Resurs publ : Interim Report January - September 2019

Q3

Interim Report January-September 2019

1 July-30 September 2019*

• Lending to the public rose 13% to SEK 31,125 million
• Operating income increased 5% to SEK 925 million
• Operating profit rose 6% to SEK 416 million
• Earnings per share increased 5% to SEK 1.60
• C/I before credit losses (excl. Insurance) was 37.6% (39.2%)
• The credit loss ratio was 2.0% (2.1%)

1 January-30 September 2019*

• Lending to the public rose 13% to SEK 31,125 million
• Operating income increased 7% to SEK 2,734 million
• Operating profit increased 8% to SEK 1,198 million
• Earnings per share increased 8% to SEK 4.63
• C/I before credit losses (excl. Insurance) was 38.9% (40.5%)
• The credit loss ratio was 2.1% (2.1%)
• Resurs Holding AB plans to issue Additional Tier 1 instruments of SEK 100-400 million in the next few months, if market conditions are favourable. The purpose of such an issue is to further enhance Resurs's capital structure.

"Continued growth in yet another strong quarter."

Kenneth Nilsson, CEO Resurs Holding AB

ABOUT RESURS HOLDING

Resurs Holding (Resurs), which operates through the subsidiaries Resurs Bank and Solid Försäkring, is the leader in retail finance in the Nordic region, offering payment solutions, consumer loans and niche insurance products. Since its start in 1977, Resurs Bank has established itself as a leading partner for sales-driven payment and loyalty solutions in retail and e-commerce, and Resurs has thus built a customer base of approximately 6.0 million private customers in the Nordics. Resurs Bank has had a banking licence since 2001 and is under the supervision of the Swedish Financial Supervisory Authority. The Resurs Group operates in Sweden, Denmark, Norway and Finland. At the end of the third quarter of 2019, the Group had 737 employees and a loan portfolio of SEK 31.1 billion. Resurs is listed on Nasdaq Stockholm.

• Certain performance measures provided in this section have not been prepared in accordance with IFRS or the capital adequacy rules, meaning that they are alternative performance measures. Calculations and reconciliation against information in the financial statements of these performance measures are provided on the website under "Financial reports." Definitions of key ratios are provided on the website under "Financial data." In this section, changes and comparative figures refer to the same period in the preceding year. This applies to all other sections of text in this interim report, profit/loss items and cash flow that are compared with the same period in the preceding year. The exception is for financial position for which the comparative figure refers to 31 December 2018.

RESURS HOLDING AB | INTERIM REPORT JAN-SEP 2019

Statement by the CEO

Continued growth in yet another strong quarter

The healthy performance of both our banking segments generated continued strong growth in lending for the third quarter of the year. It meant that Resurs grew quicker than the market and delivered above our financial targets, with lending growth of 13 per cent, which on 30 September amounted to SEK 31,125 million. Resurs also achieved its best ever earnings for a single quarter with profit after tax of SEK 320 million (306). This was achieved through our profitable growth based on responsible credit lending and continued good cost control. The cost/income ratio excluding Insurance declined further to 37.6 per cent (39.2 per cent) and the credit losses were stable at 2.0 per cent (2.1 per cent).

Innovative solutions and number of new collaborations with retail finance partners

The core of Resurs's business model, Payment Solutions and mainly retail finance, continued to report robust growth in the third quarter. A factor for success is our concerted efforts to develop new and innovative solutions for our retail finance partners. A prime example is the launch of a new and upgraded version of Resurs's partner portal - the Merchant Portal - during the quarter. One of the benefits this provides is a service for retailers to quickly and easily capture all sales statistics in real time regardless of sales channel.

Some examples of new collaboration during the quarter is that Svensk Handel (Swedish Trade Federation) has added us as a new partner. Resurs Checkout is now Svensk Handel's latest offering to its members for store, e-commerce and omni-retail payment solutions, meaning that Svensk Handel's members now have greater opportunities to offer their customers a smooth shopping experience with favourable conditions for both higher average purchases and increased customer loyalty. The ability of Resurs Checkout and the omni-solution to offer an effective customer journey also meant that a number of major companies in the car-dealer aftermarket segment decided to sign agreements with us.

Major transformation of Norwegian consumer loan market

All in all, Consumer Loans delivered healthy third-quarter lending growth, but the business segment continued for face certain challenges. These are mainly related to the far-reaching transformation that the Norwegian market is currently undergoing, which is the effect of the new legal requirements that came into effect in May combined with the implementation of the Gjeldsregisteret debt information service at the start of July.

For Resurs it is a matter of designing an offering - in pace with the emerging market conditions - that meets both the new rules of play, and delivers customer and business value. The fundamental and governing factor for all of our decisions is always to prioritise a high credit rating over volume. Our geographically diversified business model with its ability to compensate the business segments according to varying market conditions gives us the endurance and strength required to defend a sustained strong position in the Nordic markets in the long term.

We also noted a continuous increase in the average loan in Consumer Loans, primarily driven by the option of offering higher loans to our consumers using the credit engine. Compared with the year- earlier quarter, the average loan rose to about 15 per cent to app. SEK 100,000. In the shorter term, this results in a lower NBI margin. In the longer term, it will however contribute positively to our overall profitability since higher average loans with higher credit quality entail lower credit risk.

A stagnant market and cautious approach in Norway, together with the increasing average loan and some price pressure across the segment, had a negative impact on the risk-adjusted NBI margin, which amounted to 9.3 per cent (10.2 per cent) for the quarter.

Initiatives to optimise our capital structure

To further optimise Resurs's capital structure, we are investigating the possibility of issuing Additional Tier 1 instruments (AT 1 instruments) in the next few months, if the market conditions are favourable. We also announced in the third quarter that the method for calculating operational risk had been changed, which strengthened our capital ratio by 0.5 of a percentage point in the third quarter.

Overall, these initiatives strengthened Resurs's capital position and mean that we are well-prepared to continue to deliver both growth and profitability based on responsible credit lending and good

cost control.

LENDING

SEK 31,125 MILLION

LENDING GROWTH

+13%

C/I RATIO (excl. Insurance)

+37.6%

Kenneth Nilsson

CEO Resurs Holding AB

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RESURS HOLDING AB | INTERIM REPORT JAN-SEP 2019

Performance measures

	Jul-Sep	Jul-Sep	Change	Jan-Sep	Jan-Sep	Change	Jan-Dec
SEKm unless otherwise specified	2019	2018		2019	2018		2018
Operating income	925	881	5%	2,734	2,554	7%	3,437
Operating profit*	416	394	6%	1,198	1,112	8%	1,487
Net profit for the period	320	306	5%	927	860	8%	1,143
Earnings per share, SEK	1.60	1.53	5%	4.63	4.30	8%	5.72
C/I before credit losses, %*	38.1	39.5		39.4	41.0		41.2
C/I before credit losses (excl. Insurance), %*	37.6	39.2		38.9	40.5		40.5
Common Equity Tier 1 ratio, %	13.6	13.8		13.6	13.8		13.4
Total capital ratio, %	15.5	15.3		15.5	15.3		14.7
Lending to the public	31,125	27,470	13%	31,125	27,470	13%	27,957
NIM, %*	9.5	10.3		9.7	10.5		10.6
Risk-adjusted NBI margin, %*	9.3	10.2		9.5	10.5		10.6
NBI margin, %*	11.4	12.3		11.6	12.6		12.6
Credit loss ratio, %*	2.0	2.1		2.1	2.1		2.1
Return on equity excl. intangible assets (RoTE), %*	27.3	28.5		26.8	27.2		27.4
Return on equity excl. intangible assets, given a Common
Equity Tier 1 ratio according to the Board's target and
deducted dividend from the capital base, (RoTE), %*	34.8	34.6		34.9	33.1		33.9

• Alternative performance measures are performance measures used by management and analysts to assess the Group's performance and are not defined in International Financial Reporting Standards (IFRS) or in the capital adequacy rules. Management believes that the performance measures make it easier for investors to analyse the Group's performance. Calculations and reconciliation against information in the financial statements of these performance measures are provided on the website under "Financial reports." Definitions of key ratios are provided on the website under "Financial data."

Group results*

Third quarter 2019, July-September

Operating income

The Group's operating income increased 5 per cent to SEK 925 million (881). Net interest income increased 5 per cent to SEK 733 million (698), with interest income amounting to SEK 839 million (780) and interest expense to SEK -106 million (-82). Fee & commission income amounted to SEK 63 million

1. and fee & commission expense to SEK -16 million (-14), which resulted in a total net commission for the banking operations of SEK 46 million (40).

Premium earned, net, in the insurance operations increased 11 per cent to SEK 232 million (209), while claim costs were SEK -58 million (-59), which is recognised in the item insurance compensation, net. Fee & commission expense in the insurance operations amounted to SEK -64 million (-54). In total, net insurance income increased to SEK 110 million (96).

OPERATING INCOME

+5%

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RESURS HOLDING AB | INTERIM REPORT JAN-SEP 2019

Net expense from financial transactions amounted to SEK -7 million (-4), primarily comprising changes in value of investments in interest-bearing securities, shares and exchange-rate differences. Other operating income, mainly comprising remuneration from lending operations, amounted to SEK 43 million (50).

Operating expenses

The Group's expenses before credit losses increased 1 per cent to SEK -353 million (-348) and was the result of continued costs focus and ongoing efficiency enhancements, particularly in the Norwegian market to address the lower income margin. Personnel expenses rose SEK 1 million to SEK -146 million (-145)year-on-year. General administrative costs excluding personnel expenses increased

SEK 11 million to SEK -149 million (-138), and depreciation, amortisation and impairment of intangible and tangible assets rose SEK 8 million to SEK -22 million (-14). IFRS 16 resulted in an increase of SEK 8 million in depreciation, amortisation and impairment for the quarter, while general administrative costs declined. Other operating expenses fell SEK 17 million to SEK -35 million (-52). Viewed in relation to the operations income, the cost level (excluding Insurance) amounted to 37.6 per cent (39.2 per cent).

Credit losses totalled SEK -157 million (-139) and the credit loss ratio was 2.0 per cent (2.1 per cent). The risk-adjusted NBI margin was 9.3 per cent (10.2 per cent). The lower margin was mainly due to the performance of the Norwegian consumer loan market, certain price pressure and lower margins due to higher average loans.

Profit

Operating profit increased 6 per cent to SEK 416 million (394). Net profit for the quarter increased 5 per cent to SEK 320 million (306). Tax expense for the quarter amounted to SEK -95 million (-88).

Nine months 2019, January-September

Operating income and expenses

The Group's operating income increased 7 per cent to SEK 2,734 million (2,554), primarily due to growth in lending. Net interest income increased 7 per cent to SEK 2,161 million (2,024), with interest income amounting to SEK 2,465 million (2,261) and interest expense to SEK -304 million (-237). Fee & commission income amounted to SEK 167 million (162) and fee & commission expense to SEK -45 million (-41). This resulted in a total net commission for the banking operations of SEK 123 million (121).

The Group's expenses before credit losses increased 3 per cent to SEK -1,077 million (-1,047). Viewed in relation to the operations income, the cost level (excluding Insurance) continued to improve and amounted to 38.9 per cent (40.5 per cent) for the first nine months of the year.

Credit losses totalled SEK -459 million (-395) and the credit loss ratio was 2.1 per cent (2.1 per cent). The risk-adjusted NBI margin was 9.5 per cent (10.5 per cent).

Profit

Operating profit increased 8 per cent to SEK 1,198 million (1,112). Net profit for the period amounted to SEK 927 million (860). Tax expense for the period amounted to SEK -271 million (-252).

C/I RATIO (excl. Insurance)

37.6%

OPERATING PROFIT FOR THE QUARTER

SEK 416 MILLION

OPERATING PROFIT FOR THE PERIOD

+8%

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RESURS HOLDING AB | INTERIM REPORT JAN-SEP 2019

Financial position at 30 September 2019*

Comparative figures for this section refer to 31 December 2018, except for cash flow for which comparative figures refer to the same period in the preceding year.

On 30 September 2019, the Group's financial position was strong, with a capital base of SEK 4,732 million (4,281) in the consolidated situation, comprising the Parent Company, Resurs Holding, and the Resurs Bank Group. The total capital ratio was 15.5 per cent (14.7 per cent) and the Common Equity Tier 1 ratio was 13.6 per cent (13.4 per cent). During the period, Resurs Bank and the consolidated situation changed the method for calculating operational risk from the basic indicator method to the standardised method, which strengthened the capital ratio in the third quarter of 2019 by 0.5 of a percentage point.

Lending to the public amounted to SEK 31,125 million (27,957) on 30 September 2019, representing an 11 per cent increase for the period and a 9 per cent increase excluding currency effects. Lending to the public at 30 September last year totalled SEK 27,470 million, corresponding to a 13 per cent annual increase and a 13 per cent annual increase excluding currency effects. This strong growth was driven by both the banking segment and is well in line with the Group's financial target of lending growth of more than 10 per cent.

In addition to capital from shareholders, the operations are financed by deposits from the public, the issued MTN bonds and the securitisation of certain loan receivables (ABS financing). The Group's strategy is to actively work with various sources of financing in order to use the most suitable source of financing at any given time and to create diversified financing in the long term.

Deposits from the public on 30 September 2019 rose 19 per cent to SEK 24,581 million (20,578). Financing through issued securities totalled SEK 7,850 million (7,832). Liquidity remained healthy and the Liquidity Coverage Ratio (LCR) was 207 per cent (146 per cent) in the consolidated situation. The minimum statutory LCR ratio is 100 per cent. Lending to credit institutions at 30 September 2019 amounted to SEK 5,009 million (3,704). Holdings of treasury and other bills eligible for refinancing, as well as bonds and other interest-bearing securities, totalled SEK 2,906 million (2,272).

Cash flow from operating activities amounted to SEK 1,526 million (-1,394) for the period. Cash flow from deposits amounted to SEK 3,659 million (1,595) and the net change in investment assets totalled SEK -1,023 million (-464). Cash flow from investing activities for the period totalled

SEK -82 million (-107) and cash flow from financing activities was SEK -135 million (1,845). Since year-end, bonds of a nominal SEK 1,600 million have been issued under Resurs Bank's MTN programme, of which SEK 300 million were Tier 2 bonds.

Intangible assets amounted to SEK 2,080 million (1,974), and primarily comprise the goodwill that arose in the acquisition of Finaref and Danaktiv in 2014 and yA Bank in 2015.

TOTAL CAPITAL RATIO

15.5%

LENDING TO THE

PUBLIC

	31.1
27.5
	+13%
Q3-18	Q3-19

Trend in lending to the public in SEK billion.

LIQUIDITY COVERAGE

RATIO

207%

• Certain performance measures provided in this section have not been prepared in accordance with IFRS or the capital adequacy rules, meaning that they are alternative performance measures. Calculations and reconciliation against information in the financial statements of these performance measures are provided on the website under "Financial reports." Definitions of key ratios are provided on the website under "Financial data."

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