Avanza Bank : Company presentation, November 2020

Company presentation

November 2020

Sweden's leading platform for savings and investments

• Founded in 1999
• Most satisfied savings customers in Sweden for 10 consecutive years
• 1,219,800 customers
• SEK 498 bn in savings capital
• 502 employees
• 4.9% market share of the Swedish savings market

2

Customer satisfaction and employee engagement create shareholder value over time

Long-term targets

• Customer satisfaction & Employee engagement
• • • Growth in customers and savings capital
  • Scalability and cost efficiencies (top modern
  • 
    IT platform)

Growth potential

• • • Occupational pension business
  • Focus on broader customer groups
• Strong potential in existing customer base

Customer proposition

• • Cheaper, better and simpler offering
  • • High user experience
    • Broad range of product
• Information, education and decision-making tools

Revenues and costs

• More stable revenues through funds and
• • 
    mortgages
  • High scalability
  • Cost control vital

3

High customer satisfaction	•	Price leadership
•	Wide range of products
Creating a better future for millions of people	•	Decision-making tools
	•	Best customer service
		and user experience

Customer promise - more to you, less to the bank

To give our customers a better return on their savings than any other bank or pension company, due to low fees, better tools and education

4

Growth strategy built on scale

1. Growth in savings capital

• Customer satisfaction
• • Customer growth
• Innovation and user
  experience• Net inflow

1. Savings capital

2. Revenues/savings capital

3. Costs/savings capital

5

2. Revenues/savings capital

• No fixed fees
• Revenues mainly based on transaction fees, net interest income (NII) and distribution fees from mutual funds
• NII and transaction revenues tend to be inversely correlated

3. Costs/savings capital

• Mainly fixed costs, tight cost control
• High scalability
• Long-termaim to reach a cost/savings capital of 16 bps

Leading cost position

	160																					600 000
	142
	140
																				500 000
	120
points																				400 000
100
73
Basis	80																		300 000
	60
																				51 200 000
	40
																				100 000
	20
																				17
	0																					0
	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020
																					9M
				Savings capital			Income/savings capital			Cost/savings capital

In 2018, cost/savings capital exclude the Swedish Financial Supervisory Authority's administrative fee of SEK 35 million on

6	Försäkringsaktiebolaget Avanza Pension.

Savings capital, SEK m

A history of growth built on innovation

7

In-house development by 23 teams

Customer journey

Activate	Follow	Find &	Design
	&	get help	system
	Improve

Products

Interest	Funds	Trading	Trading	Endow-	Pension	Mort-
data &
rate			ment		gages
		Decision-
			insurance
			support
			tools
Business plattform
BO	Become a	Being a	Cash	Pension
trans-	customer	customer		plattform
formation
Technical plattform
User	Data	Delivery	Open	Trading	Service	Perfor-
interface	plattform	platform	banking	Plattform	plattform	mance
plattform						testing

Launches to make Avanza more relevant for a broader audience

9

Customer value with real open banking

10

Largest Swedish participant in stock market transactions on Nasdaq OMX and First North

Market share, %

25,0

20,0

15,0

10,0

5,0

0,0

Transactions		Turnover
		10,0
		9,0
	%	8,0
	share,	7,0
	6,0
	Market	5,0
	4,0
		3,0
		2,0
		1,0
Q1-15Q2-15Q3-15Q4-15Q1-16Q2-16Q3-16Q4-16Q1-17Q2-17Q3-17Q4-17Q1-18Q2-18Q3-18Q4-18Q1-19Q2-19Q3-19Q4-19Q1-20Q2-20Q3-20		0,0
	Q1-15Q2-15Q3-15Q4-15Q1-16Q2-16Q3-16Q4-16Q1-17Q2-17Q3-17Q4-17Q1-18Q2-18Q3-18Q4-18Q1-19Q2-19Q3-19Q4-19Q1-20Q2-20Q3-20

• Market share of 19.9% in terms of transactions and 9.6% in turnover in Q3 2020

11

Customer growth drives net inflow

New customers

1. 000

1. 000

1. 000

1. 000

1. 000

1. 000

1. 000

1. 000

1. 000

1. 000
   0

25 000

		9M 2020:
		Customers: +218,300
		Net inflow: 57,600	20 000
2017:		2019:		m
Customers: +140,000	Customers: +139,300
Net inflow: 26,800	Net inflow: 32,600	SEK
2016:	2018:		15 000
Customers: +103,000
Net inflow: 26,500	Customers: +126,500	inflow,
2015:	Net inflow: 27,600
Customers: +96,400
Net inflow: 25,200
2014:			10 000	Net

Customers: +54,700

Net inflow: 20,100

2013:

Customers: +33,000

Net inflow: 10,900

5 000

0

12		Customer inflow		Net inflow

Age distribution among new customers

Share, %

4

3,5

3

2,5

2

1,5

1

0,5

0

13

2019

2012

2007

0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78 81 84 87 90 93 96 99 Age

Strong long-term potential in existing customer base

Market penetration

Customers, %

4,5%

4,0%	1,40
3,5%	1,20	m
3,0%	1,00	SEK
2,5%	0,80	capital,
2,0%
	0,60	Savings
1,5%
1,0%	0,40
0,5%	0,20
0,0%	0,00

0	3	6	9	12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78
						Age
Savings capital by age		Total customer base		Age distribution among new customers

14

• Total share of Swedish savings market: 4.9% as of Q2 2020
• Total share of Swedish population: 9.1% as of 1 November 2019
• • ages 20-29: 15.3%
  • ages 30-39: 17.8%
  • ages 40-49: 13.3%
• Highest penetration in urban areas. Stockholm region, snapshot (Women/Men) as of 1 November 2019:
• • ages 20-29: 15%/25%
  • ages 30-39: 19%/29%
  • ages 40-49: 14%/23%
  • ages 50-59: 12%/17%
  • ages 60-69: 9%/13%

Savings capital grow by number of years at Avanza

Savings capital, SEK

1. 000

1. 000

1. 000

1. 000

1. 000

1. 000
   0

1 month 1 year 2 years 3 years 4 years 5 years 6 years 7 years 8 years 9 years 10 years Average savings capital per customer (excluding customers with > SEK 10m in savings capital)

15

Significant growth potential with a 4.9% market share of the Swedish savings market

• The Swedish savings market SEK 9,047 bn

• Annual market growth of on average 9% last ten years

• An estimated 80% of the Swedish population saves in funds and 11% own shares

The white circles refer to Avanza's share of each savings area.

• An estimated 50% of the market is addressable for Avanza when collectively agreed pensions are excluded.

16

Market share of 19.2% rolling 12M of net savings on the Swedish savings market

Long-term target by 2025 of at least 15%

17

Growth potential in broader customer groups

Knowledge & time

Invest Trade

Save

Gamble

Begin

		Interest
Do it for me	Help me do it	Do it myself

18

Strategy for more recurring income

Share of total income

60%

50%

40%

30%

20%

10%

0%
2012	2013	2014	2015	2016	2017	2018	2019
				Net brokerage income		Fund commissions
				Net interest income			Other commission income

19

Strong growth in occupational pension

	30 000
	25 000
SEK
capital,	20 000
Savings	15 000
	10 000
	5 000
	0
	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
	20

Growth drivers in the Swedish savings market

• Digitisation and open banking create new needs and customer behaviours
• More reasons for customers to take responsibility for their own savings
• Increased focus on sustainable investments
• Our focus is on attracting new and broader customer groups as well as keeping current customers happy
• • Product innovation and evolution
  • User experience increasingly important
  • Price remains important

21

As always… key success factors for Avanza

• Customer satisfaction - keep the No 1 position
• Continuous growth in both number of customers and volume
• Create possibilities for continued strong innovation

Employee engagement key

22

Appendix

Operations	24-26
Financials	27-35
Balance sheet data	36-38
Contact details	39

23

Performance on targets 2019

Long-term targets	Outcome 2019	Comments
Sweden's most satisfied savers	√	Achieved in 2019 for the tenth consecutive year
according to Swedish Quality Index
Engaged employees, eNPS of at	54	Very strong ambassadorship
least 45
Market share of at least 10% R 12M	15.6%
of the total net inflow to the
Swedish savings market
1 million customers 2020	976,400	Target achieved in January 2020
Cost growth should not outpace		Income growth 13,8%
income growth	√	Cost growth 10,6%, excluding fee and one-off write
		down
Dividend of at least 70% of net	79%	Dividend SEK 2.30 per share
profit for the year

24

New long-term targets by 2025

The new targets are still focused on customer satisfaction and employee engagement, but also on growth in savings capital. Targets connected to sustainability are added

Satisfied customers:

• Sweden's most satisfied savers according to SQI's (Swedish Quality Index) annual award

Engaged employees:

• eNPS (Employee Net Promoter Score) of at least 45

Long-term value growth:

• Market share of at least 15 per cent of the total net inflow to the Swedish savings market 2025
• Market share of nearly 7 per cent of the Swedish savings market by the end of 2025
• Return on equity of 25-30 per cent
• Dividend of at least 70 per cent of the profit of the year

Sustainability:

• Increased share of capital in sustainable investments
• Increased share of customers who save in sustainable alternatives
• Be regarded as the leading sustainable brand and the natural choice for sustainable savings
• Increase the share of female to 50 per cent of new customers
• Organisation with parity between women and men

• Become climate positive

26

inflow Customer

Jan-14

Apr-14

Jul-14

Oct-14

Jan-15

Apr-15

Jul-15

Oct-15

Jan-16

Apr-16

Jul-16

Oct-16

Jan-17

Apr-17

Jul-17

Oct-17

Jan-18

Apr-18

Jul-18

Oct-18

Jan-19

Apr-19

Jul-19

Oct-19

Jan-20

Apr-20

Jul-20

Okt-20

					Number of customers							Customer
0	000 5	000 10	000 15	000 20	000 25	000 30	000 35	000 40
																		Y/Y) (+114% 2020 in 243,400 of inflow

Net inflow of SEK 63,700m in 2020 (+129% Y/Y)

Net inflow, SEK m

1. 000

1. 000

1. 000

1. 000

1. 000
   0
   -2 000

14-Jan14-Apr14-Jul14-Oct15-Jan15-Apr15-Jul15-Oct16-Jan16-Apr16-Jul16-Oct17-Jan17-Apr17-Jul17-Oct18-Jan18-Apr18-Jul18-Oct19-Jan19-Apr19-Jul19-Oct20-Jan20-Apr20-Jul20-Okt Net inflow

• Net outflow in November 2017 is explained by a few withdrawals amounting to SEK 2,200m, connected to customers' M&A activities.

27

Financial overview

	Q3 20	Q2 20	∆ %	Q3 19	∆ %
Operating income, SEK m	575	526	9	313	84
Operating expenses, SEK m	-177	-185	-4	-148	19
Operating profit, SEK m	396	333	19	163	144
Operating margin, %	69	63	6	52	17
Income to savings capital ratio, %	0.48	0.52	-0.04	0.34	0.14
Costs to savings capital ratio, %	0.15	0.18	-0.03	0.16	-0.01
ROE, %	55	56	-1	33	23
EPS, SEK	2.15	1.83	18	0.91	137

28

Relationship between long-term savings capital growth and revenue growth

Revenue, SEK m

700

600

500

400

300

200

100

0

Savings capital Q3 2020: SEK 514 bn (+36 % Y/Y)

Q3 2020

2012-Q3 2020 Corel=0.88

0

100 000

200 000

300 000

400 000

500 000

600 000

Savings capital, SEK m

29

Long-term revenue development

Revenue, SEK m

1. 400

1. 200

1. 000
   800
   600
   400
   200
   0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

5,0

4,0

3,0

2,0

1,0

0,0

-1,0

Average repo rate, %

		Total income		Net brokerage income		Income from mutual funds
30		Net interest income		Other income		Average repo rate

Historical correlation between low market rates and growth

Net inflow, SEK m

25000

20000

15000

10000

5000

0

Q1-03Q3-03Q1-04Q3-04Q1-05Q3-05Q1-06Q3-06Q1-07Q3-07Q1-08Q3-08Q1-09Q3-09Q1-10Q3-10Q1-11Q3-11	Q1-12Q3-12Q1-13Q3-13Q1-14Q3-14Q1-15Q3-15Q1-16Q3-16Q1-17Q3-17Q1-18Q3-18Q1-19Q3-19Q1-20Q3-20
		Net inflow			Repo rate

5,0

4,0

3,0

2,0

1,0

0,0

-1,0

Repo rate, %

• Historical negative repo rate between 2015 and 2019. Repo rate raised to 0.00% on 8 January 2020
• Low repo rate creates a good growth environment but puts pressure on NII (100 bps repo rate change affects NII by around SEK 400 m at Q3-20 volumes)

31

Revenue development

Revenue, SEK m

700

600

575

542 526

500

400
									313	329
300	244	234	227	271	271	244	267	267	268	284
200

100

0

Q1-17Q2-17Q3-17Q4-17Q1-18Q2-18Q3-18Q4-18Q1-19Q2-19Q3-19Q4-19Q1-20Q2-20Q3-20

Total income		Net brokerage income		Income from mutual funds
Net interest income		Other commission income

32

Income split 9M 2020

	SEK m	% of	% of specific	% of total
		income	savings capital	savings capital
Shares, bonds, options	811	49	0.45	0.25
(transactions)
Mutual funds	293	18	0.34	0.09
Net interest income	241	15	0.42	0.07
Other**	298	18		0.09
Total	1,643	100	0.51	0.51

• Based on deposits
• Corporate finance fees, foreign exchange, AZA Markets, subscription and advertising income, additional services

33

Cost development

200

Operating expenses, SEK m

180

160

140

120

100

80

60

40

20

0

					8
				35	179	179	185
				177
	157			164	166
	152	153	155	148
	131			135
124	123

Q1-17Q2-17Q3-17Q4-17Q1-18Q2-18Q3-18Q4-18Q1-19Q2-19Q3-19Q4-19Q1-20Q2-20Q3-20

Total expenses	Non-reccuring items		Personnel		Marketing		Depreciation		Other expenses

	Q4	2018 including the Swedish Financial Supervisory Authority's administrative fee of SEK 35 million on the subsidiary Försäkringsaktiebolaget Avanza Pension
34	Q4	2019 including one-offwrite-down of SEK 8.3 million

Costs 9M 2020

	SEK m	% of total	% of total
		costs	income
Personnel	-334	62	20
IT	-60	11	4
External services	-24	4	1
Marketing & Sales	-17	3	1
Depreciation	-50	9	3
Other	-56	10	3
Total costs before credit losses	-541	100	33
Credit losses, net	-5
Profit/loss from participations in	-6
associated companies

35

Operating margin of 69% in Q3 2020

Operating profit, SEK m

450

400

350

300

250

200

150

100

50

0

396

361

333

163

121				120		132	140
		114		117
103	104	90	100
					76

Q1-17Q2-17Q3-17Q4-17Q1-18Q2-18Q3-18Q4-18Q1-19Q2-19Q3-19Q4-19Q1-20Q2-20Q3-20

Operating profit		Operating margin

100

90
80
70	%
60	margin,
50	Operating
40

30

20

10

0

	Operating profit in Q4 2018 is affected negatively by the Swedish Financial Supervisory Authority's administrative fee of SEK 35 million on the
36	subsidiary Försäkringsaktiebolaget Avanza Pension.

Balance sheet, 30 September 2020

Assets	SEK m	Liabilities & equity	SEK m
Lending to credit	2,654	Deposits	44,421
institutions*
Lending to the	16,226	Liabilities in insurance	143,312
public		operations
Bonds	25,631	Other liabilities	1,230
Assets in insurance	143,310	Subordinated liabilities	100
operations
Other assets	3,857	Equity	2,616
Total assets	191,678	Total liabilities and equity	191,678

Comments

• Mainly self-financed through shareholders' equity and customer deposits
• Surplus-liquidityof SEK 29,806m invested in covered bonds, at the Riksbank and O/N (including SEK 1,521m deposits in client fund accounts)

* Incl. balances at central banks and treasury bills eligible for refinancing

37

Capital surplus for the Group

SEK m	30 September 2020
Shareholders' equity	2,616
Solvency capital	1,585
Less non-distributable solvency capital	-304
Subordinated loan	69
Additional value adjustments	-8
Intangible assets and deferred tax receivables	-75
Own funds before dividend adjustment	3,882
Capital requirement Pillar 1	-1,921
Buffer requirement	-197
Capital requirement Pillar 2	-123
Capital requirement	2,241
Capital surplus before dividend	1,641
Capital surplus per share, SEK	10.59
Total capital ratio (consolidated situation), %	18.7

38

2020-11-03

Historical financial key data

2001 - Q3 2020

is available in Excel at:

avanza.se/keydata

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