Alisa Bank PLC

Earnings Release • Aug 9, 2024

Alisa Bank Plc's Half-Year Financial Report January - June 2024

Alisa Bank Plc's Half-Year Financial Report January - June 2024

ALISA BANK PLC STOCK EXCHANGE RELEASE 9.8.2024 AT 09.00 EEST

SIGNIFICANT COMBINATION WITH PURO FINANCE

January-June 2024 in brief

· Alisa Bank Plc and PURO Finance Oy completed the combination on May 15,
2024. The combination supports Alisa Bank's focus on digital banking and
financial services for SMEs, as well as improves growth and profitability in the
form of synergies and partnerships.
· January-June profit before non-recurring items and taxes was EUR -1.0
million (0.5). Profit before taxes was EUR -2.0 million (0.4).
· Net interest income was EUR 7.2 million (7.4). The change was caused by the
increase in financing expenses.
· Total operating income was EUR 7.7 million (8.4).
· Realised and expected credit losses were EUR -3.2 million (-2.2).
· Total capital adequacy ratio was 14.0 percent (15.2).
· Loan portfolio before reducing expected credit losses increased by 11
percent to EUR 192.6 million (172.9) in the accounting period due to the effect
of the combination with PURO Finance.
· Deposits increased by 89 percent to EUR 508.5 million (268.9).

Group key figures (EUR Jan-June 2024 Jan-June 2023 Jan-Dec 2023
1,000)
Net interest income 7,175 7,427 14,757
Net commission and fee 417 847 1,785
income
Total operating -6,432 -5,747 -11,398
expenses
Impairment of -3,223 -2,235  -5,257**
receivables
Profit before taxes -1,995 390 45**
*Profit before non -999 467 574**
-recurring items and
taxes
* Cost / income ratio, 84 69 68
%
Balance sheet total 565,440 287,527 312,583**
* Return on equity -13.0 2.6 0,2**
(ROE), %
Total capital ratio 14.0 15.5 15.2
(TC), %
Common Equity Tier 11.6 12.0 12.0
(CET1), %
Number of employees, 91 85 78
end of period
Earnings per share -0.02 0.00 0.00
(EPS), EUR
* Impairment of 3.4 3.8 3.1**
receivables / loan
portfolio, %

* The calculation principles of alternative performance measures are presented
in Appendix A.
** The figures for the 2023 financial year have been retroactively adjusted due
to a system-technical calculation error that occurred in December 2023. The ECL
provision was erroneously 258 thousand euros too small and result would have
been 258 thousand euros lower than reported in the financial statements, i.e.
the result for the fiscal year 2023 is 48 thousand instead of 306 thousand. In
the income statement, the adjustment was made to the "impairment of receivables"
line, and the adjustment affects the sum lines after that. In the balance sheet,
the correction had a decreasing effect on the line "Claims on the public and
public sector entities" and “result for the year”. Corrections have also been
made to the 2023 cash flow statement, statement of changes in equity, the notes
and key figures that are affected by the above-mentioned accounts.

CEO's review

Towards a profit turnaround and profitable growth

We entered 2024 with both the bank's capital restrictions and the weak economic
situation limiting lending, as a result of which the first quarter was clearly
weaker than our expectations in terms of operational profitability. As we said
in connection with last year's financial statements, we have shifted our focus
to business customers during the first half of the year. At the same time, we
worked determinedly to strengthen the capital structure, and the combination
with PURO Finance completed in May was an important step in this work. As a
result of the combination, the bank's own funds were strengthened and
profitability and competitiveness in cost-effective service to business
customers improved significantly. With the combination, the cooperation
agreement between Alisa Bank and Accountor on the integration of banking
services into the Procountor financial management software strengthened the
bank's banking-as-a-service (BaaS) strategy. BaaS means the provision of banking
services (loans, cards and accounts) to the end customer in the partners'
channels. The business model enables quick distribution of products in an
operationally light and efficient manner. With the combination, the company's
personnel was strengthened with experienced professionals in corporate customer
business, and we got new owners to join our growth story. The combination
strengthened our view that we are on the right path in shifting the focus of the
strategy. As a company, we are determinedly on our way towards a profit
turnaround.

Due to a weak start to the year, profit before non-recurring items and taxes was
EUR -1.0 million and profit before taxes EUR -1.9 million. The profit of the
first half of the year was significantly burdened by non-recurring items related
to the combination.

Business development

Our loan portfolio before reducing provisions for loan losses increased to EUR
193 million (173) by the end of June.

As a whole, the business development of the first half of the year was strongly
determined by the combination of Alisa Bank and PURO Finance. We acquired
profitable business and strengthened our competitiveness in serving business
customers. With the combination, the number of business customers and the
potential for cross-selling increased.  Our technological ability to serve
business customers of all sizes with an invoice financing product was
strengthened and loan origination processes became more efficient with the help
of automation. The bank's BaaS strategy was also strengthened with new
partnerships, the most significant of which is Finland's largest provider of
financial management services and software, Accountor. The cooperation agreement
we concluded on the integration of banking services with Accountor's Procountor
financial management software creates good conditions for the continued growth
of the number of business customers.

Supported by the combination, the loan portfolio of business financing increased
by the end of June by 62 percent to EUR 66 million from the EUR 41 million level
of the end of last year. During the reporting period, the growth of corporate
customer business was limited by the challenging operating environment of SMEs
and our caution in loan origination, especially in industries with increased
credit risk, such as construction. Especially during the first quarter, the
volumes of corporate finance lending remained small, but clearly increased
towards spring and summer. The quality of the corporate loan portfolio remained
good and stable, as a result of which we did not record significant credit
losses from corporate customers in the first half of the year. With the
strengthening of our competitiveness, we are confident of the profitable growth
of our corporate customer business.

In personal customers, out loan portfolio decreased by 4 percent being EUR 126
million (31.12.2023: EUR 132 million). The market demand for consumer financing
has remained strong, but we focused on lending to more profitable business
customers. In the financing of personal customers, we managed to further improve
our interest margin and to direct lending relatively more to customer segments
with a lower credit risk. In the first half of the year, we completely stopped
loan origination to personal customers in Germany and Denmark due to low
profitability.

Our deposit portfolio were EUR 508 million at the end of June (31.12.2023: EUR
269 million). The structure and sources of our deposit portfolio continued to
diversify. We expanded our distribution of savings account and term deposit
products through the deposit comparison portal Raisin to France and Austria. At
the end of June, the average interest rate on the deposit portfolio was 3.0
percent, however, it turned to a decrease at the end of the reporting period.
However, the bank's interest margin on liquid assets has continued to increase
with the significant increase in liquid assets.

The number of active customers continued to grow and was 68,600 (57,500) at the
end of June. Customer satisfaction has remained at a good level (Net Promoter
Score 46).

In June, we implemented a cost-saving program to ensure the realisation of the
cost synergy benefits of the combination. In the reporting period, the cost
-income ratio was 84 percent (2023: 68%). The cost-income ratio of the reporting
period was weakened by non-recurring expenses arising from the combination.

Market environment and risk position

During 2024, general economic growth in Finland has remained weak. The number of
bankruptcies of SMEs has remained high, and the strong contraction of the
construction industry continues to limit the sector's business opportunities,
especially in the invoice financing business, which is central to Alisa Bank.
Domestically, inflation has continued to fall and is at the lowest level among
the countries of the euro zone, while interest rates still remain relatively
high. The operating environment challenges a significant improvement in the
business conditions of SMEs in the coming months. Thanks to the increased number
of corporate customers, however, we are even better positioned for the future
growth of corporate business.

The bank's liquidity position is strong with liquid assets being EUR 352 million
(31.12.2023: EUR 135 million). We have increased deposits significantly despite
the slight decline in interest rates. We are confident that thanks to the
acquisition of deposits spread over several channels, we will also be able to
generate a significant return on liquid deposit funds in the future and at the
same time increase our deposit portfolio.

The bank's total capital ratio was 14,0 percent falling short of the 16 percent
target as a result of negative result. We estimate that capital adequacy will
improve during the second half of the year due to improved balance sheet
management and positive earnings development.

Despite the challenging market environment, we succeeded in managing the credit
risk. The credit risk position has remained stable for both personal and
business customers. Non-performing loans totalled to EUR 7.5 million (EUR 7.2
million) and relative share of the loan portfolio (NPL ratio) was 3,9 percent
(4.2) at the end of the reporting period. At the end of last year and in the
first half of this year, debt collection companies lowered the valuation levels
of non-performing loans. This increased realised loan losses in our loan
portfolio when we sold personal customers' non-performing loans to debt
collection companies. However, loan losses were at the expected level in
relation to the size of the loan portfolio being 3.4 percent of loan portfolio.

Outlook for the future

The combination with PURO Finance was a significant step. The combination
strengthened our competitiveness in cost-effective service to business
customers. In our business, supported by the combination, we emphasize even more
strongly the provision of banking services and financing for SMEs together with
our significant partners.

In the first half of the year, we have eliminated poorly profitable businesses,
e.g. abroad, simplified the product structure, for example in online payments,
and implemented a cost-saving program that realizes the synergies of the merger.
Although the operating environment remains challenging, we believe that our
improved competitiveness will enable strong, profitable organic growth in
corporate customers and especially in the invoice financing business. We are
also actively mapping out the opportunities for inorganic growth in corporate
customer business. We estimate that our profitability level will improve in the
second half of the year.

We will update our medium-term financial goals and the bank's strategy by the
end of September.

Juha Saari, Interim CEO

Financial targets and outlook for 2024

The prolonged uncertainty of the operating environment, the decline in interest
rates and delay in strengthening the company's capital structure continues to
challenge the financial performance in 2024.

When the financial goals of the combination with PURO Finance Ltd are fully
realised both on the income and expenses side, total income will increase in
2024 compared to 2023 and profit before one-off items and taxes for the
financial year 2024 is estimated to be slightly profitable (EUR 0.5-1.5
million).

The target for the group's total capital ratio is 16 percent.

Further information

Juha Saari, Interim CEO, Alisa Bank Plc, juha.saari@alisapankki.fi, tel. +358 40
672 0595

Alisa Bank in brief

Alisa Bank (https://www.alisapankki.fi/pankki) Plc is a Finnish digital bank
that helps both personal and business customers to manage their day-to-day
finances in a flexible and straightforward manner. For savers, we offer an
attractive interest rate on deposits. Alisa Bank Plc is regulated by the
Financial Supervisory Authority of Finland and listed on Nasdaq Helsinki's main
list (ALISA). www.alisabank.com

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