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Evli Bank Plc’s Interim Report January-September 2021

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EVLI BANK PLC STOCK EXCHANGE RELEASE OCTOBER 20, 2021, AT 1.30 PM (EET/EEST)

EXCELLENT QUARTER

Financial performance January-September 2021

  • Operating income was EUR 80.6 million (1-9/2020: EUR 51.6 million)

  • Operating profit was EUR 36.9 million (EUR 15.5 million)

  • Operating result of the Wealth Management and Investor Clients segment increased to EUR 29.7 million (EUR 15.6 million)

  • Operating result of the Advisory and Corporate Clients segment increased to EUR 6.5 million (EUR 1.2 million)

  • Revenue from own balance sheet developed positively and amounted to EUR 2.9 million (EUR 1.0 million)

  • At the end of September, assets under management amounted to EUR 16.8 billion (EUR 13.6 billion) on net basis.

  • Diluted earnings per share were EUR 1.02 (EUR 0.46) and return on equity was 36.7 percent (19.8%)

  • The ratio of recurring revenues to operational costs was 136 percent (128%).

Financial performance July-September 2021

  • The Group's net revenue was EUR 24.8 million (EUR 18.7 million)

  • The Group's operating profit was EUR 12.1 million (EUR 6.9 million)

  • Earnings per share amounted to EUR 0.39 (EUR 0.21).

Outlook for 2021 unchanged

Supported by strong client demand and a favourable stock market performance, business has developed well during the year.

Demand for advisory services has developed positively and its outlook for 2021 is stable. Although investment activities through Evli’s own balance sheet constitute only a limited proportion of Evli’s business, these could still have a substantial impact on the earnings development during sudden market movements. Seasonal and annual fluctuations in income from advisory business and own investments are possible.

However, there are always risks associated with the overall development of the stock and fixed income markets. Any fall in prices or a reduction in investors' risk appetite would have a negative impact on the company's earnings development. The group's assets under management reached a new record level at the end of the third quarter, and the product range has expanded especially to alternative investment products, mitigating the negative impact of a possible market downturn.

Taking into account the above considerations, we estimate that the operating profit in 2021 will clearly exceed the level of the previous year.

Key figures describing the Group’s financial performance

1-9/2021

1-9/2020

1-12/2020

Income statement key figures

Operating income, M€

8.6

51.6

79.7

Operating profit/loss, M€

36.9

15.5

29.1

Operating profit margin, %

45.8

30.0

36.5

Profit/loss for the financial year, M€

30.4

12.3

23.2

Profitability key figures

Return on equity (ROE), %

36.7

19.8

26.2

Return on assets (ROA), %

5.3

1.7

2.7

Balance sheet key figures

Equity-to-assets ratio, %

16.7

8.1

12.3

Group capital adequacy ratio, %

16.1

15.5

15.2

Key figures per share

Earnings per Share (EPS), fully diluted, €

1.02

0.46

0.87

Comprehensive Earnings per Share (EPS), fully diluted, €

1.02

0.46

0.88

Dividend per share, €

0.73

Equity per share, €

5.01

3.40

3.86

Share price at the end of the period, €

24.40

10.00

12.20

Other key figures

Expense ratio (operating costs to net revenue)

0.54

0.70

0.63

Recurring revenue ratio, %

136

128

124

Personnel at the end of the period

282

258

261

Market value, M€

588.3

241.1

294.1


Maunu Lehtimäki, CEO

The strong rise in share prices at the beginning of the year levelled off in the third quarter. Share prices rose until the end of August but turned lower in September as inflation fears increased. Investors' nervousness was reinforced by the US Federal Reserve's plans to reduce its quantitative easing and expectations that interest rate hikes could be brought forward. Other key concerns included the rapid spread of the delta variant of COVID-19, and China's tightening regulatory policy towards internet companies along with increasing difficulties in that country's real estate sector. In addition, asset values that have reached record highs in recent years have become a growing concern for investors. However, economic growth has strengthened, and with it, corporate earnings are on the rise, which is helping to mitigate the high valuation multiples.

In the third quarter, Evli's business developed extremely well. Operating income increased by one third versus the comparison period and amounted to EUR 24.8 million. Group operating profit increased by 75 percent and amounted to EUR 12.1 million. The result for the comparison period was boosted by income from securities trading and foreign exchange operations of almost EUR 2 million as well as the temporary adjustment of personnel expenses in response to uncertainty regarding the coronavirus pandemic. In the period under review, Evli's return on equity increased to 36.7 percent (19.8 percent) and the ratio of recurring income to operating expenses was 136 percent (128 percent).

Operating income in the Wealth Management and Investor Clients segment increased by 40 percent to EUR 20.5 million. Client assets under management reached a record EUR 16.8 billion (EUR 13.6 billion) and Evli Fund Management Company’s fund capital amounted to EUR 10.6 billion (EUR 8.7 billion). Net subscriptions for the funds amounted to EUR 350 million, mainly in Nordic and European corporate bonds. The growth in segment returns was positively influenced by fee income from traditional and alternative funds as well as brokerage commissions. New client additions, increased investments from existing clients, and a positive market impact increased the client assets under management for both the high-net-worth individuals and the institutional asset management mandates to a new record. The segment's positive development was reinforced by good portfolio management results and success in independent benchmarking within both wealth management and fund management.

Operating income in the Advisory & Corporate Clients segment increased by 55 percent to EUR 3.1 million. The Corporate Finance unit’s invoicing clearly increased from the comparison period to EUR 1.4 million (EUR 0.8 million). The unit’s mandate base is strong and the outlook for the rest of the year is favourable. Incentive income increased as in the first half of the year and amounted to EUR 1.6 million (EUR 1.1 million). The company has won significant new incentive plan planning and management mandates in the first half of the year and its outlook for the rest of the year is good. New demand for the company's services has been boosted by the active Finnish IPO market, the change in the law on the tax treatment of employee shareholdings in unlisted companies and marketing to Swedish listed companies.

The key drivers for Evli's strategy, international sales and alternative investment products, developed as planned in the first half of the year. Despite travel restrictions, international sales have performed well, with net subscriptions exceeding EUR 500 million since the beginning of the year and the share of international clients in Evli’s total fund capital, including alternative investment products, already exceeds 25 percent. Total sales of alternative investment products in Q3 amounted to EUR 140 million, of which the specialised investment fund Evli Leveraged Loan, launched in August, raised EUR 55 million by the end of the period, and Evli Growth Partners II Ky, which invests in unlisted growth companies and made its first closing in September, raised EUR 50 million.

During the third quarter, we launched practical actions toward the climate targets we set in June 2021. We set up a separate working group on climate targets, introduced a new climate data platform and started a process to engage with the companies in which our funds invest. The climate target engagement is part of the roadmap for Evli's climate targets and will, in the first phase, target high emitting companies that do not have emission reduction targets or science-based targets. During the third quarter, Evli had such engagement with a total of fourteen companies. Some of this engagement was not only on climate change mitigation, but also on that from the companies’ supply chains.

On July 14, we published a stock exchange release announcing our demerger into a new listed asset management company and a continuing banking company, which will be merged with Fellow Finance Plc. The arrangement follows the launch of a review announced at the end of January 2021 on the future of the credit institution operations in the Evli Group. The result of the arrangement will be the birth of a new Fellow Bank based on a scalable and digital service concept and a new Evli with a stronger focus on wealth management and advisory services. The arrangement will enable us to grow both our banking and wealth management businesses as independent entities. The arrangement is expected to be fully completed in the first half of 2022.

The new Evli aims to be the leading asset manager in the Nordic countries, with an even broader international reach. Growth, profitability, and responsibility will be the guiding themes. The company aims to achieve a return on equity of more than 25% and an operating profit margin of more than 30% over the business cycle, as well as to double the assets under management from current levels in the long term. In addition, the company aims to increase the ratio of recurring revenues to operating costs to over 130%. The Board of Directors of the new Evli will further specify its financial objectives after the implementation of the demerger.


EVLI BANK PLC


For additional information, please contact:

Maunu Lehtimäki, CEO, Evli Bank Plc, tel. +358 (0)50 553 3000, maunu.lehtimaki@evli.com
Juho Mikola, CFO, Evli Bank Plc, tel. +358 (0)40 717 8888, juho.mikola@evli.com


Evli Bank Plc

Evli is a bank specialised in investments that helps institutions, companies and individuals grow their wealth responsibly. The range of products and services includes investment funds, wealth management and capital markets services, alternative investment products, equity research, incentive plan design and management services, as well as Corporate Finance services. The company also offers banking services that support clients' investment operations. Evli is ranked as the best and most used institutional asset manager in Finland.*

Evli has EUR 16.8 billion of client assets under management (net 9/2021). Evli Group has equity of EUR 125.4 million and a BIS solvency ratio of 16.1% (September 30, 2021). The company employs around 280 people. Evli Bank Plc's B share is listed on Nasdaq in Helsinki.

*Kantar Prospera External Asset Management Finland 2015, 2016, 2017, 2018, 2019, 2020, 2021 and SFR Scandinavian Financial Research Institutional Investment Services, Finland 2015, 2016, 2017, 2018.

Distribution:
Nasdaq Helsinki Ltd, main media, www.evli.com


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