Profits, revenue growth despite non-performing loans rise for consumer lender 4 Finance

By Daniel Lanyon on Thursday 2 June 2016

Alternative Lending

European consumer lender 4 Finance has reported strong growth in revenue of 30 per cent to €90.3m in the first three months of 2016 compared with €69.2m in the same period last year. 

Profits also increased for 4 Finance, who operate through a portfolio of brands across Europe including Vivus, SMS Credit and Zaplo to €16.7m, an increase of 7 per cent from €15.6m in 2015.

4 Finance issues short term loans via its own balance sheet across the European market and has seen strong growth in recent years. It passed a milestone at the start of 2016 by issuing its 10 millionth loan since inception in 2008 and also recently tapped a €100m bond to fund further expansion and acquisitions.

While these numbers demonstrate its growth has continued apace, its cost to revenue ratio increased to 47 per cent from 38 per cent compared to the first three months of last year.

This reflects a 66 per cent increase in staff and investment across its platforms, enabling the future funding of growth both geographically and in terms of new product launches, a spokesman for the firm said.

However, its non-performing loans also increased, marginally, to 9.4 per cent for Q1 of 2016 from 9 per cent compared with Q1 in 2015.  The firm said this is within its expected range “given growth of higher return markets”.

Despite this uptick, the firm was keen to point out ‘financial strength’ as measured by its capital-to-assets ratio leaped up from 42 per cent as of 31 March 2016 compared to 35 per cent as of 31 March 2015.

The total number of registered customers across 4 Finance’s brands also grew by more than a third reaching 5m, up 35 per cent from a year ago.

Applications from mobile devices also increased to 32 per cent of total loan applications from 13 per cent in Q1 2015.

Kieran Donnelly, chairman of the management board at 4 Finance says the firm managed to grow while also implementing regulatory changes in four key markets as well as increasing staff and IT spending. 

“The rise in our non-performing loans to loan issuance ratio is in line with our plans and reflects our geographic diversification. We are laying the foundations for the next phase of growth.  Our significant investment in people and technology continues, supporting an ambitious roll-out plan for Instalment Loans and new markets.  The recent 5 year €100m bond issue diversifies our funding and underpins this expansion,” he said.

"As we gain global scale, our management team and structure also develops. On this front, we have decided to split the chairman and CEO roles and are pleased to welcome George Georgakopoulos as CEO, while I will remain as chairman." 

Georgakopoulos is the former CEO of Eurobank in Romania.

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