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Cembra Money Bank reports half-year net income of CHF 64.7 million and confirms full-year 2014 guidance

29 August 2014

Cembra Money Bank reports half-year net income of CHF 64.7 million and confirms full-year 2014 guidance

Reported net income of CHF 64.7 million, including a CHF 3.0 million pre-tax FINMA-related provision, up 5% compared to the one-off adjusted first half 2013 net income of CHF 61.6 million
Net revenues up 8% to 185.9 million, outperforming key products markets
Solid cost control with cost/income ratio at 44.5% or 42.8% on an adjusted basis
Return on average equity of 16.4% on strong capital base with Tier 1 ratio of 19.8%
Full-year 2014 guidance with reported earnings per share of CHF 4.40 – 4.60 confirmed

Zurich, Switzerland – Cembra Money Bank reports for the first-half 2014 a consolidated net income of CHF 64.7 million on a US GAAP basis or CHF 2.16 per share¹. This translates into an annualized return on average equity² of 16.4% while maintaining a strong capital position with a Tier 1 capital ratio³ of 19.8%. Costs remained well under control resulting in a cost/income ratio⁴ of 44.5%. With net financing receivables growing by 3% to CHF 4.1 billion, Cembra Money Bank was able to gain market share. Cembra Money Bank confirms its full-year 2014 guidance with earnings per share of between CHF 4.40 and CHF 4.60 on a reported basis.

Robert Oudmayer, Chief Executive Officer, said: “We are very satisfied with the operating results of the first half 2014 under our new brand Cembra Money Bank. We have been able to gain market share in all three business lines and our business transition as stand-alone company is well on track.”

Operating performance

Compared to first-half 2013, net revenues increased by 8% to CHF 185.9 million, driven by both net interest income as well as commission and fee income. Net interest income, which accounts for 80% of net revenues, was 7% higher at CHF 148.4 million, reflecting a net interest margin⁵ of 7.2%. Main driver of the increase in net interest income was lower funding costs due to changes in the funding mix. Commissions and fee income, which contribute 20% to net revenues, were 9% higher at CHF 37.5 million. Provisions for losses came in at CHF 21.0 million translating into a loss rate⁶ of 1.0% of financing receivables; in-line with the guidance provided earlier. First-half 2013 provisions had been positively impacted by the sale of a portfolio of loss certificates for CHF 33.1 million. Total operating expenses were 4% higher at CHF 82.6 million mainly driven by a CHF 3.0 million one-off provision related to the FINMA investigation. While personnel expenses decreased by 7% to CHF 47.9 million because of lower pension costs and increased headcount productivity, operational general and administrative expenses increased to CHF 31.7 million mainly due to the on-going business separation from GE. This resulted in a cost/income ratio of 44.5%, or 42.8% adjusted for the FINMA-related provision. Income before taxes amounted to CHF 82.3 million while the tax rate remained unchanged at approx. 21%. This led to a net income of CHF 64.7 million representing an increase of 5% compared to first-half 2013 net income adjusted for the one-off gain from the sale of loss certificates.

Cembra Money Bank's prudent risk management approach was reflected in stable delinquencies at low levels: 2.0% for 30+ days past due⁷ and 0.5% for non-performing loans⁸.

Balance sheet and capital developments

Net financing receivables (representing loans and leases to customers) increased by 3% or CHF 119 million to CHF 4,112 million. All three business lines reported growth versus year-end 2013 gaining market share in their respective markets. Funding from former parent GE Capital was reduced further to CHF 500 million translating into a stand-alone funding of 87%. Institutional and retail deposits grew by 14% to CHF 1,898 million, reflecting investor's confidence into Cembra Money Bank as a stand-alone company. Additionally, Cembra Money Bank successfully converted its historical CHF 200 million facility with a syndicate of local Swiss banks into a CHF 150 million 3-year term loan and a CHF 100 million revolving facility. Shareholders' equity slightly declined to CHF 780 million as a result of the CHF 85.5 million dividend payment in May, partially offset by first-half 2014 net income. With risk-weighted assets of CHF 3,697 million (up 3% versus year-end 2013) and eligible Tier 1 capital of CHF 732 million, the Tier 1 capital ratio reached a high 19.8% by end-June 2014.

Antoine Boublil, Chief Financial Officer, commented: “We made good progress on our funding, reaching 87% on a standalone basis driven by deposits which now account for more than 50% of the funding base. We also have CHF 67 million of excess capital as of June 2014.”

Product lines

In a slightly decreasing market, Personal Loans was able to consolidate its strong market position with receivables increasing by 1% versus year-end 2013 to CHF 1,888 million. Interest income was 3% lower at CHF 106.0 million compared to first-half 2013.

While new car registrations in Switzerland declined by 4% in the first half 2014, product line Auto was able to capitalize on the rebranding and increased net financing receivables by 2% to CHF 1,688 million. Interest income fell by 8% to CHF 43.9 million as a result of lower rates offered in the market, compared to first-half 2013.

Credit Cards again recorded strong growth with net financing receivables increasing by 11% to CHF 536 million compared to year-end 2013. Interest income of CHF 18.7 million was 23% higher than in the previous year. The number of issued cards grew by 5% to 581'000 (compared to year-end 2013) with the Cumulus MasterCard being the main driver.

Outlook

For the second half of 2014, Cembra Money Bank is currently expecting interest rates to stay broadly unchanged at historically low levels and therefore pricing pressure to remain, in particular in Auto and Personal Loans. Credit Cards is expected to further deliver on its growth path. Cembra Money Bank confirms its full-year guidance given in March and is expecting reported earnings per share of between CHF 4.40 and CHF 4.60. Given the seasonality in Cembra Money Bank's business, net profit for the second half-year 2014 is expected to exceed first-half net profit. Medium-term targets remain unchanged including a dividend pay-out ratio of 60-70% of net income, a minimum Tier-1 ratio of 18%, return on equity (ROE) of at least 15% and financing receivables to grow in line with Swiss GDP.

All documents (half-year report, results presentation, letter to shareholders and this media release) will be available from 07:00 a.m. CET at www.cembra.ch/en/investor

Contacts

Media:

Brigitte Kaps; +41 44 439 8194; brigitte.kaps@cembra.ch

Investor Relations:

Christian Waelti; +41 44 439 8572; christian.waelti@cembra.ch

Key dates

26 February 2015	Publication of full-year 2014 results
29 April 2015	Annual General Meeting 2015

About Cembra Money Bank AG

Cembra Money Bank is a Bank with a well-established position in Swiss consumer finance. The Bank is regulated by FINMA, holds a banking license and provides a range of financial products and services. The Bank holds leading positions in Switzerland for its Personal Loans and Auto business. It has a growing Credit Cards business based on partnering with Swiss retailers and other institutions. Headquartered in Zurich, the Bank operates exclusively in Switzerland through a nationwide network of 25 branches as well as through alternative distribution and sourcing channels, such as the internet, credit card partners, independent agents and over 3,200 auto dealers

Presentation for analysts of Cembra Money Bank's half-year 2014 results via audio webcast and telephone conference (in English)

Date and time:	29 August 2014 at 09.00 a.m. CET
Speakers:	Robert Oudmayer, CEO Antoine Boublil, CFO
Audio webcast:	www.cembra.ch/en/investor
Telephone:	Europe UK US:	+41 (0)58 310 50 00: +44 (0)203 059 58 62 +1 (1)631 570 5613
Q&A session:	Following the presentation, participants will have the opportunity to ask questions via the telephone conference

Please dial in 10–15 minutes before the start of the presentation and ask for “Cembra's half-year 2014 results”.

Explanatory notes

¹	Basic earnings per share based on weighted-average numbers of common shares outstanding.
²	The return on average equity is defined as the ratio of net income to average total shareholders' equity (2-point average).
³	The Tier 1 capital ratio: this means the ratio (expressed as a percentage) of the Bank's consolidated Tier 1 capital (CET1) to the Bank's consolidated risk-weighted assets as at 30 June 2014. The Bank's consolidated Tier 1 capital as well as the risk-weighted assets have been derived from the Banks's statutory consolidated financial statements as at 30 June 2014, which were prepared in accordance with Swiss law, and calculated in accordance with applicable Swiss regulatory requirements.
⁴	The cost/income ratio is defined as the ratio of total operating expenses to net revenues.
⁵	The net interest margin is defined as the ratio of net interest income to average financing receivables (net of deferred income and costs and before allowance for losses; calculated on a quarterly basis).
⁶	The loss rate is defined as the ratio of provisions for losses on financing receivables to average financing receivables (net of deferred income and costs and before allowance for losses; 2-point average).
⁷	This ratio represents the Bank's 30+ days past due balances divided by the financing receivables (excluding initial direct costs).
⁸	The non-performing loans (NPL) ratio is defined as the ratio of non-accrual interest-bearing assets (at period-end) to interest-bearing assets.

Disclaimer regarding forward-looking statements

This media release by Cembra Money Bank (“the Bank”) includes forward-looking statements that reflect the Bank’s intentions, beliefs or current expectations and projections about the Bank’s future results of operations, financial condition, liquidity, performance, prospects, strategies, opportunities and the industries in which it operates. Forward-looking statements involve matters that are not historical facts. The Bank has tried to identify those forward-looking statements by using the words “may”, “will”, “would”, “should”, “expect”, “intend”, “estimate”, “anticipate”, “project”, “believe”, “seek”, “plan”, “predict”, “continue” and similar expressions. Such statements are made on the basis of assumptions and expectations which, although the Bank believes them to be reasonable at this time, may prove to be erroneous.

These forward-looking statements are subject to risks, uncertainties and assumptions and other factors that could cause the Bank’s actual results of operations, financial condition, liquidity, performance, prospects or opportunities, as well as those of the markets it serves or intends to serve, to differ materially from those expressed in, or suggested by, these forward-looking statements. Important factors that could cause those differences include, but are not limited to: changing business or other market conditions; legislative, fiscal and regulatory developments; general economic conditions in Switzerland, the European Union and elsewhere; and the Bank’s ability to respond to trends in the financial services industry. Additional factors could cause actual results, performance or achievements to differ materially. In view of these uncertainties, readers are cautioned not to place undue reliance on these forward-looking statements. The Bank, its directors, officers and employees expressly disclaim any obligation or undertaking to release any update of or revisions to any forwards-looking statements in this media release and any change in the Bank’s expectations or any change in events, conditions or circumstances on which these forward-looking statements are based, except as required by applicable law or regulation.