Iute Group reports unaudited results for 9M/2023

Performing loans portfolio and revenue continued to grow – with fewer and better customers

STRATEGIC HIGHLIGHTS

• Number of active customers declined to 282 thousand (31 Dec. 2022: 293 thousand) but the revenue per customer (LTM) increased to 377 EUR compared to 346 EUR in the previous period.
• Total number of customers increased by 8,8% to 1 million (31 Dec. 2022: 928 thousand).
• Group consolidated balance sheet up 12,8% to 363,7 million EUR and equity up 24,5% to 69,9 million EUR as of 30 Sep. 2023.
• Increasing use of MyIute app – 727 thousand downloads as of 30 Sep. 2023 (31 Dec. 2022: 477 thousand).
• Launch of e-money institution IutePay in Albania as major milestone in evolution of Wallet business.

OPERATIONAL HIGHLIGHTS

• Loan payouts increased by 10,6% to 213,1 million EUR (9M/2022: 192,7 million EUR).
• Number of loans signed down to 250 thousand (9M/2022: 264 thousand).
• Gross loan portfolio up 12,6% to 242,7 million EUR (31 Dec. 2022: 215,5 million EUR) of which principal amount of loans increased 12,6% to 223,0 million EUR (31 Dec. 2022: 198,1 million EUR).
• Repayment discipline (Customer Performance Index, CPI30) down to 87,3% (9M/2022: 90,5%).
• Net loan portfolio up 14,1% to 221,2 million EUR (31 Dec. 2022: 193,9 million EUR).
• 72 cardless ATMs operational (31 Dec. 2022: 71 ATMs).

FINANCIAL HIGHLIGHTS

• Interest and commission fee income up 21,4% to 68,8 million EUR (9M/2022: 56,7 million EUR) driven by Iute Non-Bank loan portfolio. Interest income from Energbank portfolio remained at the prior-year level considering consolidation as of Feb. 2022.
• Net interest and commission fee income up 14,0% to 48,1 million EUR (9M/2022: 42,2 million EUR) driven by Iute Non-Bank loan portfolio.
• Total revenue up 22,1% to 78,9 million EUR (9M/2022: 64,6 million EUR).
• Cost to revenue ratio at 41,7% (9M/2022: 44,5%).
• Adjusted cost to revenue ratio at 37,8%.
• EBITDA adjusted for FX and integration expenses related to Energbank up 33,6% to 33,8 million EUR (9M/2022: 25,3 million EUR).
• Net profit at 9,3 million EUR compared to 7,4 million EUR adjusted for one-off gains related to the acquisition of Energbank in the prior-year period.
• Strong capitalization and profitability – Eurobond covenants exceeded.

Tallinn, Estonia, 15 November 2023. Iute Group, a leading European personal finance group, reported today unaudited results for 9M/2023.

“Iute Group had another successful quarter thanks to its customers and the Iute teams in the Balkans and Estonia. As management, we are very proud of the strong results achieved, given the current developments and trends on the capital markets, monetary policies, and overall macroeconomic and geopolitical situation. However, it is not only the external environment that determines success or struggle. In other words, we have to take a number of factors into account when making decisions in order to continue to grow profitably. Faced with major challenges, we have resolved at the beginning of this year to focus on quality rather than quantity: Fewer is not only more but also better.

On the one hand, we saw a decline in the absolute number of performing customers with whom we maintain active and profitable business relationships for the first time. Historically, the performing customer pool (PCP) has always grown, but not this year, in which the PCP shrank by 11 thousand people or 3,7%. Moreover, there has been a decline in customers’ repayment discipline. Accordingly, the CPI30 fell from 90,5% to 87,3%. This means that during the period 873 thousand EUR out of every repayable million EUR were repaid on time or with a maximum delay of 30 days, whereas a year ago the number was 905 thousand EUR out of every million. To cut a long story short: At the end of the nine-month period, we have fewer customers who are even worse at repaying their loans.

In this context, the number of loan applications also decreased slightly by 2% in Q3. More importantly, however, we tightened the loan approval criteria. As a result, the approval rate in Q3 fell to about 60%, compared to over 66% in the past. Ultimately, a decline in the performing customer pool in conjunction with an increase in late repayments was intensified by slightly lower loan demand and a significantly lower approval rate.

On the positive note, the performing loans portfolio and revenue continued to grow, as we had planned – with fewer but better customers. It is clearly paying off that we take larger exposure per performing customer: Revenues continued to increase. Understanding who these fewer but better customers are requires data science, effort, and investments. So, the biggest challenge is to improve quality. And although we are profitable, we have not yet reached our full potential to reduce the cost-to-income ratio to below 40%, which is becoming increasingly important given the rising cost of capital and overall higher risk in the consumer lending business. The same applies to a CPI30 of over 90 points, which is our Group benchmark for “optimal” in consumer lending. Part of risk reduction is also the Iute Group’s increased involvement in legislative initiatives. Which means that not only we are increasingly adapting to ever-changing requirements, but in turn, we are also being consulted more and more frequently by the regulatory authorities in various countries on our understanding of the role of microfinance, digitalization of finance, responsible lending, and compliance. Tangible examples include the ongoing Wallet development and the Energbank turnaround, which place additional strain on the Group’s compliance and risk procedures in view of the primacy of profitability.

We are sticking to our annual targets. The forecast assets have already been exceeded and the Group’s revenue will surpass the 100 million EUR mark. Somewhat disappointingly, the Group’s net profit may fall short of the 12 million EUR net profit target under a sudden change in corporate income tax laws in Macedonia and the imposition of a one-time solidarity tax of 1,3 million EUR,” said Tarmo Sild, CEO of Iute Group.

The full unaudited report for 9M/2023 is available under iutecredit.com/reports/.

Earnings Call:

CEO Tarmo Sild and CFO Kristel Kurvits will comment on the unaudited 9M/2023 results by means of a webcast presentation on 16 November 2023, 10.00 CET. The webcast/call will be held in English.

Please register in time to participate in the webcast/call at:
Iute Group – Earnings Call 9M 2023.

The corresponding presentation will also be available on the Company's website prior to the earnings webcast/call.

Contact:

Kristel Kurvits, Group Chief Financial Officer (CFO)
Email: investor@iutecredit.com
Phone: +372 622 9177

About Iute Group:

Iute Group is a fintech company established in 2008 in Estonia. The Group specializes in consumer finance, payment services, banking, and insurance products. It serves customers in Albania, Bosnia and Herzegovina, Bulgaria, Moldova, and North Macedonia. Iute Group finances its loan portfolios with equity, deposits, and secured bonds on the Regulated Market of the Frankfurt Stock Exchange and the Nasdaq Baltic Main List.

www.iutecredit.com