Avarda Bank (AVARDA) Q4 2018 earnings summary

Executive summary

• FY 2018 operating income rose 22.7% to SEK 627.6m; reported operating profit reached SEK 250.1m, including SEK 20.3m in comparability items, while adjusted operating profit was SEK 229.8m, up 19.1%.

• Loans to the public grew 41.0% to SEK 4,449m by year-end; growth was led by Norway, the Baltics and Ecommerce Solutions.

• Q4 operating income rose 28.6% to SEK 172.2m and adjusted operating profit increased 29.5% to SEK 64.9m.

Financial highlights

• FY net profit rose 29.8% to SEK 191.8m; adjusted net profit was SEK 176.0m, up 19.0%.

• FY EPS was SEK 8.75 versus SEK 7.04; adjusted EPS was SEK 8.01. The SEK 20.3m comparability item reflected reclassification of pre-2018 inactive customer balances.

• Q4 net profit increased 68.7% to SEK 65.0m; adjusted net profit was SEK 49.2m, up 27.6%. EPS was SEK 2.95 and adjusted EPS SEK 2.21.

• FY interest income rose 23.3% to SEK 657.2m; net fee and commission income grew 20.0% to SEK 51.4m, mainly on lending growth.

• FY operating expenses increased 30.8% to SEK 247.5m, reflecting growth preparation, investment, headcount and currency effects; average FTE rose 27% to 140.

Outlook and guidance

• 2019 ambition was continued, controlled growth in carefully selected markets and segments, with diversified organic growth and disciplined execution.

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

• Norwegian credit-register introduction and potential 2019 regulation of unsecured lending were expected to create opportunities to gain share; market turbulence would inform decisions.

• Priorities included further Consumer Lending platform use, Ecommerce expansion, protecting Swedish and Finnish consumer-loan margins, and growing Norwegian market share; Lithuania was expected to contribute positively by Q4 2019.

• A firmer view on the German card program was expected in H2 2019.