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Home Credit Group’s First-half 2020 Results

Home Credit

24/9/2020 | 7 minutes to read

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Home Credit’s response to the global pandemic underscores the resilience of its business model with development of robust reserves, a liquidity cushion and accelerated digitalization

Amsterdam, 25 September 2020 – During the height of the unprecedented measures to restrict social and business activities across all its countries, Home Credit Group B.V. (“HCGBV” or “the Group”) remained fully operational, adapted to the reality of the pandemic, and created substantial reserves to offset the elevated credit risk. By doing so, it has tackled the impact of the crisis decisively and embarked on a path to a post-COVID recovery in its markets.

Responding to this adverse environment, HCGBV increased its provisions leading to an overall loss in ongoing operations. The Group also quickly implemented stricter loan underwriting rules and stepped up initiatives to enhance cash collection, generating a strong liquidity cushion. On the operational side, HCGBV stepped up its global digital transformation programme, refining its physical distribution network and leveraging innovative technology and software in order to improve cost efficiency.

“The simultaneous impact of the coronavirus pandemic on all the markets where Home Credit operates is something we have never faced before. It is a credit to our teams and to our business model that we remain well-positioned going into the latter part of the year. I am confident that by keeping our business intact despite such strong headwinds, recalibrating our operations to reflect the changing environment and assisting our communities most hurt by this health crisis, HCGBV can draw a line under the first-half performance. I am encouraged to see that our business has already been improving since late in the second quarter. Barring further economic shocks, we expect the business tocontinue rebounding in the second half of 2020.”

Jean-Pascal Duvieusart, CEO of Home Credit Group B.V

Key Financial Highlights for 1H 2020
Income Statement 1H 2020 1H 2019 YoY Change
Net (Loss) Income (EUR million) (619) 250 N/A
Net Interest Income (EUR million) 1,698 1,803 (5.8%)
Net Interest Margin 14.9% 15.6% (0.7ppt)
Impairment Losses (EUR million) 1,791 871 105.6%
Balance Sheet 30 Jun 2020 31 Dec 2019 YTD Change
Total Assets (EUR million) 22,506 26,590 (15.4%)
Total Net Loans to Customers (EUR million) 16,157 20,185 (20.0%)
Key Ratios 1H 2020 1H 2019 YoY Change
Cost of Risk Ratio 17.8% 8.5% 9.3ppt
NPL Coverage Ratio 197.8% 124.1% 73.7ppt
  30 Jun 2020 31 Dec 2019 YTD Change
Liquid Assets-to-Total Assets Ratio 20.8% 18.1% 2.8ppt
Allowance-to-Gross Loans Ratio 12.2% 7.3% 4.9ppt
Non-Performing Loans Ratio 6.2% 5.6% (0.6ppt)


Operational Indicators 30 Jun 2020
Total Customers in Database (millions) 135.4

Lockdown measures curbed consumer spending both by limiting access to brick-andmortar stores across HCGBV’s markets and by creating spending constraints and hesitancy among consumers.

The pandemic severely impacted the Group’s new loan volumes across its footprint and forced the Group to adopt more stringent underwriting, resulting in a 44% year-on-year decline in new loan volumes to EUR 5.9 billion in first half 2020. As a result, total consolidated net loans declined 20.0% in the six months to 30 June 2020 to EUR 16.2 billion.

To offset the difficulties with new customer acquisition offline, HCGBV focused on improving engagement with its existing client pool and strengthened its digital distribution and repayment channels. The Group was able to limit the year-on-year decline in operating income to 10.2%, decreasing to EUR 1.9 billion for the first half, compared to a 20.0% decrease in net loans. The Group also actively focused on cost control and improving its operating efficiency

through the expedited execution of its digital strategy. In the second quarter, the Group’s operating expenses were 17.4% lower compared to the final quarter of 2019. As anti-pandemic restrictions and loan payment moratoria took hold, the Group proactively assessed its portfolio and created reserves to draw a line in the sand and cover the impact on its credit portfolio. In the first half, impairment provisions rose to EUR 1.8 billion from EUR 871 million. The increased provisioning corresponds to HCGBV’s conservative view of the scope for potential loan defaults.

During the first half, the NPL ratio increased slightly to 6.2% from 5.6% at the end of 2019 and as at the end of June, the Group had 10.3% of its loan portfolio subject to payment holidays. The coverage ratio for the overall loan portfolio or allowance-to-gross loans increased to 12.2% as of 30 June 2020, from 7.3% at the end of 2019. The Group therefore boosted its non-performing loan coverage ratio to 197.8% as of 30 June 2020, from 124.1% a year earlier.

This prudent approach creates a solid foundation for anticipated business recovery, which has been observed since late in the second quarter. While allowing for possible temporary flare-ups of the pandemic in the coming months, the Group is now focused on business opportunities in a post-COVID environment.

Amid COVID-19 restrictions, the Group accelerated the implementation of its global digital strategy leveraging its 81 million registered mobile application users. The strategy focuses chiefly on driving online sales via HCGBV’s proprietary mobile app, introducing paperless sales processing at physical stores, rolling out our e-commerce portals, and using voiceand chat-bots at customer care centres. This rapid digitalization is streamlining the Group’s omni-channel distribution network by making its sales points entirely self-serviced or operated by retailers’ staff. The transition has allowed HCGBV to transfer tasks from its own sales teams to external parties, demonstrating how existing market trends are being propelled by the pandemic. These adjustments have also allowed the Group to reduce its operating costs, including on personnel.

With many economies around the world starting to reopen in late May and early June, HCGBV has begun to see signs of improved loan demand across its operations. This positive financial and operational trend continued through July and beyond. During the period, HCGBV maintained its strong capital position with an equity-to-net loans ratio of 12.8%. Ongoing diversification of funding also continued with HCGBV maintaining access to local and international banking partners. Total equity as of 30 June 2020 was EUR 2.1 billion.

Putting Employees, Customers and Communities First

Throughout the pandemic, the Home Credit has prioritized employee health and safety and support for its customers and partners. HCGBV quickly carried out its necessary business continuity plans and adapted to the evolving circumstances in all its markets. HCGBV provided customers whose incomes were impacted by the pandemic with both government-mandated payment relief plans and additional assistance, including late fee waivers and extended payment insurance policies. The Group also ensured that its customers were informed about the assistance available to them. HCGBV offered its employees options to enable them to continue working as safely as possible, including working remotely from home. Wherever possible, HCGBV provided  24/7 hotlines to give employees access to medical advice and mental health counselling from telemedicine professionals. The Group also supported those employees most
affected by the health crisis with supplementary health insurance, financial donations and other aid. HCGBV strived to help all the local communities where is operates affected by the COVID- 19 pandemic. In total, the Group has distributed over 55 tonnes of emergency medical equipment, including face masks, respirators and testing kits, with a value of over EUR 5 million. In addition, HCGBV donated and distributed food and financial aid to affected areas.
As the current situation evolves, the Group will continue to maintain its focus on supporting employees, customers and partners, contributing to the recovery in all its communities.

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