Home Credit B.V.: IFRS consolidated results for the six-month period ended 30 June 2016
Asian high-growth countries driving ahead; Russia profitable, back on track
Amsterdam, 29 August 2016: Home Credit B.V. (‘HCBV’ or ‘the Group’), the Netherlands-based holding company for Home Credit’s leading multi-channel consumer finance operations in CEE, Asia and the US, announces its consolidated financial results for the six-month period ended 30 June 2016 in accordance with International Financial Reporting Standards (IFRS).
“Building on the positive start to the year, the Group produced another strong performance, delivering a fourth consecutive quarter of profitable growth. The momentum in China and Vietnam continues, while the highlight of the period was our return to profitability in Russia after a period of recalibration in the face of the economic challenges in that market. While we are delighted with the contribution from Russia, the Asian markets remain the growth drivers and we continue to invest in that region, expanding our network in areas such as India, Indonesia, and the Philippines, in order to secure a strong position in these high-growth markets.
China again outperformed the other regions with an almost three-fold increase in volumes year on year. Given its importance, we are investing behind this growth to achieve the optimal scale for this business more quickly. Across our footprint, we continue to launch new offerings in order to extend and develop our customer base, and this is particularly visible in Asia where, working with our retail and manufacturing partners, we introduced zero-percent loans. These proved a strong platform for cross-selling, allowing us to double our market share in Vietnam, while also doubling our volumes and our profits year on year. They were a resounding success not only there but in China and the Philippines as well, which shows that we are able to achieve an equally strong pace of growth across different Asian markets at the same time.
Our performance in the first half of 2016 has demonstrated once more the capability of our team to grasp opportunity while carefully analyzing and adapting to often changing macro-economic and operational conditions. The depth of our experience and ability to adapt quickly and effectively are key strengths of our business and mangement. We will continue to pursue a balanced geographical presence, allowing us to avoid over-dependence on any single market. With Asia leading the way, our operations will continue to deliver growth.”
Chairman of the Board of Directors and Group Chief Executive Officer, Home Credit B.V
Home Credit continued the growth from the previous period and delivered a net profit of EUR 59.3 million for the first six months of 2016. The profit registered in Q2 2016 amounted to EUR 44.7 million, significantly up from EUR 14.6 million in Q1 2016. The company maintained its focus on having a balanced geographical spread with new loans coming from across the footprint, increasing 80% compared to the first half 2015 with Asia recording the biggest gains. The Group now has over 15 million active clients, with over two-thirds of them in Asia.
Compared to the same period last year in China new loan volumes increased over 200%, and more than doubled in Vietnam, while the Philippines rose almost six-fold on a local currency basis. This is due mainly to a combination of the expansion of the POS network, with over 101,000 sites across Asia, and the roll-out of new zero-percent interest rate products in joint campaigns with retailers and electronics producers. In emerging markets, people are much more reliant on mobile devices to access important information due to a lack of infrastructure such as post offices and local government offices. This creates significant demand and through responsible lending Home Credit enables its customers to buy those devices, providing them with the ability to access vital information. Home Credit’s POS model is key to extending its customer base in this region. Home Credit had 7.3 million active customers in China and 1.3 million in Vietnam at the end of June, and recently added its 1 millionth customer in India.
In Russia, the optimization measures taken are delivering results, with business volumes increasing 20% year on year in the first half (measured in local currency) and a return to profitability in the second quarter. The operation is now much more efficient and correctly structured to reflect the ongoing economic conditions in that market. The Group is securing healthy new loans meeting robust risk assessment protocols and has again increased its POS market share to 28%. At the same time, 20% of customers now regularly use the company's online services, an important trend.
Looking ahead to the second half, the Group will continue to drive growth across its operations with a focus on further increasing its market share in relevant countries in Asia.
- The Group posted a net profit of EUR 59.3 million overall in the first six months of 2016 compared with a net loss of EUR 90 million for the first half of 2015, as the contribution of Asia to the Group business continued to grow and the Russian business returned to profitability. Net profit for the second quarter was EUR 44.7 million, a further improvement on the 14.6 million of net profit in the first quarter. This now marks four consecutive quarters of profit for the Group.
- Operating income in the first six months of 2016 increased 12.9% year on year to EUR 885 million (6M 2015: EUR 784 million). Net Interest Income was up 21.6% to EUR 679 million from EUR 559 million compared to the same period last year.
- HCBV’s multi-channel network consisted of 217,597 distribution points as at 30 June 2016, up 34.6% from June 2015, with 215,272 POS and loan offices, 360 bank branches and 1,965 post office sites. The Group continued to expand the network in Asia, particularly in China, where the number of distribution points has more than doubled since June 2015.
- New loan volume was EUR 4,631 million for the first half of 2016, up almost 80% year on year (1H 2015: EUR 2,574 million). In China, new loan volumes reached EUR 2,618 million (1H 2015: EUR 888 million) while in Vietnam new volumes increased to EUR 322 million from EUR 154 million in the same period of 2015 (our top two performers in absolute terms). Asian countries - althought different in terms of market size - are all achieving a robustly fast pace of growth in new loan volumes+. Vietnam achieved 109% year-on-year growth, China achieved 195%, India 164%, Indonesia 321%, and the Philippines achieved 466%. In Russia, new loan volumes stood at EUR 905 million, down slightly compared to EUR 914 million in the same period the previous year.
- General and Administrative and other operating expenses in the first six months of 2016 increased to EUR 517 million (6M 2015: EUR 421 million) in line with the significant expansion of Home Credit’s networks. However, in Russia the G&A expenses were cut by 21% despite rising business volumes and high inflation.
- The net loan portfolio increased to EUR 6,988 million (4Q 2015: EUR 5,835 million) reflecting strong growth in Asia, particularly in China and Vietnam.
- The quality of HCBV’s loan portfolio improved year on year with the NPL (i.e. loans more than 90 days overdue) share of the gross loan book down to 8.0% (13.3% in 1H 2015). This is a further improvement from Q1 2016 when NPLs were 9.0%. The Russian subsidiary also further strengthened its loan portfolio, reporting a decrease in NPLs to 9.9% down from 13.3% at the end of 2015.
- The NPL coverage ratio rose to 122.2% (4Q 2015: 115.7%).
- HCBV’s customer deposits increased in last three months by 7% to EUR 4,933 million in line with funding requirements. The share of Current accounts and deposits from customers stands at 51.3% of total liabilities, down from 58.0% as at the end of 2015.
- Impairment losses were EUR 269.8 million in the first half of 2016, down substantially from EUR 453 million in the same period last year.
- HCBV remains strongly capitalised with total equity of EUR 1,263 million and an equity-to-asset ratio of 11.6%.
|Business Results||6M 2016||FY 2015||6M 2015|
|Loans granted YTD (EUR millions)||4,631||6,558||2,574|
|Number of clients actively served (millions)||15.1||12.5||9.7|
|Number of distribution points||217,597||185,893||161,654|
|- Number of POSs and loan offices||215,272||183,488||159,206|
|- Number of bank branches||360||439||502|
|- Number of post offices||1,965||1,966||1,946|
|Number of employees (thousands)||86.8||72.9||58.2|
|Profit and Loss (EUR millions)||6M 2016||FY 2015||6M 2015|
|Net interest income||679||1,193||559|
|Credit risk costs¹||(270)||(725)||(453)|
|Net profit for the period||59||(42)||(90)|
¹Credit risk costs represent impairment losses on the loan portfolio
²Operating expenses comprise general administrative and other operating expenses
|Financial Position (EUR millions)||6M 2016||FY 2015|
|Net loan portfolio||6,988||5,835|
|Customer deposits and current accounts||4,933||4,909|
Source: Home Credit B.V., consolidated.
|Profit and Loss Ratios||6M 2016||FY 2015||6M 2015|
|Net interest margin¹||14.3%||15.4%||15.7%|
|Net interest income to operating income||76.8%||73.7%||71.3%|
|Cost to average net loans²||16.3%||16.1%||15.6%|
|Cost to income ratio³||58.5%||54.8%||53.7%|
|Cost of risk ratio4||8.5%||13.2%||16.8%|
|Financial Position Ratios||6M 2016||FY 2015||6M 2015|
|Net loans to total assets||64.3%||60.4%||62.0%|
|NPL coverage ratio7||122.2%||115.7%||111.9%|
|Deposits to total liabilities||51.3%||58.0%||68.2%|
|Equity to assets||11.6%||12.4%||14.1%|
|Equity and deposits to net loans ratio||88.7%||104.6%||117.3%|
Source: Home Credit B.V., consolidated.
¹Net interest margin is calculated as net interest income divided by the average balance of net interest earning assets.
²Cost to average net loans is calculated as general administrative and other operating expenses divided by average net loans.
³Cost to income ratio is calculated as general administrative and other operating expenses divided by operating income.
4Cost of risk represents impairment losses on the loan portfolio divided by average balance of net loans to customers.
5RoAA is calculated as net profit divided by average balance of total assets.
6NPL ratio is calculated as gross non-performing loans divided by total gross loans. The Group defines non-performing loans as collectively impaired loans that are overdue by more than 90 days as well as loans considered individually impaired.
7NPL coverage ratio is calculated as loan loss provisions divided by gross non-performing loan.