Multitude Ag · XETR:MULT
Multitude — Ferratum — Investor Day (June 2019)
80 slides from Multitude's investor day presentation, Jun 25, 2019
Slide 1: Ferratum Capital Markets Day
Ferratum Capital Markets Day Frankfurt, 25 June 2019 ferratum
Slide 2: Forward-looking statements
This presentation contains, or may be deemed to contain, forward-looking statements. These statements relate to future events or future financial performance of Ferratum. Such statements are based on the current expectations and certain assumptions of Ferratum’s management, of which many are beyond
Slide 3: Expansion and profitable growth for 14 years
Expansion and profitable growth for 14 years Introduction - Emmi Kyykka, Head of Group Communications & IR ferratum
Slide 4: MB next generation Prime Loan
MB next generation Prime Loan Mobile Bank SME Lending IPO EU Banking Licence Product Geographic Diversification Mobile Expansion Concept FIN SWE LAT POL DEN GBR MLT GER CAN BRA BGD EST LIT ESP BUL CRO ROM NOR NIG CZE NZL MEX NED AUS 4 FE-Classification: General\Anyone
Slide 5: Founded in Helsinki (2005) by CEO Jorma Jokela
Founded in Helsinki (2005) by CEO and Frankfurt Stock Exchange largest shareholder Jorma Jokela (~55%), Prime Standard Mobile lender and mobile bank with deposit Full EU Banking Licence, enabling business deposit taking for optimizing cost of Lending in 23* countries on 5 continents capital * From p
Slide 6: Consumer Lending Business
8% 1% Consumer Lending 262.2 221.6 Business Lending 154.1 111 70.5 Mobile Bank incl. 2014 2105 2016 2017 2018 91% Primeloan 37.8 31.8 4% Northern Europe 32% 43% Western Europe 21.1 16.5 Eastern Europe 10.6 Rest of the World 22% 2014 2015 2016 2017 2018 6 FE-Classification: General\Anyone
Slide 7: Focus Mobile Bank development
Focus Future profitability Risk Mobile Bank management Future growth Evolution to development lower yield lending 7 FE-Classification: General\Anyone
Slide 8: Management team presenting today
Founder and Chief Executive Officer Presenting today Chief Operating Officer Business Unit Director SME Lending Chief Commercial Officer Business Unit Director for Installment Loans Head of Strategic Partnerships Business Unit Director for Revolving Loans Consumer Lending Business leader Head of Leg
Slide 9: Agenda
1. Introduction Emmi Kyykkä, Head of Group Communications & IR 2. Strategy & Vision Jorma Jokela, Group CEO & Founder 3. Tech Platform Ari Tiukkanen, COO & David Kalosi, Director of Technology Break 15min 4. Consumer Lendingxxxxxxxxxx Pieter van Groos, Consumer Lending Business Leader 5. Business Le
Slide 10: The path to Most Valued Financial Platform
The path to Most Valued Financial Platform Our Strategy - Jorma Jokela, CEO & Founder ferratum
Slide 11: We continue to grow our SME and consumer lending business
• Scale-up all countries We continue to grow our SME and consumer • Fire up all growth cylinders lending business • Product innovation We accelerate our profit and growth with our • Mobile Wallet at the center of lending offering new Mobile Wallet • Integrate additional financial services into it •
Slide 12: Fast, easy and digital financial solutions
Fast, easy and digital financial solutions... 12 FE-Classification: General\Anyone
Slide 13: Vision and Mission
Vision Mission “We have always strived to offer our customers the fastest, easiest and “We strive to offer everyone globally value beyond money through most convenient loans. Now, we bring this vision beyond lending and fastest, easiest and best customer experience” into the whole financial field. T
Slide 14: Technology and data-driven lending
Data gathering and analysis Real-time credit Digital marketing risk scoring Technology Automated pay- Digital in & pay-out onboarding Entrepreneurial spirit and calculated risk-taking culture Unique regulatory expertise globally 14 FE-Classification: General\Anyone
Slide 15: Values and culture
1 Customer centricity – it all comes down to 4 Respect – it is about how we feel about our customers and making them happy. Our others and how we treat them. We respect customers are at the heart of what we do, why our customers – internal and external ones – Winning teams we exist, whom we first se
Slide 16: Three horizons to Most valued Financial Platform
Most valued Financial Platform Horizon III Revenue & adding value Most valued Mobile Wallet • by attracting ecosystem partners • Growth through start-ups & ventures Horizon II Most valued Lender • • Partnerships and joint ventures • Asset-light model Horizon I • • Simplify & digitize further • Execu
Slide 17: Strategic priorities
• Attract and keep more good customers • Successfully meet regulatory challenges • All Ferratum people to deliver more value to countries and customers • Service-to-profitable sales • Scale Mobile Wallet with lending • Everyone doing more with less to deliver operating leverage • Prime loan up-and-r
Slide 18: Mobile Wallet at the center of Ferratum's offerings
Mobile Wallet at the center of Ferratum’s offerings, creating growth multipliers Being established in the lower yield segment with our core business Asset-light model Applying force multipliers through Joint Ventures and partnerships Innovating and growing further through startups & ventures Evolvin
Slide 19: Commission revenue and risk-free profit
Commission Risk free revenue profit New Customer customer segments retention 19 FE-Classification: General\Anyone
Slide 20: FerraOS: the technological backbone
FerraOS: The technological backbone enabling our strategy Technology Platform - Ari Tiukkanen, COO & David Kalosi, Director of Technology ferratum
Slide 21: Technology foundation across horizons
Most valued Financial Platform Horizon III Revenue & adding value • Most valued Mobile Wallet • Platform as a service with Open API deployable worldwide Horizon II Most valued Lender • • Shortening release cycles by increasing CI/CD pipeline efficiency Horizon I • • Transition to a modern, microserv
Slide 22: Internal and external development split
Ext 40% Int 60% 22 FE-Classification: General\Anyone
Slide 23: Open standards and cost effectiveness
• Minimizing vendor lock by adhering to open standards • Cost effectiveness by eliminating unnecessary fees and licenses • Attractive working environment with cutting edge technologies • Enables faster innovation cycles • Creates a competitive edge FE-Classification: General\Anyone
Slide 24: Time to market and complexity
Single Multiple Multiple Platform product products channels Cloud Native Proactive / Autonomous Infrastructure Teams Automated Processes Time to market Complexity 24 FE-Classification: General\Anyone
Slide 25: Platform services
Lending Services Collection Banking Services Services Document Payment Management Services Customer Risk Management Management FE-Classification: General\Anyone
Slide 26: Growing a financial service business: Consumer Lending
Growling a financial service business Consumer Lending - Pieter van Groos, Business Leader Consumer Lending ferratum
Slide 27: Fast, easy & digital financial solutions
Fast, easy & digital financial solutions... 27 FE-Classification: General\Anyone
Slide 28: Loan application process
Online Application Ferratum Approval Customer search for & Loan payout online process relationship loans verification ~15% approved 28 FE-Classification: General\Anyone
Slide 29: Our typical Ferratum customer
Our typical Ferratum customer is: • Employed or self-employed • Between 31 to 50 years young • Lives with a spouse and children Based on 2018 data 29 FE-Classification: General\Anyone
Slide 30: Product category evolution
Product category evolution towards higher customer lifetime value: All products are based on the same principles: Full digital setup and high user convenience, real-time, paperless LOW LOAN AMOUNT HIGH PRODUCT: SOLUTION: LONG SME – Business loan offering for small and medium SME size companies Prime
Slide 31: Net accounts receivables by product
400 250% Primeloan & other 350 200% SME loan 300 191% 172% Net accounts receivables PlusLoan 250 150% 150% Contributed 219 224 133% 132% value 200 187 106% 100% 100% 150 Avg. APR 91% 89% 139 153 121 119 117 100 103 Credit Limit 50% 50 Microloans 0 0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q1 A
Slide 32: Responsible lending pillars
Focus on our three responsible lending pillars: Ensure understanding of key Flexibility and empathy terms and conditions. Best-in-class underwriting regarding payment difficulties Clarity and transparency in Approval rates ~15 % Encouraging communication policy: customer communication - Amicable col
Slide 33: Scale up all countries, fire up growth cylinders
Scale-up all countries • Teams, systems, and infrastructure in place • Product roll-out • Best practice sharing Fire-up growth Product cylinders innovation • Build Primeloan • Fire cylinders to attract business & keep more good customers • Mobile Wallet at the core of the customer • Leverage data an
Slide 34: Revenue and product availability by country
EUR 46 m revenue 2018 FI Consumer lending Microloan a a a a a a a a a a a a a PlusLoan a a a a a a a a Credit Limit a a a a a a a a a a a Primeloan a a a SME a a a a a a a a a Mobile Bank a a a a Deposits a a a a Operating under banking licence a* a a a* a a a a a a a a * Aimed to be operating under
Slide 35: Customer acquisition and channel optimization
• Keeping good customers happy • Optimize application • Leverage conversion implemented • Growth hacking technology • Continuous • Quality sessions to • Best in class infrastructure to improvements of our channels underwriting nurture customers products, terms, and • Channel optimization • Best in c
Slide 36: Customer funnel
Started application % Arrived Paid out Sessions Activity Product application loan X follow-up adjustment % % Approved application % Passive Abandoned Abandoned customers % % % FE-Classification: General\Anyone
Slide 37: FE-Classification: General\Anyone
FE-Classification: General\Anyone
Slide 38: Speed & convenience combined with higher risk appetite
Drivers Feature Ferratum Banks • Onboarding in minutes Speed • Payout same day • Full online onboarding / no media breaks • Payment holiday Product • Installment reduction • Choose due date • Just in time approval Decision engine • Screen Scraping for risk evaluation • Immediate decision Transparenc
Slide 39: Onboarding compared with traditional banks
Traditional banks 30 mins Current account, Virtual card, self-selected Loan Day 3 Identification PIN Day 4+ application ~ in minutes process Consultation, Day 2 >4 days Digital Credit check 3-6 Credit data Credit Wallet approval Loan capture in use signatures, bank Salary payout statements, statemen
Slide 40: Evolution to new revenue pools
Existing unsecured loans business seamlessly integrated with a mobile wallet and future products is our strategic market opportunity Evolution to new revenue pools Payments Lending Pricing Fully digital Debit Card Overdraft Instalment SME Profitable Cost to Loans Loans serve 2005 Low 2013 Partner pr
Slide 41: Strategic priorities
• Attract and keep more good customers • Successfully meet regulatory challenges • All Ferratum people to deliver more value to countries and customers • Service-to-profitable sales • Scale mobile wallet with lending • Everyone doing more with less to deliver operating leverage • Prime loan up-and-r
Slide 42: Business Lending: working capital to SMEs
Working capital to SMEs underserved by conventional banks — avast opportunity Business Lending - Scott Donnelly, Business Unit Director SME Lending ferratum
Slide 43: SMEs underserved by conventional banks
Working capital to SMEs underserved by conventional banks – a vast opportunity Value Added by SMEs Estimated SME Funding # of SME Businesses in EU % of economic gross value Gap in EU added in EU Source: EU-28 https://ec.europa.eu/docsroom/documents/32581/attachments/1/translations/en/renditions/nati
Slide 44: Our SME offering
Median Time in Business Our offering Where FI, SE, DK, NL, UK, AU, PL, CZ, LT Loan Amount EUR 2K - 250K - Avg. EUR 15K Median # of Employees Term 6 – 24 months - Avg. 14.8 Pricing 20% - 55% APR - Avg. 42% APR Median Annual Revenue ✓ 5 minute online application Speed ✓ Approval and payout same day In
Slide 45: SME Net Receivables
SME Net Receivables (EURm) 74.2 58.3 51.6 122% 49.3 CAGR 43.7 36.4 32.1 26.8 21.7 15.2 10.4 45 FE-Classification: General\Anyone
Slide 46: Banking licence benefits for SME lending
Lower funding costs → Significant benefit to EBT New market opportunities → Entering new markets that require a banking licence for SME lending 46 FE-Classification: General\Anyone
Slide 47: New SME products
Merchant Cash Advance Supply chain finance Leasing 47 FE-Classification: General\Anyone
Slide 48: Enterprise and local partners
Enterprise and local partners • POS providers • Banks • Accounting software • Sales finance 48 FE-Classification: General\Anyone
Slide 49: Risk & Data Analytics
Risk & Data Analytics - Dr. Clemens Krause, Head of Finance & Risk ferratum
Slide 50: Impairments on loans
Brief description of impairments on loans • IFRS 9 is a sophisticated standard calculating the expected loss Impairments/Revenues in% 39.2% • ~6.7% of loss provions (Q1) when paying out a loan 36.9% 35.2% • Time difference between impairment and revenue recognition 32.1% • The model is very sensitiv
Slide 51: Loan application to repayment funnel
1 2 3 4 5 6 Loan Check Decision Approval Payment Repayment application Customer credit and ID Instant loan decision Loan approval by Loan pay-out by Invoice via post, loan and by Ferratum and via (online, mobile) customer (online, Ferratum handling fee payment by external databases mobile). Contract
Slide 52: Data sources for scoring and fraud prevention
Application Browsing Behavior & Google Analytics Fraud Prevention Credit Bureau Bank Scraping & PSD2 Transactional Data Categorization Mobile Wallet 52 FE-Classification: General\Anyone
Slide 53: Real-time data processing and proactive scoring
• Real-time data processing based on event-streaming platform • Proactive scoring (streaming) • External data usage for all loans & withdrawals • PSD2 allows access to more transactional bank account details • Focus on leveraging data on existing customers & open account usage • Real time data influ
Slide 54: Early and late collections
Early Collections (1-90 DPD) / Termination Late Collections (after 90 DPD) Focus on Co-operation with customer to find the best way 1 1 Portfolio management to pay their loan 2 Customer relationship protection as a high priority 2 Protection of claims and minimizing losses Minimization of cases movi
Slide 55: Collections performance
Early Collections (1-90 DPD) / Termination Late Collections (after 90 DPD) +€ 18 M +€ 2 M +€ 4 M 10-20 M Forward Flow Collected cash Collected cash Recovery from recoveries p.m. p.m. debt sales p.a. p.m. ~60% ~70K 7 50-90% Recoveries of overdue amount <90DPD Cases < 90 DPD Countries with Forward Flo
Slide 56: Intelligent debt collection
IN-HOUSE & THIRD PARTY Big Data& Best Client Best Analytics Understanding (Smart Segmentation) INTELLIGENT DEBT COLLECTION AI debt collection CUSTOMER CUSTOMER LANDING PAGE LANDING PAGE Settlements Communication (Different payment Channels methods) (Digital & Traditional) Soft Collection Late Collec
Slide 57: Underwriting and collections by product yield
Credit Microloan PlusLoan Primeloan Limit HIGH YIELD LOW YIELD Increasing Underwriting & Collections Requirements Underwriting Underwriting • Sound application Scoring • Top customer Scoring • New and repeat customer scoring • Dynamic scoring – new/behavioral • Light onboarding • More data in applic
Slide 58: NPL ratio and receivables ageing
IAS 39 IFRS 9 NPL Ratio % Non-comparable to historical figures NPL Ratio % 21.50% 20.70% 19.00% 18.30% 18.40% 18.30% 17.80% 17.83% 16.00% 16.00% 16.60% 13.50% 13.70% 14.00% 12.40% 12.60% 12.50% 11.30% 400 400 348 321 350 350 51 47 300 300 11 257 10 237 250 17 77 250 12 72 22 31 200 184 9 200 15 52 8
Slide 59: Impairments as % of revenues and credit portfolio
Impairments as % of revenues were at around 30-35% annually in the last years. Impairments on loans in % of the Credit Portfolio provide a better view on our risk and scoring model and show a decreasing trend reflecting our strategic product transition. Impairments / Revenues Impairments / Net Credi
Slide 60: Interest cap effects in Estonia and Sweden
Interest cap Index (Net sales 2014 = 100) Index (Net sales Q1-17 = 100) introduced in Q3 2018 0.12 30% 670 646 1 089 26.1% 566 0.1 25% 508 490 466 7.4% 0.08 449 17.8% 20% 6.9% 417 6.6% 6.2% 5.9% 18.9% 0.06 547 15% 5.0% 6.4% 9.2% 373 3.5% 0.04 10% Interest cap 301 5.9% 155 157 introduced in 219 125 1
Slide 61: Finance
Finance - Dr. Clemens Krause, Head of Finance & Risk ferratum
Slide 62: Main growth drivers 2014–2018
Our main growth drivers between 2014 – 2018: International expansion, market share gains, new product roll-outs Revenue EBIT EBIT-Margin % 38 262 32 15% 222 15% 14% 14% 14% 154 21 111 16 71 11 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 EBT EPS EBT-Margin % 0.92 23 22
Slide 63: EBIT guidance and mid-term aspiration
▪ Delivered: Strong revenue and profit growth ▪ 2019 EBIT to exceed EUR 45 million Mid-term aspiration ▪ Mid-term aspiration EBIT EUR 100 million Guidance EBIT to exceed EBIT to exceed EUR 100 million EUR 45 million EBIT MEUR 100 45 38 32 21 16 11 2014 2015 2016 2017 2018 2019 Mid-term aspiration 63
Slide 64: Equity and net debt
30.3% 28.6% 63.3% 20.8% 22.2% 55.4% 19.2% 19.5% 39.5% 34.5% 29.9 29.7% 27.9% 26.9% 26.1% 24.1% 21.5% 21.3% 2014 2015 2016 2017 2018 2019 3m 2014 2015 2016 2017 2018 2019 3m Equity ratio Net equity ratio 171 Ferratum 159 Post IPO 2.83 132 135 45.0 2.58 3.00 2.35 116 116 40.0 2.50 97 1.90 35.0 79 1.53
Slide 65: Funding costs and debt maturities
8.6% Ferratum Capital Germany 4.875% 2019 8.0% 6% 11 % Ferratum Bank 3mE+6.25% 2020 Ferratum Capital Germany 3mE+5.50% 2022 49 % Nordea credit line 27 % Deposits 7% 5.2% 3.1% 3.2% 3.2% 100 80 40 25 2014 2015 2016 2017 2018 2019 3m 2019 2020 2021 2022 2023 Ferratum Capital Germany 4.875% 2019 Ferratu
Slide 66: Migrating countries under EU banking licence
…by migrating more countries under Sphere I operations Countries covered by Countries / operations not currently utilising Ferratum Bank p.l.c.’s EU banking licence Ferratum Bank p.l.c.’s EU banking licence Potential Sphere I Operations Migration targeted in 2019 Deposits from customers 15 Ferratum
Slide 67: Growth, profitability, capital & liquidity, asset quality
Growth, Profitabilty, Capital & Liquidity, Asset Quality Maintaining profitable Operating leverage & Risk Appetite & Capital & Liquidity revenue growth improving margins Credit Loss Level ✓ 14 Years of continuous ✓ Increase operating ✓ Cost of Capital at c. 3.2% ✓ Lower APR of bigger growth and prof
Slide 68: Equity and debt valuation levers
Relative Preference Measure Lever Metric impact Timing Legend impact Increase share of assets B/S – Current 1 under deposit financing liabilities E+ D+ R+ 2019 E+ Strengthens equity valuation B/S – Net E- Reduces equity valuation 2 Debt Sales (NPL) E+ D+ R+ 2019 receivables D- Increases cost of debt
Slide 69: Mobile Wallet: our rocket fuel for customer growth
Mobile Wallet: Our rocket fuel for customer growth Mobile Wallet - Petri Rahja, Head of Mobile Bank ferratum
Slide 70: Development speed, maintenance costs, acquisition model
Speed of development • Microservice architecture and agile development Maintenance costs • No traditional core bank system New customer acquisition model • Combination of wallet and lending 70 FE-Classification: General\Anyone
Slide 71: Customers' frustrations with banks
“No one is really helping me with my finances, and I get stressed about it” Banks are… Costly Still paper based Slow FE-Classification: General\Anyone
Slide 72: Empowering customers to master their finances
“Empowering customers to master their finances as easily as messaging” Simple and real-time pure mobile banking experiences Proactive financial companion that will help you to manage finances better Providing best practices (A.I.) to excel and get on top of your finances Connected – all your finance
Slide 73: Benefits for customers and for Ferratum
Benefits for customers Benefits for Ferratum Modern banking Accessing all services to use services from one money securely place globally Helping to save Increasing and prosper Support when activity & loyalty and where there is a need for extra money Decreasing cost of funding Ferratum revenue sourc
Slide 74: Platform services
Lending Services Collection Banking Services Services Document Payment Management Services Customer Risk Management Management 74 FE-Classification: General\Anyone
Slide 75: Open accounts for all potential customers
Direct Linking 24 million visits Seamlessly integrated, open accounts for all potential customers 75 FE-Classification: General\Anyone
Slide 76: Evolution to new revenue pools
Evolution to new revenue pools Payments Lending Pricing Fully digital Debit Card Overdraft Instalment SME Profitable Cost to Loans Loans serve 2005 Low 2013 Partner product Low ` 2014 Low Not yet 2015 available in Germany Low 2017 Traditional banks High 76 FE-Classification: General\Anyone
Slide 77: FE-Classification: General\Anyone
77 FE-Classification: General\Anyone
Slide 78: Summary
Summary - Jorma Jokela, CEO & Founder ferratum
Slide 79: Proven digital business model with 14 years of profitable growth
Proven digital business model with 14 years of profitable growth • CAGR Revenue (11-18): 34% • CAGR EBIT (11-18): 40% Proven • Strong asset quality digital business Strong competitive position model • 14 years learning curve in key winning and complex areas • Customer-centric organization; Knowing t
Slide 80: We continue to grow our SME and consumer lending business
• Scale up all countries We continue to grow our SME and consumer • Fire up all growth cylinders lending business • Product innovation We accelerate our profit and growth with our • Mobile Wallet at the center of lending offering new Mobile Wallet • Integrate additional financial services into it •