Fellow Bank Plc corrects its financial statement bulletin published on February 16, 2023 at 9:00 AM.
The company has corrected the income tax item in the income statement. With the correction, the result after taxes for the fiscal year 2022 is -10.6 million euros.
In addition, in accordance with the IFRS3 -standard, the company has adjusted the acquisition cost calculation for Evli Bank presented in the financial statement bulletin so that the goodwill shown in the calculation is € 0.7 million lower.
Below is the updated financial statements bulletin.
Growth continued and profitability improved in the second half
| GROUP’S KEY FIGURES (EUR 1,000) | 2022 | 2021 |
|---|---|---|
| Net interest income | 9 053 | 2 650 |
| Net commission and fee income | 1 511 | 4 497 |
| Total operating expenses | -11 601 | -6 663 |
| Impairment of receivables | -8 321 | -1 989 |
| Profit before taxes | -9 684 | -1 464 |
| * Cost / income ratio, % | 113 | 93 |
| Balance sheet total | 291 661 | 22 418 |
| * Return on equity (ROE), % | neg. | neg. |
| Total capital ratio (TC), % | 16.8 | - |
| Common Equity Tier (CET1), % | 12.6 | - |
| Number of employees, end of period | 73 | 66 |
| Earnings per share (EPS), EUR | -0.14 | -0.22 |
| * Impairment of receivables / loan portfolio, % | 5.1 | 11.0 |
The data for the comparison periods are Fellow Finance group's IFRS figures. Due to the merger and business model change implemented in April 2022, the figures for 2021 are not comparable.
* The calculation principles of alternative performance measures are presented in Appendix A of financial statements bulletin.
Financial targets and outlook for 2023
In 2022, Fellow Bank built the foundation for growth and profitability in the coming years. The operation is stabilised and the result has developed in a positive direction.
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 credit risk management. The growth of lending is supported by more comprehensive banking services for our customers and new digital service channels.
The bank's revenues are estimated to grow from 2022.
It is estimated that the financial performance will continue to be favorable, and on a monthly basis we will reach a positive profit level during the first half of 2023.
The target for the group´s total capital adequacy ratio is 16 percent. The aim is to strengthen the company's capital during 2023.
Teemu Nyholm, CEO: Growth continued and profitability improved in the second half
In April 2022, we launched banking operations when Fellow Finance merged with the company that continued Evli Bank’s banking business. Our first operational year as a bank was successful and in line with our objectives, and the bank’s services have been well received by customers.
Profit performance was positive in the second half of the year. Our profit for the second half was still loss-making at EUR ‑2.3 million, but a substantial improvement compared to the first half, when the loss was EUR ‑7.4 million. The profit for the second half was still burdened by front-loaded credit loss reservations caused by the strong growth of the loan portfolio, and non-recurring costs associated with the expansion of banking operations. Our loan portfolio developed as expected, increasing to EUR 163.8 million by the end of the year. Our deposit portfolio remained stable at the target level and was EUR 246.8 million at the end of the financial year. The bank’s liquidity position is strong: its liquid assets stood at EUR 126.5 million at the end of the year. The bank’s capital adequacy was also at a solid level of 16.8%.
In terms of business areas, business customer base continued to grow steadily throughout the year. Our competitiveness and visibility improved as a result of banking operations, and this was clearly reflected in corporate lending, where many new customers started to use our financial services. In the second half, our lending volumes exceeded those of the first half by 43%. We also achieved the targeted increase of 46% in our loan portfolio for personal customers. Overall, we succeeded in increasing the number of bank customers, with the number of active customers totalling 48,200 at the end of the year.
Our operations are founded on strong risk management. After the start-up of our banking operations, we systematically focused lending on customers with lower credit risk. The bank’s credit loss levels have remained at the forecast level, and we have not seen any significant weakening in liquidity within our customer base.
During 2022, the economic environment deteriorated due to the tightened geopolitical situation and the resulting acceleration of inflation. Despite the uncertain macroeconomic outlook, we expect employment to remain at a good level, and the operating conditions for small and medium-sized enterprises to remain relatively stable. We anticipate that the increase in inflation and the weakening of consumer purchasing power will turn around during 2023. Therefore, we believe that the liquidity of our customer base will remain at a good level, though we will continue to monitor macroeconomic and client liquidity developments closely in our credit risk management. The general rise in interest rates seen in 2022 supports the bank’s profitability due to the improvement in the interest margin.
Our mission is to provide the most user-friendly everyday digital banking services to private individuals and small and medium-sized enterprises. Our strategic development projects have progressed as planned during our first year of operation. Our goal is to evolve from a finance provider into a comprehensive provider of everyday digital banking services for our selected customer segments. In connection with the start-up of our banking operations, we launched the mobile and online banks, which have received positive feedback from customers on their ease of use. The digital services combined with readily accessible personal customer service have delivered good results: our customer satisfaction was high in 2022 (Net Promoter Score: 57).
We continued systematically to develop the bank’s digital services both during and after the review period. In early January 2023, we launched a credit card for our customers and during February 2023, we will launch payment accounts. These will provide a strong foundation for the bank’s digital services in the future. In 2023, we will bring more new and innovative digital banking services to our customers, enabling us to differentiate and increase our competitive advantage on the market.
In September, we announced our first major cooperation agreement to provide BaaS banking services in collaboration with Talenom. This will allow Talenom’s corporate customers to benefit from user-friendly banking services integrated directly into the financial management software. The banking services will be launched for Talenom’s corporate customers during the first quarter. Our e-commerce payment solution has also been well received in the market. In August, we announced a distribution agreement with Paytrail, Finland’s largest payment service provider, which will further expand our Fellow Invoice payment method to more than 20,000 Finnish online stores. Both initiatives support our strategy to use digital channels in acquiring new customers.
In our banking operations, we succeeded in recruiting the necessary highly competent and motivated employees during the year. Our personnel have shown admirable commitment and flexibility in the challenging start-up phase of banking operations. The scaling of our operations will not require a significant increase in the number of employees.
We aim to achieve a positive profit level during the first half of 2023. This requires the accumulation of a loan portfolio of around EUR 160-170 million, considering the bank’s expense level and current lending interest rates.
We launched a cost reduction program in the summer and succeeded in reducing the bank’s fixed costs in terms of personnel costs and operating costs. Our goal is to further improve the operational efficiency of our bank, and our long-term strategic objective is to be the most operationally efficient bank on the market. We decided to wind down our business in Poland and we aim to complete the arrangements to discontinue the Polish business during the first half of 2023. In international markets, we will focus on developing our operations in Denmark and Germany.
In September, we strengthened the bank’s capital adequacy by issuing a EUR 6.1 million Tier 2 debenture. Our capital adequacy ratio at the end of the year was 16.8%. As a result of our improved profitability and stabilised banking operations, we set our capital adequacy target at 16% (18%), well above the regulatory minimum.
Although our capital adequacy is supported by positive profit performance, to enable stronger growth, we are exploring arrangements to strengthen our equity during 2023. In 2023, we will focus on profitable growth and achieving a positive profit level. We will increase our credit portfolio in accordance with the requirements set by capital adequacy, taking account of macroeconomic uncertainties in credit risk management.
In addition, we will continue to develop our digital banking services. Our expanded service selection will allow us to provide our customers with innovative digital banking services that generate competitive advantage, combined with first-class customer service. I would like to thank our customers, shareholders, and personnel for the past year. We will continue our endeavours towards building the most user-friendly everyday bank.
Further information
Teemu Nyholm, CEO, Fellow Bank Plc, teemu.nyholm@fellowpankki.fi, tel. +358 50 577 1028.
Fellow Bank in brief
Fellow 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. Fellow Bank Plc is regulated by the Financial Supervisory Authority of Finland and listed on Nasdaq Helsinki’s main list (FELLOW). www.fellowbank.com
Financial Statements Bulletin 2022