AlphaValue Corporate Services Fundamental Analysis FR
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AlphaValue Corporate Services
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Swissquote Group Holding

CR
Bloomberg   SQN SW
Internet banking/Fintech  /  Switzerland  Web Site   |   Investors Relation
Exporting high quality financial technology
Earnings/sales releases17/03/2020

A very reassuring guidance

Swissquote released full annual results this morning. It had already disclosed its revenues and pre-tax margin in January (cf. our Latest) but these full results add some positive news to the fintech’s investment case. Profit is indeed higher than our expectations thanks to a new corporate tax regime in the Canton of Vaud (corporate tax rate at 21% vs 25% in 2018). As important is the guidance for 2020 (revenues and net profit above 10%) as the company has leveraged on the markets’ high volatility.


Fact

Today’s Swissquote’s results and outlook were a a sunbeam in current grim environment driven by the spread of COVID-19 in the world. We can’t say the Swiss fintech is “COVID-proof” but its business model makes it an interesting investment case vs traditional banks under our coverage. It has indeed a very limited exposure to credit and market risks. Hence, we expect it to remain strongly capitalised (a CET1 ratio of 21.7% at the end of 2019) and to benefit from financial markets’ volatility.


Analysis

Total revenues were up 7.5% yoy, whereas pre-tax profit was down about 5.9% due to a sharp increase in total expenses (+12%) from the integration of Internaxx (and an increase to depreciation). We expect the growth in expenses to slow going into 2020 and later.
Assets under custody have sharply risen as well, by 35% to CHF32.2bn (already disclosed). Half of the increase has come from market effects and the other 50% from new money (of which about half from Internaxx). Net new money was also quite balanced geographically (Switzerland, Europe (Internaxx), MEA and Americas & APAC).
2019 was therefore a more than decent year for the fintech company but it is almost ancient history at a time when COVID-19 has been rattling the financial markets. However, today’s outlook and conference call were very positive.

Management has been indeed quite optimistic regarding 2020 as it expects revenues to grow at least 10% (as well as net profit).
The company benefits indeed from a high level of trading (etrading FX especially). It has also benefited from “a massive demand in account opening. Several thousand applications are received each week since the beginning of the year”. It now has to translate into revenues.
However, we believe that both volatility and these new accounts will more than offset the negative impacts from a lower market effect on AuC (CHF-4bn ytd) as well as lower net interest income (as global rates have been sharply decreasing after central banks’ rate cuts).

Management has also confirmed its guidance for 2022 where it expects a pre-tax profit of CHF100m (with CHF36bn AuC). We do not have numbers for 2022 at the moment but based on our current estimates for 2021, our future expectations won’t reach that (ambitious) number. However, we are positive on the company and the 2020 guidance will more than reassure investors in the current environment.


Impact

Our numbers are under review and we will integrate the 2022 estimates.


Target
Upside 11.1%
Price (CHF) 185.2
Market Cap (CHFM) 2,839
Perf. 1W: -9.22%
Perf. 1M: -0.75%
Perf. 3M: 13.2%
Perf Ytd: 118%
10 day relative perf. to stoxx600: -3.43%
20 day relative perf. to stoxx600: 2.30%
Updates

11 Aug 20 Earnings/sales releases
Another strong set of results

17 Jun 20 Other news/comments
More good news again...

27 Apr 20 Opinion change
More tailwinds

24 Apr 20 Latest
More tailwinds

17 Mar 20 Earnings/sales releases
A very reassuring guidance

17 Jan 20 Opinion change
An enabling environment

16 Jan 20 Earnings/sales releases
Very promising numbers

09 Oct 19 Initiation cov.
Leveraging high quality financial services

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