4finance investor presentation. Pareto Securities Conference in Stockholm, Sweden 7 March 2017

Transcription

1 4finance investor presentation Pareto Securities Conference in Stockholm, Sweden 7 March

2 4finance: Europe s largest online & mobile consumer lender Putting our customers first, providing a convenient and transparent service using cutting edge data-driven technology 31% 24% 15% 21% 2016 return on average equity 2016 revenue growth 2016 Adjusted EBITDA growth 2016 profit before tax margin Twelve months of ,900,000+ online applications reviewed 3,500,000+ online loans issued 16 >3,500 Countries of operation (1) 9 Leading market positions 2016 full time employees (2) 83% 2016 returning customer business (3) 7,700,000+ registered customers 1,150,000,000+ online loans issued Notes: (1) Includes Friendly Finance (2) Including Friendly Finance and TBI Bank (3) Issuance volumes to customers who have returned, ie taken out and repaid at least one prior loan 1

3 Historical growth Group milestones - Establishment of the Company - Active product development - First foreign expansion - Business amount tripled vs Served 100,000 customers - EUR 100m total issued loans - Financial investor Finstar attracted - 450,000 registered customers - New IT platform - First offline loan granted - No. of loans issued tripled compared to > 10,000 loans issued per day - > 4,000 registrations per day - 1 million registered customers - > EUR 1 billion total issued loans employees million loans granted million registered customers million loans granted million registered customers - Moody s and S&P ratings assigned for the first time - > EUR 2.8 billion total issued loans - > 1,300 employees - > 4.3 million registered customers - New product roll-out: credit line - >11.5 million loans granted - >EUR 3.7 billion total issued loans - > 3,500 employees - >7 million registered customers >EUR 4.0 billion total issued loans {acquisition} Entries to new markets and brands Number of countries:

4 Diversification today: by geography and product 2016 Revenue: EUR 393m 95% online / 5% banking 2016 Net portfolio: EUR 494m 64% online / 36% banking Other 3% Czech Republic 4% FF 4% TBI 5% Latvia 11% Lithuania 5% Bank (SME) 13% Spain 14% Finland 6% Sweden 6% Bank (consumer) 23% Single Payment Loans 45% Denmark 9% Georgia 9% Poland 24% Instalment loans 19% (1) Note: (1) Instalment loans includes Line of Credit product 3

5 Clear and simple online product structure Single payment loan Instalment loan Line of credit % in portfolio (1) 69.8% 29.2% 1.0% Loan amount EUR EUR Limit up to EUR Term Up to 30 days (2) Up to 24 months Open-ended revolving credit line Average loan size (3) 318 EUR 773 EUR 1,804 EUR Fee/payment structure Fee amount Single fee payable at maturity Loan cost: 6% 29% in Europe; 30%-35% in LatAm (4) Monthly interest payments Repayment in multiple instalments Nominal annual interest rate: 45% 200% (4) Minimum monthly repayment (MRP) First withdrawal for free Further withdrawals: 11% of amount Monthly interest rate: 8.5%-10.0% Extension Option to extend up to 30 days Extension fee payable before extension Option to reset scheduled repayment by a month Extension fee payable before extension Flexible payment options as long as MRP is met Customers can change their repayment date Markets Distribution channels Latvia, Lithuania, Finland, Sweden, Poland, Denmark, Georgia, Spain, the Czech Republic, Bulgaria, Romania, Argentina, Mexico, Dominican Republic, Slovakia (FF) Websites (mobile/tablet/web) Apple & Android native apps Phone call and SMS Offline: agents, loan shops and other partners Latvia, Lithuania, Sweden, Poland, Denmark, Armenia, Spain, Romania, the Czech Republic Finland, Latvia Websites (mobile/tablet/web) Apple & Android native apps (servicing only) Call centre, , webchat and SMS (servicing only) (1) Performing online loan portfolio as of 31/12/2016 (2) Friendly Finance up to 35 days (3) Average size of loan issued (for Single Payment loan and Instalment loan) and average outstanding balance for Line of credit, data on 31/12/2016 (4) Max term and max loan amount pricing 4

6 Our lending process: online, efficient, data-driven Marketing Apply Underwrite Accept and Fund Service Collection Attract customers through a diversified multi-channel and data-driven marketing and acquisition strategy Focus on marketing to customers with the highest conversion potential Sophisticated in-house marketing agency and Digital Hub with bestin-class technology Prospective customer applies online or through a smartphone application Customers enter identity, income, pay date and bank account information Customer identification methods customised by country to reflect local regulation and available sources of information Within a few seconds, proprietary systems pull data and determine creditworthiness Dynamic credit scoring model ensures that 4finance captures the highest quality and most profitable customers Extensive IT driven scoring system Customer executes legally binding loan agreement online and funds are advanced within a few minutes Entire disbursement process built around the customer experience to ensure satisfaction More than 700 in-house specialists provide support in local language across all markets of operation Key performance indicators are constantly monitored to improve customer service and enhance customer retention Well staffed local inhouse debt collection team Highly automated collection process in initial stages Focused on customer satisfaction Strong recovery rates Full regulatory compliance with no controversial debt collection practices 5

7 Online/mobile customer profile Most common customer characteristics: Has a bank account Expenditure matches monthly income Little or no savings Limited credit history Employed + self employed Uses financing for lifestyle choices or necessities Not willing to pay more for valueadded services 83% of loans are issued to returning customers (2016) 65% of customers are millennials Client split by gender 9M 2016 Client split by age 9M % 16% 17% 18% 12% 6% 6% Applications by source 9M 2016 Loan usage (1) Emergency/unexpected expenses 33% 9% 58% Desktop Mobile Other 15% 12% 6% 34% Pay regular bills (house, utilities) Debt consolidation/repayment 33% Maintaining my lifestyle (e.g. holidays, shopping, trips, etc.) (1) Loan usage distribution in Latvia, smscredit.lv. Research agency: SKDS, 2015 Other (wedding costs, medical expenses, etc.) 6

8 52% 54% 58% 59% 57% 57% 55% 54% 55% 52% 52% 53% 50% 51% 51% 51% 50% 51% 48% 48% 47% 47% 45% 42% 39% 40% 38% 35% 35% 33% Robust credit scoring Professional approach to underwriting Data sources used in approval process Both traditional (e.g. credit bureaus) and alternative (e.g. facebook) data used Verification through one or more credit bureaus Internal customer database - Over 11.5 million loans issued and over 25 million applications reviewed External data warehouses & services Experian Risk Suite Extensive scoring system - 32 scorecards in place - Data mining and scorecard development tools (e.g., SAS, R, WPS) Acceptance rate total new applications (all products) 29% 30% 27% 30% 29% 27% Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 7

9 4finance is a responsible lender and supports regulation What does responsible lending mean to 4finance? Marketing: clear, simple and transparent products and terms Pricing: position rates at lower end of market to self select responsible borrowers who shop around Underwriting: credit check and underwriting for ALL loans, including returning, with 30% average new customer acceptance Customer care: local language, well staffed and responsive teams Extensions: limited use (only a quarter of customers), no ballooning interest (interest paid for prior month) or cycle of debt Collections: push payments from customer to 4finance, no automatic withdrawal from bank accounts these are practices common to mainstream bank lending only common characteristic with payday lending is 30 day term As a responsible lender, we welcome appropriate regulation Active in regulatory / legislative consultations through industry associations and at top Group level including Group CEO Supportive of clear regulatory frameworks Clear, transparent products and pricing with IT/development resources to adapt products where needed Launch of responsible borrowing global website ( with local sites in 9 markets Secured Consumer Credit company license from Finansinspektionen in Sweden in September, Microfinance organisation registration from National Bank in Georgia in December, Czech license application underway Active preparation / monitoring of upcoming regulatory changes and proposals 8

10 Financial and portfolio review 9

11 Financial highlights - profitable growth Revenue, m EUR Adjusted EBITDA, m EUR Capital to assets ratio, % (1) % 35% 88 29% 71 38% (ex TBI) 25% Net profit from continuing operations (m EUR) and net margin % 22% 58 18% 63 16% Adjusted interest coverage ratio 4.6x 4.2x 3.7x 3.6x Capital/net loans, % 37% 47% 56% 47% 2.5x min. 20% min (1) Total assets figure for 2014 adjusted for the effect of bonds defeasance 10

12 Diversified overall loan portfolio Net portfolio c.eur 500m following inclusion of TBI Bank 87% consumer loans 64% online loans / 36% banking Online loans issued in 2016: EUR 1,157m - growth of 9% from 2015 Net loan portfolio, 31/12/2016 TBI Bank: 36% 1.6%) BG/RO (online) 1% LatAm 0.6% Romania (TBI) 10% Bulgaria (TBI) 13% SME (TBI) 13% Georgia/ Armenia Czech/ 6% Slovakia 4% Spain 6% Baltics 14% Poland 17% Online: 64% 12%) Scandinavia 15% Net loan portfolio (1), meur Online loans issued (2), meur (1) Gross loan portfolio less provisions for bad debts (2) Continuing operations only , , Bank Online 11

13 Online: non-performing loans and provisioning stable Loans that are overdue more than 90 days are considered as nonperforming (NPLs) At the end of 2016, NPLs represented 9.3% of total issued loans over the last 730 days (excluding acquisitions) Stable NPLs to issued loans ratio (1) 9.2% 8.8% 9.0% 9.3% Actual loss experienced on NPLs is approximately 50%-60% (57% as of 31/12/2016) Provisions for default are typically 5-10 p.p. higher Non-performing loans (NPLs) as % of total loans issued (1) Conservative online loan provision coverage EUR 2,106 m 9.3% of total loans issued EUR 197m EUR 1,909m 57% 66% 9% 80% Loans issued 10/2014-9/2016 (730 days) NPLs as of 31/12/2016 Repaid and performing loans 31/12/2016 Loss given default Provision for default portfolio Provision coverage buffer Overall provision coverage (1) Total issued loans include the amount of online loans issued, excluding TBI Bank, during 730 days ending 90 days prior to the end of period 12

14 NPL / 2 year loan issuance Online: asset quality trends for single payment loans 20% 15% Spain Non-performing loans to loan issuance ratio tends to improve over time in each market More data: better scorecards More experience: better debt collection More returning customers 10% 5% Georgia Denmark Czech Poland Finland Latvia Different characteristics for each market Portfolio mix shift drives overall Group NPL/sales ratio (eg growth in Spain) Current trend is in line with expectations Increases in some markets with lower new issuance (Finland, Lithuania, Sweden) 0% Lithuania Sweden Higher NPL ratio countries also have higher interest rates and revenue Impairment / revenue ratio stable 13

15 TBI Bank update: solid results and progress on initiatives TBI results: solid year end performance Solid profitability FY16 RoE of 25% EUR 7.5 million contribution to Group net profit Strong retail business growth EUR 46 m additional deposits in Q4 at sub 2% blended cost EUR 14 m growth in consumer loans in Q4 Stable asset quality and robust capital ratios 10.8% gross NPL ratio with low impairment / revenue ratio Capital Adequacy Ratio of 22.3% TBI initiatives: good early progress Net loan portfolio (1), 31/12/2016, meur SME 100 Retail Consumer gross portfolio by type, 31/12/2016 Progress with cross border regulatory applications Products: Approved by Romanian and Polish regulatory for credit cards Lowering group funding cost: Notification to Bulgarian regulator for Sweden/Denmark portfolio transfers Medium term plan: move towards digital bank Enhance product offering for joint European customer base Potential to address other market segments (near-prime) 43% 6% 1% Cash loans (EUR598 av. size, 121k active, 47% av. Rate) 50% POS (EUR269 av. size, 233k active, 35% av. Rate) Cards (EUR259 av. size, 33k active, 28% av. Rate) Other (1) Gross loan portfolio less provisions for bad debts, based on management reporting, book value 14

16 Conclusion 15

17 Future growth: increases scale and diversification Only half of our product instances are mature 33 online product sites live at year end 15 launched in Q onwards Quarterly Issuance (Latin America) EUR 4m Latin American expansion on track Argentina & Mexico volumes increasing Dominican Republic launched in August Pipeline: Guatemala, Brazil Q Q Q Q Q Instalment loan roll out Recent instalment launches in larger markets Denmark (Q3 15), Poland (relaunch Q4 15), Spain (Q2 16) & Romania (Q3 16) Czech Republic launched in December Gross portfolio (new instalment loans) EUR 51m Q Q Q Q Q

18 Conclusion 4finance has established a leading business Solid full year results, driven by online business, delivering EUR 63 million net profit and EUR 137 million Adjusted EBITDA TBI Bank contributing to overall results, with multiple initiatives underway New market and product investments not yet mature: 15 of our 33 product instances launched H onwards Large scale, market leading operator with capabilities in place to deliver future growth 4finance continues to deliver 17

19 Appendix 18

20 Income statement INCOME STATEMENT, M EUR FY 2015 unaudited FY 2016 unaudited % Change Interest income % Interest expense (28.7) (38.7) 35% Net interest income % Net fee and commission income n/a Net impairment losses on loans and receivables (77.0) (89.7) 17% General administrative expenses (133.9) (190.4) 42% Other income/(expense) (4.9) 4.5 n/a Profit before tax % Tax (15.7) (17.8) 14% Profit from continuing operations % Discontinued operations, net of tax (100)% Net profit (1)% Net impairment to revenue ratio % 24% 23% Cost to income ratio % 42% 48% Net profit margin (continuing operations), % 18% 16% 19

21 Balance sheet BALANCE SHEET, M EUR FY 2015 audited FY 2016 unaudited % Change Loans and advances % Cash and cash equivalents % Assets held for sale n.m. Property and equipment % Intangible assets (IT platform) % Goodwill n.m. All other assets % Total assets % Loans and borrowings % Deposits from customers n.m. All other liabilities % Total liabilities % Total equity % Total equity and liabilities % KEY RATIOS FY 2015 FY 2016 Capital/assets ratio 40% 25% Capital/net loan portfolio 56% 47% Adjusted interest coverage ratio 4.2x 3.6x Return on average equity (1) 41% 31% Return on average assets (1) 16% 9% (1) RoAE and RoAA based on net profit from continuing operations 20