Instabank (INSTA) Q4 2020 earnings summary

Executive summary

• Q4-20 profit before tax was 19.1 MNOK and profit after tax was 14.3 MNOK; higher income and relatively low loan losses supported results.

• The NPL portfolio sale nearly halved the NPL ratio to 5.6% and reduced risk; mortgage growth and planned diversification were key priorities.

Financial highlights

• Q4 total income was 70.1 MNOK, up 14% YoY; FY 2020 total income was 263.1 MNOK.

• Q4 PBT was 19.1 MNOK vs 20.3 MNOK in Q4-19; after-tax profit was 14.3 MNOK, up from 13.2 MNOK in Q3-20.

• Q4 net loans were 2,771 MNOK vs 2,696 MNOK in Q4-19; adjusted for NPL sales and currency effects, quarterly growth was 137 MNOK.

• Q4 income rose QoQ as interest income increased 1.6 MNOK; lower deposit volumes and rates reduced interest expense by 1.5 MNOK.

Outlook and guidance

• 2021 targets: ROE above 13%, net loans of 3.7 BNOK and cost/income below 38%; mid-term ambitions are ROE of 15–20%, loans of ~6.0 BNOK and cost/income below 30%.

• 2021 ambitions include approximately 1 BNOK of loan growth, increased diversification and strong profit growth; a 75% increase in after-tax result may be within reach.

• Strategy targets growth in markets with the highest ROE and prioritizes mortgage loans to diversify the portfolio, reduce risk and improve profits.