Unrelenting customer growth - again
Unrelenting customer growth - againEARNINGS/SALES RELEASES
After releasing preliminary FY 22 results a few weeks ago, Swissquote released its detailed figures this morning. The firm confirmed its robustness in the face of very tough market conditions. Customer growth continues to be sustained despite the inflationary environment, confirming the effectiveness of an anti-mass market product. Interest income gives the firm a natural hedge against financial market volatility.
We confirm our investment thesis and our positive opinion.
FACT
FY 22 release
Sales ended at CHF 408m (-13.5% yoy) vs. CHF 400m (AV estimates) and CHF 407.8m (BBG Cons.)
Number of accounts rose 10.5% to c.539k vs. 543k (AV estimates)
Client assets reached CHF 52.2bn (from CHF 55.9bn in 2021) vs. CHF 55bn (AV estimates)
Pre-tax profit stands at CHF 187m vs. CHF 186m (AV estimates) and CHF 187m (BBG Cons.)
Pre-tax profit margin robust of 45.7% vs. 47.3% in 2021
Net profit of CHF 157m vs. CHF 159m (AV estimates) and CHF 159m (Cons.)
DPS of CHF 2.2 vs. CHF 2.2 (AV Estimates) and CHF 2.6 (BBG Cons.)
ANALYSIS
Swissquote confirmed the positive feeling generated by the preliminary FY 22 results. Sales remain robust, in-line with the guidance, while the latter has been confirmed for 2025 – which is a positive given that it had initially been set in a wholly different context.
Interest rates compensated for the decline in transactions which is a great asset for the firm. In our view higher rates, which have resulted in half-mast transaction volumes for the retail brokerage platforms, will continue to generate high interest income for the firm as they continue to rise but also more customers join the platform.
As stressed by the management, the good news is that platform customers are not using Swissquote as a regular bank from which they would expect to receive interest income. Instead they use it as a portfolio management tool. The share of cash deposits as a percentage of customer assets has increased from 15% to 18% yoy, and this is not only due to lower Assets Under Custody. Although this represents a modest increase in CHF-amount (from an average cash deposit per customer CHF 17.2k to CHF 17.4k), the continued growth in customers will continue to feed this pool of cash as well as transaction volumes.
In fact, the firm has recorded 10.5% growth in accounts yoy and, as we have said in the past, we believe that the past 12 months growth in customer accounts offers substantial potential for further volumes given that:
1. New customers should progressively add funds as they become familiar with the tool
2. Customers that have joined within this window have faced tumultuous markets, massively impeding trading massively
IMPACT
We are confident that Swissquote will meet its objectives. On top of a sustained growth, the firm has an extremely discipled cost management policy.
The DPS of CHF 2.2 (in line with our expectations), similar to the 2021 level, is a material sign of resilience given the variation of the firm’s profitability year on year.
We also like the fact that the firm has some cash at hand to finance new projects.
Our investment thesis is confirmed and our model update will not lead to a change in recommendation.
Swissquote Group Holding is engaged in the provision of Online Financial Services. Co. provides online securities trading services (including custody services) and quantitative asset management services (ePrivate Banking among others) to self-directed private investors, independent asset managers, investment funds, and third party financial institutions. Co. provides access to over-the-counter FX markets through in-house technology platform to retail customers, money managers, and third-party financial institutions. In addition, Co. operates an online bank that accepts deposits in the form of current accounts and saving accounts from its customers.
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