A comment from our CEO
Since the inception of Collector, we have always indulged our shareholders and ourselves with an exceptionally high growth rate, considering both revenue and earnings. For this reason, there was major disappointment, both internally and externally, when our growth was lower than expected in the fourth quarter of 2017 and in the first quarter of 2018.
After a somewhat sluggish start of the year with reduced growth and costs that were higher than planned, we have noted a gratifying trend in June with higher revenue and lower costs, which has some effect on the second quarter as a whole. The underlying business has grown while costs have been cut, and we now enter the third quarter with great momentum. What we saw was hopefully no more than a dent in the curve, which has now passed.
The Corporate segment continues its excellent performance with stable growth and now accounts for 49 percent of the total credit portfolio. We should bear in mind that factoring credits have short terms, 30–120 days, compared with traditional loans. There is a clear opportunity in the segment for small and medium enterprises. Traditional banks appear to have a reduced appetite for this segment, which has significantly increased the inflow of business to Collector. So far, the effect of new products such as Digital Factoring is marginal, but it will be notable in the long term, as it is aimed at small companies and is a typical volume business that builds up over time.
Real estate credits remain on roughly the same level as in the previous quarter, at approximately 30 percent of the total credit portfolio, as a number of credits have matured and been redeemed, and new ones have been added. Our real estate financing is short term, with maturities ranging from six months to 60. It often has the same characteristics as bridge financing, which means that the volume trend may vary between quarters.
Profitability remains excellent, and no provisions are needed for probable credit losses. Due to our selection of large, professional operators in cities with high demand and low vacancy levels, we believe the trend will remain stable going forward.
The Retail segment has grown by 9 percent and regained momentum in June. But even if the portfolio is growing, revenue growth lags somewhat, as interest is payable periodically during the term. Our Swedish scoring templates were improved in the spring. This resulted in more solvent borrowers and larger loans per individual. To avoid too large an exposure to retail with only personal loans, we have now introduced digital residential mortgages for owner-occupied apartments in major cities and university towns. In June, we went live and paid loans to our first trial group, with highly successful results, considering both loan quality and administration. In September, we will launch digital residential mortgages on a larger scale. The most urgent area of development in retail is the creation of more frequent direct contacts and relations with our retail customers. Mostly through our clever Contact Centre, but also by further developing the bank app and creating interesting content that leads to dialogue. A digital relationship can be personal, as well.
Payment solutions are characterized by long lead times from agreement to implementation. The first krona in revenue is often received more than a year after the agreement was signed. The volume has grown with a substantial number of customers. However, relatively small customers have generated a lot of work but only limited revenue. Going ahead, our focus will be on major e-commerce operators, omnichannel and B2B, the areas where we believe we are the best.
Collector Ventures has invested a total of SEK 173 million in 24 companies since its inception in 2016. The portfolio contains many exciting companies, several of which have performed better than expected.
Colligent performed strongly in the second quarter. The acquisition of a major credit portfolio in Sweden led to increased volumes and had a positive effect on results already in June. In general, the operations became more efficient and generated more revenue in the second quarter.
Much remains to be done if we are to become even better; on the other hand, there is potential for the future. The C/I ratio has already come down but should fall even further. The recipe is more satisfied customers, increased revenue, a high pace and cost control. We will show that our business is truly scalable and digital. And that good digital customer relations are possible.
This return to writing CEO comments is unusual for me, but not wholly unknown. Next time, our new CEO Martin Nossman will be the one to set pen to paper. I am delighted to welcome him in August.