Tier 1 (%) (incl. interim profit) 13,0% 14,5% -1,5%-p 13,4% -0,4%-p 13,0% 13,4% -0,4%-p
Capital adequacy ratio Tier 1 (%) (excl. interim profit) 11,8% 12,8% -1,0%-p 11,6% 0,2%-p 11,8% 11,6% 0,2%-p
Liquidity coverage ratio (LCR) (min 100%) 303,6% 351,2% -47,5%-p 230,3% 73,3%-p 303,6% 230,3% 73,3%-p
Net stable funding ratio (NSFR) (min 100%) 125,2% 113,5% 11,7%-p 109,8% 15,4%-p 125,2% 109,8% 15,4%-p Figure 10: Key performance indicators overview
The KPIs are in line with expectations and the development of the business as explained above. The gross yield on credit cards remains stable at around 18%. Advanzia managed to reduce its loan loss rate by 0.2%-points YoY through improved credit risk measures. The cost-income ratio, showing the Bank’s ability to manage its expenses compared to its income, remains stable at 36% QoQ. The cost-income ratio excluding acquisition cost is 22% in Q3-16. Advanzia maintains a stable solvency, having a capital adequacy ratio (incl. interim profits) of 13% and a liquidity coverage ratio of 303.6% in Q3-16.
Figure 11: Key performance indicators development
Advanzia Bank S.A. Quarterly Report Q3-16 9
Selected market performance indicators
Figure 12: Market performance indicators
Germany/Luxembourg is growing satisfactorily. Austria, launched in end 2015, follows a similar succesful pattern to the first year in Germany/Luxembourg. It is, however, too early to draw any final conclusions with regards to Austria. France remains weak but is expected to deliver better results with time (please see the Active clients/credit cards section for additional details).
Germany/Luxembourg (in 000's)Actual
Q3-16
Actual
Q2-16
QoQ
growth
Actual
Q3-15
YoY
growth
Actual
YTD-16
Actual
YTD-15
YTD
growth
Gross loan balance (KEUR) 867,0 811,5 7% 728,0 19% 867,0 728,0 19%
Interest receivable, credit cards (KEUR) 35,2 33,1 6% 29,9 18% 100,2 84,3 19%
Loan losses (KEUR) (9,0) (8,4) 7% (8,4) 7% (26,0) (22,8) 14%
France (in 000's)Actual
Q3-16
Actual
Q2-16
QoQ
growth
Actual
Q3-15
YoY
growth
Actual
YTD-16
Actual
YTD-15
YTD
growth
Gross loan balance (KEUR) 29,0 25,7 13% 17,1 69% 29,0 17,1 69%
Interest receivable, credit cards (KEUR) 1,0 0,9 11% 0,6 55% 2,6 1,6 58%
Loan losses (KEUR) (1,1) (1,0) 13% (0,6) 90% (3,0) (1,8) 66%
Austria (in 000's)Actual
Q3-16
Actual
Q2-16
QoQ
growth
Actual
Q3-15
YoY
growth
Actual
YTD-16
Actual
YTD-15
YTD
growth
Gross loan balance (KEUR) 9,3 4,7 98% - - 9,3 - -
Interest receivable, credit cards (KEUR) 0,2 0,1 n/a - - 0,4 - -
Loan losses (KEUR) (0,1) (0,1) n/a - - (0,3) - -
Advanzia Bank S.A. Quarterly Report Q3-16 10
Outlook
The economic environment in all countries continues to remain stable and is favourable for Austria and Germany. Advanzia will continue its momentum in Germany and Austria, but remains prudent about the development in France at this stage.
As pointed out, in line with the strategy, the Bank’s gross loan balance is growing quickly, while profit growth is more subdued due to high acquisition investments and other general investments needed to realise the Bank’s growth potential and to increase its market share.
The Bank’s financial situation is expected to remain strong, with stable operating costs and loan losses, all contributing to continued strong financial performance.
Munsbach, Luxembourg
08.11.2016
Gregor Sanner Marc Hentgen Chief Operating Officer Chief Executive Officer
Advanzia Bank S.A. Quarterly Report Q3-16 11
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