Avarda Bank (AVARDA) Q2 2018 earnings summary

Executive summary

• H1 operating income rose 18.8% to SEK 293.7m; operating profit increased 11.7% to SEK 101.9m and net profit rose 11.9% to SEK 78.4m.

• The loan portfolio reached SEK 3.876bn at June 30, up 22.8% from year-end; new lending grew 39.7% YoY to SEK 2.072bn.

• Q2 operating income increased 19.3% to SEK 152.8m, operating profit rose 11.4% to SEK 53.4m, and net profit grew 11.8% to SEK 41.1m.

Financial highlights

• H1 interest income rose 18.9% to SEK 306.4m and net fee and commission income increased 16.6% to SEK 24.9m.

• H1 operating expenses rose 25.8% to SEK 118.1m, driven by staffing, IT investment and new-lending costs; Q2 expenses increased 28.7% YoY to SEK 61.3m.

• H1 net loan losses rose 18.5% to SEK 73.6m; Q2 losses increased 17.3% to SEK 38.1m, with IFRS 9, portfolio growth and currency effects contributing.

• H1 total comprehensive income was SEK 84.5m versus SEK 68.2m in H1 2017.

Outlook and guidance

• Management expected rising interest income to continue in H2 2018 and maintained a positive outlook for profit growth, supported by new lending and portfolio expansion.

• H2 priorities included expanding ecommerce solutions in Finland, Sweden and Norway, leveraging the consumer lending platform and launching in Lithuania.

• Medium-term targets: annual EPS growth of at least 20%, C/I ratio below 35%, and total capital ratio of at least 14.5%; H1 outcomes were 9%, 40.2% and 17.2%, respectively.

• Ecommerce financial performance was expected to improve gradually as income grew while most operating expenses were already in place.