Zurich – For the first half-year 2016 Cembra Money Bank reports a 3 % increase in net income to CHF 71.8 million or CHF 2.55 per share. This reflects an annualised return on average shareholders’ equity (ROE) of 18.2 % while maintaining a strong capital position with a Tier 1 capital ratio of 20.1 %. Costs remained well under control as demonstrated by the competitive cost/income ratio of 42.9 %. With net financing receivables expanding by 1 % to CHF 4.1 billion, Cembra Money Bank was able to outperform Swiss GDP growth.

Robert Oudmayer, Chief Executive Officer, said: “Our Bank achieved the best first half-year results since the IPO in 2013 despite a challenging economic environment. The Bank remains strongly capitalised and is now 100 % stand-alone funded.”

Strong first half-year results

Net revenues increased by 4 % to CHF 197.4 million compared to first half-year 2015, driven by both interest and commission and fee income. Net interest income, which accounts for 76 % of net revenues, was up 2 % to CHF 150.3 million, reflecting a net interest margin of 7.3 %. Interest income was down 2 % driven by the business mix and costs for cash held at the Swiss National Bank (SNB). Interest expense fell 28 % on favorable repricing of the Bank’s liabilities and the partial repayment of the GE term loan. Commissions and fee income, which contributes 24 % to net revenues, was up 10 % to CHF 47.1 million, mainly driven by strong credit cards fee income and higher insurance profit share. Provision for losses came in at CHF 21.7 million translating into a loss rate of 1.05 % of financing receivables which is in line with 2015 performance. Cembra Money Bank’s prudent risk management approach was reflected in stable delinquencies at low levels: 2.0 % for 30+ days past due and 0.4 % for non-performing loans (NPL).

Total operating expenses were 4 % higher at CHF 84.8 million. Personnel expenses increased by 2 % to CHF 49.9 million as a result of higher pension cost. General and administrative expenses of CHF 34.9 million were 7 % up due to an increase in IT and depreciation costs after the successful completion of the IT separation end of 2015. This resulted in a competitive cost/income ratio of 42.9 %. Income before taxes increased by 3 % to CHF 90.9 million. With an unchanged tax rate of approximately 21 %, this led to a strong net income of CHF 71.8 million representing an increase of 3 % compared to first half-year 2015.

Fully independently funded

Cembra Money Bank continued to further diversify its funding. Owing to the attractive term deposit rate offering the Bank has been able to increase deposits from both retail (up 8 %) and institutional clients (up 1 %) to an aggregate CHF 2,324 million. Deposits now account for 62 % of total funding. In June 2016, the Bank successfully executed its fourth auto lease asset backed security (ABS) transaction of CHF 200 million at favorable conditions. The Bank also fully repaid the remaining CHF 250 million term loan from the General Electric Group in two steps during January and July. With that the Bank is now 100 % independently funded.

Strongly capitalised Bank

Shareholders’ equity decreased slightly to CHF 779 million by end of June 2016 as a result of the CHF 94.5 million dividend payment in May. With a Tier 1 capital ratio of 20.1 % Cembra Money Bank remains very well capitalised. Compared to the Bank’s minimum Tier 1 target of 18 %, excess capital amounts to CHF 78 million. The Bank prefers to use that capital for acquisitions in the consumer finance space to support the growth of the business.

Continued strong growth in the cards business

Despite resilient private consumption in Switzerland the consumer loan market continued to decline in the first half-year 2016. Receivables in the Bank’s personal loan business decreased by 2 % to CHF 1,756 million compared to year-end 2015. Revenues reduced in line with the receivables development to CHF 98.7 million. As the Bank kept its pricing stable until May, the yield was virtually unchanged at 10.9 %.

After a very strong growth development in 2015 the Swiss auto market stabilised in the first six months of 2016. While new car registrations slightly regressed the market for used cars developed positively. The Bank’s net financing receivables of the auto leases and loans portfolio increased by 1 % to CHF 1,670 million. Interest income fell by 3 % to CHF 41.8 million and the yield was 5.0 %.

Cards again recorded excellent growth with net financing receivables increasing by 9 % to CHF 673 million compared to year-end 2015. Revenues in the cards business increased supported by higher cross-border transactions and the overall growing portfolio. Interest income of CHF 25.0 million was 14 % higher than in the first half-year 2015 and the yield rose to 7.7 %. All credit card programs contributed to the 6 % increase in the number of issued cards to 693,000 (compared to year-end 2015). Furthermore, the partnership with Conforama was renewed and FNAC, a retailer of entertainment and leisure products and consumer electronics, was signed as new credit card partner.

New interest rates for consumer loans

On 11 December 2015, the Federal Council decided to decrease the maximum interest rate on consumer loans offered under the Consumer Credit Act from 15 % to 10 %. The respective maximum interest rate for credit card overdraft was reduced to 12 %. This decision came into force as of 1 July 2016 for all new contracts entered thereafter. Cembra Bank has adapted the pricing of its loan products accordingly and offers personal loans starting from 7.95 %. Also the pricing for some of the smaller credit card programmes has been adjusted. In order to mitigate the potential consequences the Bank has defined a set of measures. Some of them will be introduced in the short and medium-term, others have already been implemented. The Bank decided for example to close four smaller branches as of 1 May 2016.

Full-year 2016 guidance

Assuming no major change in the economic environment, Cembra Money Bank expects earnings per share (EPS) at the higher end of the guided range of between CHF 4.80 and CHF 5.10. For full-year 2016, interest income in the personal loans business is expected to decline as a result of the interest rate cap effective since July 2016. On the other hand, lower refinancing costs and continued growth in the credit card business should be supportive to revenues. For loan loss provisions a stable development is foreseen and the loss rate is expected to be in line with prior years’ performance. Costs are expected to increase slightly for 2016.

All documents (half-year report 2016, investor presentation, letter to shareholders and this media release) are available at www.cembra.ch/en/investor.