home credit group bv annual results 2019...this presentation is strictly private, confidential and...
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Home Credit Group BVAnnual Results 2019
March 2020
This presentation has been prepared solely for informational purposes and shall not be considered as an offer to sell or the solicitation of an offer to buy, subscribe for orotherwise acquire any securities of or obtain lending services from Home Credit Group B.V., Home Credit N.V., PPF Group N.V., Home Credit Consumer Finance Co. Ltd.,or any of their affiliates in any jurisdiction and shall not be treated as any investment advice or recommendation.
Copies Of This Presentation May Not Be Sent To Countries, Or Distributed In Or Sent From Countries, In Which This Is Barred Or Prohibited By Law. Persons Into WhosePossession This Presentation Comes Should Inform Themselves About And Observe All Such Restrictions. Any Failure To Comply With These Restrictions May ConstituteA Violation Of The Laws Of Any Such Jurisdiction. This presentation is strictly private, confidential and personal to its recipients and shall not be copied, distributed orreproduced in whole or in part, nor passed to any third party. In accessing to this presentation, you acknowledge that this presentation is confidential and intended only foryou and you agree that you will not copy, distribute, forward or publish this presentation any other person.
The presentation does not take into account, in any way whatsoever, the investment objectives, financial situation or specific needs of its recipients. The material containedin this presentation may include information derived from publicly available sources that have not been independently verified. Certain information in this presentation isbased on management estimates. Such estimates have been made in good faith and represent the current beliefs of members of management. Those managementmembers believe that such estimates are founded on reasonable grounds. However, by their nature, estimates may not be correct or complete. Accordingly, norepresentation or warranty (express or implied) is given that such estimates are correct or complete. Where this presentation quotes any information or statistics from anyexternal source, it should not be interpreted that Home Credit Consumer Finance Co. Ltd. or Home Credit N.V. or Home Credit Group B.V. has adopted or endorsed suchinformation or statistics as being accurate.
This presentation may contain forward-looking statements. These statements reflect the Home Credit Group B.V.’s current knowledge and its expectations and projectionsabout future events. By their nature, forward-looking statements are subject to a number of risks and uncertainties, many of which are Home Credit Group B.V.’s control thatcould cause the actual results and performance to differ materially from any expected future results or performance expressed or implied by any forward-looking statements.No representation or warranty whatsoever, express or implied, is made as to the accuracy, completeness, consistency or the reliability of the information contained in thisdocument and nothing contained in this presentation is, or should be relied upon as, a promise or representation. None of Home Credit Group B.V., Home Credit N.V. andHome Credit Consumer Finance Co. Ltd. accepts any liability for loss arising from the use of any information or acting on any opinion contained in this document. We retainthe right to change the contents of this presentation at any time without notice. Home Credit Consumer Finance Co. Ltd., Home Credit N.V., Home Credit Group B.V. andany other person are not under any obligation to update or keep current the information contained in this presentation or to correct any inaccuracies in any such informationwhich may become apparent or to provide you with any additional information. None of directors, officers, employees, direct or indirect shareholders, agents, affiliates,advisors or any other person accept any responsibility, liability or duty of care whatsoever for the contents of this presentation, and no representation or warranty, express orimplied, is made by any such person in relation to the contents of this presentation.
The numbers in this presentation are largely taken from the consolidated China GAAP financial statements of Home Credit Consumer Finance Co. Ltd. In this presentation,certain financial data and measures are presented which are not calculated pursuant to any accounting standard and which are therefore alternative performance measure.These financial data and measures are, among others, RoAA and NPL. These alternative performance measures are included to provide readers with further basis, alongwith standard accounting measures, for measuring the financial performance. Because of the discretion that the management has in defining and calculating thesemeasures, care should be taken in comparing these measures with similar measures used by other companies. Alternative performance measures have limitations asanalytical tools, and readers should not consider them in isolation, or as a substitute for analysis of results as reported under statutory accounting standards, and readersshould not place any undue reliance on the alternative performance measures.
For more information of Home Credit Group, please visit www.homecredit.net.
Disclaimer
3
Our strategy is to transform the way our customers purchase and make the things that matter in their lives affordable for
them in a convenient and efficient way by building long-standing relationships in our core high-growth markets
2019 KEY STATISTICS
Focus on
Digitalisation
• Distribution: Deployment of self handling offline POS application and remote self assisted application
• APP Registered users grew by more than 60% y-o-y to 70mn
• Market Place launched into 3 additional countries
• Underwriting: Fully automated process with 33 second median time to decision
• Collection: High efficiency of Voice bots and Tchat bots, 90% voicebots collection call with no human
intervention
Continued
Growth and
Evolution in our
Business
Operations
• Granted 32.8 million loans (POS and Cash) in 2019 or equivalent to 1 loan a second
• Leadership in POS lending through 477K POS, 764k tippers supporting referrals, 1,000 E-POS and
leveraging significant relationship with retailers
• Scale with 135mn+ customers served in our 23 years of operation
• New credit card license granted in Philippines. Successfully rolled out new revolving products across our
countries of operations
• Continue to win a number of awards in our key countries demonstrating the continue recognition of our
franchise
Strong
Financial
Results
• Stable revenue and portfolio growth (14% in net interest income, 16% in net loans)
• Cost of risk improved from 9.5% in 2018 to 8.6% during 2019
• Continued focus on OPEX productivity with Cost-to-income ratio decreasing from 44.3% to 42.6%
• Funding source diversification (including growth in joint lending volume and new partners onboarding)
• Profit before tax grew by 31% from EUR 469 mn in 2018 to EUR 613 mn in 2019
• Strong equity position of EUR 2.9 bn with equity-to-assets rising to 10.8%
4
Leadership position in core markets sustain profitable operations at scale backed by a strong balance sheet
2019 KEY STATISTICS
€400MnNet Income
#1POS leadership
in key markets1
32.8 MnLoans granted
135Mn+Borrowers served
67%New Volume from
Repeat Customers
<33sMedian Time to
Decision
€4.3BnOperating
Income
€613MMProfit before tax
€2.9Bn Equity
Operations in
10 countries
€21.7Bn Gross Loans
1 excluding India
5
Simple products distributed through an unparalleled omni channel network
PRODUCTS ALLOW CUSTOMER TO SHOP WHENEVER WHEREVER THEY WANT
Avg. line: €1,534 / Revolving
Revolving
Loans
Avg. size: €361 / Avg. tenor: 13 months
POS
Loans
Avg. size: €2,189 / Avg. tenor: 43 months
Cash
Loans
Additional
ProductsFlexibility | Protection | Warranties
✓
HC App
70MMRegistered
Users
Customer
applies via
website or
mobile app
Salesperson
verifies
customer
Go to
POS
1,000
E-shop
Partners
68KPOS
Sales Team
764KTippers
477KPOS
82
Product
Partners
52%
48%
Channel
Mix
6
Further integration of technology across the operations from sourcing to underwriting to collection to CRM
LEVERAGING ON SUPERIOR TECHNOLOGY
Paperless
Automated
Processing
Voicebot
& Chatbot
Mobile
ApplicationsCollections
SystemCRM
System
Customer
Care Centre
System
Credit
Decision
Engine
Mobile APP
• > 70 MM registered users
• Roll out of HC pay functions
• One stop shopping & customer
service functions enable
effective cross-sell
• Best Mobile Banking App 2019
in Markswebb's Digital Office
category in Russia
• Leverage wide selection of products at
attractive rates
• Driven daily user up by 40% in China
and Indonesia in 2019
• Convenient online experience allowing
for Online to Offline
Leveraging technology throughout the customer life cycle
Application Collection
Underwriting
CRM
Predictive
dialingBiometric
identification
A.I. feature engineering
Biometric ID
& Video
Interview
PropensityModel
Market Place
7
10,920 11,955
3,0833,773
1,915
2,581
2018 2019China CIS SSEA CEE
4,559 4,993
11,93813,913
529801
2018 2019POS Cash loan Revolving Other
17,46220,185
3,362
3,2882,823
3,117
2018 2019
Other assets
Cash and cash equivalents
Net Loans to customers
Net Loans to Customers by Geography1
+12% +16%
Total Assets Net Loans to Customers
(€ MM)(€ MM)
16.5%
9.5%
51.4%
(€ MM)
9.5%
34.8%
22.6%
22.4%
Y-o-Y Growth
Y-o-Y Growth
OVERVIEW OF ASSETS & LOAN PORTFOLIO
Solid growth in operations leveraging growing scale of business
• Growth of assets
driven by 16% growth
in net loan portfolio
• Loan portfolio as a
percentage of total
assets increased
from 74% to 76%
• Strong growth in all
clusters lead by
SSEA
• Prudent expansion in
China in
consideration of
external factors
1 excluding Others segment
8
6,776 7,348
11,96612,979
1,795
2,449
2018 2019
Debt Securities
Due to Banks & Other FinancialInstitutionsCurrent Accounts & Deposits fromCustomers
2,154
2,873
2018 2019
Continued diversification in Funding
FUNDING AND EQUITY
Funding mix evolution
+11%
Y-o-Y Growth(€ MM)
Equity
(€ MM)
8%
8%
36%
9.1% 10.8%Equity to
Assets
Ratio
• 210+ relationship
with banks and
financial institutions
• Greater penetration
of capital market with
36% y-o-y growth
• Key issuances:
• AT1 in Russia
• Financial
Bond in China
• CNY 11.5 Bn
ABS issued in
China
• INR 7.7 Bn
ABS in India
• Equity to asset
increased to 10.8%
driven by solid
profitability as well
as AT1 issuance in
Russia
9
3,2173,663
680
48356
103
2018 2019
Other operating income
Net fee and commission income
Net interest income
+7%
Operating income breakdown Average portfolio Yield, COF & NIM
(€ MM)
22.20% 22.50%
15.50% 15.50%
7.20% 7.50%
2018 2019
Average Portfolio Yield
Net Interest Margin
Cost of Funds
OPERATING INCOME
Stable portfolio yield and NIM during 2019
• Interest Income grew
by 16% in line with
portfolio growth
• COF increase slightly
due to an extension
of borrowing tenor to
match assets
• NIM remained stable
at 15.5%
• Net Fee &
commission
decrease due to
regulations in China
limiting our ability to
offer additional
products
10
Continued focus on cost efficiency and productivity enhancement
OPERATING EXPENSES AND EFFICIENCY
%
Personnel
Expense
136,483
123,888
2018 2019
88%
Total Operating and Administrative Expenses
(€ MM)
Cost-to-Income Ratio
Number of Employees
44.30%
42.60%
2018 2019
1,7501,810
2018 2019
87%
OPEX as %
of Assets 6.8%7.4%
• Personal operating
expenses grew by
0.3% y-o-y compared
to net loan growth of
16%
• Key initiatives:
- New technology
(e.g. VoiceBot)
- Increasing
efficiency of POS
network
- Reduction in
headcount
• Increase in scale /
operating leverage in
China and SSEAChina in low
30’s
11
Impairment Losses on Financial Assets
(€ MM)
Cost of Risk
NPL Ratio
127.6% 130.6%NPL
Coverage
Ratio
1,729
1,823
2018 2019
+5.5% 9.5%
8.6%
2018 2019
8.4%
5.6%
2018 2019
Improving asset quality
REVIEW OF ASSET QUALITY
• Improved credit
quality due to
ongoing portfolio de-
risking and increased
access to data and
better customer
segmentation
• Revision in credit
loss estimate at the
time of write-off and
alignment of the
estimate with latest
recovery
expectations
• Cost of risk reduced
as a consequence
12
469
613
422400
2018 2019
Pre Tax Post Tax
Strong pre-tax improvement
PROFIT BEFORE & AFTER TAX, RETURN ON ASSETS & EQUITY
Profit before & After tax
(€ MM)
Return on Adjusted Assets
Return on Adjusted Equity
+31%2.11%
2.45%
1.90%1.60%
2018 2019
Pre Tax Post Tax
24.12% 24.21%21.70%
15.80%
2018 2019
Pre Tax Post Tax
-5%
• Strong improvement
in profit before tax
due to positive jaws
with revenue growth
outpacing expenses
• Tax expenses
returned to a normal
level in 2019,
following a low level
in 2018, when certain
Deferred Tax Assets'
were recognized, in
particular in India
• Strong Net Income
delivered with
healthy ROAA and
RoAE
13
Chinese franchise shows resilience while facing regulatory changes and macro headwinds
GEOGRAPHICAL CLUSTERS HIGHLIGHTS - CHINA
Regulatory
• PRC government and our primary regulators, issued various laws and
regulations with the objective of curtailing unsustainable lending activities in the
market
• Amongst the main impact to our business was an interest rate cap introduction
the rate cap applied in China imposed a review of our product offering and a
reduction of our net fee and commission income
• China our biggest market impacted by the ongoing US – China trade war which
in part has negatively impacted the GDP growth rate
• The Baoshang takeover situation impacted the entire market sentiment
Results
highlights
• Net Loan grew from EUR 10,920 mn in 2018 to EUR 11,955 mn
• NPL decreased from 9.7% at the end of 2018 to 6.2% at the end of 2019, NPL
coverage ratio increased from 125.9% to 129.4% respectively
Macro
Key
Achievements
• Further leveraging of technology in physical POS with self service and remote
assistance
• Growth of Market Place driving App daily usage increase
• Execution of a number of high profile partnership including Webank
• Significant expansion of joint lending and capital market activity
14
Strong performance in other clusters
GEOGRAPHICAL CLUSTERS HIGHLIGHTS - CONTINUED
CIS
• Benefited from monetary easing and/or public spending to support the domestic economy
• Successful APP roll out awarded best Mobile Banking App in Russia
• Successfully issued a AT1 bond in Russia and gathered an increased amount of deposit in
Kazakhstan
• Net loan grew from EUR 3,083mn to EUR 3,773mn and NPL decreased from 3.7% to 3.1% at
the end of 2019 resulting in strong income
• Strong loan growth despite mature market
• Innovate and expand our distribution capacity both online and offline
• New revolving products met significant customers’ interest and satisfaction combined with
strong growth in mobile app daily users
• Net loan grew from EUR 1,513mn in 2018 to EUR 1,855mn in 2019, while our NPLs
decreased from 10.7% to 8.8%, net income achieved was amongst strongest to date
• Airbank achieves highest net income result to date
SSEA
• Significant improvement of our operations’ results as they mature and gain further critical scale
• Launch of market place and obtention of credit card licenses
• Turmoil in India local capital market and tax reform
• Further growth of joint lending in existing market or launch in new market
• Net loan grew from 1,915mn in 2018 to EUR 2,581 mn 2019, NPLs decreased from 6.2% to
4.1%, all countries turned profitable
CEE
15
Our Philosophy
We understand that our place in the financial industry gives us
an important role in enhancing financial inclusion, as we can
often be the first touchpoint for people encountering the
regulated financial system
CORPORATE SOCIAL RESPONSIBILITY AT HOME CREDIT
Financial Literacy
“Juan, Two, Three”
is a roving series of
workshops in rural
and urban areas
across the
Philippines
Poverty Reduction
Host seminars
focusing on various
key issues including
gender empowerment
Direct Aid
Donated 11 tonnes of
medical and personal
safety equipment as
well as RMB 1 mn to
Wuhan during the
Covid-19 outbreak
Students in Home Credit ’s “Blue Bird” programme for disadvantaged children in Russia
Estimed
3 million peopleImpacted by our CSR
programmes reached in 2019
*company estimate
Our focus is promoting financial inclusion and the conditions that facilitate financially inclusive societies
3 Pillars of HC’s CSR• Education, and financial literacy
• Poverty reduction
• Direct aid to our communities
As well as supporting employee
initiatives
16
Numerous accolades for customer experience, corporate and social responsibility or quality employer
2019 AWARDS
“Best Bank for CSR”Kazakhstan - AsiaMoney Magazine
“Most Trusted Brand” for Non-Banking Consumer Loans”Czech Republic Most Trusted Brand Awards
“Most Socially Responsible Consumer Finance
Company”Philippines - International Finance Magazine
“Excellent CSR Company Award”China Finance Winter Summit
Major Company Awards
China:
• CFC with Best Customer Experience,
Tsinghua University
Slovakia:
• Slovak Superbrand Award, Non-banking
category
Indonesia:
• Best Multi-Finance Company, Infobank
Digital Brand Awards
Air Bank (Czech Republic):
• 1st place, KPMG/Fincentrum Bank of the
Year contest
• 1st place, HN Best Bank contest
Product and Marketing Awards
Vietnam:
• Top 10 High-Quality Product, Vietnam
Institute for Economy and Culture
• Most Innovative CFC, International Finance
Magazine
Indonesia:
• Winner in Consumer Finance, Indonesia
Best Brand Awards
• Smartest Financing Channel, Electronic
City Awards
• Best Social Media Advertising, OJK Awards
Air Bank (Czech Republic):
• 1st place, Effie Marketing Awards
CSR Awards
China:
• Best CSR Fintech, 8th China Charity
Festival
Russia:
• Best Volunteer Project, Eventiada IPRA
Awards
Vietnam:
• Unique CSR Programme, Saigon Times
Kazakhstan:
• Best Bank for CSR, AsiaMoney
Magazine
Philippines:
• Most Socially Responsible CFC,
International Finance Awards
HR Awards
Indonesia:
• Best Retention Strategy, Best
Leadership & Development, HR
Excellence Awards
Philippines:
• Best Employee Engagement, Public
Affairs Gold Standard Awards
Air Bank (Czech Republic):
• Best Employer, Employer Brand
Research Awards
India:
• Best Employer Award, Kinetic
17
OUTLOOK AND RECENT EVENTS
New appointments
• Jean Pascal Duvieusart appointed CEO as Ondrej Frydrych returns to the helm of our Chinese operations.
Changes made to continue the execution of our strategy in a dynamic and fast changing industry
Coronavirus outbreak
• In China, where the outbreak started in early January, the economy and our business was impacted but our
business is fully operational as China goes back to work
• New volume dipped as people were confined home but is steadily recovering
• Our collections are fully automated
• Granted payment holidays to most affected customers
• Expect to see a slight increase in NPL levels in the short term due to the adjustment of our loan book
• Our balance sheet remains solid, our relationship with partners is strong and we have the capacity to
manage potential shocks in the short term
• No material impact observed to date in our operations in other countries but we continue to monitor markets
and assess potential impact
Other
• Velvon project: After reevaluating the project in Germany, it was decided to wind down the operations as
does not support the group’s renewed strategic focus on building long-standing relationships with
customers in its core, high-growth markets
• Revolving product: Credit Card license obtained in Indonesia
Appendix
19
HC GROUP B.V. BALANCE SHEET
As at 31 December
(€ MM) 2018 2019
Assets
Loans to customers 17,462 20,185
Cash and cash
equivalents3,362 3,288
Other assets 2,823 3,117
Total assets 23,647 26,590
Liabilities
Due to banks and other
financial institutions11,966 12,979
Current accounts and
deposits from customers6,776 7,348
Debt securities issued 1,795 2,449
Subordinated liabilities 199 15
Other liabilities 1,122 1,175
Total liabilities 21,493 23,717
Total equity 2,154 2,873
Total liabilities and
equity 23,647 26,590
For the year ended
31 December
(€ MM) 2018 2019
Interest income 4,601 5,325
Interest expense (1,384) (1,662)
Net interest income 3,217 3,663
Fee and commission
income837 661
Fee and commission
expense(157) (178)
Net fee and
commission income680 483
Other operating income 56 103
Operating income 3,953 4,249
Impairment losses on
financial assets(1,729) (1,823)
Operating and
administrative
expenses
(1,750) (1,810)
Profit / (loss) before
tax 469 613
Income tax (expense) /
benefit(47) (213)
Net profit / (loss) from
operations422 400