Avanza: Interim Report January–September 2016

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Avanza (STO:AZA)

· Growth in number of customers remained strong in the third quarter. During the nine-month period the number of new customers was 73,700. The annual target of 46,760 new customers was surpassed already before the end of the second quarter

· Net inflow in the third quarter was SEK 5,920 million, an increase by 18 per cent compared to the previous year. For the nine-month period net inflow increased by 5 per cent compared to last year

· Operating income increased by 9 per cent compared to the third quarter 2015, primarily due to increased income from Avanza Markets and higher fund commissions. Compared to the second quarter, income was slightly lower as a result of seasonally low Corporate Finance activity

· Operating expenses increased by 4 per cent compared to the previous year, primarily due to increased number of employees. Compared to the second quarter, expenses were lower, mainly due to seasonally low personnel costs. The announced increase in full-year expenses of 8–10 per cent remains unchanged

· Net profit for the third quarter was SEK 105 million, an increase by 13 per cent compared to the previous year. Compared to the second quarter, net profit increased by 12 per cent, mainly due to lower operating expenses

· Increased digitisation and pending regulations for the financial sector provide good opportunities for Avanza to further strengthen its position. The pace of development will therefore be increased, which is expected to generate increased expenses at a rate of 15–20 per cent in 2017 before returning to a rate of 8–10 per cent

 

Q3

 

Q2

 

Change

 

Q3

 

Change

 

Jan–Sep

 

Jan–Sep

 

Change

2016

2016

%

2015

%

2016

2015

%

Operating income, SEK m 220 225 –2 203 9 671 652 3
Operating expenses, SEK m –98 –113 –13 –95 4 –323 –307 5
Operating profit, SEK m 122 111 10 108 13 348 345 1
Net profit, SEK m 105 94 12 94 13 298 297 0
Earnings per share, SEK 3.53 3.18 11 3.19 11 10.06 10.19 –1
Operating margin, % 55 49 6 53 2 52 53 –1
Net inflow, SEK m 5,920 9,430 –37 5,010 18 20,300 19,400 5
No. new customers (net) 24,500 23,100 6 20,400 20 73,700 72,700 1
Savings capital at the end of the period, SEK m 222,900 199,200 12 170,700 31 222,900 170,700 31

Quarterly highlights

· Avanza’s new CEO Johan Prom, who was presented in July, will assume his position by 7 November 2016. Henrik Källén remains as Acting CEO until then

· New price list for Private Banking customers which allows them to choose the brokerage fee class best suited to their trading

· Top score of 70 in Net Promoter Score, concerning customers’ recommendation rate

· Record high market share of 15.2 per cent regarding number of transactions on the stock exchange

Comments of the CEO

Innovative product development an important part of our business model

Avanza began the summer with a strengthened customer offering. The mobile customer experience was improved by allowing direct deposits from other banks and the Private Banking offer was made more attractive through lower mortgage rates and a new price list. Equity trading for savers with a smaller savings capital was improved as well, through the introduction of Avanza Start. These efforts, coupled with our existing offering, paid off with a net inflow of SEK 5.9 billion and 24,500 new customers during the third quarter. This resulted in a higher profit than both the second quarter of this year and the third quarter of 2015 and underscores the strength of our business model and the importance of innovative product development.

Good customer activity and higher risk appetite

After Brexit pounded the stock market in late June, we saw a rebound in the third quarter, with the Stockholm Stock Exchange posting a 10 per cent gain. The number of Avanza customers who trade stocks stayed at record levels and impacted trading data. We consolidated our top position on the Stockholm Stock Exchange and First North with a share of transactions of over 15 per cent. Our customers were net buyers in the stock market, which is reflected in lower deposits and higher risk appetite. Margin lending as well as equity trading on foreign exchanges increased.

We were especially pleased with reaching a NPS of 70 during the quarter in our regular survey of customer satisfaction. The Net Promoter Score shows our customers’ recommendation rate. This is an extremely high result which we will continue to make the most of.

Increased profit and a strong cost position

Although lending increased during the quarter, negative interest rates continued to put pressure on net interest income. Brokerage income rose by 3 per cent during the quarter. Fund capital grew and savings gradually shifted more to equity and mixed funds, which strengthened commission income. The Portfolio Generator, Avanza’s first digital decision-making support tool for fund savings launched just over a year ago, continues to attract fund capital. Our customers have invested as much as SEK 1.3 billion in various funds through the Portfolio Generator, an increase of 30 per cent since 30 June. This encourage us to make further investment in digital decision-making support. Avanza Markets continues to develop strongly, with a market share of 67 per cent during the quarter, and now accounts for a growing share of other income. Corporate transactions were seasonally low on the other hand, but are expected to increase later in the year if the investment climate remains.

Expenses are seasonally lower in the third quarter. The previously announced rate of an increase of 8–10 per cent for the full-year 2016 remains unchanged, which means that costs for the forth quarter will increase around 20 per cent compared to the same period 2015.

Avanza’s business model is based on scalability in order to always give our customers a less expensive, better and easier offering than any other bank – more for the customer and less for the bank. This is what is driving customer inflows and growth in savings capital, which in turn generates income. Our cost position is a critical success factor and also our way to offset lower income due to changing customer behaviours and market trends. During the quarter, we further cut our costs per savings ratio. We continue to improve efficiencies and automate internal processes in order to lower costs. Our strong cost position is an important competitive advantaged, which also allows us to continue to invest to attract customers and savings capital.

We increase our efforts

The financial sector is facing major changes as a result of digitisation and regulatory changes. We see good opportunities in this regard to strengthen Avanza’s position as Sweden’s best platform for savings and investments. During the year, and especially in the third quarter, we saw confirmation that our digital decision-making support and an improved mobile user experience have a positive impact on growth. In order to raise the growth rate and further improve our customer offer we will invest greater resources during 2017, with a focus on an improved user experience. Avanza is bursting with innovation and everything we want to do to improve our savings offer while truly focusing on the customer. More resources will give us the best opportunity to develop Avanza’s offering without losing momentum in an industry where competition is increasing from new Fintech companies as well. We estimate that expenses will rise by 15–20 per cent in 2017 before returning to a rate of 8–10 per cent in 2018.

On 7 November, Johan Prom will assume his position as CEO. Personally, I will return to my role as COO and Deputy CEO. We welcome our new captain to Avanza!

Stockholm, 18 October 2016

Henrik Källén, Acting CEO Avanza

This information is information that Avanza Bank Holding AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out below, at 08.15 (CEST) on 18 October 2016.

This Interim Report is published in Swedish and English. In the event of any difference between the English version and the Swedish original, the Swedish version shall prevail.

Avanza is an Internet bank founded in 1999. The Parent Company, Avanza Bank Holding AB (publ), is listed on the Stockholm Stock Exchange. Avanza’s customer promise is a better return on your savings than with any other bank or insurance company in Sweden – due to low fees. Services include saving in shares, funds, savings accounts and a strong pension offering. Avanza has more than 500,000 customers and more than SEK 200 billion in total savings capital. This is equivalent to 3 percent of the Swedish savings market. Avanza is largest in terms of number of transactions and the second largest in terms of turnover among Swedish banks on the Stockholm Stock Exchange including First North. During the last six years Avanza has won SKI’s (Swedish Quality Index) award, “Year’s Most Satisfied Savings Customers”. For more information visit: http://www.avanza.com

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Contacts

Avanza
Henrik Källén
Acting CEO
Telephone: +46 (0) 70 861 80 25
or
Birgitta Hagenfeldt
CFO
Telephone: +46 (0)73 661 80 04
or
Sofia Svavar
Head of IR
Telephone: +46 (0)8 409 420 17

Contacts

Avanza
Henrik Källén
Acting CEO
Telephone: +46 (0) 70 861 80 25
or
Birgitta Hagenfeldt
CFO
Telephone: +46 (0)73 661 80 04
or
Sofia Svavar
Head of IR
Telephone: +46 (0)8 409 420 17