Evli Bank Plc’s Interim Report January-March 2020

EVLI BANK PLC STOCK EXCHANGE RELEASE APRIL 16, 2020, AT 1.00 PM (EET/EEST)
VALUATION CHANGES IN EVLI’S BALANCE SHEET WEAKENED FIRST QUARTER RESULT SIGNIFICANTLYFinancial performance January-March 2020Net revenue was EUR 14.2 million (1-3/2019: EUR 16.8 million)Operating profit was EUR 2.1 million (EUR 4.3 million)The Wealth Management and Investor Clients segment’s operating profit increased and was EUR 6.2 million (EUR 2.8 million)The Advisory and Corporate Clients segment’s operating profit declined and was EUR 0.4 million (EUR 0.5 million)The return from own balance sheet items declined substantially as a consequence of the market collapse and were EUR -3.7 million (EUR 1,1 million), which resulted in a clear decline in the operating profit in the Group Operations segmentNet assets under management amounted to EUR 12.2 billion (EUR 11.9 billion) at the end of MarchEvli’s diluted earnings per share were EUR 0.07 (EUR 0.13) and return on equity was 10.1 percent (19.2%)Proportion of recurring revenue to operating costs was 118 percent (110%).
Outlook for 2020In the current market environment, we estimate that the operating profit for 2020 will be clearly positive. In a situation where market conditions would deteriorate further, we estimate the operating profit to be positive.Despite the challenging market environment, the view is supported by a high ratio of recurring revenue to operating costs, as well as sales of alternative investment products, which have brought new, stable revenue. In addition, the company took a number of adjustment measures during March to ease the cost structure. As part of the measures, the Board of Directors and the Executive Group as well as some employees have, among other things, voluntarily reduced salaries and fees on a temporary basis.
Key Figures*Approved by the Annual General Meeting. The dividend was paid on March 18, 2020.
Maunu Lehtimäki, CEOEvli’s business developed steadily until late February and early March, when the coronavirus epidemic that emerged in China turned into a global pandemic that derailed the capital markets and rapidly weakened our earning power. As a result of the unprecedented decline in equities and corporate bonds, Evli’s balance sheet return weakened and commission income growth slowed.At the beginning of March, we switched to a decentralized work model in accordance with our continuity plan to ensure uninterrupted operations. Quite soon after this, we further reduced our employees’ presence at the office and eventually completely switched over to remote working. Evli’s ability as a banking and fund management group to transform into purely virtual operations shows that our investments made in previous years to develop our information systems have been successful. Despite the market turmoil, Evli has been able to keep all its funds open and Evli’s personnel have performed excellently in these difficult circumstances, focusing on market operations, active customer relations and taking care of administrative tasks. Evli’s liquidity and capital adequacy have remained at a good level despite the crisis.In the first quarter of the year, Evli’s net sales decreased by 16 percent and operating profit by as much as 52 percent from the previous year. The intensification of market fluctuations at the beginning of March slowed the growth of commission income. Commission income nevertheless increased by 15 percent on the corresponding period of the previous year. In contrast, net income from securities trading and foreign exchange dealing decreased by almost EUR 5 million and showed a loss of almost EUR 4 million. Evli’s return on equity decreased to 10.1 percent (19.2%), but the ratio of recurring revenue to operating expenses improved to 118 percent (110%).The Wealth Management and Investor Clients segment’s revenue increased by 21 percent to EUR 15.7 million. At the end of March, assets under management were EUR 12.2 billion (EUR 11.9 billion) and Evli Fund Management Company’s fund capital was EUR 7.5 billion (EUR 8.1 billion). Net subscriptions during the first quarter were EUR -982.4 million. A significant part of the redemptions took place in March at the beginning of the crisis, with a focus on fixed income funds, from which institutional and corporate clients rushed to withdraw assets to reinforce their cash reserves.The Advisory and Corporate Clients segment’s revenue declined by 14 percent to EUR 2.1 million. The Corporate Finance unit’s invoicing fell below the previous year’s level after several advisory projects were suspended as a result of the crisis. The unit’s mandate base has decreased, and the execution and timetable of mandates are uncertain. The incentive systems management business continued to grow as in previous years. However, we expect growth to temporarily level off as a result of certain clients’ M&A activities.Evli’s strategic focus areas – international fund sales and sales of alternative investment products – performed according to plans. At the end of the review period, international clients’ fund capital was EUR 2.4 billion (EUR 2.1 billion) and net subscriptions were EUR -171 million. The total investment assets of alternative investment products increased by 125 percent year-on-year to almost EUR 930 million. Alternative investment product fees accounted for nearly 15 percent of total fund fees. As a new product, we launched the Evli Infrastructure I fund with an initial capital of almost EUR 50 million.At the end of the quarter, we also launched a series of cost efficiency measures aimed at boosting Evli’s profitability. These measures cover both personnel and administrative expenses and are expected to have a positive impact on Evli’s profitability already in the upcoming quarters. In addition to the short-term adjustment measures mentioned above, we will continue our work to streamline Evli’s processes and further improve client satisfaction. Evli’s position in the market is strong and I believe that after the crisis, we will be in an excellent position to grow our business with new clients and by building on existing client relationships.I would like to thank our clients and shareholders for their trust and our employees for their hard and successful work in an exceptionally challenging environment.
EVLI BANK PLCMaunu Lehtimäki, CEO, Evli Bank Plc, tel. +358 (0)50 553 3000, maunu.lehtimaki@evli.com
Juho Mikola, CFO, Evli Bank Plc, tel. +358 (0)40 717 8888, juho.mikola@evli.com
Evli Bank PlcEvli is a bank specialized in investments that helps institutions, corporations and private persons increase their wealth. The product and service offering includes mutual funds, asset management and capital markets services, alternative investment products, equity research, the administration of incentive programs and Corporate Finance services. The company also offers banking services that support clients’ investment operations. Evli is the highest ranked and most used institutional asset manager in Finland*.Evli has a total of EUR 12.2 billion in client assets under management (net 3/2020). Evli Group’s equity capital totals EUR 67.5 million and its BIS capital adequacy ratio is 14.6 percent (March 31, 2020). The company has around 250 employees. Evli Bank Plc’s B shares are listed on Nasdaq Helsinki Ltd.*KANTAR SIFO Prospera External Asset Management Finland 2015, 2016, 2017, 2018, 2019 and SFR Scandinavian Financial Research Institutional Investment Services, Finland 2015, 2016, 2017, 2018.
Distribution:
Nasdaq Helsinki Ltd, main media, www.evli.com