Evli Bank Plc’s Financial Statements Bulletin January-December 2019

Finanzanalysten bei der Arbeit (Symbolbild). © scyther5 / iStock / Getty Images Plus / Getty Images

EVLI BANK PLC STOCK EXCHANGE RELEASE JANUARY 24, 2020, AT 11.00 AM. (EET/EEST)

RECORD PROFIT FOR THE FINAL QUARTER OF THE YEAR

The Wealth Management and Investor Clients segment’s operating profit increased and was EUR 20.8 million (1-12/2018: EUR 17.4 million)
The Advisory and Corporate Clients segment’s operating profit increased and was EUR 2.8 million (EUR 2.2 million)
The return from own balance sheet items developed favorably and totaled EUR 3.2 million (EUR 0.7 million) improving operating profit in the Group Operations segment
According to strategy, Evli's assets under management in alternative investment products increased during the review period and were nearly EUR 870 million (about EUR 350 million).

January-December 2019

Net revenue was EUR 75.8 million (EUR 68.5 million)
Operating profit was EUR 24.1 million (EUR 18.9 million)
Profit for the financial year was EUR 18.7 million (EUR 17.3 million). Profit for the financial year includes EUR -0.6 million (EUR 2.1 million) of the share of the associated company
Evli’s diluted earnings per share were EUR 0.71 (EUR 0.68) and return on equity was 23.4 percent (23.0%)
Net assets under management grew and totaled record-high EUR 14.3 billion (EUR 11.4 billion) at the end of December
Proportion of recurring revenue to operating costs was 124 percent (113%)
A dividend of EUR 0.66 per share is proposed (EUR 0.61 per share).

October-December 2019

Net revenue was EUR 22.7 million (EUR 17.5 million)
Operating profit was EUR 8.7 million (EUR 3.6 million)
Evli’s diluted earnings per share amounted to EUR 0.24 (EUR 0.07).

Outlook for 2020

The risks associated with the general trend in the equity and fixed income markets are high due to the prevailing uncertainty on the markets. A possible decline in equity prices or a reduction in investors’ risk appetite would have a negative impact on the company’s profit performance. Evli Group’s assets under management have grown substantially in recent years, which softens the result-impact of any reversal of the market. Sales of alternative investment products, in particular, have brought new, stable revenue. Evli has initiated a series of internal, strategy-based actions and cost savings, which are expected to improve the company's cost efficiency.

There has been positive development in the demand for advisory services, and its outlook for 2020 is stable. Own balance sheet investments share of Evli’s business has decreased during recent years. Nevertheless, it may have a significant impact on the company’s result performance. In the advisory business and in own investment activities, fluctuations in quarterly and annual returns are possible.

As a result of this positive development, we estimate the operating profit for 2020 to be clearly positive.

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Key Figures

	1-12/2019	1-12/2018
Income statement key figures
Operating income, M€	75.8	68.5
Operating profit/loss, M€	24.1	18.9
Operating profit margin, %	31.8	27.6
Profit/loss for the financial year, M€	18.7	17.3

Profitability key figures
Return on equity (ROE), %	23.4	23.0
Return on assets (ROA), %	2.1	1.9

Balance sheet key figures
Equity-to-assets ratio, %	8.9	9.5
Group capital adequacy ratio, %	15.1	16.2

Key figures per share
Earnings per Share (EPS), fully diluted, €	0.71	0.68
Comprehensive Earnings per Share (EPS), fully diluted, €	0.71	0.67
Dividend per share, €*	0.66	0.61
Equity per share, €	3.40	3.27
Share price at the end of the period, €	10.40	7.28

Other key figures
Expense ratio (operating costs to net revenue)	0.68	0.72
Recurring revenue ratio, %	124	113
Personnel at the end of the period	249	254
Market value, M€	248.6	172.5

*Dividend for 2019, proposal by the Board of Directors.

Maunu Lehtimäki, CEO

There was stable development in Evli's business already in the first three quarters of the year, but the final quarter was especially strong as the turnover of both of Evli’s business segments grew and overall development in the equity and bond markets was favorable. Our financial performance exceeded our expectations and we adjusted our earnings outlook upward for the second time in the later part of the year. Fourth-quarter figures showed a clear improvement on the previous year: operating income increased nearly 30 percent to EUR 22.7 million and operating profit over doubled to EUR 8.7 million. The ratio of recurring revenue to operating costs, an important measure of operating stability and predictability for us, reached 124 percent at the end of the year, well above our 100 percent target.

In 2019, client assets under management exceeded the EUR 14 billion mark for the first time, and at the end of the year they were at a record EUR 14.3 billion, or 25 percent higher than at the end of last year. Our fund fees also increased eleven percent to EUR 45 million.

Evli's strategic focus areas, international fund sales and sales of alternative investment products developed as planned during 2019. Our fund capital from international clients totaled EUR 2.8 billion at the end of the year. About half of the total net subscriptions of EUR 960 million of our mutual funds came from outside Finland, mainly from Europe. Net subscriptions from Finland, on the other hand, were approximately equally divided between direct sales and subscriptions through asset management mandates.

The total investment assets of the alternative investment products, a key growth area for us in Finland, almost three folded during the year and amounted to almost EUR 870 million at the end of the year. Exceeding ten percent of our total fund fees in 2019, commissions from alternative investment products have in a short time become an important source of commission income for Evli.

The performance of the Advisory and Corporate Clients segment also developed favorably. Invoicing by the Corporate Finance business exceeded the level of the previous year and the company's mandate base remained good in the final quarter, which means that the outlook for 2020 is favorable. The incentive system management business continued its strong growth due to new clients and existing clients extending their service packages.

Our strategy-driven work to streamline our investment processes and improve our customer experience continued in 2019. We successfully completed a major overhaul of the system framework, related to our asset management in particular, which has allowed us to simplify our internal processes. Another measure that significantly improved our operating efficiency was the transfer of custody of our funds to Skandinaviska Enskilda Banken. This solution, in line with international practice, also improves our ability to sell our funds outside Finland. As a consequence of these and a number of smaller measures, we again significantly improved our operational efficiency.

Followed by our successful strategic choices, we have maintained our good position in the rapidly changing market. We believe that by continuing to invest in our strategic focus areas, operating profit for 2020 will be clearly positive.

I want to thank our clients and shareholders for their trust and our employees for their hard and successful work.

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 specialized in investments that helps institutions, corporations and private persons increase their wealth. The product and service offering includes mutual funds, asset management and capital markets services, alternative investment products, equity research, administration of incentive programs and Corporate Finance services. The company also offers banking services that support clients' investment operations. Evli is the highest ranked and most used institutional asset manager in Finland*.

Evli has a total of EUR 14.3 billion in client assets under management (net 12/2019). The Evli Group’s equity capital totals EUR 81.7 million and its BIS capital adequacy ratio is 15.1 percent (December 31, 2019). The company has about 250 employees. Evli Bank Plc’s B shares are listed on Nasdaq Helsinki Ltd.

*KANTAR SIFO Prospera External Asset Management Finland 2015, 2016, 2017, 2018, 2019 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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