The Fintech Formula: Capital, technology, data, and human skills in, profit out

STRATEGIC HIGHLIGHTS AT CONSOLIDATED GROUP LEVEL

• Total number of customers increased by 47,2% to 1,0 million (31 December 2021: 687 thousand).
• Group consolidated balance sheet up 92,4% to 320,9 million EUR and equity more than doubled to 59,2 million EUR as of 30 September 2022.
• Group cons. total income before expenses up 48,1% to 64,6 million EUR (9M/2021: 43,6 million EUR).
• Group cons. EBITDA more than doubled to 36,5 million EUR (9M/2021: 16,5 million EUR).
• Group cons. net profit with 17.9 million EUR more than quadrupled (9M/2021: 4,4 million EUR).
• Progress in achieving operational control in Moldovan Energbank with Iute manager appointed board member – know-how and technology transfer to start.
• Expansion in Bosnia and Herzegovina halted and OPEX reduced as scalability of digitalized services currently not adequately applicable in view of recent regulatory requirements.
• Increasing use of MyIute app drives wallet revenues, also with e-commerce solutions – 391 thousand downloads (31 December 2021: 181 thousand).
• Continued investments into New Core IT platform for customer management of integrated loans and wallet service value streams incl. insurtech industry – step-by-step rollout in operating countries.

OPERATIONAL HIGHLIGHTS AT IUTECREDIT BUSINESS WITHOUT EFFECTS OF BANK ACQUISITION

• Loan payouts at prior-year level at 160,0 million EUR (9M/2021: 162,1 million EUR) in particular related to restrained lending after regulatory tightening APR caps in Moldova and Albania.
• Number of loans signed up y-o-y 19,9% to 259.055 (9M/2021: 216.046).
• Balance sheet up 19,6% to 199,4 million EUR (31 December 2021: 166,8 million EUR).
• Gross loan portfolio up 28,9% to 155,2 million EUR (31 December 2021: 120,4 million EUR) of which principal amount of loans increased 31,5% to 139,4 million EUR (31 December 2021: 106,0 million EUR).
• Repayment discipline (Customer Performance Index, CPI30) significantly improved to 90,5% (9M/2021: 86,7%).
• Net loan portfolio up 31,2% to 138,3 million EUR (31 December 2021: 105,4 million EUR).
• 67 cardless ATMs operational (31 December 2021: 30 ATMs).

FINANCIAL HIGHLIGHTS AT IUTECREDIT BUSINESS WITHOUT EFFECTS OF BANK ACQUISITION

• Interest and commission fee income up 25,9% to 44,2 million EUR (9M/2021: 35,1 million EUR) driven by loan portfolio growth.
• Net interest and commission fee income up 22,4% to 30,9 million EUR (9M/2021: 25,3 million EUR) with increasing efficiency in the allocation of productive assets.
• Total revenue up 21,3% to 52,9 million EUR (9M/2021: 43,6 million EUR).
• Launch of Energbank earnings contribution expected to be visible from Q1 2023 with gradually increasing compensation for 20 million EUR investment.
• Cost to revenue ratio at 43,8% (9M/2021: 38,0%) mainly as result of expenses related to the acquisition of Energbank, increasing business activity, and expenses for buildup of future revenue streams.
• Adjusted cost-to-revenue ratio at 40.7%, in particular for one-time expenses related to Kosovo arbitration and integration expenses.
• EBITDA adjusted for FX, revaluation, and one-time effects, in particular, income from Energbank and for Kosovo arbitration up 16,5% to 18,4 million EUR (9M/2021: 15,8 million EUR).
• Net profit adjusted, in particular, for income from Energbank and for Kosovo arbitration expenses at 5,6 million EUR (9M/2021: 4,4 million EUR).
• Net profit margin adversely impacted by acquisition of Energbank – without operational control, a non-productive asset vs. potential use of investment for lending purposes.
• Strong capitalization and profitability – Eurobond covenants exceeded.

Tallinn, Estonia, 21 November 2022. IuteCredit Europe (“ICE”), a leading European personal finance group, reported today unaudited results for 9M/2022.

“IuteGroup continues its journey to serve more and more customers profitably. We create an extraordinary experience with loan and payment solutions and with the human interaction we provide with our team of customer advisors. The Group’s consolidated balance sheet grew by 22 million EUR (7%) to 321 million EUR in Q3 alone. The number of performing loan customers superseded 173,000 and the total of wallet customers crossed 83,000 thousand by the end of September 2022. In the first nine months of 2022, all our customers not only paid us more than 64 million EUR for our loan and payment services on a consolidated basis, but our business is also more than sufficiently profitable. We achieved profitable growth in both of our two businesses, IuteCredit and Energbank.

Our long-term sums up to 34 terabytes of data from a total of 1 million customers, which we are not yet fully exploiting, not yet issuing every loan digitally in an instant, and most of our customers’ payments are processed in a slow banking clearance system. At the same time, the demand for faster and more comfortable financial services is growing and people are willing to pay for these services. Our focus is on creating the extraordinary experience within the existing regulatory framework and banking ecosystem, without the risks and escalating costs of cryptocurrencies and blockchain technologies. For most people, the slight push towards digital onboarding, digital signatures, strong data processing capability and analytics, virtual accounts within the Iute ecosystem, and cardless ATMs is all it takes. The MyIute App alone has been cumulatively downloaded more than 390,000 times in the short time since its release.

In pursuit of our strategic objectives, most of the effort at the Group’s HQ in Q3 was devoted to the implementation of our New Core technology at IuteCredit Albania and the establishment of operational control in Energbank, subject to regulatory approval. Consequently, the New Core technology was successfully implemented in Albania after the end of the reporting period, just as Energbank’s management body was replaced with a new management board fully seconded by IuteGroup. In doing so, the Group has paved the way for the next strategic milestones in Moldova. New Core is already being rolled out at IuteCredit Moldova, followed over the course of 2023 by the introduction of the customer-centric, digitalized, instant services functions as well at Energbank.

The strategic initiatives launched will in turn generate competitive growth advantages in our markets and improve significantly our OPEX‑to‑revenue ratio which currently is just above 40%. We aim to be well below 40%, in order to sustain a long-term return on equity above 20%. Moreover, we remain committed to our CPI target of above 90 with an average yield of 49% on IuteCredit’s loan portfolio. Considering the market risks we face, we consider the targeted yield of the unsecured consumer loan portfolio to be reasonable. I must clearly point out that currently, IuteCredit’s business is bluntly bearing the cost of investing in technology and improving business capabilities, and Energbank is at the moment only