TF Bank AB (publ) (STO: TFBANK) Q3 2025 Earnings Call | 10/14/2025

Overview: TF Bank reported a strong Q3 2025, achieving controlled growth and improved margins, with operating profit rising 21% to SEK 231 million compared to Q3 2024. The credit card segment drove earnings growth, supported by a scalable business model and stable credit quality. The bank is undergoing a strategic transformation, including a proposed name change to Avarda Bank to reflect its evolved focus on credit cards and e-commerce solutions across 14 European markets.

Key Financial Highlights:

• Revenue: Increased 20% to SEK 748 million, primarily driven by credit card portfolio growth.
• Operating Profit: Up 21% to SEK 231 million, with EPS rising to SEK 2.70 from SEK 2.17 in Q3 2024.
• Loan Portfolio Growth: Total growth of 6% in local currency (20% year-over-year):
  • Credit Cards: Grew 12% in Q3 (41% year-over-year), with a loan portfolio exceeding SEK 10 billion and 379,000 active cards in Germany (+33% year-over-year).
  • E-commerce: Grew 1% in Q3 (flat year-over-year), with transaction volumes up 51% year-over-year.
  • Consumer Loans: Grew 1% in Q3 (7% year-over-year), now 25% of the loan portfolio vs. 70% at IPO in 2016.
• Credit Losses: Rose to SEK 252 million (4.5% of loans), driven by the higher-loss credit card segment. Risk-adjusted margin improved to 8.9% from 8.5% in Q3 2024.
• Cost-to-Income (C/I) Ratio: Improved to 35.4% (down 1% from Q3 2024). Credit card segment C/I fell to 29%, reflecting scale benefits and automation.
• Return on Equity (ROE): Normalized ROE rose to 31% from 27%, despite increased capital from an 80% R&DM share issuance in December 2024.
• Capital Ratios: Primary capital ratio at 14.3%, total capital ratio at 17.4%, well above regulatory requirements. Finansinspektionen set Pillar 2 Guidance at 0%, enhancing capital planning visibility.
• Liquidity: Liquidity Coverage Ratio (LCR) at 172% and Net Stable Funding Ratio (NSFR) at 113%. Fixed-rate loans decreased to 49%, lowering financing costs.

Strategic and Operational Updates:

• Name Change to Avarda Bank: Proposed to reflect the bank’s shift from a Nordic consumer loan focus to a pan-European credit and payment platform. Avarda, founded in 2015, emphasizes scalable, cloud-based technology and a white-label strategy for e-commerce. The change requires shareholder and regulatory approval.
• TF Bank Nordic: Consumer loan operations in the Nordic region will move to a new subsidiary to maintain focus and profitability, as this segment now represents only 25% of the loan portfolio (vs. 70% at IPO).
• Market Expansion:
  • Germany: Over 40% of the loan book, with strong credit card demand and recent launches in e-commerce and consumer loans. Expected to drive future growth.
  • Nordics: Focus on profitability and stable credit quality in consumer loans. E-commerce solutions growing in Norway.
  • Other Markets: Stable credit quality in Estonia, Latvia, Lithuania; strong profitability potential in Austria; early-stage credit card growth in Denmark, Spain, and Italy.
• E-commerce Growth: Transaction volumes up 51% year-over-year, driven by new merchant partnerships. Profitability maintained despite retail challenges, with delayed revenues from new integrations expected to boost future credit volumes.
• Funding: Deposits in Germany (SEK 16.4 billion) and the Netherlands (SEK 5.1 billion) remain key funding sources. Reduced fixed-rate loans lowered financing costs.

Outlook:

• Q4 2025: Strong seasonal effects expected in e-commerce, with continued credit card growth, particularly in Germany. New merchant partnerships to drive e-commerce expansion.
• Long-Term: Focus on pan-European growth, with Germany as the core market. The bank aims to maintain disciplined growth, strong profitability, and capital efficiency. The Avarda Bank rebranding and TF Bank Nordic subsidiary enhance strategic flexibility and shareholder value creation.
• Capital Management: Strong capital position supports growth, with potential for dividends or share repurchasing, though decisions prioritize profitable growth opportunities.

Key Takeaways: TF Bank’s Q3 2025 performance reflects successful strategic repositioning, with robust credit card growth and stable e-commerce and consumer loan operations. The proposed rebranding to Avarda Bank aligns with its digital, pan-European focus, while the creation of TF Bank Nordic ensures continued profitability in consumer loans. Improved margins, strong capital ratios, and a scalable business model position the bank for sustained growth and value creation, particularly in Germany and e-commerce.