Value Indicators: EUR Share data: Description: DCF: Bloomberg: FLA GR Reuters: FLAG.DE ISIN: DE

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1 (EntryStandard, Financial Services) Buy EUR Price EUR Upside 65.7 % Value Indicators: EUR Share data: Description: DCF: Bloomberg: FLA GR Reuters: FLAG.DE ISIN: DE FinTech Group is a financial services technology company in Germany Market Snapshot: EUR m Shareholders: Risk Profile (WRe): 2016e Market cap: 233 No. of shares (m): 17 Freefloat MC: 100 Ø Trad. Vol. (30d): th Freefloat 43.0 % GfBk mbh 40.1 % Heliad Equity Partners 16.9 % Beta: 1.5 Price / Book: 2.7 x Equity Ratio: 8 % Strong earnings growth ahead; Initiation with Buy and PT of EUR 23 We are initiating our coverage of FinTech Group with a Buy recommendation and a DCF-based price target of EUR 23, implying some 66% upside. We have identified five reasons to buy FinTech Group: Flatex, FinTech s B2C online securities brokerage platform, has a strong competitive position: Flatex is an established brand, which is well positioned in the market, offers high quality services and has a competitive edge with its flat-fee pricing model, which it has been operating for more than 10 years. New customers to drive growth at Flatex: The Flatex customer base is expected to increase by an average of 15% p.a. over the next three years by way of geographic expansion with local partners, a resumption of marketing activities, strategic partnerships and an expansion of the product assortment, e.g. credit business. Banking licence used to leverage B2B service offerings: The subsidiary XCOM AG gives FinTech access to a solid recurring revenue base, to profound IT-infrastructure know-how for the financial services industry as well as access to a full German banking licence through XCOM s subsidiary, biw Bank. This represents another competitive advantage, attracting more clients to the B2B business, especially in the current booming fintech environment. Strong margin expansion with the alternative use of customer deposits: A major trigger for the investment case is the alternative use of cash from biw Bank s customer deposits. With the integration of XCOM, FinTech gained access to roughly EUR 1bn customer deposits of biw Bank. As regulatory requirements have decreased since FinTech s withdrawal from the German deposit protection fund ( Einlagensicherungsfonds ), we expect FinTech to generate some 1.5% interest income from the new treasury and consumer lending operations. In 2016, we assume some EUR 7m in additional interest income reported above EBITDA from these activities which is expected to boost the group EBITDA margin by 9pp. Fundamental and relative valuation looks appealing: FinTech is currently trading on an adj P/E of 12x, below its broader peer group. Our fundamental DCF-based valuation approach points to a PT of EUR 23, which supports the attractiveness of the current share price levels. Furthermore the recent share price drop offers an attractive entry point. Rel. Performance vs Entry Standard: 1 month: 12.6 % 6 months: % Year to date: % Trailing 12 months: -0.2 % Company events: Oct.16 H May.17 FY 2016 FY End: in EUR m CAGR (15-18e) e 2017e 2018e Sales 10.7 % Change Sales yoy n.a % 20.0 % % 11.2 % 12.1 % 8.7 % Gross profit margin % % 97.1 % 82.0 % 84.1 % 84.5 % 84.8 % EBITDA 28.2 % Margin 8.5 % -2.6 % 21.1 % 26.3 % 35.0 % 38.9 % 40.8 % EBIT 30.4 % Margin 0.5 % -7.9 % 16.6 % 22.4 % 30.0 % 34.5 % 36.7 % Net income EPS EPS adj DPS Dividend Yield n.a. n.a. n.a. n.a. n.a. n.a. n.a. FCFPS FCF / Market cap % 1.8 % 25.0 % % 3.7 % 10.8 % 10.6 % Book Value / Share Price / Book 3.8 x 1.5 x 1.8 x 2.8 x 2.7 x 2.1 x 1.8 x ROE 1 % -5% -19 % -5% 15 % 25 % 19 % P / E x n.a. n.a. n.a x 9.6 x 10.1 x P / E adj x n.a. n.a. n.a x 9.6 x 10.1 x Guidance: EBITDA 2016: EUR 30-35m Analyst Lucas Boventer lboventer@warburg-research.com FUL L NOT E Published :55 1

2 Sales development in EUR m Sales by segments 2015; in % EBITDA development in EUR m Company Background FinTech Group is among the market leaders in Germany in the fields of B2C online securities brokerage under its brand name, Flatex In its unit XCOM AG, FinTech Group offers innovative software and IT outsourcing services for its B2B clients XCOM subsidiary biw Bank as a deposit bank gives FinTech Group access to a banking license and provides the full range of white label banking services to its B2B clients Competitive Quality FinTech differentiates itself from competitors by offering B2C as well as B2B services, which offers synergy potential In the field of B2C, Flatex has a strong competitive position which is supported by its unique flat fee pricing model In the field of B2B, XCOM has more than 25 years' experience as an IT-infrastructure provider. The company has a strong track record of completed projects with high-profile companies in the financial services sector Customer Growth - Flatex Transaction Growth in k FUL L NOT E Published

3 Summary of Investment Case 5 Investment Case 7 Six reasons to Buy FinTech 7 Competitive Quality 8 B2C securities trading & financial services 8 Flatex is a strong brand in the online brokerage business 8 Price leadership and high satisfaction levels 8 Expected tailwinds from strengthened marketing activities 9 Strong margin despite rather low pricing 9 B2B transaction processing & white label banking services 9 Profound IT-expertise for financial services 9 Leveraging the banking licence of biw Bank as a competitive advantage 10 Strategy & Growth 11 Strategy overview and recent development 11 Transaction volume as major growth driver 11 Further expansion in DACH region 12 Flatex as fully-fledged Bank Flatex flex-credit as cheap alternative to consumer loans 12 Customer deposits to be monetised, generating attractive returns 14 Disposal of Aktionärsbank 17 Strategic cooperations to enhance growth 18 Fostering own fintech ideas 20 Growth potential of online financial service market 21 Competitive Environment 24 Risks 26 Volatility causes fluctuations in transaction volume 26 Interest-change risk 26 Risk of IT breakdown 26 Customer churn risk 27 Financials 28 Reporting 28 Top-line and EBITDA growth 28 Securities trading & financial services - B2C business 29 Transaction processing & white label banking services - B2B business 31 Additional interest income from treasury activities 31 Other & consolidation 31 Company guidance 32 Balance Sheet 32 Valuation 34 Fundamental valuation 34 FUL L NOT E Published

4 DCF approach 34 Relative valuation 36 Peer group overview 37 B2C - Online brokerage 37 B2B - IT services 38 B2B - Banking services 39 Company Background 40 Overview and organisation 40 B2B segment transaction processing & white-label banking services 41 B2C segment Securities Trading & Financial Services 43 Company History 45 Management 45 Shareholder structure 46 FULL NOTE Published

5 Investment case summary Summary of Investment Case Investment triggers Strong earnings growth potential in 2016: Earnings are set to grow substantially by 57% in 2016 owing primarily to the alternative use of customer deposits Excellent entry point: The recent restructuring activities led to a significant share price drop (YTD c. -30%) which we regard as a good entry opportunity for long-term oriented investors. Potential winner of a Brexit: The possibility that many Anglo-Saxon financial institutions will relocate their European headquarters from London to Frankfurt offers potential for further B2B projects Valuation DCF model suggests a fair value per share of EUR 23, taken as our initial price target and implying 66% upside Broad peer multiples support fundamental approach Growth Strong earnings growth expected, CAGR 35% between e Strong underlying structural growth drivers with digitalisation of financial industry Flatex has an excellent track record in customer growth: 36% CAGR Competitive quality Among the market leaders in B2C online brokerage market with the Flatex brand Long-standing flat fee pricing model of Flatex is a competitive edge in B2C business Profound know-how and strong track record in B2B software and IT-infrastructure service offerings by subsidiary XCOM AG Banking license allows for deposit investments and serves as an opportunity to leverage B2B service offerings Warburg versus consensus On sales we are between 1% and 2% below consensus owing to our rather conservative approach towards customer and total transaction growth On EBITDA we are between 5% and 10% below consensus Our rather cautious estimates reflect the high fluctuation potential in the online brokerage business as well as the rather low visibility of future projects in the B2B business Investment risks Risk of a change in interest rates: Interest-change risk includes the potential market value change of interest-sensitive instruments such as bonds and other positions held in the treasury portfolio of FinTech. Dependence on technology: Since FinTech is extremely dependent on its IT infrastructure and related services, operational risks arise in the event of an IT or server malfunction. However, FinTech has a state-of-the-art back-up server and is currently investing in a new IT data center. Customer churn in B2C: In the B2C business, FinTech faces the risk of customer churn, since customers do not sign long-term contracts. The average duration of FinTech s relationships with B2C clients is currently more than five years. FUL L NOT E Published

6 Company at a glance flatex XCOM biw Bank Products & services Net sales 2015 (EUR m) EBITDA 2015e (EUR m) Customers Market position / share Broad peer group Flatex is a leading B2C online broker in XCOM provides software and IT biw Bank is a fully licensed bank responsible Germany and Austria offering to trade solutions in the B2B business for financial for the implementation of all banking Shares, Bonds, CFDs, Fx, Warrants, ETFs, institutions and other industries. Services include services of the group. biw Bank is the custodian Certificates and Funds. The company pro- banking, ebanking, payment, trading and bank of flatex keeping the accounts vides online and mobile trading platforms. consulting. and acts as an outsourcing partner Unique is the flat fee pricing model where FinTechs stake in XCOM is above 75%. (white-label-banking) for other banks and trade fees are independent of order volume. financial service provider. Biw Bank is 100% owned by XCOM 28.5 (incl. ViTrade) c. 170k active B2C customers each with c. 250 B2B partners such as banks and flatex uses biw Bank as the custodian bank, about 45 trades on average p.a. other financial services companies financial companies w ithout banking license ranked # 2 among best online brokers (wiwo) - - comdirect, ING-Diba, DAB Bank Cancom, avaloq, ss&c, temenos, fidessa, w orldpay, SutorBank, fidor Bank, w irecard sino, Cortal Consors, S-Broker Lending Club, Ferratum Lending Club, Ferratum Free Float 43% GfBk Gesellschaft für Börsenkommunikation mbh 40% Shareholder structure Heliad Equity Partners GmbH & Co. KGaA 17% Brand overview B2B Business Technology and white label banking business for third parties B2C Business Business models operated by FinTech Group AG under own brands Leading provider of software and technology solutions for banks and financialservicescompaniesin Europe with more than 250 clients B2B Brands B2C Brands - Renowned online broker in Germany with approx. 150k customers - Strong brand in Germany - European expansion in progress - Continuous product development German BaFin licensed bank with full range of white label banking services Professional trading for highly active investors, c. 3k customers FUL L NOT E Published

7 Investment Case Investment Case Six reasons to Buy FinTech We are initiating our coverage of FinTech Group with a Buy recommendation and a price target of EUR 23 per share, offering some 66% upside. Our recommendation is based on the following arguments: FinTech s online securities broker Flatex has a strong competitive position: Flatex is an established brand, which is well positioned in the market, offers high quality services and has a competitive edge based on its flat fee pricing model, which has been in place for more than 10 years. The high quality of the services offered by the company was demonstrated by the smooth operation of the electronic trading systems on the day after the Brexit referendum, when the trading platform processed about 80k transactions at full load. New customers and products to drive further growth for Flatex: The customer base of Flatex is expected to increase its by some 15% on average p.a. over the next three years by way of geographic expansion with local partners, a resumption of marketing activities, strategic partnerships and by extending the product assortment e.g. in the credit business. Banking licence used to leverage B2B service offerings: The subsidiary XCOM AG gives FinTech access to a solid recurring revenue base, to profound IT-infrastructure know-how for the financial services industry as well as access to a full German banking licence which serves as a competitive edge to attract further clients for the B2B business, especially in the current booming fintech environment. Strong margin expansion with the alternative use of customer deposits: A major trigger of the investment case is the alternative use of cash from biw Bank s customer deposits. With the integration of XCOM, FinTech gained access to roughly EUR 1bn customer deposits of biw Bank. As regulatory requirements have eased since FinTech s withdrawal from the German banking association s deposit protection fund, we expect FinTech to generate some 1.5% interest income from the new treasury and consumer lending operations, i.e. with the recently-launched Flatex flex credit. In 2016, we assume these activities will generate some EUR 7m in additional interest income, above EBITDA, which is expected to boost the group EBITDA margin by 9pp. Additional B2B projects may arise as a consequence of Brexit: FinTech is expected to clearly benefit from the consequences of Brexit as financial institutions, particularly from the US, are expected to shift their European headquarters from the UK to continental Europe, where Frankfurt would seem to be an ideal alternative given its stable legal system, its proximity to the ECB, the EU passport as well as its existing banking network. We expect FinTech to be among the partners chosen to set up the ITinfrastructure. The company is already negotiating mandates with some clients. Fundamental and relative valuation looks appealing: FinTech is currently trading on a 2016 adj. P/E of 12x, below its broader peer group. Our fundamental DCF-based valuation approach points to a PT of EUR 23, which supports the attractiveness of the current share price levels. Furthermore the recent share price drop offers an attractive entry point. FUL L NOT E Published

8 Competitive quality Competitive Quality B2C securities trading & financial services Flatex is a strong brand in the online brokerage business FinTech s online securities brokerage, Flatex, is among the market leaders in the areas of usability, transparency and transaction costs, as determined by a study conducted by the German business magazine Wirtschaftswoche in December Flatex achieved second place in the overall ranking of best online brokers and achieved first place in terms of customer satisfaction. According to a study by the Deutsche Gesellschaft für Verbraucherstudien mbh (DtGV) conducted in 2014, Flatex achieved first place among online brokers under the headings of conditions, product range, transparency and customer service. In order to make the results comparable, goal attainment in the categories mentioned was aggregated for each online broker on a single 100% scale (see below). These studies show the general satisfaction with the Flatex brand and the quality of its service offerings in the Germanspeaking online broker market. In 2015, Flatex achieved organic growth of 15% to c. 150,000 customers. Aggregated goal attainment of online brokers in GtGV test 1. flatex 80.5% 2. DAB Bank 78.1% 3. OnVista Bank 77.7% 4. S Broker 77.3% 5. comdirect 77.2% Source: DtGV; Warburg Research Price leadership and high satisfaction levels Flatex offers reference accounts and securities accounts free of charge. When it comes to trading activities, Flatex offers a very transparent transaction fee structure which is acclaimed by its customers. All orders on the German stock exchanges cost EUR 5 excl. stock exchange charges and all OTC trades cost EUR 5.9 independent of transaction volume. This fee structure makes Flatex unique in Germany and unique among the top brokers active in the German market as no other broker offers flat fees. Instead competitors usually charge a percentage fee of the order volume, which is on average about 0.25%. Along with the strong brand name, Flatex flat fee price model represents a unique selling proposition. The following chart shows the costs per trade of different online brokers in the German market compared to Flatex on a XETRA-based trade. The costs involve all usual fees and floors but special conditions and potential discount campaigns are not reflected. The chart shows that customers of competitors could immediately save costs by switching to Flatex. FULL NOTE Published

9 Minimum cost per order of leading online brokers Source: Flatex; Warburg Research Expected tailwinds from strengthened marketing activities Front-end marketing has been a significant success factor for the business model of Flatex. Between 2007 and 2013, the strategy was to focus on the core competence which is online brokerage and to outsource custodian services and technology solutions to XCOM and biw Bank. By focusing on the core operations, a successful marketing strategy supported organic sales growth of 11% (CAGR ). In 2013, all marketing activities for the Flatex brand were cut (see Company History for further details). While customer growth slowed, it nevertheless remained at some 6% on average per year and thus increased from 126k to 150k. We conclude that customers value the superior pricing model as well as the customer service, as customer numbers continued to grow at decent levels even without marketing expenditure. Looking forward, we expect that FinTech to reinstate its marketing activities for Flatex. We estimate marketing expenditure of some EUR 3-5m p.a. for the years to come which should have a noticeable impact on customer growth. Furthermore, the newly-designed front-end of the webpage, which is also mobile responsive, aims to enhance the customer experience and attract further clients. Hence, after a CAGR of 6% , we expect customer growth to jump to some 15% from 2016e to 2018e. Strong margin despite rather low pricing With a total of 150,000 customers, of which 80% are active clients (conducting at least one trade per year), and 7.1m completed transactions in 2015, Flatex has a transactionsper-customer rate of 47. On average, a trade generates EUR 5 (transaction fee of EUR 5.9 less EUR 0.9 exchange fees) with an estimated EBITDA margin of up to 40% which leads to more than EUR 2 per trade EBITDA contribution on group level. In contrast to Flatex, many competitors encounter higher costs to maintain their checking account business that currently fails to generate a sound profit contribution as interest rates are at a historically low level. Therefore, it seems unlikely that competitors will be able to reduce their fees. Since the start of business in 2006, Flatex has maintained its flat fee of EUR 5.0 excl. stock exchange fee showing a competitive advantage based on a low cost structure. B2B transaction processing & white label banking services Profound IT-expertise for financial services XCOM AG has been a renowned IT-infrastructure service provider for the financial service industry for more than 25 years. The company owns a full banking licence through its subsidiary biw Bank. The company has solid track record of successfully completed projects with about 250 high-profile companies (see below). The company FULL NOTE Published

10 has about 200 IT experts with extensive expertise, providing innovative technical solutions for their clients. Currently, XCOM is working on about 20 projects, which are generating recurring revenues and have average project durations of 5-7 years. Furthermore, XCOM generates non-recurring revenues with projects lasting less than one year. Customer snapshot of B2B Business Source: FinTech Group; Warburg Research Leveraging the banking licence of biw Bank as a competitive advantage As biw Bank owns a full banking licence for Germany and Austria, FinTech has the opportunity to offer its banking services as a white label partner to companies without a banking licence such as fintech companies in start-up stages which are less institutionalised or further advanced financial institutions. Hence, the licence is an attractive asset that serves as a competitive advantage when it comes to cooperation with fintech companies. While XCOM is able to cover all technology implementation issues, biw Bank holds the important key to meeting the regulatory stipulations with its banking license, which serves as an important competitive edge for early-stage fintech companies as well as advanced financial institutions that cooperate with FinTech. By combining IT services as well as a bank in-house, FinTech s operations are efficient and fast and deliver better service to the clients. While taking care of the regulatory requirements, FinTech can actively help its partners to shift their focus to their core operations. The strategy of being an active, client-oriented partner for new fintech companies, which provides banking solutions, seems promising in the currently booming fintech market. According to a study conducted by Accenture, fintech investments experienced the highest level of growth in Europe, with an increase of 215% yoy in Furthermore, the banking licence represents an entry barrier. The process of attaining a banking license involves regulatory capital and reporting requirements which are demanding and costly. As an example of the attractiveness of banking license, FinTech announced a deal in April 2016 in which its asset Aktionärsbank was sold to Obotritia Capital. For the new investor, the full banking licence was the essential benefit of the acquisition to operate a commercial mortgage financing business. FULL NOTE Published

11 Strategy & growth Strategy & Growth Strategy overview and recent development After restructuring measures in 2015 and 2016, which included the outsourcing of the market maker CeFDex and the exit of Aktionärsbank (events which are described in more detail later) as well as the first consolidation of the acquired XCOM and biw Bank, FinTech took large steps towards implementing the new corporate strategy which is to become a leading infrastructure B2B and B2C provider in the financial services industry. The transformation process from a pure play online broker to an integrated B2B and B2C financial services provider is shown below. FinTech s transformation process Source: FinTech Group; Warburg Research Transaction volume as major growth driver FinTech s B2C customer and transaction volume is a decisive factor in the growth story. In FY 2015, 57% of overall sales stemmed from the B2C business, while part of the sales in the B2B business was also dependent on transaction volume. Therefore, our main determinant to estimate future sales is B2C business growth on the basis of the number of transactions. We expect customers and transactions to grow by some 10% on average p.a. between e, primarily owing to stronger marketing activities and extension of the product assortment. Customer growth in FinTech s B2C business % 35% 30% % % 7% 15% 10% 10% 20% 15% 10% 50 5% e 2017e 2018e 0% B2C customers % change FULL NOTE Published

12 FinTech transactions growth in k ,4% 5% 9,0% 9,5% 10,0% -2% e 2017e 2018e 80% 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% B2C transactions % change Further expansion in DACH region In step with the successful marketing strategy and strong customer acquisition, awareness of the Flatex brand has increased in the online broker industry in Germany. FinTech seeks to use the perceived strength of the brand to expand to other European countries in the next couple of years. Flatex has already entered the Austrian market and has a customer base of c. 15k customers (c. 10% of total Flatex customers). In 2015, Flatex Austria benefitted greatly from the shutdown of brokerjet (c. 37k customers) leading to a significant churn in favour of Flatex. Other potential markets include Switzerland, Poland and the Czech Republic. In Switzerland the proven flat-fee business model might have a disruptive effect on the Swiss brokerage market. We expect Flatex offers a fee of around CHF compared to CHF 30 or more of established brokers. Hence, Flatex might have a competitive price advantage in this market. However, it should be mentioned that Flatex prefers to tap new markets with experienced local partners. Flatex as fully-fledged Bank 4.0 FinTech plans to utilise the strong brand Flatex to create a modern, state-of-the-art and mobile fully-fledged online broker with a broad product portfolio. Based on the existing Flatex customer base, the strategy envisages vertical integration of new services into the Flatex universe by creating new business branches. FinTech s CEO Niehage is willing to develop the company in areas such as lending, payment transactions, and consulting services (by e.g. video chat). Consequently, Flatex introduced a new flexible credit line, named Flatex flex-credit in March Flatex flex-credit as cheap alternative to consumer loans Flatex flex-credit is intended as an alternative to an overdraft facility with significant advantages. Featuring the same benefits as an overdraft loan such as full flexibility in facility drawings and maturities, Flatex flex-credit is a more cost-effective alternative with an interest rate of 3.9% p.a. in contrast to competitors rates of 8.95% p.a. for overdraft loans. From a structuring point of view, the Flatex flex-credit can be compared to a securities loan, since the invested securities serve as loan collateral. Therefore, FinTech does not need additional core capital as the loans are already secured. Every customer with a portfolio of securities that match the risk scoring requirements may draw a credit volume of 25% of deposit volume (max. EUR 50k). FULL NOTE Published

13 Flatex flex-credit Credit with flexible application, max. 25% ofsecuritiesaccountvolume, max. EUR 50k Customer Securities serve as loan collateral, interest rate at 3.9% p.a., flatex benefits when customer buys additional securities The loan can be used freely, e.g. to transfer to any other current account, to buy additional securities, or for consumption. Depot carryover or sale of underlying securities is not possible without balancing the credit. There are two potential sources of profit for Flatex: Customer interest payments increased trading commission, assuming the credit is used to buy additional securities. In our view, the new credit line should be compared to competitors securities loans rather than to overdraft facilities. Comparable offers by competitors include S-Broker securities loan with an interest rate of 4.68%, Consorsbank with 5.51% and comdirect with 5.67%. Flatex flex-credit an attractive alternative to competitors securities loans 5.51% 5.67% 4.68% 3.90% flatex S-Broker Consorsbank comdirect Effective interest rate p.a. Compared to the offers of close competitors, Flatex again shows its qualities as a costeffective discount broker. Following a four-week trial period of the new credit line, some EUR 25m were distributed to 4k customers, showing the appetite for convenient FULL NOTE Published

14 consumer lending and the growth potential. Customer deposits to be monetised, generating attractive returns Already in progress is the monetisation of customer deposits, which should offer the opportunity to generate incremental interest income at rather low cost. Since 2015, deposits of biw Bank customers were consolidated on the balance sheet of FinTech as liabilities to customers. The corresponding cash of some EUR 947m on the asset side was partly parked at the ECB (EUR 416m) incurring a penalty interest rate of bps. However, the company has already reduced the assets parked at the ECB to below EUR 200m ytd and reallocated most of the EUR 216m to treasury activities at a positive bps. The remainder was mostly already invested in alternative current financial assets such as cash loans and receivables (EUR 437). We note that the interest income by far does not reflect the earnings potential of the deposits, even in the current low-interest phase. Selected adjusted balance sheet items as of FY 2015 Assets EURm Liabilities EURm Non-current assets 65.0 Non-current liabilities 16.3 Current assets 1,142.1 Current liabilities 1,106.1 thereof cash loans and receivables thereof Liabilities to customers thereof balances w ith central banks Other current liablities and provisions thereof receivables ow ed by credit institutions 89.4 Equity 85.9 Source: Company Data, Warburg Research According to FinTech s balance sheet, the leverage ratio (equity to total assets) is solid, at 7.1% as of end The chart below shows the leverage ratios of selected direct banks. The leverage base of FinTech is superior to the leverage base of brokerage competitors. Leverage ratios of FinTech and its direct banking peers 8% 7% 7.1% 6% 5% 4% 3.7% 5.0% 5.0% 3% 2% 1% 0% comdirect DAB-Bank ING-Diba FinTech Source: Company data, Warburg Research As biw Bank had a comparatively low leverage ratio of less than 3% before it was consolidated by FinTech, the Association of German Banks, which operates a deposit protection fund (Einlagensicherungsfonds), required biw Bank to allocate the available cash from deposits at low risk, e.g. at the ECB. The deposit protection fund secured biw Bank s individual customer deposits in case of default up to some EUR 3.8m. FULL NOTE Published

15 In order to manage customer deposits more efficiently, biw Bank left the Association of German Banks in 2016, a step that is also expected to allow the realisation of certain cost benefits. As it is no longer participating in the deposit protection fund, biw Bank can now actively allocate the funds to alternatives including classic treasury and technologybased lending. Significant customer churn is regarded as unlikely as roughly 95% of customers have less than EUR 100k in their reference accounts and deposits of up to EUR 100k are protected by a statutory deposit protection scheme under the German Deposit Guarantee Act ( Einlagensicherungsgesetz ). Hence there is only marginal risk that customers will lose their money. Without the restrictions on monetising the available deposits, FinTech is able to actively generate interest income on the some EUR 1bn cash from customer deposits with a variety of different treasury investments. We expect FinTech to have employed more than EUR 700m in treasury and consumer lending by the end of From negative yield to sustainable positive return e 2017e 2018e 4,5% 900 3,5% in EURm ,4% 225 1,5% 300 1,7% 2,5% 1,5% ,5% ,3% -0,5% ECB deposits Classic treasury Consumer lending Return on treasury and lending Source: Company data, Warburg Research Using the available cash to generate profit, FinTech s strategy is expected to include some EUR 600m for classic treasury (such as sovereign bonds, corporate bonds, leasing, factoring) with average yields of c. 0.6%, leading to interest income of roughly EUR 2m. We expect that another EUR 180m to be used for Flatex flex-credit and other technology-based lending opportunities with an average return of c. 4% leading to an annual interest income of some EUR 7m. As the loan book was launched in April, we expect some EUR 5m interest income for lending activities in FinTech plans to gradually increase the loan book of technology-based consumer credit. The first activity in this direction is the Flatex flex-credit. Derivation of EUR 180m consumer lending volume: Flatex has c. 150k clients with an average total account volume of EUR 32k of which EUR 26k is in invested in securities As the max. credit line is 25% of the amount invested in securities, we derive an average credit volume of roughly EUR 7k Dividing EUR 180m (estimated consumer lending volume) by EUR 7k (avg. customer credit line), we conclude that only c. 26k customers or 17% of total customers will sign up for a consumer loan. We do not regard the monetisation of customer deposits as a one-off effect as the FULL NOTE Published

16 interest income from investments is expected to be recurring. Furthermore, expected average customer growth of about 10% p.a. in FinTech s B2C business should further drive this additional income. The gradual development of a loan book for technologybased lending activities has quite attractive margin opportunities which could foster profit growth. Additional income and EBITDA generated by cash usage 18,0 16, ,0 16,0 EBITDA contribution 15,6 14, ,0 12,6 12,0 12,0 in EURm 10,0 8, ,0 12,0 10,0 8,0 7,2 6,0 4,0 4,8 6,0 4,0 2,0 0,0 2,4 3,6 3,6 2016e 2017e 2018e 2,0 0,0 2016e 2017e 2018e Classic treasury income Alternative lending income EBITDA contribution Source: Company data, Warburg Research Regarding treasury management, certain regulatory capital requirements have to be met for investments in corporate bonds, factoring, leasing and technology-based lending. At the end of 2015, FinTech issued 606,061 new shares at EUR The capital increase was conducted to increase the equity ratio of biw Bank and to set the prerequisites for expansion into technology-based consumer lending. It also underlines the acceptance of FinTech s expansion strategy among investors. For Flatex flex credit, loan collateral is solely provided by the underlying securities in the customers accounts. Hence, no further equity is required for this credit model. We expect FinTech to generate some EUR 12-15m incremental interest income with these alternative investment measures in the mid term. The strategic shift is expected to be accomplished by the end of June 2016, as we expect that most of the cash reserves at the ECB to be reallocated by then. The full impact is expected to be seen by Peer2peer (P2P) lending in particular is regarded as one possible technology-based lending alternative and would seem to be promising in generating interest income. FinTech could act as a lender with its large biw Bank customer deposits. P2P lending was one of the most important growth areas for fintech investors on a global scale in 2015 as shown in the graphic below. The market for P2P lending is believed to have strong upside potential within the fintech industry. In 2015, a total of USD 6.8bn was invested in fintech companies. Of this, EUR 1.8bn or 26.8% was invested in P2P lending. FULL NOTE Published

17 Share of total global investments in fintech companies 2014 P2P / online lending Mobile wallets 25.0% 26.8% Personal finance and management 14.1% Corporate lending 11.5% Mobile point of sales technologies Mobile banking Bitcoin Crowdfunding/-investing 7.2% 6.0% 4.7% 3.6% Other 1.1% % share of total investments Source: Life.SREDA, Warburg Research As margins in the credit business are very attractive, FinTech intends to act as a borrower and to build a consumer credit book through partnerships with alternative technology-based lenders in Europe similar to LendingClub in the US. LendingClub is the biggest P2P lending platform in the world, over which private individuals invest money that is aggregated to a credit and distributed to selected borrowers. The company receives a commission from the borrower and an investment fee from the lender. Business model of P2P lending Borrowers Application, administration fee Classical P2P lending provider Capital, administration fees Notes; investment fee Investors Purchase price Loan Loan Loan proceeds Issuing bank We expect FinTech to cooperate with European P2P providers in future. More information is provided in the Strategic Cooperations section below. Disposal of Aktionärsbank In April 2016, FinTech announced that Aktionärsbank would be sold to Obotritia Capital. However no information about the terms of the deal was disclosed. We assume that FinTech received the book value of equity which is assumed to be c. EUR 10m plus a premium of a lower single-digit million. With the disposal, FinTech reduced the number of banking licenses in the group from four to one and pooled all banking activities in biw Bank. Thus, certain cost savings of some EUR 10m p.a. are expected to be realised in In the 2016 annual report, we expect the non cash effective impairment to be booked as discontinued operations and will not affect EBITDA. Nevertheless, we regard this divestment as a major step for FinTech to pursue the corporate strategy and to free regulatory capital In addition, FinTech gained a new cooperation partner with this deal for its white-labelbanking business. Obotritia Bank will be provided with a core white label banking system from XCOM including personnel, IT, regulatory, legal and compliance services generating recurring revenues for XCOM in the years to come. Furthermore, FinTech is FULL NOTE Published

18 expected to gain access to Obotritia s mortgage security lending business to extend its product offerings. Strategic cooperations to enhance growth As presented below, FinTech teamed up with renowned strategic partners to further develop its business model in the direction of revenue- and profit sharing cooperations: Strategic partnerships with renowned banks and aspiring fintechs Morgan Stanley In February 2016, FinTech signed a cooperation agreement with Morgan Stanley to offer exchange traded products (ETP). The cooperation is to last for several years with options for extension. The structured products include derivatives and warrants and are being sold as of June One of the first products launched was a structured product specifically designed for the British referendum on EU membership which took place on June 26, This specific product was also the second most traded product on the day after the referendum which already underlines quality of the cooperation. From a technical perspective, the cooperation is structured as follows: Morgan Stanley conducts the financial engineering and issues the structured products, which are initially linked to the DAX index, German blue-chip stocks and foreign exchange rates. Flatex distributes the products to its customer base under the Flatex brand name with the label powered by Morgan Stanley. The products are also available to customers without a Flatex account. We estimate that Flatex conducted some 2.5m transactions with structured products from its partners in Each of these trades generates commission income of c. EUR 5-7 representing some 10-15% of the overall revenues from the transactions. The cooperation with Morgan Stanley is expected to provide for superior returns. Instead of earning the usual commission, Flatex is expected to receive c. 50% of the total revenue of the structured product transactions owing to the underlying JV with Morgan Stanley. We estimate the per trade revenue for Flatex at some EUR 20 on average representing a significant increase in comparison with former structured product transactions. Innovative product offering in cooperation with Morgan Stanley Issues structured products Distributes products under its label Customer ~20 revenue ~20 revenue ~40 revenue per trade Morgan Stanley has three major advantages from this deal. Morgan Stanley is yet not active in the German structured product market. Flatex FULL NOTE Published

19 provides the perfect customer base with a high proportion of customers who trade structured products. Flatex is independent of major competitors of Morgan Stanley and is among the largest independent brokers in Germany. We expect rather low marketing expenditure or customer acquisition costs for Morgan Stanley, given the well established Flatex brand and its strong customer base in the German market. We estimate Flatex can generate c. 200k trades with these new products in 2016 which leads to additional revenues of some EUR 2-3m. In 2017, we estimate that Flatex can process roughly 300k trades with these products leading to additional sales of roughly EUR 4-5m. Flatex is not Morgan Stanley s first cooperation with a local online broker. The global financial institution has already pursued this strategy in Sweden by successfully teaming up with Avanza, one of the largest local independent online brokers with about 400,000 customers as of March Currently, Deutsche Bank and Commerzbank are the most important financial product suppliers for Flatex. The cooperation with Morgan Stanley is expected to allow Flatex to broaden its sales channels and provide one of the largest product ranges within the German retail market of structured products. Nevertheless Flatex retains its open architecture for its other premium partners. Zinspilot Furthermore, Flatex offers attractive solutions for its customers to place deposits at attractive conditions as cash investments. The company cooperates with ZINSPILOT, an innovative intermediate provider of savings solutions with the main aim of offering its clients cash investments provided by different European banks from one single deposit. Thus, customers may choose the banks listed on the platform with the most attractive interest conditions. Business model of ZINSPILOT The cooperation is the classic example of FinTech eco system which has the ability to combine its B2B services with its B2C services. By providing its B2B services to Zinspilot FinTech had the opportunity to prove the business model and subsequently offer it to its B2C clients. Since the beginning of the year, Flatex customers may invest in fixed-term or daily or deposits at no charge from their existing Flatex accounts. For the first time, German investors can trade securities as well as invest in savings products from different banks from one single account. Thus Flatex is expected to be one of the first German online brokers offering its customers the whole line-up of private wealth management: from a single account, customers have access to a broad choice of stocks, certificates, warrants and funds as well as to fixed-term and daily deposits of different banks. This service is financed by the respective partner bank offering cash investment products through a commission income to ZINSPILOT and Flatex. There are no additional costs for the customer. We do not expect major revenue contributions from this deal. Equatex The cooperation between FinTech Group and Equatex, a provider of equity and nonequity based plan administration for large and small companies with international reach, FULL NOTE Published

20 is pioneering as it highlights the opportunity to use XCOM as a technology provider and biw Bank as the white label banking partner to offer modern and comprehensive banking services such as financial reporting, cloud technology and consulting to blue chip clients (e.g. BMW, Henkel). Commerzbank In the CeFDeX deal with Commerzbank, FinTech licensed out the CFD order flow with a volume of c. EUR 30m (representing some 5% market share in Germany). For customers, the deal did not come with any changes as Flatex is still their broker. Only the back-end solution is now provided by Commerzbank. FinTech saved some EUR 6m investment through the deal since the outdated IT platform had to be replaced (new platform release, new frontend WEBfiliale etc. was needed). In addition, FinTech faced strong risk exposure due to the volatility of the business which requires management attention. Commerzbank benefitted from natural hedging effects already incorporating the whole CFD market. Ultimately, this deal led to a win-win situation for both parties. The licensing period expires in We estimate that the deal, completed in 2015, had a one-off licensing fee of some EUR 8m and will contribute commission income of some EUR 2-4m p.a. until The licensing agreement will be renegotiated with Commerzbank and potential other backend providers which could lead to further licensing fees and commission income in 2022, allowing FinTech to participate in the growing CFD trading market (CAGR of 10%) without facing any strong risk exposure. The corporate strategy of FinTech is based on these smart revenue- and profit-sharing deals with banks and other companies as it increases the barriers to market entry and gains a competitive edge over peers. These ties to global partners generate further profit opportunities and may help to acquire new cooperation projects. For FY 2016 and 2017 we expect the Morgan Stanley deal and the Commerzbank cooperation to be growth drivers. Fostering own fintech ideas Payments via smart phones are becoming increasingly popular, especially money transfers between friends. The mobile payment system kesh was rolled out by FinTech in 2016 and is currently in the pilot stage. An increasing number of companies, especially fintech ventures, are expected to use kesh as an application programming interface (API) for their own mobile payment solutions. For example, German football clubs such as Fortuna Düsseldorf and Carl Zeiss Jena are among the test candidates and have already installed kesh as an alternative mobile payment system. Currently, kesh is the only smart phone payment system of a German bank which is approved by BaFin. Thanks to its banking licence, biw Bank can address the whole payment process while many competitors have to incorporate credit- or cash card providers such as MasterCard or Visa. Thus kesh has the competitive edge as a very cost-effective alternative electronic payment system. Even though it is still in the pilot phase, kesh is already serving 8,500 customers. We value kesh as a long-term opportunity in addition to all the other cash-generating assets. Today, kesh s sales contribution to the Fintech Group is rather negligible but in future, kesh is expected to generate revenues of some EUR 2-3m by 2018 and beyond. Growth is expected to be driven by the mobile payment market in Germany which is still underdeveloped and leaves room for the realisation of additional growth. The recently-launched joint venture between FinTech and Finotek, a Korean mobile banking solutions provider highlights the growth potential and the competitive quality of kesh. The JV aims to supply the Asian market with a white label version of kesh. FinTech receives 49% of the generated sales. Both companies have also agreed on a second JV in which FinTech brings the Korean credit platform to Europe and FinTech receives 51% of generated revenues. FULL NOTE Published

21 Multichannel payment solution kesh payments to privates transfer money claim money Interaction with ATMs cash payout from kesh account kesh recharge from cash-/credit card ecommerce payments transfer of personal data payment release in kesh Social Banking contact data favorite retailers, etc. point of sale payments smartphone/ tablet monitor with internet access integration in cash system Services voucher codes browser access backend-integration API systems Source: Company data, Warburg Research In order to foster new fintech ideas and to attract and cooperate with innovative start-up businesses, FinTech established a start-up lab in Berlin. By continuing to evaluate trends, developing own IT-based disruptive solutions and supporting innovative startups, FinTech s goal is to position itself as a pioneer in the fast-moving fintech industry. Growth potential of online financial service market Compared to other markets such as travel agencies, commerce or advertising, the online market for financial services is not yet as saturated. Fintech companies such as wikifolio (a leading social trading platform in Europe) or gini (paperless processing of payments) have just entered the market within the last years. Nevertheless, the financial services sector is structurally changing and the traditional banks are starting to put greater focus on technology-driven, digitalised and modern distribution channels. Customers are demanding online, mobile and more individualised interfaces for their banking activities. As traditional banks need to accessing digital technologies in order to meet customer demands have a competitive advantage FinTech is well-positioned to benefit from dynamic growth in this segment thanks to the acquisition of XCOM AG (technological competence including a banking license owned by biw Bank). FULL NOTE Published

22 Digitalisation is the key for German financial institutions Source: IDC Vertical Markets Survey, October 2015, 220 Financial Institutions in Europe Germany in particular offers ample opportunity for market penetration as the online banking market is not as disruptive. Only 49% of people older than 18 were using online banking in 2014 compared to Scandinavia, where the proportion is >80%. The same holds true for the use of mobile banking. In this sector, Germany s user share is 47% compared to 63% in the USA. Share of e-banking and mobile banking users in selected countries Share of e-banking user 2014 Share of mobile banking user 2015 Iceland 91% Turkey 65% Norway 89% USA 63% Netherlands 89% Netherlands 61% Sweden 82% Spain 61% France 58% France 49% Germany 49% Germany 47% The general willingness to use online and mobile banking services is particularly remarkable in generation Y consisting mostly of so-called digital natives born between 1977 and As generation Y ages surrounded by digital devices, it is becoming ever more important for banks to match the digital expectations of the changing customer base, especially as they reach their peak years of financial consumption. FULL NOTE Published

23 Online and mobile are preferred channels, particularly for gen Y clients Matures (born before 1945) Baby boomers (born ) Gen X (born ) Gen Y (born ) online mobile Source: PwC, Warburg Research FULL NOTE Published

24 Competitors Competitive Environment There are two different fields of competition in direct online brokerage. Online brokers for professional traders, such as sino and the FinTech-owned brand ViTrade, and online brokers geared towards frequently trading retail customers. The FinTech brand Flatex is among the market leaders, as confirmed by various customer-oriented rankings. Flatex convinces customers with its transparent flat fee pricing model and the state-of-the-art online and mobile trading platform. The peer group of FinTech includes online brokerage companies mostly also offering current account services such as comdirect, ING-Diba, Consorsbank and S-Broker. Overview of product offerings of competitors Company flatex Business model Leading B2C online broker in Germany and Austria focusing on frequently trading customers and offering a flat fee pricing structure. Direct bank with a wide product range, e.g. savings investments, building loans and ING-Diba consumer credits. The company offers current account business and brokerage to its customers. Online brokerage business of Deutsche Bank solely addressing retail customers. A feature Maxblue is that customers can access macro and equity research of Deutsche Bank. S-Broker is an online broker which belongs to the "Sparkassengruppe" and offers all typical S-Broker brokerage products on the one hand and on the other hand conventional savings products. Leading direct bank in Europe and subsidiary of BNP Paribas offering current account Consorsbank business and online brokerage. Costs per EUR 5k XETRA order: broker fee + stock exchange fee EUR = 7.00 EUR = EUR = EUR = EUR = Comments - flat-fee pricing model w ithout variable part - 5,500 funds to buy from investment companies - c.150,000 customers - 7.1m transactions in FY order costs incorporate a fee of 0.25% of order value - 8,400 funds to buy from investment companies - more than 8m customers - 9m transactions in FY order costs incorporate a fee of 0.25% of order value - more than 10,000 funds to buy from investment companies - latest available data: some 500k customers in order costs incorporate a fee of 0.25% of order value - 6,500 funds to buy from investment companies - in 2015 (2013) ca. 130,000 customers (140,000) - 1.5m trades in FY order costs incorporate a fee of 0.25% of order value - more than 10,000 funds to buy from investment companies - more than 800k customers B2C: direct bank with current account and Comdirect brokerage business. B2B: Full service partner for banks, insurance EUR = and other financial service companies. - order costs incorporate a fee of 0.25% of order value - more than 10,000 funds to buy from investment companies - some 3m customers In the German online broker market, some competitors have a similar cost structure to Flatex (LYNX) or even lower prices (DEGIRO). After conducting careful research, we decided to exclude these companies from our overview of competitors (even if the pricing structure is competitive) since we identified considerable differences in the product offering of the listed peers: Since LYNX and DEGIRO are located in the Netherlands, these online brokers do not issue German tax confirmations like the ones listed above. Calculating taxes and submitting declarations to the tax authorities is time-consuming especially for frequent traders. DEGIRO s accounts are secured up to EUR 20k by the Dutch deposit protection. It is not possible to conduct OTC trades and choice of stock exchanges is limited. Flatex average trading volume per custody account is about 45 trades p.a. vs c. 15 trades of comdirect based on FY 2015 figures. The graph below shows the executed transactions among various online brokers. Considering that most of Flatex customers trade more frequently than customers of other brokers, we link transaction volume increases with further growth of the customer base. This effect may enhance the position FULL NOTE Published

25 of Flatex in the market and offers potential for stronger growth compared to the market, as underscored by transactions of 7.1m in 2015 and c. 2.2m transactions in Q Hence, based on Q1 2016, Flatex is currently on a run-rate of up to 8.8m transactions for Furthermore, the increased volatility also contributed to significantly higher transaction volume. Total executed transactions in m - Flatex vs. competitors 25 23, ,7 18,0 19,2 20, ,0 7,0 6,6 5,9 5,5 6,8 6,0 7,4 7,1 9, flatex comdirect ING-Diba In terms of deposit volume, Flatex has a rather small market share compared to the peer group. Comdirect has c. EUR 65bn assets under administration and is among the market leaders in online brokerage in Germany. While comdirect, DAB Bank and ING-Diba are direct banks and thus have a larger product range than Flatex, the comparison has rather limited significance. In future, Flatex intends to become a fully-fledged online bank. Hence, there ample growth potential with regards to services. Flatex and comdirect have similar average custody account volumes per customer of some EUR 26k. Assets under administration in EURbn (FY 2015) x1: negligible deposit volume, since ustomers can keep their reference accounts at Sparkasse x1 flatex comdirect DAB Bank (H1 2015) S-Broker Securities volume Deposit volume FULL NOTE Published

26 Risks Risks Volatility causes fluctuations in transaction volume Depending on the market phase, the success of FinTech s B2C business is highly dependent on market volatility. While in times of high volatility, the number of transactions should rise and thus boost commission income for brokerage providers, times of low volatility generally lead to weaker commission income. Thus the first quarter of 2016 was rather successful with EUR 2.2m executed transactions, implying a potential run rate of EUR 8.8m. In comparison, FinTech executed some EUR 7.1m transactions in FY The following table shows the development of transactions and the respective development of the German volatility index VDAX. The table underlines that the number of transactions corresponds to the degree of market volatility. Number of Xetra security transactions (in k units) and VDAX 160, , , ,000 80,000 60,000 40,000 20, Xetra security transactions VDAX Source: Deutsche Bundesbank, Warburg Research Interest-change risk Interest-change risk includes the potential market value change of interest-sensitive instruments such as bonds and other positions held in the treasury portfolio of FinTech. In order to manage potential impairments, FinTech calculates the duration of all instruments and aggregates them to form one single pro-forma security and measures the effect of a sudden and unexpected change in interest rates on this security. Based on the interest rate scenario, the change of net present values determines the risk. In order to meet the risks, according to the company, a ratio of 20% between the change in cumulative net present values and liable equity must be maintained. In 2014, biw Bank showed this ratio at 15.3%. Regarding the newly-established loan business, interest rate changes should have only a minor impact. Given the current interest rate environment, which is close to zero, upside for FinTech is only expected when interest rates rise again. Risk of IT breakdown Since FinTech is heavily dependent on its IT infrastructure and the related services, the possibility of IT malfunction poses an operational risk. The IT infrastructure is composed of servers and other technological applications; hence a breakdown would result in significant monetary damage such as lost sales. Furthermore, an IT breakdown could also lead to legal issues in the form of claims for damages by the customers. However, FinTech has a highly reliable, state-of-the-art IT system, as proven by its smooth operation on the day after the British EU referendum, when about 80k trades were executed error-free. FULL NOTE Published

27 Customer churn risk In the B2C business, FinTech faces the risk of customers churn, as customers do not sign long-term contracts. We believe this risk to be rather small as FinTech s most important brand Flatex is a proven cost leader in times in which cost awareness plays a major role for consumers. Flatex average customer relationship duration is more than five years. In its B2B business, the company avoids the inherent customer risk by concluding rather long-term contracts with durations of five to seven years. FULL NOTE Published

28 Financials Financials Our valuation framework is based on a long-term fundamental analysis and should be understood as a mid-term assessment of the expected value of the company. Reporting FinTech changed reporting rules from German GAAP to IFRS with release of the 2015 annual report. The company will report on two segments, B2C securities trading & financial services and B2B transaction processing & white label banking services. The B2C segment primarily includes the brands Flatex, ViTrade, kesh and benk whereas the B2B segment comprises biw Bank and XCOM. Top-line and EBITDA growth In our revenue model, we estimate sales and EBITDA in the operating segments B2B and B2C 2016e-2018e separately. From 2016 onwards we expect FinTech to generate incremental operating interest income from own treasury activities with customer deposits which we qualify as additional interest income not specifically attributable to one segment. In future, these income streams will be included in sales of the B2B segment. In our view, EBITDA is the key financial figure to measure the success of FinTech. Additional interest income from own trading activities is booked as revenues and thus before EBITDA. We expect a group EBITDA margin expansion of c. 15pp between 2015 and 2018e from 26% to 41% owing mainly to the high EBITDA contribution of the additional interest income from treasury activities. The EBITDA margins in the core segments B2C and B2B are expected to expand slightly (by roughly 3pp) owing to further economies of scale and synergy effects. Total sales and EBITDA estimate in EURm ,2 26,3% 83,6 35,0% 29,3 93,7 38,9% 36,5 101,9 40,8% 41,6 45% 40% 35% 30% 25% 20% 15% 20 19,7 10% 5% e 2017e 2018e 0% Total sales Total EBITDA Margin FUL L NOT E Published

29 EBITDA and EBITDA margin per segment 30 80,0% in EURm e 2017e 2018e 70,0% 60,0% 50,0% 40,0% 30,0% 20,0% 10,0% 0,0% B2C B2B B2C margin B2B margin Securities trading & financial services - B2C business In our model for the B2C business, we pursue a bottom-up approach based on the number of transactions driven by customer growth and market environment. In our calculations, we expect that each transaction in the B2C business carries an average commission income for the B2C business of c. EUR 3 per trade. As a result, we get the expected sales for the B2C business. FinTech s number of customers and transactions increased significantly in 2015 due to the full consolidation of XCOM which brought in the high-frequency trading platform ViTrade (c. 3k customers). Furthermore, Flatex grew significantly in Austria (c. 15k customers) following the closure of Brokerjet, a close competitor. Development of customers for FinTech s B2C business in k % 35% 30% % % 7% 15% 10% 10% 20% 15% 10% 50 5% e 2017e 2018e 0% B2C customers % change Transactions growth of FinTech s B2C business in k Source: Company data, Warburg Research FULL NOTE Published

30 ,4% 5% 9,0% 9,5% 10,0% -2% e 2017e 2018e 80% 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% B2C transactions % change Source: Company data, Warburg Research Our estimate for total transactions growth is based on the median of historic trades per customer p.a. figures which is 54 for the period between 2006 and Transactions per customer ,00 80,00 70,00 60,00 50,00 Median 54 40,00 30,00 20,00 10,00 0, Transactions per customer From our estimates for transactions growth p.a. in connection with the average revenue per trade, we derive our revenues p.a. for the detailed forecast period as shown in the table below. Our assumption for sales per trade is based on average group-wide revenue per trade of EUR 5. Thereof, we estimate that roughly EUR 3 can be allocated to the B2C segment for transaction processing services and EUR 2 to the B2B segment for clearing services of biw Bank. For 2016e we estimate some 11.1m total transactions, of which roughly 90% are expected to be revenue-generating, amounting to total sales of EUR 29.9m and an EBITDA of EUR 20.9 implying a margin of c. 70%. At this stage we point out that sales in 2015 include a positive one-off effect of roughly EUR 8m resulting from licensing fee, generated with the CefDex deal with Commerzbank. Sales and EBITDA estimate B2C in EURm 2015 yoy 2016e yoy 2017e yoy 2018e yoy B2C Transactions in k % % % % Sales 28,5 29,9 5% 32,7 9% 36,0 10% EBITDA 19,6 20,9 6% 23,2 11% 25,9 12% Margin 69% 70% 71% 72,0% FULL NOTE Published

31 Transaction processing & white label banking services - B2B business The B2B technology business has an entirely different structure as revenues are not measured by transactions but by projects. XCOM and biw Bank generated some EUR 45m revenues in XCOM has currently about 20 long-term recurring revenue IT and financial technology projects which each generate annual sales of EUR 1-2m. We estimate that some 95% of revenues are recurring (given a project contract duration of 5 to 7 years, avg. remaining project length + 5 years) while 5% of revenues are related to rather small projects with durations of less than one year. Looking forward, we estimate only minor sales growth of roughly 4% p.a. The exit of Britain from the EU could represent an additional sales growth driver that could bring further long-term projects with revenue contributions of EUR 1-2m on an individual level. We have not yet included the Brexit scenario in our model. However, with significant synergy, scale and multiplier effects along the entire value chain we expect a noticeable margin expansion from 18.6% to 21.0%. Sales estimate B2B in EURm e yoy 2017e yoy 2018e yoy Sales 45,2 46,6 3% 48,4 4% 50,4 4% EBITDA 8,4 9,8 16% 10,2 4% 10,6 4% Margin 18,6% 21,0% 21,0% 21,0% Additional interest income from treasury activities As already mentioned in our Strategy & Growth section, we see particular earnings potential for FinTech in the utilisation of cash from customer deposits to generate additional interest income. The income is to be included in the B2B segment. We expect FinTech to use roughly EUR 600m for classic treasury, yielding 0.6% return (EUR 2.4m income), EUR 180m for Flatex flex-credit and other consumer-based lending activities at a return of 4% (EUR 7.2m income p.a.) in FY However, since the loan book was started in April 2016, interest income from lending activities is expected to be some EUR 4-5m in As an average customer has an account volume of some EUR 32k, which can be split into EUR 26k invested in securities and some EUR 7k held as cash, further customer growth is expected to lead to larger available funds for treasury trading activities. Below we have derived our estimates for the use of the cash deposits by FinTech. Sales estimate for additional interest income in EURm e 2017e yoy 2018e yoy Interest income (before EBITDA) n.a. 7,2 12,6 75% 15,6 24% EBITDA n.a. 7,2 12,6 75% 15,6 24% Margin 100,0% 100,0% 100,0% Other & consolidation In other & consolidation, the company records sales from other operating activities which cannot be directly dedicated to either segment. It records negative earnings to be deducted for consolidation effects in the two segments. For instance in 2015, the reported B2C EBITDA of EUR 19.6m (standalone EBITDA margin of c. 69%) had to be adjusted for consolidation effects and central costs of EUR 8.3m in the B2B segment, which provided services such as custodian account services and transaction processing for the B2C segment, in order to avoid double counting effects. Below we have outlined the other & consolidation effects. FULL NOTE Published

32 Other & consolidation in EURm e yoy 2017e yoy 2018e yoy Sales 1,5 0,0 n.m. 0,0 n.m. 0,0 n.m. EBITDA -8,3-8,6 4% -9,5 10% -10,4 10% Margin n.m. n.m. n.m. n.m. Company guidance In FY 2016, the company guides for EBITDA of EUR 30-35m. Our estimates are slightly below the guidance as we estimate an EBITDA for 2016e of EUR 29.3m. In our view, the incremental income from treasury should be a significant catalyst for the EBITDA margin expansion as the interest income should be associated with rather marginal costs leading to high margins. EBITDA improvement in the B2C business looks rather minor, however we want to highlight that there was a positive one-off effect in 2015 in the B2C business (see page 31 for details). EBITDA bridge e by segments 35,0 30,0 7, ,0 20,0 19,7 1,3 1,4 15,0 10,0 5,0 0,0 EBITDA 2015 B2C business B2B business Treasury Other EBITDA 2016e Balance Sheet Assets FinTech s balance sheet on the asset side (total assets EUR 1.2bn) is substantially made up of current financial assets of EUR 568m (47% of total assets), of which EUR 436m are cash loans and receivables, as well as liquid assets of EUR 541m (45% of total assets), of which some EUR 415m are cash reserve balances with central banks, reflecting the use of customer deposits that came in with the consolidation of XCOM and its subsidiary biw Bank. Intangible assets point to EUR 54m which can be split into: Internally-generated intangible assets (EUR 17.1m) such as software through the consolidation of XCOM depreciated on straight line over eight years Customer relationships (EUR 5.9m) being depreciated on straight line over years. Customer relationships reflect the customer base of ViTrade (EUR 3.5m) and the customer base of biw bank (EUR 2.4m). Goodwill (EUR 28.8m) reflecting the intangible company value of XCOM Liabilities and equity Current liabilities stand at EUR 1.106m. Of this, liabilities to customers at EUR 947m make up the largest part reflecting 92% of total equity and liabilities. Customer liabilities FULL NOTE Published

33 are attributable to the customer deposits of biw bank. FinTech has total equity of EUR 85m pointing to a solid equity ratio of 7.1%. FULL NOTE Published

34 Valuation Fundamental valuation supports investment case Our DCF model points to a fair value of EUR 23 Fundamental valuation DCF approach The main assumptions for the DCF model are: 2016e-2018e: Sales CAGR of 10% is expected in the detailed planning phase. 2018e-2028e: An average growth rate of 5% is assumed for the transitional period with an average EBIT margin of 32%. LTG is seen at 1.5%. The terminal value reflects 49% of total present value Our WACC points to 9.2% including a beta of 1.5. FULL NOTE Published

35 DCF model Detailed forecast period Transitional period Term. Value Figures in EUR m 2016e 2017e 2018e 2019e 2020e 2021e 2022e 2023e 2024e 2025e 2026e 2027e 2028e Sales Sales change 11.2 % 12.1 % 8.7 % 6.5 % 6.5 % 6.0 % 6.0 % 6.0 % 5.0 % 5.0 % 4.0 % 3.0 % 2.0 % 1.5 % EBIT EBIT-margin 30.0 % 34.5 % 36.7 % 35.0 % 34.0 % 33.0 % 32.0 % 32.0 % 32.0 % 32.0 % 32.0 % 32.0 % 32.0 % Tax rate (EBT) 10.0 % 15.0 % 31.0 % 31.0 % 31.0 % 31.0 % 31.0 % 31.0 % 31.0 % 31.0 % 31.0 % 31.0 % 31.0 % NOPAT Depreciation in % of Sales 5.0 % 4.4 % 4.1 % 4.0 % 4.0 % 4.0 % 4.0 % 4.0 % 4.0 % 4.0 % 4.0 % 4.0 % 4.0 % Changes in provisions Change in Liquidity from - Working Capital Capex Capex in % of Sales 1.2 % 1.1 % 1.0 % 4.0 % 4.0 % 4.0 % 4.0 % 4.0 % 4.0 % 4.0 % 4.0 % 4.0 % 4.0 % Other Free Cash Flow (WACC Model) PV of FCF share of PVs % % % Model parameter Valuation (m) Derivation of WACC: Derivation of Beta: Present values 2028e 209 Terminal Value 158 Debt ratio 7.00 % Financial Strength 1.40 Financial liabilities 7 Cost of debt (after tax) 2.1 % Liquidity (share) 1.50 Pension liabilities 0 Market return 7.00 % Cyclicality 1.60 Hybrid capital 0 Risk free rate 1.50 % Transparency 1.70 Minority interest 13 Others 1.30 Market val. of investments 0 Liquidity 36 No. of shares (m) 16.8 WACC 9.21 % Beta 1.50 Equity Value 384 Value per share (EUR) Sensitivity Value per Share (EUR) Terminal Growth Delta EBIT-margin Beta WACC 0.75 % 1.00 % 1.25 % 1.50 % 1.75 % 2.00 % 2.25 % Beta WACC -1.5 pp -1.0 pp -0.5 pp +0.0 pp +0.5 pp +1.0 pp +1.5 pp % % % % % % % % % % % % % % Liquid assets were adjusted for deposit volumes FULL NOTE Published

36 Relative valuation FinTech is not directly comparable to any listed company due to its dual business approach of being an online discount broker and an IT infrastructure service provider for financial services companies. Both business segments are interlinked to such an extent that deriving a fair value from relative valuation does not make sense. Therefore, we decided to provide a peer group table that contains peer companies for online brokerage firms as well as IT infrastructure providers. Peergroup B2C Key Figures Company LC Price MC EP S Sales BPS in LC in LC m 16e 17e 18e 16e 17e 18e 16e 17e 18e comdirect EUR , mwb fairtrade EUR n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. plus500 GBp n.a. n.a. n.a. sino EUR n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. swissquote CHF BinckBank EUR F int ech Gro up EUR Peergroup B2C Valuation multiples Company LC Price MC P / E Price / Sales P / B in LC in LC m 16e 17e 18e 16e 17e 18e 16e 17e 18e comdirect EUR , x 22.7 x 20.2 x 3.3 x 3.6 x 3.5 x 2.1 x 2.1 x 2.1 x mwb fairtrade EUR n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. plus500 GBp x 9.1 x 8.4 x 3.7 x 3.3 x 3.1 x n.a. n.a. n.a. sino EUR n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. swissquote CHF x 9.2 x 7.8 x 2.2 x 2.0 x 1.9 x 1.2 x 1.1 x 1.0 x BinckBank EUR x 8.7 x 10.3 x 2.4 x 2.3 x 2.2 x 0.8 x 0.8 x 0.8 x Average 13.1 x 13.7 x 12.1 x 3.0 x 3.0 x 2.8 x 1.7 x 1.6 x 1.6 x Median 11.5 x 9.2 x 8.4 x 3.3 x 3.3 x 3.1 x 1.7 x 1.6 x 1.6 x FinTech Group EUR x 9.6 x 10.1 x 2.8 x 2.5 x 2.3 x 2.7 x 2.1 x 1.8 x Peergroup B2B Key Figures Company LC Price MC EP S Sales BPS in LC in LC m 16e 17e 18e 16e 17e 18e 16e 17e 18e Cancom EUR , , , Davis & Henderson CAD , n.a. 1, , , n.a. Ferratum EUR n.a. Fidessa GBp 2, FIS USD , , , , n.a. LendingClub USD , SS&C USD , , , , Temenos CHF , Wirecard EUR , , , , Worldpay GBp , , , , F int ech Gro up EUR FULL NOTE Published

37 Peergroup B2B Valuation multiples Company LC Price MC P / E Price / Sales P / B in LC in LC m 16e 17e 18e 16e 17e 18e 16e 17e 18e Cancom EUR x 16.9 x 14.7 x 0.7 x 0.6 x 0.6 x 2.6 x 2.4 x 2.8 x Davis & Henderson CAD , x 12.7 x n.a. 2.1 x 2.0 x 2.0 x 1.6 x 1.7 x n.a. Ferratum EUR x 11.6 x 8.5 x 2.4 x 1.7 x 1.3 x 4.3 x 3.0 x n.a. Fidessa GBp 2, x 27.8 x 26.3 x 3.0 x 2.9 x 2.7 x x x x FIS USD , x 17.8 x 15.9 x 2.7 x 2.6 x 2.5 x 2.5 x 2.3 x n.a. LendingClub USD , x 22.4 x 12.8 x 3.3 x 2.6 x 1.8 x 1.7 x 1.1 x 0.7 x SS&C USD , x 16.4 x 15.0 x 4.2 x 3.8 x 3.7 x 2.7 x 2.5 x 2.2 x Temenos CHF , x 25.1 x 22.1 x 6.6 x 6.1 x 5.5 x 8.7 x 7.2 x 6.0 x Wirecard EUR , x 19.7 x 16.0 x 5.1 x 4.1 x 3.5 x 3.5 x 3.1 x 2.6 x Worldpay GBp , x 22.8 x 19.7 x 5.4 x 4.9 x 4.4 x x x x Average 27.0 x 19.3 x 16.8 x 3.5 x 3.1 x 2.8 x x x x M edian 22.6 x 18.8 x 15.9 x 3.1 x 2.8 x 2.6 x 3.1 x 2.8 x 2.8 x FinTech Group EUR x 9.6 x 10.1 x 2.8 x 2.5 x 2.3 x 2.7 x 2.1 x 1.8 x Peer group overview B2C - Online brokerage comdirect: comdirect with headquarters in Quickborn, Germany, is the leading direct bank in Germany offering financial services such as deposit accounts and current accounts to its customers. The company is a direct competitor of FinTech in both the B2C business line under the name comdirect and the B2B business line via its subsidiary ebase. Comdirect generates EURm 528.5m revenue and EUR 149.9m EBITDA. Charles Schwab: Charles Schwab is an American brokerage and banking company. Schwab operates in investing, wealth management, banking and trading and has about 9 million brokerage accounts. In 2015, the company made USD 6.4bn sales and an operating income of c. USD 2.3bn. Swissquote: Swissquote is a Swiss company focusing on providing online-based financial services including security trading and quantitative asset management services, OTC leveraged foreign exchange trading and current accounts and saving accounts services. The company offers a B2B business line as well, providing white label solutions, custody services and API solutions. Swissquote generates revenue of EUR 154.3m and EBITDA of EUR 28.7m. mwb fairtrade: mwb fairtrade is one of the biggest securities trading banks in Germany headquartered in Munich. The company specialises in orderbook managing securities, bonds and investment funds on all German stock exchanges and also offers sales and sales trading services to institutional clients as well as capital market services. Since the first quarter 2015, FinTech runs mwb s full securities settlement process. Sales of mwb fairtrade amount to EUR 13.2m and EBITDA is at EUR 0.5m. Plus500: Plus500 is an online CFD platform provider offering online trading services to retail customers in 31 languages in more than 50 countries. According to the company, the self-developed and easy-to-use trading platform represents the competitive edge. Generating USD 276m revenue, the EBITDA amounts to USD 133m (48% margin). Sino: Sino is a specialised securities broker with a focus on heavy traders with high trading volume. The custodian bank managing the deposit and current accounts is HSBC Trinkaus & Burkhardt. With a market cap of EUR 11.7m, sino is a very small player in the market of online brokerage in Germany and generates EUR 6.1m revenue and EUR 0.7m EBITDA. Nordnet AB: Via its subsidiary Nordnet Bank AB, Nordnet offers online and mobile savings, securities trading, pension, and banking services in Sweden, Norway, Denmark, and Finland. In 2015 the company made an operating income of c. SEK 1.25bn (EUR 132.2m) and a gross profit of c. SEK 357m (EUR 37.8m). FULL NOTE Published

38 TD Ameritrade: TD Ameritrade is US online broker based in Omaha, Nebraska. The company, through its private client and institutional client divisions, provides tiered levels of brokerage products and services tailored to meet the varying investing, trading, and execution needs of self-directed individual investors, financial institutions, and corporations. In 2015, TD Ameritrade generated a net revenue of c. USD 3.25bn, EBITDA of USD 1.5bn and an operating income of c. USD 1.36bn. Avanza: Bankaktiebolaget Avanza is the largest independent online stock broker in Sweden with more than 400k customers. The company offers its members a range of financial services including stock trading, stock market information, and investment courses through its website. Avanza also offers brokerage services, administration of share issues, and stock buybacks services to its corporate and institutional clients. In 2015, Avanza made an operating income SEK 923m (c. EUR 97m) and an operating profit after tax of SEK 415m (c. EUR 43m). E-Trade: E-Trade Financial Corporation is a financial services company headquartered in New York City, United States. The company provides online brokerage and related products and services primarily to individual retail investors. Its products and services include investor-focused banking, primarily sweep deposits and savings products, and asset gathering. E-Trade generated c. USD 1.43bn in sales and a net income of USD 268m. BinckBank: BinckBank is an independent Dutch online broker. In 2015 the company had about 600k registered customer accounts and processed 9.2m transactions. The company generated a result from operating activities of EUR 39.8m in B2B - IT services Temenos: Temenos is a Geneva, Switzerland based market leading software provider in the fields of banking and finance. With more than 2k B2B customers in over 150 countries worldwide, Temenos generated revenues of USD 543m and EBITDA of USD 171m. Cancom: Cancom is an integrated IT provider headquartered in Munich, Germany. The company is a cloud transformation partner, a system integrator and a managed services provider and is listed on the TecDax 30. The group generates USD 933m sales and EBITDA of USD 51m. It has 2,724 FTEs. Fidessa: Fidessa is a London-based company selling software products on the market for trading systems to clients in the financial services sector. The company also provides market data and related services to buy-side and sell-side customers. Fidessa generates GBP 296m and an EBITDA of GBP 79.4m. FIS: FIS (Fidelity National Information Services) is the world s largest global provider dedicated to banking and payments technologies, particularly in the fields of payment processing and banking software and technology outsourcing. Fidelity Information Services GmbH is the German subsidiary offering software products and services for the European banking market. FIS generates revenues of USD 6,595.2 and EBITDA of USD 1,779.5m. SS&C: SS&C develops and sells software for financial services firms offering individually-tailored solutions to insurance and asset management companies, the REIT industry and other financial services companies. SS&C is based in Windsor, USA and employs more than 6k FTEs worldwide. SS&C generates USD 1,000.3m revenues and EBITDA of USD 315.6m. GFT Technologies: GFT is an IT service provider and offers a wide range of services from application development, consultancy to system integration for the financial service industry. The company made sales of EUR and an EBITDA of EUR 44.6m in FULL NOTE Published

39 B2B - Banking services LendingClub: LendingClub, based in San Francisco, USA, is the world s largest peer-topeer lending company providing an online credit platform, in which private investors provide funding for private borrowers obtaining loans. Due to fully online and automatic infrastructure, LendingClub operates at comparably low cost and offers attractive interest rates for both investors and borrowers. LendingClub generates USD 429.9m and EBITDA of USD 69.8m. Ferratum: Ferratum is an international provider of mobile consumer loans headquartered in Helsinki, Finland. To operate the credit business, the company runs a licensed bank responsible for processing of the credit transactions. In June 2015, Ferratum entered the SDAX index. The company generates EUR 111m revenues and EBITDA of EUR 18.3m. Wirecard: Wirecard is a TecDAX-listed provider of risk management, banking, electronic payment transactions and processing services based in Aschheim, Germany. The company serves more than 20k commercial customers worldwide generating >670m individual transactions. The sales of Wirecard amount to EUR 771.3m and EBITDA to EUR 225m. Worldpay: Worldpay is a platform technology provider for online payment processing for merchant customers operating globally. Through Worldpay s platforms, merchants can accept many different payment types across multiple channels. Worldpay is headquartered in London, UK, is listed on the LSE and is a constituent of the FTSE 100 Index. The company generates revenues of GBP 981.7m and EBITDA of GBP 408.3m. D+H: D+H is a leading financial technology provider for financial institutions worldwide. The offered services include lending, payments, enterprise and global transaction banking solutions. The company has its headquarters in Toronto, Canada and has 5.5k employees. The sales amount to CAD 1,506.6m and EBITDA amounts to CAD 502.8m. My Bucks: MyBucks is a fintech company which is dedicated to facilitate financial inclusion by servicing customers predominantly in high-growth emerging markets. The broad portfolio of virtual banking products includes lending, insurance and banking, and is supported by services such as mobile banking. The company is headquatered in Luxembourg and generated revenues of EUR 31.3m and an operating profit of EUR 11.1m in the financial year FULL NOTE Published

40 Company background Company Background Overview and organisation FinTech Group is a leading German provider of innovative financial technologies B2B and B2C. Structured as a holding company, FinTech s B2B portfolio includes the subsidiaries XCOM AG and biw Bank AG while the B2C segment including the subsidiaries flatex and ViTrade. In addition, FinTech has developed its own brands kesh and benk, which implement innovative fintech business models. In addition, FinTech reached promising cooperation agreements with Morgan Stanley, Commerzbank and Zinspilot to widen the attractive product range for its customers. FinTech s former subsidiary CefDex, a market maker for CFD-trading was licensed out in 2015 to Commerzbank. Another former subsidiary, Aktionärsbank, a broker with a banking license was sold to Obotritia Capital in April The divestment of Aktionärsbank is accompanied by a strategic partnership with the new owner as FinTech will provide its IT core banking system as well as regulatory services to Obotritia Capital. The entire holding currently employs about 500 FTEs. Based on its strong brands such as Flatex, XCOM, biw bank and ViTrade, FinTech is among the leading online brokers in Germany. In 2015 the group completed more than 10 million securities transactions. Currently, the group has c. 200,000 private clients, 250 institutional clients, more than EUR 5.7 billion assets under administration and group EBITDA of EUR 20m (figures of 2015). Its full subsidiary Flatex GmbH is one of the leading German online brokers with more than 150,000 private clients and focuses on active, well-informed traders who trade without investment advice. Stocks, options, derivatives, CFDs, bonds, ETFs, forex and funds can be traded over the platform. Flatex offers a unique flat-fee pricing model independent of order volume. FinTech is a majority stakeholder in XCOM AG (more than 75%) which has been providing software and technology solutions since It is one of Germany s fintech pioneers and today one of Germany s leading banking technology providers for ebanking, Payment, Trading and Insourcing. The main services range from outsourcing of solutions for banks to retail banking solutions with own brands to consulting services. biw Bank für Investments und Wertpapiere AG is a full subsidiary of XCOM AG and is also part of FinTech. With its banking license, biw is responsible for all banking services of the group. Furthermore, biw Bank acts as an outsourcing partner for other banks ( white-label-banking ). The short-term future organisational chart of FinTech as well as a broad operational peer group is presented below. FULL NOTE Published

41 Organisational Chart of FinTech Source: Company data, Warburg Research B2B segment transaction processing & white-label banking services With the acquisition of XCOM in 2015 (current stake of more than 75%), FinTech strengthened its B2B segment, where the company handles upstream operations in the IT infrastructure business. The segment contributed roughly 60% (EUR 45.2m) to FinTech group revenues with an EBITDA margin of c. 19%. The segment provides IT research and development services which ensure long-term benefits from innovative solutions for the financial service industry. XCOM is a leading provider of software and technology solutions for banks and financial services companies in Europe. Its 100% subsidiary biw Bank is a German BaFin licensed bank with full range of white label banking services. The two companies collaborate and offer complementary services along the entire value chain of digital banking infrastructure. The B2B service portfolio includes the following services: In the business segment banking, the XCOM Group offers tailor-made Banking-IT such as business process outsourcing (BPO) using a white label approach, and the implementation of core banking and reporting systems (deposit management, securities and payment transactions, client systems and regulatory requirements). XCOM s full subsidiary biw Bank is responsible for all banking services of the group such as managing custody services, clearing and settlement especially for Flatex, the custodian bank keeping the accounts. Furthermore, biw Bank can use its banking license to support other companies as a white label banking partner. For example XCOM runs the OTC trading platform L.O.X. for Deutsche Bank and Commerzbank. As well as for pbb direct (Deutsche Pfandbriefbank) offering daily allowances and fixed deposits, biw Bank is responsible for account management, processing of payments, reporting and fulfilment. These services are offered by XCOM through Banking Suite, modular-based software that enables XCOM to provide separate modules according to the demand of the customer. Offered services include deposit management, securities and payment transactions. FULL NOTE Published

42 Banking Suite Complete value chain from distribution to settlement Source: Company Data, Warburg Research XCOM provides ebanking platforms, especially payment platforms, SEPA platforms incl. mandate management, online banking and secure transactions. In times of digitalisation, banks face increasing performance, data storage and functionality requirements, which FinTech can efficiently meet. XCOM s most important ebanking platform is the software ebanking Suite, which is a solution in the growing business of digital payment transactions. The segment payment supports companies with payment services including mass payment processing, mobile payment via cell phone in shops or online shops. Combining technology services and banking services, XCOM can significantly help the companies with regards to the implementation of new business ideas in terms of regulatory requirements. Trading solutions of XCOM range from increasing the efficiency of order processing over faster assessment of regulatory and contractual investment restrictions in the back office to complete broker systems including the implementation of market maker systems, trading platforms, market and price data supply. Based on long experience and comprehensive expertise in the financial services sector, XCOM offers Consulting services concentrating on the improvement of IT and business processes in areas such as compliance, IT security, and structured documentation. The cooperation of XCOM and biw Bank, consolidated as XCOM Group enables the group to offer its clients innovative IT-solutions together with the whole product line of a cooperative bank as an in-sourcing partner. FULL NOTE Published

43 Customers of B2B Business Source: Company data, Warburg Research B2C segment securities trading & financial services The core segment of FinTech is the B2C segment where the company offers products and services in the front-end of its online brokerage and specialist banking services. FinTech s B2C services refer to its brand Flatex which offers brokerage business in Germany and Austria and to ViTrade, a professional trading platform for heavy traders in Germany. The segment contributed roughly 38% (EUR 28.5m) to FinTech Group s revenues with an EBITDA margin of roughly 40%. Taking into account all branches of the B2C segment, FinTech has increased the number of customers continuously and expects further rise in number of customers as shown below. Growing number of B2C customers in k % 35% 30% % % 7% 15% 10% 10% 20% 15% 10% 50 5% e 2017e 2018e 0% B2C customers % change Source: Company Data, Warburg Research Previous to the acquisition of XCOM, FinTech was addressing mainly private consumers through its subsidiaries flatex and ViTrade: Flatex is the backbone in FinTech s B2C unit, a leading German online retail broker FULL NOTE Published

44 (# 2 in terms of trades and #3 in terms of customers) that started to disrupt the market in Approximately 150,000 customers (end of FY 2015) can trade stocks, options, derivatives, CFDs, bonds, ETFs, forex and funds via all German and many international stock exchanges as well as OTC. In 2015, Flatex processed a total of 7.1m trades. The competitive advantage of Flatex is the cheap flat-fee structure and the strong focus on customer orientation. The business model of Flatex does not include the execution and processing of customer orders, but only the acceptance and forwarding of customer orders to biw bank. Therefore, every customer uses the Flatex platform, but effectively has a custody account at biw bank. In recent years, Flatex has won many awards as the cheapest broker in Germany. Flatex has many premium partners including BNP Paribas, Commerzbank, Société Générale, DZ Bank, HSBC, Vontobel and Tradegate. ViTrade offers professional trading for highly active investors and heavy-traders over a flexible and individual online trading platform. In 2015 we expect the total number of trades to be around 2m. The product range includes all major financial products such as stocks, CFDs, futures, forex, derivatives, bonds or funds. The major target group consists mainly of daytraders, chart traders and forex traders. ViTrade serves 2,500 clients managing over EUR 300m of customer assets. Since the market is expected to be saturated, the growth potential for customers is rather limited looking forward. ViTrade provides a state-of-the-art mobile trading platform, which makes trading by cell phone very simple. Besides Flatex and ViTrade, FinTech has developed its own brand kesh, the mobile payment system of biw Bank: Kesh is a mobile payment system of biw Bank for the point of sale (POS), online and P2P payments (friend to friend) which can be operated via a smart phone app. In addition, customers can withdraw money at an ATM or retail store via their smart phones. As a provider, biw Bank guarantees the processing of all banking custodies and securities. FULL NOTE Published

45 Company history Company history Historically, XCOM was an independent IT solutions provider and with its subsidiary biw Bank, was the banking solutions provider for Flatex. Flatex paid some 40% of the customer transaction fees to XCOM for IT and banking services. In 2013, a legal dispute arose between biw Bank and Flatex as regards which company was entitled the generated interest revenue on the issued Lombard loans to customers. In the course of these events, Flatex AG bolstered the marketing activities of Aktionärsbank, which was originally founded in 2012 to extend the business model of FinTech to deposit banking with current accounts. Aktionärsbank obtained the banking licence in September Thus, Flatex could make use of a potential alternative to biw Bank. At that time, the marketing expenditure of Flatex was reduced to virtually zero. XCOM s managing partner at the time Matthias Albrecht representing 31% of XCOM s equities was forced to resign by the supervisory board in In 2015 he sold his stake to Bernd Förtsch, founder and shareholder of FinTech, who became the majority shareholder of XCOM and, in this way, the legal dispute was settled. The newlylaunched Aktionärsbank with its banking license had trouble to operate profitably due to high start-up costs and was no longer relevant as the biw Bank was now part of FinTech and could be controlled by Förtsch. Some 2.8k of the 3k customers of Aktionärsbank were successfully merged to Flatex and by April 2016, FinTech announced the sale of Aktionärsbank to Obotritia Capital, a private equity investor focusing on commercial real estate. The company history below includes the major events of both independent firms: 1988: XCOM BCC is founded in Langen 1999: XCOM AG results from the merger of 12 companies while at the same time PRE.IPO AG is incorporated in Kulmbach 2003: XCOM AG acquires XCOM Bank 2005: biw AG (Bank für Investments und Wertpapiere) is founded and XCOM AG holds minority stake. 2005: XCOM Bank was sold to Wirecard mainly for its banking licence 2006: PRE.IPO AG changes its name to Flatex AG and starts CFD trading in : IPO of Flatex AG 2010: XCOM AG and Flatex invest in heavy trader platform ViTrade AG (formerly etrade) 2012: Full takeover of biw AG (100%) 2013: Flatex subsidiary Aktionärsbank Kulmbach GmbH obtains a banking licence, furthermore Flatex acquires CeFDex, a market maker for CFD-trading 2014: Flatex holding AG becomes FinTech Group AG 2015: CeFDex is sold and FinTech takes over a strategic majority in XCOM AG Management CEO Frank Niehage Frank Niehage has been the CEO of FinTech Group AG since August He gained broad experience in retail and commercial banking during his time as Managing Director of Goldman Sachs and as the former CEO of Bank Sarasin AG. Frank Niehage holds a Masters in Law, majoring in international economics. FULL NOTE Published

46 Chairman of Supervisory Board Martin Korbmacher Martin Korbmacher has been Chairman of the Supervisory Board since October He gained expertise in traditional banking and financial services technologies through his time as Global Head of Equities at Dresdner Kleinwort and Head of Investment Banking, Germany and Austria for Credit Suisse ( ). Shareholder structure The majority of shareholders are institutional investors. The company founder Bernd Förtsch has a 40%-stake through his GfBk Gesellschaft für Börsenkommunikation mbh. Heliad Equity Partners is a private equity fund, also significantly influenced by Bernd Förtsch. Heliad Equity Partners is listed on the Frankfurt Stock Exchange. About 42% of the shares are free float. In the past there was only one relevant shareholder and no relevant free float, but by now, the shareholder structure is more diversified, as there is a relevant free float. In future the group aims to further increase the free float. In 2015, the changeover from national reporting standards to IFRS paved the way to change the listing from Entry Standard to Prime Standard of the Frankfurt Stock exchange, combined with a dual listing at AIM, London. We expect this change to be implemented in Structure of shareholders Free Float 43% GfBk Gesellschaft für Börsenkommunikation mbh 40% Heliad Equity Partners GmbH & Co. KGaA 17% Source: Company data, Warburg Research FULL NOTE Published

47 Valuation e 2017e 2018e Price / Book 3.8 x 1.5 x 1.8 x 2.8 x 2.7 x 2.1 x 1.8 x Book value per share ex intangibles EV / Sales 3.2 x 2.7 x 1.7 x n.a. n.a. n.a. n.a. EV / EBITDA 37.3 x n.a. 8.2 x n.a. n.a. n.a. n.a. EV / EBIT x n.a x n.a. n.a. n.a. n.a. EV / EBIT adj.* x n.a x n.a. n.a. n.a. n.a. P / FCF n.a x 4.0 x n.a x 9.2 x 9.5 x P / E x n.a. n.a. n.a x 9.6 x 10.1 x P / E adj.* x n.a. n.a. n.a x 9.6 x 10.1 x Dividend Yield n.a. n.a. n.a. n.a. n.a. n.a. n.a. Free Cash Flow Yield Potential 2.3 % -0.7 % % -0.9 % -6.5 % -9.6 % -8.6 % *Adjustments made for: - Company Specific Items e 2017e 2018e Consolidation based changes of liquid funds Customer Growth - Flatex n.a. n.a. Transactions Growth n.a. n.a. FUL L NOT E Published

48 Consolidated profit & loss In EUR m e 2017e 2018e Sales Change Sales yoy n.a % 20.0 % % 11.2 % 12.1 % 8.7 % Increase / decrease in inventory Own work capitalised Total Sales Material Expenses Gross profit Gross profit margin % % 97.1 % 82.0 % 84.1 % 84.5 % 84.8 % Personnel expenses Other operating income Other operating expenses Unfrequent items EBITDA Margin 8.5 % -2.6 % 21.1 % 26.3 % 35.0 % 38.9 % 40.8 % Depreciation of fixed assets EBITA Amortisation of intangible assets Goodwill amortization EBIT Margin 0.5 % -7.9 % 16.6 % 22.4 % 30.0 % 34.5 % 36.7 % EBIT adj Interest income Interest expenses Other financial income (loss) EBT Margin 1.6 % -8.5 % 15.9 % 18.9 % 26.8 % 31.6 % 34.1 % Total taxes Net income from continuing operations Income from discontinued operations (net of tax) Net income before minorities Minority interest Net income Margin 0.3 % -7.9 % % -3.9 % 14.6 % 25.8 % 22.5 % Number of shares, average EPS EPS adj *Adjustments made for: Guidance: EBITDA 2016: EUR 30-35m Financial Ratios e 2017e 2018e Total Operating Costs / Sales 91.5 % % 78.9 % 73.5 % 65.0 % 61.1 % 59.2 % Operating Leverage n.a. n.a. n.a. 1.5 x 4.3 x 2.4 x 1.8 x EBITDA / Interest expenses n.a. n.m x 7.4 x 10.9 x 13.6 x 15.5 x Tax rate (EBT) 80.5 % 7.0 % % 6.8 % 10.0 % 15.0 % 31.0 % Dividend Payout Ratio 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % Sales per Employee n.a. n.a. n.a. n.a. n.a. n.a. n.a. Sales, EBITDA in EUR m Operating Performance in % Performance per Share FUL L NOT E Published

49 Consolidated balance sheet In EUR m e 2017e 2018e Assets Goodwill and other intangible assets thereof other intangible assets thereof Goodwill Property, plant and equipment Financial assets Other long-term assets Fixed assets Inventories Accounts receivable Liquid assets Other short-term assets Current assets ,149 1,160 1,189 1,217 Total Assets ,208 1,216 1,242 1,267 Liabilities and shareholders' equity Subscribed capital Capital reserve Retained earnings Other equity components Shareholders' equity Minority interest Total equity Provisions thereof provisions for pensions and similar obligations Financial liabilities (total) thereof short-term financial liabilities Accounts payable Other liabilities ,084 1,084 1,084 1,084 Liabilities ,122 1,117 1,118 1,119 Total liabilities and shareholders' equity ,208 1,216 1,242 1,267 Financial Ratios e 2017e 2018e Efficiency of Capital Employment Operating Assets Turnover 5.2 x 1.9 x 3.7 x 3.3 x 2.7 x 2.7 x 2.7 x Capital Employed Turnover 1.9 x 0.7 x -1.5 x -0.2 x -0.2 x -0.2 x -0.2 x ROA 1.1 % % % -4.9 % 21.6 % 45.4 % 45.8 % Return on Capital ROCE (NOPAT) 0.4 % n.a. n.a. n.a. n.a. n.a. n.a. ROE 0.7 % -4.5 % % -4.8 % 15.4 % 24.8 % 19.0 % Adj. ROE 6.8 % -4.5 % % -4.8 % 24.2 % 24.8 % 19.0 % Balance sheet quality Net Debt Net Financial Debt Net Gearing % % % % % % % Net Fin. Debt / EBITDA n.a. n.a. n.a. n.a. n.a. n.a. n.a. Book Value / Share Book value per share ex intangibles ROCE Development Net debt in EUR m Book Value per Share in EUR FUL L NOT E Published

50 Consolidated cash flow statement In EUR m e 2017e 2018e Net income Depreciation of fixed assets Amortisation of goodwill Amortisation of intangible assets Increase/decrease in long-term provisions Other non-cash income and expenses Cash Flow Increase / decrease in inventory Increase / decrease in accounts receivable Increase / decrease in accounts payable Increase / decrease in other working capital positions Increase / decrease in working capital (total) Net cash provided by operating activities Investments in intangible assets Investments in property, plant and equipment Payments for acquisitions Financial investments Income from asset disposals Net cash provided by investing activities Change in financial liabilities Dividends paid Purchase of own shares Capital measures Other Net cash provided by financing activities Change in liquid funds Effects of exchange-rate changes on cash Cash and cash equivalent at end of period Financial Ratios e 2017e 2018e Cash Flow FCF Free Cash Flow / Sales % 7.0 % % % 10.3 % 26.9 % 24.2 % Free Cash Flow Potential Free Cash Flow / Net Profit % % % % 70.5 % % % Interest Received / Avg. Cash 8.2 % 0.4 % -0.3 % 0.0 % 0.0 % 0.0 % 0.0 % Interest Paid / Avg. Debt 0.0 % 8.4 % n.a % 37.1 % 37.1 % 37.1 % Management of Funds Investment ratio 30.6 % 3.1 % 0.0 % 0.0 % 1.2 % 1.1 % 1.0 % Maint. Capex / Sales 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % Capex / Dep % 57.6 % 0.0 % 0.0 % 23.9 % 24.3 % 23.9 % Avg. Working Capital / Sales 5.5 % 27.9 % 28.8 % 14.2 % 25.9 % 28.9 % 29.3 % Trade Debtors / Trade Creditors n.a % % % % % % Inventory Turnover n.a. n.a. n.a x n.a. n.a. n.a. Receivables collection period (days) Payables payment period (days) n.a. n.a. 1, Cash conversion cycle (Days) n.a. n.a. n.a n.a. n.a. n.a. CAPEX and Cash Flow in EUR m Free Cash Flow Generation Working Capital FUL L NOT E Published