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Evli Bank Plc’s Interim Report January-September 2019
22.10.2019 klo 17:15 Evli Bank Plc’s Interim Report January-September 2019
EVLI BANK PLC STOCK EXCHANGE RELEASE OCTOBER 22, 2019, AT 5.15 PM.
THIRD QUARTER OPERATING PROFIT INCREASED BY NEARLY 20 PERCENTThe Wealth Management and Investor Clients segment's operating profit decreased and was EUR 12.3 million (1-9/2018: EUR 13.5 million)The Advisory and Corporate Clients segment's operating profit nearly doubled and was EUR 1.6 million (EUR 0.8 million)The return from own balance sheet items developed favourably and totaled EUR 3.2 million (EUR 1.1 million) improving operating profit in the Group Operations segmentAccording to strategy, Evli's assets under management in alternative investment products increased during the review period and were EUR 814 million (about EUR 250 million).
January-September 2019Net revenue was EUR 53.1 million (EUR 51.0 million)Operating profit was EUR 15.4 million (EUR 15.3 million)Profit for the financial year was EUR 12.1 million (EUR 14.8 million). Profit for the financial year includes EUR -0.1 million (EUR 2.1 million) of the share of the associated companyEvli's diluted earnings per share were EUR 0.47 (EUR 0.59) and return on equity was 21.1 percent (26.8%)Net assets under management grew and totaled record-high EUR 13.6 billion (EUR 12.3 billion) at the end of SeptemberProportion of recurring revenue to operating costs was 118 percent (118%).
July-September 2019The The Group's net revenue was EUR 18.0 million (EUR 16.1 million)The Group's operating profit was EUR 5.9 million (EUR 4.9 million)Earnings per share amounted to EUR 0.18 (EUR 0.20).
Outlook for 2019 specified
The risks associated with the general trend in the equity and fixed income markets are high due to the prevailing uncertainty on the markets. A possible continued decline in equity prices or a reduction in investors’ risk appetite would have a negative impact on the company’s profit performance. Evli Group’s assets under management have grown substantially in recent years, which softens the result-impact of any reversal of the market. Sales of alternative investment products, in particular, have brought new, stable revenue. Evli has initiated a series of internal, strategy-based actions and cost savings, leading to improvements in the company’s cost effectiveness.
There has been positive development in the demand for advisory services, and its outlook for 2019 is stable. Own balance sheet investments share of Evli’s business decreased during 2018. Nevertheless, it may have a significant impact on the company’s result performance. In the advisory business and in own investment activities, fluctuations in quarterly and annual returns are possible. Customer's demand for Evli's products and services has continued to be good, which has also led to a systematic increase in lending.
Because of profitable and stable development, we estimate that our operating profit for 2019 will remain at or above the level of the comparison period.
Earlier we said that, because of profitable and stable development, we estimate that the result for the 2019 financial year, will be clearly positive.
Key Figures1-9/2019 1-9/2018 1-12/2018 Income statement key figures Operating income, M€ 53.1 51.0 68.5 Operating profit/loss, M€ 15.4 15.3 18.9 Operating profit margin, % 29.0 30.0 27.6 Profit/loss for the financial year, M€ 12.1 14.8 17.3 Profitability key figures Return on equity (ROE), % 21.1 26.8 23.0 Return on assets (ROA), % 1.7 2.1 1.9 Balance sheet key figures Equity-to-assets ratio, % 7.1 8.2 9.5 Group capital adequacy ratio, % 14.9 15.3 16.2 Key figures per share Earnings per Share (EPS), fully diluted, € 0.47 0.61 0.68 Comprehensive Earnings per Share (EPS), fully diluted, € 0.47 0.59 0.67 Dividend per share, €* 0.61 Equity per share, € 3.15 3.17 3.27 Share price at the end of the period, € 8.32 9.40 7.28 Other key figures Expense ratio (operating costs to net revenue) 0.71 0.70 0.72 Recurring revenue ratio, % 118 118 113 Personnel at the end of the period 254 260 254 Market value, M€ 198.9 222.7 172.5
*Dividend for 2018 approved by the Annual General Meeting. The dividend was paid on March 21, 2019.
Maunu Lehtimäki, CEO
The business developed positively in the third quarter. Client activity was high, as it had been in the first half, and this was reflected as strong demand for fund products, discretionary asset management services and corporate services. Fund and asset management fees grew year on year and client assets under management rose to EUR 13.6 billion, which is the highest figure in Evli's history. The growth in net commission income and balance sheet income remaining at the previous year's level boosted the Group's revenue so that it was 12 percent higher and operating profit so that it was almost 20 percent higher year on year.
The development and sales of alternative investment products, international fund sales, and projects to promote customer experience and digitalization, which are core areas of Evli’s strategy, developed as planned.
In alternative investment products, we raised nearly EUR 50 million in new capital for the Evli Private Equity I Ky and II Ky funds and the non-UCITS Evli Rental Yield Fund. The capital, including investment commitments, of alternative investment products exceeded EUR 800 million at the end of the review period compared with around EUR 250 million a year earlier. Alternative investment products have thus become a major source of commission income within a short time and we expect their relative importance to continue to grow in the future.
International fund sales grew by around EUR 100 million during the review period and calculated from the beginning of the year has grown by about EUR 450 million. Most of the international fund sales focused on our corporate bond funds, especially the Evli Nordic Corporate Bond Fund, which already had capital of almost EUR 1 billion at the end of September. Overall, our international fund capital grew to EUR 2.5 billion compared with EUR 2 billion a year earlier. Evli’s major markets outside Finland are Sweden and the other Nordic countries and the large countries in Central Europe, particularly Germany, France and Spain. We expect international fund sales to continue to focus on corporate bond funds because of their record low interest rates and, on the other hand, because the global economic challenges, the China-US trade war and Brexit are limiting investors' risk appetite on a broader scale.
At home, the sales performance of fund products and discretionary asset management services was also favorable for both private and institutional clients. Growth in asset management services for private persons has recently been accelerated by Evli's wider range of alternative investment products, combined with its market-leading Private Banking service. On the institutional clients side, growth has been supported by Evli's success in surveys measuring the quality of asset management services. In the KANTAR SIFO Prospera "External Asset Management Finland 2019" survey, Evli was ranked as the best institutional asset manager for the fifth consecutive year.
Net subscriptions in Evli’s traditional mutual funds during the first nine months were over EUR 800 million and fund capital in these funds reached EUR 9.2 billion. Evli is the fourth-largest fund management company in Finland and its market share was 7.6 percent at the end of September.
In the Advisory and Corporate Clients segment the Corporate Finance business area performed well and invoicing increased on the previous year. The company's mandate base is stable and the outlook for the final quarter of the year is favorable. The outlook is supported by the IPO of Relais Group Plc, which took place in early October so the settlement fees will be booked in the fourth quarter. The incentive system management business grew thanks to new clients and existing clients extending their current incentive systems. The incentive system management business supports Evli Group's strategic target of strengthening the position of asset management among Finnish customers.
We will continue our resolute work to develop our strategic focus areas in order to reach our target of achieving an even broader selection of funds and more international clientele. By developing new alternative investment products, we want to meet client demand even better and strengthen the margin of our fund products. In addition, our work to create a unique client experience and to boost the efficiency of our investment processes continues. At the end of the quarter, Evli completed co-determination negotiations in the Group's administrative and support functions, which resulted in the reduction of the number of permanent employees by nine. Streamlining processes and creating new work models are a key part of the process of increasing the scalability of operations and boosting cost-effectiveness being focused on in Evli's information system projects. The trends prevailing in the sector, including increasing regulation, digitalization, growth in passive investment, price competition and responsibility all highlight the importance of expanding the clientele, differentiation, strong focus, and the continuous pursuit of cost efficiency.
EVLI BANK PLC
For additional information, please contact:
Maunu Lehtimäki, CEO, Evli Bank Plc, tel. +358 (0)50 553 3000, email@example.com
Juho Mikola, CFO, Evli Bank Plc, tel. +358 (0)40 717 8888, firstname.lastname@example.org
Evli Bank Plc
Evli is a bank specialized in investments that helps institutions, corporations and private persons increase their wealth. The product and service offering includes mutual funds, asset management and capital markets services, alternative investment products, equity research, administration of incentive programs and Corporate Finance services. The company also offers banking services that support clients' investment operations. Evli is the highest ranked and most used institutional asset manager in Finland*.
Evli has a total of EUR 13.6 billion in client assets under management (net 9/2019). The Evli Group’s equity capital totals EUR 75.1 million and its BIS capital adequacy ratio is 14.9 percent (September 30, 2019). The company has more than 250 employees. Evli Bank Plc’s B shares are listed on Nasdaq Helsinki Ltd.
*KANTAR SIFO Prospera External Asset Management Finland 2015, 2016, 2017, 2018, 2019, SFR Scandinavian Financial Research Institutional Investment Services, Finland 2015, 2016 ,2017, 2018.
Nasdaq Helsinki Ltd, main media, www.evli.com