Home Credit Group, the consumer lender owned by Czech billionaire Petr Kellner, blamed a €584mn loss for 2020 on the coronavirus (COVID-19) pandemic but said it was profitable in 2H and expected to be profitable again this year. Home Credit recorded a net profit of €35mn for 2H20 compared with a €619mn net loss in the first half.
Home Credit has expanded from the Czech Republic and Slovakia into Russia, China and the Far East, using points of sale in shops, banks, kiosks and post offices, as well as the internet and social media to sell loans to consumers. It cancelled a planned IPO in Hong Kong 2019.
The group has adapted its operations in 2020 to the pandemic, reducing total assets by 30% to €18.5bn through a 37% year-on-year reduction in the loan book to €12.7bn.
"Home Credit remains resilient with an operating model that can be adapted quickly to handle changing circumstance as we did in 2020. We have recalibrated our business for the post-COVID environment and are confident that as global markets get back on track, we too will continue to rebound,” said Jean-Pascal Duvieusart, CEO of Home Credit Group BV.
Home Credit said new volumes in 2020 had decreased 49% compared to 2019 on a constant currency basis due to the impact of lockdowns, reduced consumption, stricter underwriting criteria and a strategy to promote smaller loans. The group’s net interest margin declined from 15.5% in 2019 to 13.9% in 2020 as it focused on providing loans to better borrowers.
It said loan demand increased in the second half of the year, with credit applications up 23% to 13.8mn in 4Q compared to 2Q. In the final three months of 2020 it disbursed an average of 47,900 loans per day in 4Q20 – one every two seconds – versus 39,600 in 2Q20.
“We made fewer, smaller and shorter-term loans, mindful of the financial strain many were under. Quite rightly, our loan book is now significantly smaller and reflects the increased risk profile of our markets, although there was growth in new loans in all our regions by the end of the year,” said Duvieusart.
In 2H20 average loan contract tenors were reduced to nine months from 20 months in 2019, while the amount of the average loan reduced from €910 to €450.
Cost of risk climbed from 8.6% in 2019 to 12.9% during 2020, with NPLs (loans with past interest payments due over 90 days) increasing by 6.4% in 2020 from 5.6% in 2019. Again, there was a distinct improvement in the second half, with impairment losses in 1H20 at €1.8bn, but only €0.6bn during the second of half of the year, reducing the annualised cost of risk from 17.8% in 1H20 to 6.8% in 2H20.
The loan coverage ratio increased significantly in 1H20 from 7.3% to 12.2% and then, during 2H20, it rose only slightly to 12.6%. The NPL coverage ratio strengthened to 197.3% in 2020 from 130.6% in 2019.
Partly through pushing digitilisation, Home Credit reduced operating expenses by 13.2% y/y to €1.6bn, and by 25% on a run rate basis. By the end of 2020, the group had 91mn registered users of its proprietary app, up 30% with 52% of new volumes originating digitally.
In a number of locations, customers may now apply for revolving loans themselves by scanning QR codes. More than 150,000 retail shops in China were converted to this self-service model during 2020 and there were 1.66mn new users in 2020. In China 96% of new customers are acquired digitally.
In Russia, Home Credit started piloting loans within VK Pay, a payment platform operated by the country’s leading social media network.
Home Credit’s capital position remains solid, with equity to net loans increasing to 15.3% at year-end 2020 from 14.2% a year earlier.
PPF, Kellner’s vehicle that owns 91% of Home Credit, has announced its intention to combine PPF Group’s retail banking and consumer finance units in the Czech Republic and Slovakia with Moneta Money Bank. This includes its stakes in Air Bank, peer-to-peer lender Benxy and the Czech and Slovak operations of Home Credit.