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2016-10-18

Avanza: Interim Report January-September 2016

Interim report, 2016-10-18, 08:15 CEST

· 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 220 225 -2 203 9 671 652 3
income, SEK
m
Operating -98 -113 -13 -95 4 -323 -307 5
expenses,
SEK
m
Operating 122 111 10 108 13 348 345 1
profit, SEK
m
Net profit, 105 94 12 94 13 298 297 0
SEK m
Earnings 3.53 3.18 11 3.19 11 10.06 10.19 -1
per share,
SEK
Operating 55 49 6 53 2 52 53 -1
margin, %

Net inflow, 5,920 9,430 -37 5,010 18 20,300 19,400 5
SEK m
No. new 24,500 23,100 6 20,400 20 73,700 72,700 1
customers
(net)
Savings 222,900 199,200 12 170,700 31 222,900 170,700 31
capital at
the
end of the
period, SEK
m

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.

For further information please contact:

Henrik Källén, Acting CEO
Telephone: +46 (0) 70 861 80 25

Birgitta Hagenfeldt, CFO
Telephone: +46 (0)73 661 80 04

Sofia Svavar, Head of IR
Telephone: +46 (0)8 409 420 17

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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http://news.cision.com/avanza/r/interim-report-january-september-2016,c2...
http://mb.cision.com/Main/350/2102864/576087.pdf

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