Avarda Bank (AVARDA) Q1 2018 earnings summary

Executive summary

• Loan book reached SEK 3,519m at 31 Mar 2018, up 27.7% YoY and 11.5% from year-end; operating income rose 18.1% to SEK 140.9m, operating profit 11.9% to SEK 48.6m, and net profit 12.0% to SEK 37.3m.

• Growth was led by Norway, the Baltics and Avarda; profitability faced pressure from rising costs, credit provisions and ecommerce investment.

Financial highlights

• Interest income increased 17.8% YoY to SEK 146.4m; net fee and commission income rose 11.6% to SEK 11.8m.

• Operating expenses rose 22.9% to SEK 56.8m and net loan losses increased 19.8% to SEK 35.5m.

• EPS increased 8.8% YoY to SEK 1.73; rolling 12-month EPS was SEK 7.19, or SEK 7.72 excluding Avarda.

Outlook and guidance

• 2018 priorities included ecommerce expansion in Finland, followed by Sweden and Norway, consumer-lending platform leverage, and the Lithuania launch.

• Medium-term targets: annual EPS growth of at least 20%, cost/income ratio below 35%, and total capital ratio of at least 14.5%; Q1 outcomes were 8.8%, 40.3%, and 15.1%.

• Lending in Lithuania was expected to start in Q2; Norway's BB Bank consumer loan portfolio was expected to exceed SEK 1bn in Q2.

• Ecommerce financial performance was expected to improve gradually as income grows, with most operating expenses already in place.