Alisa Bank Plc's Financial Statements Bulletin 2024

ALISA BANK PLC STOCK EXCHANGE RELEASE 14.2.2025 AT 09.05 EET

PROFIT TURNAROUND IN THE SECOND HALF OF THE YEAR

January-December 2024 in brief

• Total income was EUR 17.0 million (16.7).
• Total operating expenses increased to EUR 12.8 million (11.4) due to the merger with PURO Finance.
• Realised and expected credit losses were EUR 5.5 million (5.4*).
• January-December profit before non-recurring items and taxes was EUR -0.1 million (0.4*). Profit before taxes was EUR -1.3 million (-0.1).
• Total capital adequacy ratio increased by 17.6 percent (15.1*).
• Loan portfolio before reducing expected credit losses decreased to EUR 149.5 million (172.9). The corporate customer loan portfolio increased by EUR 47.6 million (41.1) and the loan portfolio of personal customers decreased to EUR 101.9 million (131.8).
• Deposits increased to EUR 394.6 million (268.9).
• Sampsa Laine started as the bank's new CEO on 1 December 2024.

July-December 2024 in brief

• July-December profit before non-recurring items and taxes was EUR 0.9 million (-0.0*). Profit before taxes was EUR 0.7 million (-0.4*).
• Total income increased to EUR 9.3 million (8.3).

*   Figures for the financial year 2023 adjusted for the ECL provision, see more details in note 13

** The calculation principles of alternative performance measures are presented in Appendix A.

CEO’s review

New strategy for the new year

For Alisa Bank, 2024 was a year of renewal filled with many changes. The combination with PURO Finance Ltd, completed in May, proved transformative. With the combination, the bank gained a new Board of Directors, Management Team and a strategy published later in the financial year. In the second half of the year, the focus of operations, in addition to the implementation of the new strategy, was on the technical and operational execution of the merger. At the same time, we were able to improve fundraising, create a foundation for more active risk-based pricing, and initiate discussions with new Banking-as-a-Service (BaaS) partners. 

The weak state of the Finnish economy was reflected in the demand for both consumer and business financing. In particular, demand for our main product, invoice financing, fell short of our August forecast, as B2B invoicing in our target group declined in the final months of the year. In addition to the challenging business environment, the end of the year saw a higher-than-expected amount of external expenses, and the expected credit loss from a single bankruptcy estate was specified. The focus of this year is on increasing sales and partnerships for products in line with our new strategy and on efficiency measures aimed at optimizing external expenses. The portfolio of consumer credits, which was previously a focus area, maintains a level of credit losses similar to the past financial year. A clearer decrease in credit losses is expected to come only in 2026, with the loan portfolio under the new strategy being materially less risky than before.

Due to the first half of the year, profit before non-recurring items and taxes was EUR -0.1 million, and profit before taxes EUR -1.3 million. The earnings improvement in the second half of the year was driven by both successful implementation of fund-raising and the increase in the risk-adjusted return on lending in line with the renewed strategy. Volume development in lending and certain external expenses correspondingly pushed the figures for the latter part of the year below the guidance we issued in connection with the half-year report.

Business development

The company’s operating income increased by 2.0 percent to EUR 17.0 million (16.7) during the financial year, driven by a corresponding change in net interest income. The same trend in credit losses resulted in a corresponding 2.0 percent increase in the risk-adjusted return. The bank’s profit before taxes fell to a EUR -1.3 million (-0.1*) loss after the expense level exceeded the 2023 level by EUR 1.4 million.

Business performance in the past year was characterized by a weak market situation in Finland and, on the other hand, the merger of Alisa Bank and PURO Finance. The shift in operational focus towards SME lending, initiated in spring 2024, was strengthened by the merger with PURO and the renewed strategy published on September 30. The organizational and business changes following the merger were somewhat reflected in the development of non-recurring expenses towards the end of the year but at the same time sharpened operations ahead of 2025. The bank's BaaS operations strengthened in existing partnerships and opened numerous new discussions, the results of which are expected to be announced in early 2025. The flow of customer contacts generated by the partner model remained strong among corporate customers, but the weak market environment was reflected in lower-than-expected demand for customer-specific financing. The new risk-based pricing model implemented in December 2024 is expected to be reflected in demand recovery, especially in the lower-risk SME target groups. At the same time, the decline in the average interest rate of financing from 3.1% percent in June to 2.4 percent in December improved the profitability of financing activities.

After the one-off increase in the loan portfolio (62%) generated by the PURO merger, the volume development of business financing was subdued in the second half of the year. Growth in the business financing loan portfolio for the full financial year was 16 percent. The corporate loan portfolio at the end of the financial year was EUR 48 million (41). The number of credit applications developed as targeted, but the challenging operating environment was reflected in weak credit quality and, thus, a low volume of granted financing. The granted financing focused on invoice financing, which kept the new sales portfolio low-risk. At the same time, we increased the risk-adjusted return on business financing, which was also supported by the success of own channels in deposit fundraising.

In personal customers, our loan portfolio decreased by 23 percent to EUR 102 million (132). The key reason for the drop was a strategic decision to abandon the use of comparison platforms and to emphasize new sales to the company's own customer base with a better risk profile. The decision materially improved the profitability of new sales, roughly doubling the risk-adjusted return from the level seen in summer 2024. The decision to focus on SME financing and growing the own deposit base, in line with the new strategy, reduces the emphasis on personal finance. The high credit loss ratio of the current personal finance portfolio will continue to negatively impact the company's earnings development throughout 2025.

Our deposits amounted to EUR 395 million (269) at the end of the period. During the year, the development of the structure of deposits was two-fold. During the first half of the year, we sought growth from the comparison portal Raisin while also exploring the market in different European countries. The deposit portfolio’s peak level was reached in July 2024, after which we focused on growing our own deposit base and optimizing the price level of fundraising. The end result was a highly predictable portfolio development and better-than-expected profitability of deposits, which in part supported the bank's earnings turnaround in the second half of 2024.

We had 68,000 (57,500) active customers at the end of December. Customer satisfaction increased a bit (Net Promoter Score 52) from an already strong level (46).

The long sought-after increase in the solvency ratio materialized in the second half of 2024, supported not only by the decrease in the loan portfolio but also by positive earnings development and a successful personnel issue. In the second half of the financial year, the bank’s CET1 capital increased by EUR 1.2 million and total capital adequacy ratio was 17.6 percent (15.1).

Market environment and risk position

The general economic development was weak in Finland in 2024. In the latter half of the year, the invoicing volume between companies, according to data from companies using Procountor, was lower than in the previous year. This was directly reflected in the demand for invoice financing. However, the decline in interest rates started to show as a reversal of the trend at the very end of the year, which, in turn, led to a budding recovery in our loan demand. Success in fundraising and a high-quality business financing product portfolio will enable us to play a more active role in corporate financing in the future.

The bank has a strong liquidity position (liquid assets of EUR 284 million). We significantly increased deposit funds while improving the average cost of funding. Strong development of own channels and close cooperation with several growing external channels keep fundraising a clear area of strength. The deposit margin will also significantly support the bank’s overall result in 2025.

The bank's capital adequacy was 17.6 percent, exceeding the targeted 16 percent due to the positive result in the second half of the year, the successful personnel issue, and the development of the loan portfolio. We expect the capital adequacy ratio will remain at the target level during the first half of the year, considering the targeted growth in business financing.

Despite the seasonal relative increase in non-performing loans at the end of the year, the overall development of credit losses remained stable. The decline in the loan portfolio in the last quarter brought the relative share of non-performing receivables (NPL ratio) to 4.8 percent (4.2 percent) at the end of the reporting period. During December, we successfully negotiated a new agreement for the resale of non-performing loans, which improves the outlook for credit losses for the current year. The same applies to the impact of the revised risk-based pricing on the business financing portfolio. Credit losses will remain above our target level as the current personal financing portfolio in 2025 represents just under 70 percent of our total loan portfolio during the early part of 2025.

Outlook for the future

Alisa Bank's change towards lower-risk SME financing products, driven by the new strategy, will improve the risk-adjusted return on new sales during 2025. The decline in the cost level of fundraising will continue with the market’s predicted high-interest rate scenario throughout the beginning of the year. Both measures have a significant earnings impact relative to the current size of the banking book. We are particularly looking for stronger-than-market growth in the banking book through existing and new BaaS partnerships. Based on ongoing discussions, Alisa's offering, especially in invoice financing, is considered very interesting.

In addition to successful measures that strengthen the development of net income from financial operations, we pay particular attention to the level of external expenses. We have already renegotiated several partnership agreements and initiated a similar process with other partners. In light of the changes already made, we know we will achieve significant additional efficiency in this area, some of which will be invested in growing the business.

We estimate that the bank’s operating result will continue to develop positively during 2025.

A warm thank you to our staff and customers for the past year - you have been a key part of our turn.

Sampsa Laine

CEO

Outlook for 2025

After a year of changes, Alisa Bank will implement the renewed strategy in the 2025 fiscal year and continue to develop BaaS partnerships. There are early positive signs in the general economic situation, although there is still uncertainty regarding the development of the operating environment. If the economic recovery continues, combined with the implementation of the bank’s renewed strategy, it will support the bank’s income growth during the current financial year. For the reasons mentioned above, and due to the impact of the annual cycle of invoice financing business, favorable development is expected to be emphasized in the second half of the year.

The profit for the second half of 2024 reflects the current financial state of the renewed Alisa. The profit before non-recurring items for 2025, is estimated to develop favorably compared with the current financial state.

Alisa Bank Plc

Further information

Sampsa Laine, CEO, Alisa Bank Plc, sampsa.laine@alisapankki.fi, tel. +358 40 555 9035

Alisa Bank

Alisa Bank Plc is a financial technology company that provides seamless banking services through digital channels. We serve SME customers, deposit customers seeking competitive interest returns on their deposits and partners. Together with our partners, we offer integrated banking services in the channels where customers carry out their daily business. Alisa Bank Plc’s shares are listed on the main list of Nasdaq Helsinki (ALISA), and it holds a license granted by the Financial Supervisory Authority. www.alisabank.com