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Avanza
Avanza Bank Holding |
  SEK |  %   SEK

Interim Report, 1st January – 30th June 2005

 · Regulatorisk information

• Operating income increased by 10.6% (83.9%) to SEK 127.3 million (SEK 115.1 m). • Profit after tax was SEK 41.9 million (SEK 44.6 m). • Earnings per share amounted to SEK 1.54 (SEK 1.68). • Net deposits totalled SEK 2,340 million (SEK 1,740 m), corresponding to 14.4% (15.8%) of the total value of the custodian accounts at the start of the year. Comments from the Managing Director ”The value of custodian accounts with Avanza increased by fully 35% during the first half of the year. This results both from Avanza’s private investors having done well, and strong underlying growth in the form of new capital and new customers, not least within Avanza Private Banking. The considerable increase in the value of custodian accounts has given income growth of over 10%, despite lower trading activity than in the previous year. ”We have been helped along well by a buoyant stock market during the first half of the year. And during the period, we have managed to attract net savings of over SEK 2,300 million, demonstrating that we help our customers to achieve more with the new products we provide. Avanza Pension has, for example, attracted almost SEK 100 million in new capital, despite only a month having passed since the launch, which exceeds expectations. We are now preparing the launch of yet more insurance products during the autumn”, says Nicklas Storåkers, Managing Director of Avanza. For additional information, please contact Nicklas Storåkers, Managing Director of Avanza, telephone: +46(0)70-861 80 01. Business performance During the first half year, net deposits with Avanza amounted to SEK 2,340 million (SEK 1,740 m), which is an increase of 34.5% (228%) compared with the same period of the previous year. During the second quarter, net deposits amounted to SEK 800 million (SEK 550 m). The strong level of net deposits is explained both by existing customers transferring an increasingly larger share of their savings to Avanza, and underlying growth in the number of customers. As an effect of focused marketing, net deposits in mutual funds have been especially strong. Total net deposits equal 14.4% (15.8%) of the value of custodian accounts at the beginning of the year. The value of the average Avanza portfolio during the period January to June increased by 18.3% compared with the Stockholmsbörsen’s All Share-index, which rose by 11.9%. During the second quarter, the focus has been on sales and development of new products. Several marketing and sales efforts have been implemented with good results. Through this, Avanza has strengthened its market-leading position and increased market share. Sales have been good within all customer segments; Avanza, Avanza Private Banking, Avanza PRO (day traders) and Aktiespar.se. Aktiespar.se is an easy, user-friendly service, without any minimum brokerage fee on share trading, and is directed towards small savers. Aktiespar.se was launched in March, and by the end of the half year, custodian accounts customers totalled 1,500. Total value of custodian accounts increased by 34.6% (30.0%) to SEK 21,800 million as of 30th June 2005 (SEK 16,200 million as of 31st December 2004). Within Avanza Private Banking, the value of custodian accounts increased during the half year by 105% to SEK 3,940 million (SEK 1,920 million as of 31st December 2004). Within Aktiespar.se, the value of custodian accounts increased to SEK 120 million since the start in March 2005. The main focus in Avanza’s development has been on development of insurance systems within Avanza Pension. At the end of May 2005, Avanza Pension launched a capital pension, which is Avanza’s first insurance product under its own auspices. Avanza’s capital pension is Sweden’s cheapest insurance product, entirely without insurance charges, and additionally offers a wider investment range than any other Swedish life insurance product. Avanza Pension’s customers can now choose to invest between 500 different funds and to invest directly in shares. On 28th June 2005, Avanza Fondkommission AB made an application to the Swedish Financial Supervisory Authority for authorisation to conduct banking activities. The purpose of a banking permit will be to give Avanza greater flexibility to conduct its existing operations and to develop new products and services. The intention is to change the company name to Bankaktiebolaget Avanza in connection with authorisation being granted. The total number of custodian account customers increased net by 5.5% (4.0%) during the first half year, to 94,700 (89,800 as of 31st December 2004). During the second quarter, the number of customers increased by 1,700 (-100) net. Avanza’s custodian account customers made an average of 1.40 (1.52) commission notes per month during the first half of the year. This equates with a decline in activity of 7.9% (+105%) compared with the same period of the previous year. During the second quarter, trade increased to 1.41 (1.11) commission notes per customer and month, which is an increase of 27.0% (42.3%), compared with the same period of the previous year. The explanation for the increase in activity during the second quarter is mainly the positive price trend of the Ericsson share. The proportion of active customers with at least one commission note per month has increased considerably. The portfolio tools that Avanza has developed have contributed to the increased activity. Average brokerage fee per commission note for custodian account customers amounted to SEK 96 (SEK 103) during the first half of the year. Operating income per custodian account customer amounted to SEK 1,400 (SEK 1,400) during the first half of the year. Borrowing, including client funds, increased to SEK 2,832 million (SEK 1,766 million as of 31st December 2004) as of 30th June 2005. The increase in borrowing is largely due to net sales of shares by custodian account customers as a result of the increase in share prices on the stock exchange. Lending increased by 12.8% to SEK 1,241 million (SEK 1,100 million as of 31st December 2004). Borrowing and lending respectively equalled 13.0% (10.9% as of 31st December 2004) and 5.7% (6.8% as of 31st December 2004) respectively of the value of custodian accounts. Avanza’s market share of Stockholmsbörsen during the first half of 2005 amounted to 9.0% (8.5%) of the total number of transactions, and 1.8% (1.7%) of turnover. In terms of the number of transactions therefore, Avanza was the largest online broker and the second largest member in total terms of Stockholmsbörsen. Result and position All comparative figures for 2004 have been recalculated in accordance with the International Financial Reporting Standards (IFRS). Operating income increased by 10.6% (83.9%) to SEK 127.3 million (SEK 115.1 m) during the first half of 2005. During the first half of the year, operating income amounted to 0.68% (0.86%) of the value of custodian accounts. During the second quarter, operating income increased by 33.5% (47.6%) to SEK 66.2 million (SEK 49.6 m). The second quarter increase was due to higher customer activity and underlying growth. In June, Avanza sold the domain name hq.se to Hagströmer & Qviberg, which contributed positively to operating income to the extent of SEK 1.4 million. Net interest income amounted to SEK 37.2 million (SEK 30.0 m) during the first half of the year, which is equivalent to an increase of 24.0% (42.2%) compared with the previous year. Higher volumes have compensated for lower interest margins. Brokerage income with deduction of direct costs constituted 53% (62%) of total operating income, while non-brokerage income (net interest income, custodian account fees and other income) made up the remaining 47% (38%). The brokerage income from institutional customers amounted to 3.1% (5.0%) of total brokerage income. Non-brokerage income continued to increase, and during the first half of the year amounted to 88% (82%) of operating expenses. During the second quarter, non-brokerage income amounted to 90% (90%) of operating expenses. The increase in non-brokerage income is explained by, among other things, increasing borrowing and lending volumes and additionally, considerable growth of investment in mutual funds by custodian account customers. Operating expenses during the first half of 2005 amounted to SEK 68.5 million (SEK 53.1 m), which is an increase of 29.0% (19.9%) compared with the same period of the previous year. During the second quarter, operating expenses amounted to SEK 35.0 million (SEK 25.3 m). On account of the continued high rate of market activity, active sales work and the tempo of development did not reduce operating expenses during the second quarter compared with the first quarter, which is otherwise a normal seasonal pattern. Marketing costs increased to SEK 8.6 million (SEK 2.9 m) during the first half of the year. The number of full time employees (excluding service and parental leave) at the end of June was 93 (73 at 31st December 2004). The expansion of the organisation is due both to long-term recruitment within a number of areas, and to temporary staffing on account of high market activity. During the first half year, the pre-tax result amounted to SEK 58.8 million (SEK 62.0 m), which means an operating margin of 46,2% (53,9%). Income tax expense amounted to SEK 16.9 million (SEK 17.4 m), of which tax paid constituted SEK 0.0 million (SEK 0.0 m). The tax expense refers to utilisation of a deficit deduction capitalised in the balance sheet earlier this year. The result after tax during the first half of 2005 amounted to SEK 41.9 million (SEK 44.6 m). Earnings per share amounted to SEK 1.54 (SEK 1.68). Return on equity during the period amounted to 15.3% (19.0%). During the first half of the year, investment amounted to SEK 2.0 million (SEK 1.4 m). At 30th June 2005, equity amounted to SEK 285.9 million (SEK 273.4 million as of 31st December 2004) or SEK 10.41 (SEK 10.27) per share, and the capital adequacy ratio amounted to 13.2% (14.2%). As of 30th June 2005, Avanza had SEK 28.5 million (SEK 45.4 million at 31st December 2004) remaining in deferred tax receivables. The Group’s liquid assets amounted to SEK 1 363.4 million (SEK 489.8 million at 31st December 2004). Outlook for the future The entire Internet savings market in Sweden is showing good growth, especially with the more mature age groups. Avanza is the leading player in the market for Internet investment, as regards both price and content. Avanza is therefore considered to have good prospects for continuing to show a strong inflow of new customers and new capital. Avanza’s goal is to have annual revenue growth of between 20% and 30% in the long term. The income-growth goal is based on equivalent growth in the value of custodian accounts. Growth in the value of custodian accounts is explained by two factors, net deposits and value growth. Avanza’s goal is that net deposits shall amount to 15-20% during 2005. During the first half of the year, net deposits amounted to 13.9%. The growth in value in a normal year is assessed at 6-8%. During the first half of the year, the growth in value amounted to 18.3%. In total, growth with respect to the value of custodian accounts amounted to 34.6% and is therefore considered to constitute good conditions for long-term growth of income. During the second half of the year, a number of product launches are planned and it is considered that these will strengthen Avanza’s competitiveness and thus improve growth prospects. Avanza will, among other things, launch capital insurance and pension insurance products during the autumn. The conclusion to be drawn from the positive response in connection with the launch of capital pension products is that there is positive demand for simple, cheap alternatives within insurance investment. Avanza’s cost targets for 2005 are that operating costs shall not exceed SEK 120-125 million. During the second and third quarters, operating costs are normally lower than during the first and fourth quarters. If the current positive market climate is continuing, Avanza might strengthen its marketing and development efforts, thus leading to that the cost target might be exceeded. On account of high dependence on stock market developments, Avanza does not make any income or result forecasts for 2005. The goal is, however, that non-brokerage income, i.e., the operating income which is not directly dependent on the stock exchange, shall amount to 80-90% of operating expenses, which gives good result stability also during less favourable market conditions. Other matters Extraordinary General Meeting An Extraordinary General Meeting was held on 4th July 2005. At the meeting, Andreas Rosenlew was elected new Member of the Board. Additionally, a resolution on a new option programme was made by the meeting. The option programme covers 1,294,200 shares, equivalent to 4.5% dilution. The option programme is divided into three sub-programmes, and the total option programme will run during the period July 2005 to September 2010. The first sub-programme covers 431,400 shares, and it will run up to September 2008. The exercise price of the first sub-programme is SEK 70.20 per share. Financial calendar Interim report 1st January – 30th September 11th October 2005 Preliminary financial statement January 2006 Stockholm, 11th June 2005 Nicklas Storåkers Managing Director Review report Avanza AB (publ) We have conducted a review of this Interim Report in accordance with the recommendation issued by FAR (the Swedish Institute of Authorised Public Accountants). A review is significantly restricted in comparison with an audit. Nothing has emerged to indicate that the Interim Report fails to comply with the requirements laid down in the Swedish Stock Market and Annual Report Acts. Stockholm, 11th July 2005 KPMG Bohlins AB Anders Bäckström Authorised Public Accountant

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