Avanza Bank : Company presentation, December 2020

Company presentation

December 2020

Sweden's leading platform for savings and investments

• • Founded in 1999

• • Most satisfied savings customers in Sweden for 10 consecutive years

• • 1,247,100 customers

• • SEK 546 bn in savings capital

• • 502 employees

• • 5.4% market share of the Swedish savings market

Customer satisfaction and employee engagement create shareholder value over time

Long-term targets

• ● Customer satisfaction & Employee engagement

  • ● Growth in customers and savings capital

  • ● Scalability and cost efficiencies (top modern

IT platform)

Growth potential

• ● Occupational pension business

• ● Focus on broader customer groups

• ● Strong potential in existing customer base

Customer proposition

• ● Cheaper, better and simpler offering

  • ● High user experience

  • ● Broad range of product

• ● Information, education and decision-making tools

Revenues and costs

• ● More stable revenues through funds and mortgages

  • ● High scalability

  • ● Cost control vital

High customer satisfaction

Creating a better future for millions of people

Customer promise - more to you, less to the bank

To give our customers a better return on their savings than any other bank or pension company, due to low fees, better tools and education

Growth strategy built on scale

1. Growth in savings capital

• • Customer satisfaction

• • Innovation and user experience

• • Customer growth

• • Net inflow

2. Revenues/savings capital

• • No fixed fees

• • Revenues mainly based on transaction fees, net interest income (NII) and distribution fees from mutual funds

  3.

• • NII and transaction revenues tend to be inversely correlated

Costs/savings capital

• • Mainly fixed costs, tight cost control

• • High scalability

• • Long-term aim to reach a cost/savings capital of 16 bps

Leading cost position

160

Basispoints

140

120

100 80 60 40

20

0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Savings capitalIncome/savings capitalCost/savings capital

In 2018, cost/savings capital exclude the Swedish Financial Supervisory Authority's administrative fee of SEK 35 million on Försäkringsaktiebolaget Avanza Pension.

Savingscapital,SEKm

9M

A history of growth built on innovation

In-house development by 24 teams

Customer journey

Products

Business platform

Technical platform

Launches to make Avanza more relevant for a broader audience

Customer value with real open banking

Largest Swedish participant in stock market transactions on Nasdaq OMX and First North

Transactions

Turnover

25,0

Marketshare,%

20,0

15,0

10,0

5,0

0,0

0,0

10,0

9,0

Marketshare,%

8,0

7,0

6,0

5,0

4,0

3,0

2,0

1,0

Q1-15

Q2-15

Q3-15

Q4-15

Q1-16

Q2-16

Q3-16

Q4-16

Q1-17

Q2-17

Q3-17

Q4-17

Q1-18

Q2-18

Q3-18

Q4-18

Q1-19

Q2-19

Q3-19

Q4-19

Q1-20

Q2-20

Q3-20

Q1-15

Q2-15

Q3-15

Q4-15

Q1-16

Q2-16

Q3-16

Q4-16

Q1-17

Q2-17

Q3-17

Q4-17

Q1-18

Q2-18

Q3-18

Q4-18

Q1-19

Q2-19

Q3-19

Q4-19

Q1-20

Q2-20

Q3-20

• • Market share of 19.9% in terms of transactions and 9.6% in turnover in Q3 2020

Customer growth drives net inflow

100 000

25 000

9M 2020:

Newcustomers

90 000

80 000

70 000

60 000

50 000

40 000

30 000

20 000

10 000

0

Netinflow,SEKm

Customer inflowNet inflow

Age distribution among new customers

4

3,5

3

Share,%

2,5

2

1,5

1

0,5

0

201920122007

0

3

6

9

12

15

18

21

24

27

30

33

36

39

42

45

48

51

54

57

60

63

66

69

72

75

78

81

84

87

90

93

96

99

Age

Strong long-term potential in existing customer base

Customers,%

4,5% 4,0% 3,5% 3,0% 2,5% 2,0% 1,5% 1,0%

0,5%

0,0%

0

3

6

9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78

1,40 1,20 1,00 0,80 0,60 0,40 0,20 0,00

Age

Savings capital by ageTotal customer baseAge distribution among new customers

Market penetration

• • Total share of Swedish savings market: 5.4% as of Q3 2020

• • Total share of Swedish population:

  9.1% as of 1 November 2019

  Savingscapital,SEKm

  • • ages 20-29: 15.3%

  • • ages 30-39: 17.8%

  • • ages 40-49: 13.3%

• • Highest penetration in urban areas. Stockholm region, snapshot

  (Women/Men) as of 1 November 2019:

  • • ages 20-29: 15%/25%

  • • ages 30-39: 19%/29%

  • • ages 40-49: 14%/23%

  • • ages 50-59: 12%/17%

  • • ages 60-69: 9%/13%

Savings capital grow by number of years at Avanza

600 000

500 000

Savingscapital,SEK

400 000

300 000

200 000

100 000

0 1 month 1 year 2 years 3 years 4 years 5 years 6 years 7 years 8 years 9 years 10 years

Average savings capital per customer (excluding customers with > SEK 10m in savings capital)

Significant growth potential with a 5.4% market share of the Swedish savings market

The white circles refer to Avanza's share of each savings area.

• • The Swedish savings market SEK 9,547 bn

• • Annual market growth of on average 9% last ten years

• • An estimated 80% of the Swedish population saves in funds and 11% own shares

* An estimated 50% of the market is addressable for Avanza when collectively agreed pensions are excluded.

Market share of 19.4% rolling 12M of net savings on the Swedish savings market

Long-term target by 2025 of at least 15%

Growth potential in broader customer groups

Do it for me

Help me do it

Do it myself

Strategy for more recurring income

60%

Shareoftotalincome

50%

40%

30%

20%

10%

0%

2012

2013

2014

2015

2016

2017

2018

2019

Net brokerage incomeNet interest incomeFund commissions

Other commission income

Strong growth in occupational pension

Savingscapital,SEK

Growth drivers in the Swedish savings market

• • Digitisation and open banking create new needs and customer behaviours

• • More reasons for customers to take responsibility for their own savings

• • Increased focus on sustainable investments

• • Our focus is on attracting new and broader customer groups as well as keeping current customers happy

  • • Product innovation and evolution

  • • User experience increasingly important

  • • Price remains important

As always… key success factors for Avanza

• • Customer satisfaction - keep the No 1 position

• • Continuous growth in both number of customers and volume

• • Create possibilities for continued strong innovation

Employee engagement key

Appendix

Operations 24-26

Financials 27-35

Balance sheet data 36-38

Contact details 39

Performance on targets 2019

Long-term targets	Outcome 2019	Comments
Sweden's most satisfied savers according to Swedish Quality Index	√	Achieved in 2019 for the tenth consecutive year
Engaged employees, eNPS of at least 45	54	Very strong ambassadorship
Market share of at least 10% R 12M of the total net inflow to the Swedish savings market	15.6%
1 million customers 2020	976,400	Target achieved in January 2020
Cost growth should not outpace income growth	√	Income growth 13,8% Cost growth 10,6%, excluding fee and one-off write down
Dividend of at least 70% of net profit for the year	79%	Dividend SEK 2.30 per share

New long-term targets by 2025

The new targets are still focused on customer satisfaction and employee engagement, but also on growth in savings capital. Targets connected to sustainability are added

Satisfied customers:

• • Sweden's most satisfied savers according to SQI's (Swedish Quality Index) annual award

Engaged employees:

• • eNPS (Employee Net Promoter Score) of at least 45

Long-term value growth:

• • Market share of at least 15 per cent of the total net inflow to the Swedish savings market 2025

• • Market share of nearly 7 per cent of the Swedish savings market by the end of 2025

• • Return on equity of 25-30 per cent

• • Dividend of at least 70 per cent of the profit of the year

Sustainability:

• • Increased share of capital in sustainable investments

• • Increased share of customers who save in sustainable alternatives

• • Be regarded as the leading sustainable brand and the natural choice for sustainable savings

• • Increase the share of female to 50 per cent of new customers

• • Organisation with parity between women and men

• • Become climate positive

Customer inflow of 270,700 in 2020 (+114% Y/Y)

40 000

35 000

30 000

Numberofcustomers

25 000

20 000

15 000

10 000

5 000

0

Jan-14

Okt-20

Apr-14

Jul-14

Oct-14

Jan-15

Apr-15

Jul-15

Oct-15

Jan-16

Apr-16

Jul-16

Oct-16

Jan-17

Apr-17

Jul-17

Oct-17

Jan-18

Apr-18

Jul-18

Oct-18

Jan-19

Apr-19

Jul-19

Oct-19

Jan-20

Apr-20

Jul-20

Customer inflow

Net inflow of SEK 69,900m in 2020 (+131% Y/Y)

10 000

8 000

Netinflow,SEKm

6 000

4 000

2 000

0

-2 000

Jan-14

Apr-14

Jul-14

Oct-14

Jan-15

Apr-15

Jul-15

Oct-15

Jan-16

Apr-16

Jul-16

Oct-16

Jan-17

Apr-17

Jul-17

Oct-17

Jan-18

Apr-18

Jul-18

Oct-18

Jan-19

Apr-19

Jul-19

Oct-19

Jan-20

Apr-20

Jul-20

Okt-20

Net inflow

* Net outflow in November 2017 is explained by a few withdrawals amounting to SEK 2,200m, connected to customers' M&A activities.

Financial overview

Q3 20	Q2 20	∆ %	Q3 19	∆%
Operating income, SEK m	575	526	9	313	84
Operating expenses, SEK m	-177	-185	-4	-148	19
Operating profit, SEK m	396	333	19	163	144
Operating margin, %	69	63	6	52	17
Income to savings capital ratio, %	0.48	0.52	-0.04	0.34	0.14
Costs to savings capital ratio, %	0.15	0.18	-0.03	0.16	-0.01
ROE, %	55	56	-1	33	23
EPS, SEK	2.15	1.83	18	0.91	137

Relationship between long-term savings capital growth and revenue growth

700

600

500

Revenue,SEKm

400

300

200

100

0

Savings capital Q3 2	020: SEK 514 bn (+36	% Y/Y)	Q3 2020
2012-Q3 2020
Corel=0.88

0

100 000

200 000

300 000

400 000

500 000

600 000

Savings capital, SEK m 29

Long-term revenue development

1 400

Revenue,SEKm

1 200

1 000

800

600

400

200

0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

5,0

4,0

3,0

2,0

1,0

Averagereporate,%

0,0

-1,0

Net interest incomeTotal income

Net brokerage incomeOther income

Income from mutual fundsAverage repo rate

Historical correlation between low market rates and growth

25000

Netinflow,SEKm

20000

15000

10000

5000

0

Q1-03

Q3-03

Q1-04

Q3-04

Q1-05

Q3-05

Q1-06

Q3-06

Q1-07

Q3-07

Q1-08

Q3-08

Q1-09

Q3-09

Q1-10

Q3-10

Q1-11

Q3-11

Q1-12

Q3-12

Q1-13

Q3-13

Q1-14

Q3-14

Q1-15

Net inflowRepo rate

5,0

4,0

• • Historical negative repo rate between 2015 and 2019. Repo rate raised to 0.00% on 8 January 2020

  3,0

  2,0

  Reporate,%

• • Low repo rate creates a good growth environment but puts pressure on NII (100 bps repo rate change affects NII by around SEK 400 m at Q3-20 volumes)

1,0

0,0

-1,0

Q3-15

Q1-16

Q3-16

Q1-17

Q3-17

Q1-18

Q3-18

Q1-19

Q3-19

Q1-20

Q3-20

Revenue development

700

Revenue,SEKm

600

500

400

300

200

100

0

Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20

Total income

Net interest incomeNet brokerage incomeOther commission incomeIncome from mutual funds

Income split 9M 2020

SEK m	% of income	% of specific savings capital	% of total savings capital
Shares, bonds, options (transactions)	811	49	0.45	0.25
Mutual funds	293	18	0.34	0.09
Net interest income	241	15	0.42	0.07
Other**	298	18	0.09
Total	1,643	100	0.51	0.51

* Based on deposits ** Corporate finance fees, foreign exchange, AZA Markets, subscription and advertising income, additional services

Cost development

200

Operatingexpenses,SEKm

180

160

140 120 100 80 60 40 20

0

Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20

Total expensesNon-reccuring itemsPersonnelMarketingDepreciationOther expenses

Q4 2018 including the Swedish Financial Supervisory Authority's administrative fee of SEK 35 million on the subsidiary Försäkringsaktiebolaget Avanza Pension Q4 2019 including one-off write-down of SEK 8.3 million

Costs 9M 2020

SEK m	% of total costs	% of total income
Personnel	-334	62	20
IT	-60	11	4
External services	-24	4	1
Marketing & Sales	-17	3	1
Depreciation	-50	9	3
Other	-56	10	3
Total costs before credit losses	-541	100	33
Credit losses, net	-5
Profit/loss from participations in associated companies	-6

Operating margin of 69% in Q3 2020

450

Operatingprofit,SEKm

400 350 300 250 200 150 100 50 0

Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20

100 90 80 70 60 50 40 30 20 10 0

Operatingmargin,%

Operating profitOperating margin

Operating profit in Q4 2018 is affected negatively by the Swedish Financial Supervisory Authority's administrative fee of SEK 35 million on the subsidiary Försäkringsaktiebolaget Avanza Pension.

Balance sheet, 30 September 2020

• • Mainly self-financed through shareholders' equity and customer deposits

  Comments

  Assets	SEK m	Liabilities & equity	SEK m
  Lending to credit institutions*	2,654	Deposits	44,421
  Lending to the public	16,226	Liabilities in insurance operations	143,312
  Bonds	25,631	Other liabilities	1,230
  Assets in insurance operations	143,310	Subordinated liabilities	100
  Other assets	3,857	Equity	2,616
  Total assets	191,678	Total liabilities and equity	191,678

• • Surplus-liquidity of SEK 29,806m invested in covered bonds, at the Riksbank and O/N (including SEK 1,521m deposits in client fund accounts)

* Incl. balances at central banks and treasury bills eligible for refinancing

Capital surplus for the Group

SEK m	30 September 2020
Shareholders' equity	2,616
Solvency capital	1,585
Less non-distributable solvency capital	-304
Subordinated loan	69
Additional value adjustments	-8
Intangible assets and deferred tax receivables	-75
Own funds before dividend adjustment	3,882
Capital requirement Pillar 1	-1,921
Buffer requirement	-197
Capital requirement Pillar 2	-123
Capital requirement	2,241
Capital surplus before dividend	1,641
Capital surplus per share, SEK	10.59
Total capital ratio (consolidated situation), %	18.7

2020-12-02

Historical financial key data 2001 - Q3 2020

is available in Excel at:

avanza.se/keydata

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