Avarda Bank (AVARDA) Q3 2019 earnings summary

Executive summary

• Jan–Sep operating profit rose 30% YoY to SEK 214.1m; net profit rose 30% to SEK 164.7m and EPS rose 28% to SEK 7.43.

• Loans to the public grew 37% from year-end to SEK 6,099m; Q3 growth was 8%, with operating profit up 24% YoY to SEK 77.9m.

• Growth continued across Nordic and European markets; Q3 Ecommerce Solutions growth was below expectations amid stronger-than-usual Nordic seasonality.

Financial highlights

• Jan–Sep operating income rose 23% to SEK 560.4m; net interest income increased to SEK 515.7m from SEK 416.2m.

• Q3 operating income rose 21% YoY to SEK 195.6m; net profit was SEK 59.7m, up 23%, and EPS rose 25% to SEK 2.69.

• Jan–Sep operating expenses increased 15% to SEK 209.1m, while net loan losses rose 25% to SEK 137.2m.

• Interest income rose 24% to SEK 591.9m; net fee and commission income increased 21% to SEK 45.2m, mainly on Ecommerce Solutions growth.

Outlook and guidance

• 2020 targets: EPS of at least SEK 14.50 and cost/income ratio below 35%.

• Finnish and Norwegian businesses expected to remain the main growth drivers; Lithuania expected to become important to Baltic operations.

• German credit card pilot was progressing well, with a firmer view on the way forward expected in the Q4 report.

• Capital policy targets all capital ratios at least 2.5 percentage points above regulatory requirements, including Pillar 2; funding costs were expected to remain low.

• Q3 broadly met expectations; Consumer Lending growth exceeded expectations, while segment mix left the operating income margin somewhat below expectations.