Home Credit Group, the consumer lender owned by Czech billionaire Petr Kellner, blamed a loss of € 584m for 2020 on the coronavirus pandemic (COVID-19), but said it was profitable in 2 hours and that it should be again this year. Home Credit recorded a net profit of € 35m in 2H20 against a net loss of € 619m in the first half.
Home Credit has expanded from the Czech Republic and Slovakia to Russia, China and the Far East, using outlets in stores, banks, kiosks and post offices, as well as ‘Internet and social media to sell loans to consumers. It canceled a scheduled IPO in Hong Kong 2019.
The group adapted its operations in 2020 to the pandemic, reducing its total assets by 30% to 18.5 billion euros thanks to a 37% year-on-year reduction in the loan portfolio to 12.7 billion euros. euros.
“Home Credit remains resilient with an operating model that can be quickly adapted to deal with changing circumstances as we did in 2020. We have recalibrated our business for the post-COVID environment and are confident that as we go As global markets get back on track, we too will continue to rebound, ”said Jean-Pascal Duvieusart, CEO of Home Credit Group BV.
Home Credit said new volumes in 2020 were down 49% from 2019 at constant exchange rates due to the impact of lockdowns, reduced consumption, tighter underwriting criteria and a strategy to promote smaller loans. The group’s net interest margin increased from 15.5% in 2019 to 13.9% in 2020, as it focused on lending to better borrowers.
He said loan demand increased in the second half of the year, with credit requests up 23% to 13.8 million in the 4th quarter from the 2nd quarter. In the last three months of 2020, it disbursed an average of 47,900 loans per day in 4Q20 – one every two seconds – compared to 39,600 in 2Q20.
“We made fewer, smaller, shorter-term loans, given the financial pressure many were under. Rightly, our loan portfolio is now significantly smaller and reflects the increased risk profile of our markets, even though new loans increased in all of our regions at the end of the year, ”said Duvieusart.
In 2H20, the average maturities of loan contracts were reduced to nine months against 20 months in 2019, while the average loan amount fell from € 910 to € 450.
The cost of risk fell from 8.6% in 2019 to 12.9% in 2020, with NPLs (loans with past interest payable over 90 days) increasing by 6.4% in 2020 compared to 5.6% in 2019 Once again, there was a marked improvement in the second half, with impairments in 1H20 to € 1.8bn, but only € 0.6bn in the second half, reducing the annualized cost of risk by 17.8 % in 1H20 to 6.8% in 2H20.
The loan coverage ratio increased sharply in 1H20 from 7.3% to 12.2% then, during 2H20, it increased only slightly to 12.6%. The NPL coverage rate increased to 197.3% in 2020 against 130.6% in 2019.
Partly by pushing digitization, Home Credit reduced operating expenses by 13.2% year-on-year to 1.6 billion euros, and by 25% on a run-rate basis. At the end of 2020, the group had 91 million registered users of its proprietary application, up 30% with 52% of new volumes coming from digital.
In a number of places, customers can now apply for revolving loans on their own by scanning QR codes. Over 150,000 retail stores in China were converted to this self-service model in 2020 and there were 1.66 million new users in 2020. In China, 96% of new customers are acquired digitally.
In Russia, Home Credit began piloting loans within VK Pay, a payment platform operated by the country’s leading social media network.
Home Credit’s financial position remains strong, with net loan equity increasing to 15.3% at the end of 2020 from 14.2% a year earlier.
PPF, the Kellner vehicle which owns 91% of Home Credit, has announced its intention to combine the PPF Group’s retail banking and consumer credit units in the Czech Republic and Slovakia with Moneta Money Bank. This includes its holdings in Air Bank, peer-to-peer lender Benxy, and the Czech and Slovak operations of Home Credit.