Avarda Bank (AVARDA) Q1 2019 earnings summary

Executive summary

• Loans to the public reached SEK 5,090m, up 14.4% since year-end and 45% YoY; 90,000 new customers were added.

• Adjusted operating profit rose 35% YoY to SEK 66m; reported operating profit was SEK 65.6m, up 35.1%, and net profit rose 35.6% to SEK 50.5m.

• Growth was led by Norwegian consumer lending and the Baltics; Ecommerce Solutions returned to profit, and a multi-year agreement was signed with Hansapost.

Financial highlights

• Operating income increased 24.9% YoY to SEK 176.0m; the operating income margin fell to 15.6% from 17.6% amid product-mix changes and lower new-loan rates in some markets.

• Operating expenses increased 17.6% to SEK 66.8m; net loan losses rose 22.6% to SEK 43.5m, while the net loan loss ratio improved to 3.7% from 4.5%.

• Adjusted operating profit was SEK 65.6m versus SEK 49m; 2018 adjusted comparisons exclude SEK 20.3m of items affecting comparability.

• EPS was SEK 2.28 versus SEK 1.73; adjusted ROE was 31.7% versus 30.0%.

• New lending rose 45% YoY to SEK 1,418m.

Outlook and guidance

• Continued growth was a 2019 priority, with step-by-step new-market expansion intended to preserve risk-adjusted returns and control risk.

• New-sales margins were expected to remain stable in coming quarters; underlying credit quality was expected to improve across almost all products and markets.

• 2020 targets: EPS of at least SEK 14.50, cost/income ratio below 35%, and capital ratios at least 2.5 percentage points above regulatory requirements, including Pillar 2.

• Austria consumer lending was planned to launch after a pilot phase.