Comments from the CEO
The negative interest rate creates greenhouse effect
Many people review their savings before the start of a new year, which leads to increased customer growth and activity during the first months of the year. This year was no exception. At the same time we have worked hard to strengthen our services in the recent year, including a new share trading price plan, mortgage loans for Private Banking customers, doubling our sales strength within occupational pensions and hundreds of new, on-line functions. The purpose of this work is to increase our competitiveness and capacity to grow more rapidly than in the past.
Low market rates have historically been a good climate for growth for Avanza, as the importance of fees becomes more apparent while interest in the stock exchange and more active investments increases. Many people are reviewing their savings due to today's historic negative interest rates, and this is to the benefit of a company like Avanza, which offers the market's widest choice within low cost savings and investments.
Against a background of increased marketing efforts over the quarter and the Swedish central bank's continued reductions in the repo rate, we have achieved our strongest growth in any individual quarter, with a net inflow of 10 billion (+81 per cent) and 31,800 new active customers (+119 per cent). This means that we have already surpassed our long-term goal of 30,000-40,000 new customers per year. Given the good results we have had in customer acquisition with increased marketing activities during the beginning of the year, we intend to continue the efforts in 2015. We therefore expect a cost increase rate of 8-10 per cent for the full year, compared with the previously announced 6-8 per cent. Trading activity also significantly increased among our customers during the first quarter and the number of transactions per customer and per month was 46 per cent higher than in the equivalent period for the previous year.
The operating profit increased by 51 per cent, despite pressure from interest rates
The increased interest in the stock exchange is clearly visible in the trading statistics and in an increasing net brokerage commission income. At the same time, our trading volumes increased more rapidly than the market, which can be seen from our market share of trading measured in the number of transactions on the Stockholm stock exchange, which increased from 7.5 per cent to 9.5 per cent since the first quarter of 2014. Our new price plan for share trading with a minimum 1 krona brokerage fee has extended share trading to a new customer segment, which now has the potential to trade even minor shareholdings without the brokerage eating into the capital. The combination of a steadily increasing customer base and high trading activity increased the operating profit during the quarter to SEK 115 million, which is 51 per cent higher compared with the same quarter in the previous year.
The falling market rates are simultaneously creating pressure on our interest incomes, even though the increased borrowing and lending significantly compensate for reducing interest margins. At today's volumes, a one per cent change in the repo rate is equivalent to an effect of approximately SEK 100-120 million on interest incomes annually. Despite the interest rate situation, the deposit volume grew by 16 per cent during the quarter and, if the trend continues, the far larger volumes will create good leverage on our interest income when market rates rise again.
We are continuing to expand within occupational pensions
During January we opened our new sales office for occupational pensions and Private Banking in the Malmö stock exchange building. Together with our Gothenburg office, which was established last year, the new Malmö office is an important keystone in our aim to ensure a strong, consistent growth in occupational pension trading. After the first quarter, total growth in the net inflow for the occupational pension products amounted to 34 per cent compared with the same period in the previous year; we hope to be able to increase this growth further once the new office has got up to speed.
A new mobile presence and a focus on simplicity
There is a clear trend for far more customers wanting to manage their savings during the holiday period, and we will, as previously advertised, release a new mobile presence during the second quarter.
We are also focusing on the need to make it even simpler for our customers to handle their savings and to find good investment options, regardless of the market conditions. For example, almost one in every six kronor in savings remains uninvested at today's interest rates environment, which is a sign that many customers need better tools and support when making investment decisions.
Stockholm, 20 April 2015
Martin Tivéus, CEO Avanza