For ProCredit Holding AG & Co. KGaA (ProCredit Holding) and the ProCredit banks, which are primarily active in South-Eastern and Eastern Europe, the first half of the 2019 financial year was in line with the company’s expectations, a press release informs. Positioned in its markets as the Hausbank for small and medium-sized enterprises (SMEs), the ProCredit group’s gross loan portfolio from its continuing operations has grown by a solid EUR 217m (+5%) to EUR 4.6bn since the beginning of the year.
In lending, the group focuses on the sustainable financing of investments by innovative, high-growth SMEs with stable and formalised structures. Particular emphasis is placed on promoting green investments, financing local production and strengthening the agricultural sector. 93% of outstanding ProCredit group loans are to businesses.
At the end of Q2 2019, the volume of customer deposits in the continuing operations amounted to EUR 3.9 bn. This represents an increase of EUR 63m (1.7%) compared with the previous year. Deposits from private customers also increased, reversing a decrease in 2018, reflecting positive developments with the execution of the group’s digital ProCredit DIRECT strategy.
Due to the portfolio growth, net interest income recorded an increase in the first half of 2019 to EUR 92.7m (H1 2018: EUR 92.1m). At 3.1%, the net interest margin at the end of Q2 2019 was stable at the same level as at the end of Q1, laying the foundation for increased net interest income with future portfolio growth.
Expenses for credit risk provisions increased year on year to EUR 4.1m in the first half of 2019 (H1 2018: EUR -0,1m). Overall, however, portfolio quality improved further in the first half of 2019. At 2.9%, the share of non-performing loans in the total loan portfolio of the continuing operations showed a slight improvement on the already good level recorded at the end of the previous year (31 December 2018: 3.1%). The risk coverage ratio also improved during the first half of 2019, from 90.8% on 31 December 2018 to 94.9% on 30 June 2019. At 0.1%, net write-offs in the first half of 2019 remained at their usual very low level.
Net fee and commission income grew by EUR 1.8m (7.4%) to EUR 25.8m (H1 2018: 24.0m). This increase is primarily the result of the ProCredit group implementing its direct banking strategy.
The increase in operating expenses by EUR 2.1m to EUR 83.5m (H1 2018: EUR 81.4m) was mainly due to spending on marketing activities in connection with the introduction of ProCredit DIRECT.
The result from discontinued operations of EUR -1.5m mainly comprises the anticipated losses from the planned sale of ProCredit Bank Colombia, which is currently awaiting the approval of the Colombian authorities.
The ProCredit group’s total consolidated result for the first half of 2019 amounted to EUR 22.9m. This was EUR 3.8m lower than the previous year (H1 2018: EUR 26.7m), which is broadly in line with expectations.
At 70.7%, the cost-income ratio of the ProCredit group for the first half of 2019 in its continuing operations was slightly above the previous year’s level (H1 2018: 70.2%). The Common Equity Tier 1 capital ratio, which stood at 14.3%, on 30 June 2019, was at the same level as at year-end 2018.
The group’s “green portfolio” continued to show strong growth in the first half of 2019, increasing by EUR 34m to EUR 711m. It now accounts for 15.6% of the total loan portfolio. This underlines the great importance the group places on financing its clients’ green and sustainable investments.
Thanks to its strong market positioning with SMEs in South-Eastern and Eastern Europe, during the course of financial year 2019 the ProCredit group has been able to conclude further cooperation agreements with international institutions whose mandate includes the sustainable promotion of SMEs in these regions.
In July 2019 the cooperation with the European Investment Fund (EIF) to promote lending to innovative SMEs in Eastern and South-Eastern Europe through the InnovFin guarantee programme was expanded by an additional EUR 800m, bringing the total volume to EUR 1.6bn. This will support the ProCredit group’s ambitions to grow its target SME loan portfolio in an efficient manner regarding risk weighted assets, whilst providing high quality collateral.
In May 2019 an agreement was signed with the World Bank’s International Financial Corporation (IFC) to place USD 90m in green bonds. The agreement sets a milestone in the financing of SME green investments in Eastern Europe in the fields of energy efficiency, renewable energy and environmentally friendly measures (“green loans”).
The company’s management reconfirms its forecast of 10–13% growth of the gross loan portfolio for the year as a whole. The group also reiterates its forecast of a cost-income ratio of below 70% and a consolidated result of between EUR 48m and EUR 55m. It is expected that the Common Equity Tier 1 capital ratio (CET1 fully loaded) will continue to exceed 13%.