Avarda Bank (AVARDA) Q3 2018 earnings summary

Executive summary

• Q3 operating income rose 24.1% YoY to SEK 161.7m; operating profit increased 22.3% to SEK 63.0m and net profit rose 23.4% to SEK 48.4m.

• Loan book reached SEK 4,198m at 30 September, up 33% YoY; portfolio growth topped 8% during Q3 and more than 77,000 new customers joined.

• 9M operating income rose 20.6% to SEK 455.4m; operating profit increased 15.5% to SEK 164.9m and net profit rose 16.0% to SEK 126.8m.

Financial highlights

• Q3 operating income was SEK 161.7m, up 24.1% YoY and SEK 9m QoQ; operating income margin was 16.7%.

• Q3 operating expenses rose 37% YoY; average headcount increased to 145 from 112, reflecting Avarda and Baltics expansion and adverse currency effects.

• 9M operating expenses rose 29.6% to SEK 181.1m; net loan losses rose 15.1% to SEK 109.4m.

• 9M EPS increased to SEK 5.80 from SEK 5.22; Q3 EPS rose to SEK 2.16 from SEK 1.87.

Outlook and guidance

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

• Continue expanding ecommerce solutions and leveraging the platform in consumer lending; Lithuania and Germany were in soft launch.

• Management expected ecommerce financial performance to improve gradually as income grows while operating expenses are largely in place.

• Protect margins in Sweden and Finland amid competition; revised consumer loan parameters were intended to support growth, with disciplined risk management and high return on equity.