Zurich – Cembra Money Bank’s (Ticker: CMBN) net financing receivables increased by 2% to CHF 4.2 billion with all products contributing to the overall growth. Both loss performance and costs were stable and in-line with expectations. Net income for the first half-year 2017 was 3% lower at CHF 69.4 million, or CHF 2.46 per share, on the back of the lower interest rate cap. This translated into an annualised return on average shareholders’ equity of 16.9% while maintaining a strong capital position with a Tier 1 capital ratio of 20.2%.
Robert Oudmayer, Chief Executive Officer, commented: "The interest rate reduction has influenced net interest income as expected. Cembra was prepared for this change and was able to increase other revenues. In the first six months of 2017 we have delivered on our medium-term targets and we are confirming our guidance for the full-year."
Lower interest income partially offset by strong fee and commission income
Net revenues decreased by 3% to CHF 192.3 million. Net interest income, which accounted for 72 % of net revenues, declined by 8% to CHF 138.6 million, translating into a net interest margin of 6.7%. Interest income was 8% lower driven by the implementation of the interest rate caps and by the costs-for-cash held at the Swiss National Bank (SNB). Interest expense reduced by 11% as the Bank continued to benefit from the low-negative interest environment. Commissions and fee income, which contributed 28% to net revenues, was up 14% to CHF 53.8 million, mainly driven by strong credit cards fee income. Provision for losses on financing receivables came in at CHF 21.1 million, translating into a loss rate of 1.0% in-line with prior periods.
Total operating expenses declined by 2% to CHF 83.3 million. Personnel expenses were up 2% to CHF 50.7 million as a result of higher headcount whilst general and administrative expenses of CHF 32.6 million were 7% lower mainly due to lower marketing and rental costs. Consequently, the cost/income ratio slightly increased to 43.3%. Income before taxes decreased by 3% to CHF 87.9 million translating into a net income of CHF 69.4 million after tax or CHF 2.46 per share.
All products contributed to the financing receivables growth
Despite a subdued consumer finance market, the Bank’s net financing receivables increased by 2% to CHF 4,171 million with growth across all products. Receivables in the personal loan business increased by 1% to CHF 1,738 million compared to year-end 2016. Interest income of 84.2 million was 15% lower due to lower interest rates leading to a 9.6% yield.
The Swiss auto market was stable in the first half of 2017. The market for used cars was in-line with previous year whilst new car registrations developed positively. The Bank’s net financing receivables of the auto leases and loans business increased by 1% to CHF 1,658 million in-line with market trends. Interest income reduced by 1% to CHF 41.4 million generating a 5.0% yield.
Net financing receivables in the credit cards business recorded a strong growth of 9% reaching CHF 772 million by end June 2017. The increase was driven by the increase in the number of cards issued, by higher average spending and by the increase in the number of transactions. Interest income in the cards business increased by 9% to CHF 27.2 million with a 7.3% yield. The number of credit cards issued increased by 6 %, or 41,000, to circa 768,000.
Strong balance sheet
The Bank further optimised its funding portfolio in-line with its strategy. The average remaining maturity was increased to 2.9 years and the period-end funding cost was reduced from 66 basis points to 62 basis points. In June 2017 the Bank raised CHF 150 million through a senior unsecured bond with a coupon of 0.375% and eight years maturity. Funding from retail and institutional clients reached an aggregate CHF 2,356 million. Overall, the funding mix remained stable with 59% deposits and 41% non-deposits.
Shareholders’ equity decreased by 6% to CHF 794 million by end of June 2017 as a result of the dividend payments of CHF 125.5 million in May. Cembra Money Bank remains very well capitalised with a Tier 1 capital ratio of 20.2% and a leverage ratio of 15.6%.
Beginning of March 2017, the Bank successfully completed the acquisition of Swissbilling, an invoice financing provider based in Switzerland. In the first six months of 2017, Swissbilling financed about 190,000 invoices with a volume of circa CHF 23 million. The number of merchants grew to more than 280.
On 21 July 2017, the Bank signed an agreement to refinance a CHF 42 million personal loan portfolio from eny Finance AG, a Swiss pure online personal loan provider. The Bank also has agreed to partially finance future personal loan volume. The financing deal will be structured via a special purpose vehicle (SPV) that will be fully owned, controlled and consolidated by Cembra Money Bank. eny Finance AG will remain an independent player in the Swiss personal loan market and continue originating assets in accordance with its own policies.
Outlook for full-year 2017
The Bank confirms the original guidance provided in February 2017 with earnings per share of between CHF 4.70 and CHF 5.00 for the full-year. Lower net interest income following the introduction of the rate caps in July 2016 is expected to be partially offset by the continued growth in the credit cards business. Loss performance is expected to be in-line with prior years. Cost discipline with continued investments in digitisation will lead to a slightly higher cost/income ratio for the full-year 2017.
All documents (half year report 2017, investor presentation and this media release) are available at www.cembra.ch/en/investor.
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22 February 2018 Publication of full-year 2017 results
18 April 2018 Annual General Meeting 2018
Audio webcast and telephone conference for investors/analysts (in English)
Date and time: 25 July 2017 at 09.00 a.m. CET
Speakers: Robert Oudmayer (CEO), Rémy Schimmel (CFO) and Volker Gloe (CRO)
Audio webcast: www.cembra.ch/en/investor
Telephone: Europe: +41 (0)58 310 50 00
UK: +44 (0)203 059 58 62
US: +1 (1)631 570 5613
Q&A session: Following the presentation participants will have the opportunity to ask questions via the telephone conference. Please dial in 10–15 minutes before the start of the presentation and ask for "Cembra’s half-year 2017 results".