Alisa Bank Plc’s Half-Year Financial Report January-June 2023

ALISA BANK PLC STOCK EXCHANGE RELEASE 18.8.2023 AT 09.00 EEST

Profitable result achieved

January-June 2023 in brief

• The profit before taxes for January-June was a total of EUR 0.4 million (-7.4).

• Net interest income increased from last year and was EUR 7.4 million (2.5). Net interest income increased mainly due to the increase in market interest rates and the increase in the loan portfolio.

• Total operating income 8.4 million almost tripled in January-June compared to the previous year.

• Realized and expected credit losses remained at a moderate level and were EUR -2.2 million (-4.2).

• Total capital ratio was 15.5 percent.

• The loan portfolio before reducing expected credit losses increased to EUR 170.3 million (163.8) in the accounting period.

• The deposit base was EUR 241.7 million (246.8) at the end of reporting period.

• The company changed its name from Fellow Bank Plc to Alisa Bank Plc on April 21, 2023.

• The company invested heavily in the development of digital banking services. The new services received a positive reception from customers, which was reflected in the measured customer satisfaction (Net Promoter Score: 47).

GROUP’S KEY FIGURES (EUR 1,000)	1-6/2023		1-6/2022			1-12/2022
Net interest income	7,427		2,463			9,053
Net commission and fee income	847		9			1,511
Total operating expenses	-5,747		-5,577			-11,601
Impairment of receivables	-2,235		-4,174			-8,321
Profit before taxes	390		-7,381			-9,684
* Cost / income ratio, %	69		235			113
Balance sheet total	287,527		290,790			291,661
* Return on equity (ROE), %	2.6		neg.			neg.
Total capital ratio (TC), %	15.5		19.4			16.8
Common Equity Tier (CET1), %	12.0					12.6
Number of employees, end of period	85		90			73
Earnings per share (EPS), EUR	0.00		-0.10			-0.14
* Impairment of receivables / loan portfolio, %	3.8		7.3			5.1

* The calculation principles of alternative performance measures are presented in Appendix A.

Financial targets and outlook for 2023

In 2023, we aim for profitable growth. We increase the bank's loan portfolio under the conditions of profitability and capital adequacy, taking into account the uncertainty of the financial situation in lending. Our growth is supported by more comprehensive banking services for our customers and our digital services that create differentiation. The general rise in interest rates continues to support the improvement of our profitability.

During the first half of 2023, we reached a positive profit level. In the second half of 2023, the bank's profits are estimated to increase from the level of the first half of 2023. The result before non-recurring items is estimated to be positive in 2023. The target for the group's total capital adequacy ratio is 16 percent. The aim is to strengthen the company's own capital during the second half of 2023.

Teemu Nyholm, CEO

Profitable result achieved

Profit before taxes for the reporting period was EUR 0.4 million. The positive performance was an outcome of the loan portfolio growth, a positive net interest income trend and a reduction in expected credit losses.

Our loan portfolio grew to EUR 170 million by the end of June. The general rise in interest rates bolstered the growth of our interest income.

The corporate customer business continued to grow strongly. The launch of banking operations improved our competitiveness and visibility, and this was clearly reflected in corporate financing, where we gained a large number of new financial services customers. In corporate financing, the volume of funding increased by 19% compared to the second half of 2022. Growth was particularly concentrated in invoice financing, and we tightened our corporate lending policy. We believe that both demand for and our competitiveness in SME financing will continue to be strong.

In consumer customers, our credit portfolio remained at the previous year’s level. In the markets demand for consumer financing continued to grow moderately, but our growth was constrained by our tighter credit policy and capital constraints.

In the international markets, we continued to carefully develop our business with a focus on consumer financing in Denmark and Germany. In Germany, we launched a partnership with Check 24, the largest loan broker in the market. In both markets, loan repayments developed positively in line with our targets, setting the stage for future growth in both Denmark and Germany.

The company’s deposit portfolio stood at EUR 242 million at the end of June. We diversified the structure and sources of our deposit base: the share of term deposits increased, and we succeeded in improving the raising of deposit through our digital channels. As interest rate rose, our funding costs increased, and at the end of June, the annual average interest on our deposit base was 2.2%. At the same time, the bank's net interest on funds increased significantly. We expect that the rise in interest rates will level off in the second half of the year though it will continue to support the improvement of the interest margin.

Despite a challenging market environment, the credit losses fell to 3.8% of the loan portfolio. During the period under review, we continued to tighten our lending criteria, taking into account the rising cost of living for consumer customers and the tighter operating environment for SMEs. We anticipate that the inflation and the weakening of consumer purchasing power will level off in 2023. The employment rate has also remained high, which will buoy our customer’s liquidity.

The bank's liquidity position is strong, with liquid assets of 105 million euros. The bank's total capital adequacy was 15.5 percent, falling short of the target level of 16 percent. The official requirement for total capital adequacy is 10.5%. We decided to withdraw from the issuance of our planned Tier 2 bond in the spring due to the uncertainty regarding the capital adequacy and liquidity position of international banks.

We have continued to systematically develop the bank’s digital services. We launched a credit card for our customers in January 2023 and payment transaction accounts in February. These form a solid foundation for the bank’s digital services in the future.

In June, we launched banking services that are integrated with financial administration systems (BaaS) in cooperation with Talenom Corporation. This will allow Talenom’s corporate customers to benefit from user-friendly banking services integrated directly into their financial administration software. Earlier this year, we also launched an e-commerce payment solution for SMEs with Paytrail, Finland’s largest payment intermediary. Both initiatives support our strategy to use digital channels to acquire new customers.

In April, we changed the name of the bank to Alisa Bank. At the same time, we launched new versions of our mobile and online banking services for our customers. We are pleased to report that we achieved industry-leading ratings (4.5/5) in app store reviews and our measured customer satisfaction remained at a high level (Net Promoter Score: 47).

In late 2022, we started a cost-savings programme to achieve a significant reduction in the bank’s fixed costs. The programme has been successful, and our operating efficiency developed positively in the reporting period with a cost/income ratio of 69% at the end of the period. Going forward, business growth will not require us to make significant additional investments or an increase in the number of personnel, so as business volumes grow, our operating efficiency will improve.

The growth of the bank’s balance sheet requires the strengthening of equity as planned during the second half of the year. We have also made progress in our preparations to strengthen our capital structure. In the second half of the year, however, we expect that maintaining our capital adequacy target will constrain loan portfolio growth. Nevertheless, if we are successful in strengthening capitalisation, we will be in an excellent position to continue to grow our loan portfolio in the coming years in line with our long-term target of 25%.

During the second half of the year, we will continue our controlled growth, focusing on growing our loan portfolio and deposits in both the corporate and the consumer customer sector.

At the same time, we are determined to continue the development of our innovative digital banking services to drive strong growth in customer numbers and build awareness of Alisa Bank as the most user-friendly digital everyday bank.

Achieving a positive result was an important step on the new bank's strategic path, and it provides us a solid platform for future growth.

Teemu Nyholm

CEO

Additional information

Teemu Nyholm

CEO

[email protected]

+358 50 577 1028 

Alisa Bank in brief

Alisa Bank Plc is a new Finnish digital bank that helps both personal and business customers to manage their day-to-day finances in a flexible and straightforward manner. For savers, we offer an attractive interest rate on deposits. Alisa Bank Plc is regulated by the Financial Supervisory Authority of Finland and listed on Nasdaq Helsinki’s main list (ALISA). www.alisabank.com