Cembra Money Bank AG

Robert Oudmayer, Chief Executive Officer, said: “Our first year as a stand-alone Bank was very exciting but at the same time also very challenging. We have been able to manage the massive business transition successfully as underpinned by the operating results 2014. Our new brand is well perceived and our customer focus highly appreciated. Therefore, we have gained market share. We will continue to adapt our business to potential future regulatory changes and drive our sustainable growth.”

Sustainable revenue increase coupled with rigorous cost and risk management

Compared to 2013, net revenues increased by 7% to CHF 379.4 million, driven by both net interest income as well as commission and fee income. Net interest income, which accounts for 79% of net revenues, was 7% higher at CHF 301.0 million, reflecting a net interest margin⁵ of 7.4%. The main reason for the increase in net interest income was the 32% lower funding costs due to changes in the funding mix (reaching 87% local funding). Commissions and fee income, which contributes 21% to net revenues, was 9% higher at CHF 78.4 million, driven by 21% higher credit cards fee income. Provisions for losses came in at CHF 40.9 million translating into a loss rate⁶ of 1.0% of financing receivables which is in-line with the guidance.

Total operating expenses were 10% lower at CHF 161.4 million. Adjusted for IPO-related one-time cost incurred in 2013 of CHF 23.3 million, operating expense increased by 4%. While personnel expenses decreased by 4% to CHF 95.9 million as a result of lower pension cost and productivity increase, general and administrative expenses reached CHF 65.5 million mainly due to the on-going business separation from GE. This resulted in a solid cost/income ratio of 42.5%. Income before taxes increased by 5% to CHF 177.2 million while the tax rate remained unchanged at approximately 21%. This led to a net income of CHF 139.9 million representing an increase of 5% compared to 2013. As expected, due to the seasonality of the business and the release of a provision created in connection with an examination by FINMA, second half net income (CHF 75.2 million) was stronger than first half (CHF 64.7 million).

Cembra Money Bank’s prudent risk management approach was reflected in stable delinquencies at low levels: 1.8% for 30+ days past due⁷ and 0.4% for non-performing loans⁸.

Further diversification of funding based on broad investors’ confidence

Institutional and retail deposits grew by 17% to CHF 1,941 million, reflecting investor’s confidence into Cembra Money Bank as a stand-alone Bank. In the second half of 2014, the Bank successfully placed CHF 200 million senior unsecured bonds in long maturities at attractive rates and amended some of its bank loans at favourable conditions. Funding from former parent GE Capital was reduced further to CHF 500 million translating into a stand-alone funding ratio of 87%.

Shareholders’ equity increased by 5% to CHF 842 million as a result of the CHF 139.9 million net income for full-year 2014, partially offset by CHF 85.5 million dividend payment in May 2014. With risk-weighted assets of CHF 3,689 million (up 3% versus year-end 2013) and eligible Tier 1 capital of CHF 760 million, the Tier 1 capital ratio reached a high 20.6% by year-end 2014.

Strengthening market position in all product lines

In a slightly decreasing market, Personal loans was able to consolidate its market position keeping receivables flat at CHF 1,855 million. Interest income was 2% lower at CHF 214.3 million compared to 2013.

While new car registrations and used car transactions in Switzerland declined by approximately 2% each in 2014, Auto leases and loans product line was able to capitalize on the rebranding and the opening of regional service centers. Net financing receivables increased by 1% to CHF 1,662 million and interest income fell by 5% to CHF 88.2 million as a result of lower rates offered in the market, compared to 2013.

Cards again recorded strong growth with net financing receivables increasing by 15% to CHF 556 million compared to year-end 2013. Interest income of CHF 39.7 million was 23% higher than in the previous year. The number of issued credit cards grew by 10% to 606’000 (compared to year-end 2013) with the Cumulus MasterCard being the main driver.

Concluded FINMA proceedings without business implications

In December 2014 FINMA concluded regulatory proceedings with regards to the Bank’s collaboration with a former external credit agent. Other than the CHF 1.5 million legal and procedural cost accounted for in 2014, there were no further financial or business implications.

Attractive dividend proposal and share buyback

Based on its strong capital position Cembra Money Bank’s Board of Directors will propose to the Annual General Meeting on 29 April 2015 a 9% higher dividend per share of CHF 3.10 to be paid out of reserves from capital contributions. The distribution will therefore not be subject to Swiss withholding tax. The dividend reflects a pay-out ratio of 66% of net income.

Besides, given the significant excess capital position beyond its Tier 1 capital ratio target of 18% the Bank has accumulated, the Board of Directors has given its approval to use up to CHF 100 million excess capital to buy back shares in case of a liquidity event by a major shareholder.

Antoine Boublil, Chief Financial Officer, commented: “We have exceeded all of our short-term and medium-term financial targets for our first full year as stand-alone bank. Our funding transition is tracking ahead of our plan and we finished the year with a very strong capital position. The increased dividend proposal and the CHF 100 million share buyback authorisation illustrate our capacity to enhance returns to our shareholders.”

Monica Mächler proposed for election to the Board of Directors

The Board of Directors will propose to the next Annual General Meeting the election of Monica Mächler (Swiss citizen) to the Board of Directors. Mrs. Mächler brings substantial legal, regulatory and governance expertise in a national and international context. She has held key positions at Zurich Insurance Group (1990–2006) and served as Vice-Chair of the Board of Directors to the integrated Swiss Financial Market Supervisory Authority (FINMA) from 2009 to 2012, after having been the Director of the Swiss Federal Office of Private Insurance (2007–2008). Mrs. Mächler is also a member of the Supervisory Board of Directors of Deutsche Börse AG, of Zurich Insurance Group Ltd. and of Zurich Insurance Company Ltd.

Expected EPS of between CHF 4.50 and CHF 4.70 despite challenging environment

For 2015, Cembra Money Bank is currently expecting interest rates to stay at historically low levels and therefore pricing pressure to remain in some of its business lines. Upcoming potential regulatory changes and the further development of the Swiss economy after the discontinuation of the Euro minimum exchange rate might potentially have a medium-term impact on Cembra Money Bank’s business. At the current stage it is difficult to quantify the medium-term impacts. However, short-term Cembra Money Bank remains confident and hence is expecting reported earnings per share (EPS) of between CHF 4.50 and CHF 4.70 for 2015.⁹

All documents (results presentation and this media release) will be available from 07:00 a.m. CET at www.cembra.ch/en/investor.