- Customer loan portfolio grows by 4.8%
- Customer loan portfolio in core segment of loans over EUR 30,000 grows by 9.9%
- Consolidated result of EUR 20.8 million from continuing business operations below previous year’s level (H1 2016: EUR 24.6 million; however, this includes positive one-off effects)
- Focus on widening the use of online banking services
- Sale of Banco ProCredit Nicaragua successfully concluded in August 2017
ProCredit Holding AG & Co. KGaA (ProCredit Holding), the parent company of the ProCredit group, reports dynamic growth for the group during Q2 2017. The customer loan portfolio of the group, which has positioned itself as the “Hausbank” for small and medium-sized companies (SMEs) and focuses on South-Eastern and Eastern Europe, has grown by 4.8% since the beginning of the year to EUR 3.8 billion as at 30 June 2017 (31 December 2016: EUR 3.6 billion).
Particularly strong growth in the group’s core segment of loans over EUR 30,000
The main driver of this growth was positive development in the core customer business. The ProCredit group’s strategic focus is on SMEs with good development and growth potential and whose financing needs are generally for loans ranging from EUR 30,000 to
EUR 3 million. The core segment of loans with volumes above EUR 30,000 grew by 9.9% in the first half of 2017 to EUR 3.2 billion as at 30 June 2017 (31 December 2016: EUR 2.9 billion). South-Eastern Europe and Eastern Europe recorded core customer loan portfolio growth of 9.6% and 14.6%, respectively. Above all, the banks in Bulgaria, Serbia, Kosovo and Ukraine achieved high portfolio growth levels. This growth was fostered by the good investment climate and is the result of the group’s strategic focus on SMEs.
In the first half of 2017, the development of the ProCredit group’s total customer loan portfolio continued to be affected by the planned reduction of the portfolio of loans under EUR 30,000. Overall, this part of the portfolio was decreased by EUR 115.5 million during the first six months of the current business year. It is expected that the group’s withdrawal from the segment of loans of less than EUR 30,000 will be largely completed by the end of 2017. In South America, the strategic realignment and focus on SMEs with financing needs of above EUR 30,000 are still ongoing. Consequently, the impact of these measures will be reflected in the income statement later in this region. Due to the withdrawal from low-volume lending, the customer loan portfolio in the South American segment contracted by 17.8% over the first half of the year to EUR 252.3 million as at 30 June 2017 (31 December 2016: EUR 306.9 million).
As at 30 June 2017, business loans accounted for 90.5% (EUR 3.3 billion) of the ProCredit group’s customer loan portfolio, out of which 21.4% (EUR 706 million) were to agricultural businesses. The share of loans to private clients is minor (9.5%; EUR 348 million), and the great majority (76.9%; EUR 267 million) of these are mortgage loans to purchase, renovate or improve the energy efficiency of real estate. ProCredit banks only grant a very small volume of consumer loans (EUR 62 million).
The loan portfolio of the ProCredit group continues to be highly diversified. The largest ten exposures represented 1.8% of the group’s total customer loan portfolio at the end of the first half year.
First half of 2017 profitable
With a consolidated result of EUR 23.6 million for the first half of 2017, the ProCredit group demonstrated robust profitability. The result from continuing business operations amounted to EUR 20.8 million (previous year: EUR 24.6 million), which was in line with expectations. Not taking into account the extraordinary income that was recorded in the first half of 2016, the 2017 result was similar to the previous year’s level. The return on average equity (RoAE) stood at 7.0% for the first half of 2017 (H1 2016: 9.5%). The focus on providing financing to SMEs with good prospects for development and growth, coupled with the withdrawal from lending to very small businesses, has led to an improvement in loan portfolio quality. As a result, risk provisioning expenses for the first half of 2017 were lower than for the same period in the previous year. This was offset by reduced net interest income, which was a consequence of the strategic realignment and market factors.
After the successful automation of cash transactions via its network of self-service areas, the ProCredit group’s focus is now on widening the use of its range of online banking services. It is particularly targeting clients in the mid- to high-income bracket who have an interest in modern, innovative banking services. Due to the focus on further automation of our services, the group was able to reduce the number of service points and staff. Although this process will eventually improve the efficiency of operations, in the short term higher extraordinary expenses were incurred. Ongoing restructuring measures are expected to result in further extraordinary expenses.
The Common Equity Tier 1 capital (CET1 fully loaded) of 13.0% as at 30 June 2017 (31 December 2016: 12.4%) confirms the strength of the ProCredit group’s equity base and exceeds regulatory requirements.
Borislav Kostadinov, member of the Management Board of ProCredit General Partner AG (sole liable managing entity of ProCredit Holding AG & Co. KGaA) elaborated: “We are satisfied with our performance in the first half of 2017. The strong growth in our loan portfolio exceeded our expectations. It demonstrates that the tailor-made financial solutions that we offer to small and medium enterprises provide exactly the support that is needed for the successful development of these businesses.”
Stronger-than-expected portfolio growth for the year as a whole
According to the revised forecast for the current financial year, issued on 7 July 2017, the Management Board of ProCredit Holding foresees net growth in the group’s customer loan portfolio of over 8% (previous forecast: between 5% and 8%). For the core segment of loans over EUR 30,000, the new forecast is for growth of above 10% (previous forecast: approximately 10%).
In view of the loan portfolio’s current high growth momentum, ProCredit Holding will, in the upcoming quarters, evaluate options to further strengthen the capital base in order to ensure that the positive momentum of the SME segment in the target markets can be exploited for further expanding customer relationships. Such options may include a capital increase from Authorised Capital.
The forecast for return on average equity remains unchanged in the range of 7% to 9% for financial year 2017. The projection for Common Equity Tier 1 capital (CET1 fully loaded) is also unchanged at over 13%. The sale of Banco ProCredit Nicaragua was successfully concluded in August 2017.
Planned changes in the Management Board for the turn of the year 2017/18
Dr Anja Lepp’s term as a member of the Management Board will end as planned on 31 December 2017 by mutual agreement. Dr Claus-Peter Zeitinger, Chairman of ProCredit Holding’s Supervisory Board, thanks Dr Lepp for her many years of dedicated service to the company. He particularly acknowledges her role in the development of the group, in which she has participated in a variety of roles and functions for more than 14 years. Dr Lepp will continue as an employee of the ProCredit group. With her many years of experience and her extensive expertise, she will continue to contribute to the success of the ProCredit group in the future as well.
The group’s half-year report is available as of today in German and English on the ProCredit Holding website under Investor Relations at https://www.procredit-holding.com/en/investor-relations/reports-publications.html.
Andrea Kaufmann, Group Communications, ProCredit Holding
Tel.: +49 69 951 437 138, e-mail: Andrea.Kaufmann@procredit-group.com
About ProCredit Holding
ProCredit Holding AG & Co. KGaA, based in Frankfurt am Main, Germany, is the parent company of the development-oriented ProCredit group, which consists of banks for small and medium enterprises (SMEs) and whose operational focus is on South-Eastern and Eastern Europe. In addition to this regional focus, the ProCredit group is also active in South America and Germany. The company’s shares are traded on the Prime Standard segment of the Frankfurt Stock Exchange. The anchor shareholders of ProCredit Holding AG & Co. KGaA include the strategic investors Zeitinger Invest and ProCredit Staff Invest (comprising the investment vehicles for ProCredit staff), the Dutch DOEN Participaties BV, KfW Development Bank and IFC (part of the World Bank Group). As the group’s superordinated company according to the German Banking Act, ProCredit Holding AG & Co. KGaA is supervised on a consolidated level by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) and the German Bundesbank. For additional information, please visit www.procredit-holding.com.
This report contains forward-looking statements. Forward-looking statements are statements that do not describe past events; they include statements on the assumptions and expectations of ProCredit Holding as well as underlying assumptions. These statements are based on the plans, estimates and forecasts currently available to the Management of ProCredit Holding. Forward-looking statements therefore pertain solely to the date on which they are made. ProCredit Holding undertakes no obligation to update these statements in the event of new information or future events. Forward-looking statements naturally involve risks and uncertainties. A number of important factors can contribute to the fact that actual results may differ materially from forward-looking statements. These factors could include major disruptions in the Eurozone, a significant change in foreign trade or monetary policy, a worsening of the interest rate margin or pronounced exchange rate fluctuations. Should any of these factors arise, the impact could be manifested in decreased loan portfolio growth and an increase in past-due loans, and thus result in lower profitability.