Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Avanza Bank Holding AB (FRA:1JJA, Financial) reported strong quarterly results and a solid first half of the year.
- The company saw a net inflow of SEK17 billion and welcomed 34,000 new customers.
- Avanza Bank Holding AB (FRA:1JJA) was ranked the number one financial company in a reputation index.
- The funds business achieved an all-time high net inflow of SEK22 billion in the first half of the year.
- Customer acquisition costs remain low due to strong brand recognition and word-of-mouth referrals.
Negative Points
- Operating profit for the quarter decreased by 9% compared to Q1, partly due to customer compensations and a fine from the Swedish Authority for Privacy Protection.
- Total net brokerage income decreased slightly compared to the last quarter due to three fewer trading days in Q2.
- Other income was negatively affected by customer compensations of SEK15.3 million related to interest on ISK accounts.
- The company faces challenges in internal efficiency and has identified several areas needing improvement, such as corporate actions and settlement processes.
- There was a negative net flow in the private banking segment, attributed to customers seeking exposures in assets not provided by Avanza Bank Holding AB (FRA:1JJA).
Q & A Highlights
Q: My first question is on NII during the quarter, the average annualized rate on deposit increased despite the rate cuts from the Riksbank. Was this purely due to the mix shift within deposit accounts?
A: Yes, you are right. The increase was due to a slight growth in savings accounts. The peak in expenses occurred in April, but the average rate appears higher because we take the average of opening and closing balances, which saw some uptick towards the end of the quarter.
Q: You cut your mortgage offering by 25 bps on May 15 but delayed the cut on savings accounts until May 27. Why not protect your NII more by aligning these cuts?
A: We would have preferred to lower the savings account rates immediately, but we have agreements with our savings account partners that cause a lag. The delay was not due to competition but contractual obligations.
Q: Could you help us understand your vision for Avanza going forward? Are the five areas you mentioned earlier the main focus, or should we expect other developments?
A: We are in the middle of a strategic overview, which is natural for a new CEO. The five prioritized areas are tactical for 2024, but the core business of being a leading savings platform in Sweden will remain our primary focus.
Q: Could you elaborate on your goal to move the development environment into the cloud? What is the scope, timing, and cost estimates?
A: We plan to move our workspace to the cloud by the end of this year or early next year. The production environment will follow, but the pace is undecided. The move is not to lower costs but to leverage cloud innovations. The actual cost in the cloud may be higher, but we expect efficiency gains elsewhere.
Q: You announced currency accounts for Pro and private banking clients. What is driving this move, and what revenue implications do you expect?
A: This is driven by clear client demand to avoid frequent FX conversions. While we may earn less on FX fees, we believe this will be compensated by increased volumes due to improved client convenience.
Q: How broad-based is the interest in foreign securities among your customers?
A: The interest in foreign securities is quite broad across all customer segments. Popular names like Novo Nordisk and Nvidia are frequently traded, indicating widespread interest.
Q: Could you explain the ISK interest remediation issue in more detail? Is there a risk of further claims from customers?
A: All affected customers received information from the tax authority in May and June. We have paid out SEK15 million, and while we see a slower rate of incoming claims, I cannot provide a hard upper limit on potential future claims.
Q: What is the reason for the negative net flow in the private banking segment this quarter?
A: The outflows were due to a few one-offs and not increased competition. Typically, we lose customers in this segment due to our lower risk appetite for credits compared to competitors.
Q: How do you expect the strategic update to be communicated? Will it be part of a Capital Markets Day or an interim report?
A: It depends on the extent of the changes. If they are minor, we will discuss them in an interim report. If significant, we may present them at a Capital Markets Day.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
