The Aduno Group looks back on a very successful 2018. Sales in the card business posted a further increase on the back of higher transaction volumes and the takeover of Accarda. The personal credit business was able to build on the growth trend established in the previous year in spite of the ongoing challenging environment. The Group result from continuing operations was up considerably on the prior-year level, while the refinancing structure was optimised by issuing two zero-interest bonds.

The Swiss economy showed two contrasting faces in 2018. After continuing 2017’s robust growth trend in the first half of the year, the economy stalled abruptly in the third quarter and economic output contracted by 0.2 per cent. Growth recovered in the fourth quarter, but only marginally, primarily due to declining foreign trade in the wake of the international slowdown in growth. The temporary appreciation of the Swiss franc further dampened exports, while growth stimuli from domestic demand failed to materialise. Given the strong first half of the year, GDP growth for 2018 as a whole may ultimately come in at an above-average 2.6 per cent. A smaller increase of just 0.9 per cent is expected for private consumption, however.

Swiss credit card issuers were able to defy the economic downturn and continue their growth. According to figures issued by the Swiss National Bank, in 2018 the number of credit cards issued increased by 5.6 per cent, and domestic sales grew by 8.6 per cent to over CHF 23 billion. This shows that the trend in Switzerland from cash to cards is unbroken. The same is true for the trend towards contactless payments: the number of debit cards with the contactless function rose by 42.7 per cent to 7.5 million, compared with only a slight increase of 1.7 per cent in the number of debit cards in total. At the end of December 2018, there were 6.6 million credit cards with the contactless function in circulation. This corresponds to an increase of 7.1 per cent.

The market for personal loans recorded a marked increase in 2018 versus the prior year. According to internal estimates, the rate of growth was 6.3 per cent. The market for leasing financing posted a weaker performance, with the “free” part of the leasing market – after excluding the volume for captive (producer-owned) leasing firms – recording growth of 1.5 per cent. Pressure on prices and margins therefore remained high, in both the loan and the leasing business.

Growth in both divisions

The Aduno Group increased sales by 12.0 per cent in the 2018 financial year. The Payment division grew by 17.6 per cent to CHF 363.8 million. This figure includes the sales of the acquired company Accarda for the last three months of 2018, which permits only limited comparison with the prior year. The Consumer Finance division contributed CHF 99.9 million, up 1.4 per cent year-on-year. A further CHF 91.2 million came from the central financing unit.

Commission income accounted for 33 per cent of total sales, annual fees, especially for cards, 24 per cent, interest income 21 per cent and other income 22 per cent. Commission income was up 6.9 per cent over the previous year, fuelled by robust growth in card and transaction volumes. Income from annual fees was unchanged year-on-year. The 10.2 per cent rise in interest income reflects the dynamic growth in the personal credit and leasing business. The increase in other income is due to services that the Aduno Group provides to the buyer of the acquiring business, which had an effect on a full financial year for the first time in 2018.

Profit from continuing operations up significantly over the previous year

The result from operating activities for 2018 was CHF 93.8 million. In spite of the interchange reduction from 0.7 per cent to 0.44 per cent, which applied for a full year for the first time in 2018, the company managed to achieve higher operating income. This was unable to offset higher operating expenses, however, which were exacerbated by increased personnel expenses. This is due to the approximately 220 employees of Accarda (recognised for three months) and the roughly 100 IT and call centre employees of the acquiring business sold in 2017, who were transferred back to the Aduno Group within the scope of the sale.

The full takeover of Accarda prompted the revaluation of the 30 per cent stake the Aduno Group held in Accarda from 2007. This revaluation considerably increased the item “Income from associates”.

Net profit for 2018 is CHF 106.4 million, which translates into a profit margin of 21.1 per cent. The prior-year net profit of CHF 191.6 million contains the proceeds from the sale of the acquiring business of CHF 116.3 million. Excluding these sale proceeds, profit from continuing operations for the previous year was CHF 75.4 million.

Solid capital basis and higher headcount

The total assets of the Aduno Group amounted to CHF 2,743 million as of 31 December 2018, compared with CHF 2,212 million at the end of 2017. Equity was CHF 769.9 million, versus CHF 806.9 million at the end of 2017. At 28.1 per cent, the equity ratio returned to the level seen in earlier years, following the temporary increase in 2017 due to the proceeds from the acquiring sale. This means the Aduno Group is on a solid financial footing for further growth.

As of end 2018, the Aduno Group employed 912 staff members (full-time equivalents), compared to 717 as of end 2017. This rise is due to the employees acquired as part of the Accarda purchase.

The Payment division posts strong rise

The Payment division increased transaction turnover in the card business in the 2018 financial year by 10.1 per cent, setting a new record of CHF 9,941 million. While in 2017 the main driver of growth was distance selling, in 2018 transactions at the point of sale (POS) were the chief contributor, up 13.3 per cent. The share of contactless transactions in total POS transactions was 48 per cent, compared to 29 per cent the year before. The greatest gains were recorded by the industries airlines (+20.9 per cent), domestic transport (+17.3 per cent) and entertainment & lifestyle (+15.1 per cent).

53 per cent of transaction turnover was generated in Switzerland, and 47 per cent abroad. Unlike in the previous year, growth in Switzerland was up slightly, attributable among other things to the continuing substitution of cash by card payments. Credit cards are becoming an increasingly popular means of payment in day-to-day life, even for smaller amounts.

Card holdings posted another significant increase in 2018, up 6.0 per cent to a total of 1.58 million cards (excluding Accarda). The continued success of distribution work with partner banks, especially when bundling cards with other products into banking packages, tipped the scales here. The launch of Debit Mastercard® and Mastercard® Flex together with the customers Aargauische Kantonalbank, Banque Cantonal du Jura, Freiburger Kantonalbank and Neuenburger Kantonalbank, alongside other customer banks, will be have an impact for the first time during the current year. The functions of this new generation of payment cards meet a wide range of consumer needs since they are suitable not only for contactless payments and e-commerce but also for mobile payments.

New digital services launched

In March 2018, the Aduno Group launched the payment solutions Fitbit Pay and Garmin Pay. Customers of partner banks can use these payment wearables at all contactless payment terminals to make secure and swift cashless payments around the world. Effective January 2019, a third provider, SwatchPAY!, was added – the first traditional Swiss watchmaker. As such, the Aduno Group is a pioneer for new, secure and straightforward forms of payment.

In December, Viseca rolled out an extensive update to its popular mobile app and simultaneously changed its name from “VisecaOne” to “one”. The major update included a modernised user interface, self-service functions such as temporary card blocking and automated PIN requesting, as well as a better overview of cardholders’ personal finances through the automated categorisation of transactions. Thanks to dynamic branding, the logo and design of the app now adapt automatically to the visual identity of the customer bank in question. The update will help the “one” app to consolidate its leading position in Switzerland as an innovative and full-featured card and banking app while also giving customers added security.

The implementation of Viseca’s new digital banking APIs by the first six customer banks marks a milestone within the context of digitisation. APIs – short for application programming interfaces – are digital interfaces that banks can use to integrate the data and functions of Viseca efficiently and effectively into their own applications and make them available to their customers directly. This network additionally benefits bank customers by giving them access to new functionalities within the respective banking apps. The rollout of the digital banking APIs thus paves the way for the seamless integration of Viseca services at third-party providers.

Contovista substantially expands business

Contovista, the Swiss market leader for data-driven banking, further expanded its business in 2018. Banks can integrate the Personal Finance Management (PFM) solutions offered by Contovista seamlessly into their existing financial portal. Contovista enables bank customers to analyse their account activities in detail and compile targeted breakdowns according to spending criteria such as groceries, leisure activities and living costs.

With numerous Swiss banks having already placed their trust in Contovista technology, last year contracts were concluded with the first customers from both Germany and Austria. The first independent Swiss account app also joined forces with Contovista as technology partner. On the product side, 2018 Contovista launched a Business Finance Manager for SMEs in collaboration with a customer bank. This online financial assistant subdivides every account transaction into business-relevant categories, making it possible for SMEs to perform quick and uncomplicated cashflow analyses.

Consumer Finance achieves best annual result to date

In 2018, the Consumer Finance division, comprising cashgate’s personal loan and leasing products, was able to build on the growth trend commenced the previous year. New business rose by 4.2 per cent to CHF 983 million, while the loan portfolio expanded by 8.1 per cent to CHF 1,447 million. Given the intense competition and associated pressure on prices, cashgate pushed forward with its measures to improve efficiency in the year under review. These included the end-to-end automation of the processes for approving orders and preparing contracts, which sped up the time needed to open a credit application several times over. These more efficient processes enabled savings to be made across all operating expenses. Consequently, cashgate achieved its best annual result to date in 2018.

In the personal credit segment, cashgate increased the new volume by 6.0 per cent and the total credit volume by 6.2 per cent. New sales in leasing exceeded the prior-year value by 2.2 per cent, while overall volumes were up by 10.2 per cent. This higher volume was boosted to a considerable degree by the collaboration established last year with an innovative car manufacturer. cashgate concluded additional partnerships in the reporting year with digital platforms such as the car-sharing platform Sharoo and the car leasing marketplace Gowago. These partnerships will help cashgate better align itself to changing end-customer needs as part of the sharing economy and further expand its channel strategy.

AdunoKaution and SmartCaution integrated into cashgate

In the second half of 2018, the previously independent providers of deposit guarantees, AdunoKaution and SmartCaution, were consolidated and their offering integrated into cashgate’s product range. This consolidation was an obvious step since the rental deposit business in the form of deposit guarantees has a lot of crossover with the personal credit business, allowing the organisational structure of the Aduno Group to be streamlined and synergy potential to be exploited. It will also strengthen the company’s external corporate image.

Financing: two bonds placed for CHF 325 million

Aduno Holding AG once again took advantage of the favourable environment on the capital market and in the reporting year placed two bonds totalling CHF 325 million. 6 June 2018 saw the private placement of a 0.00 per cent bond for CHF 150 million, expiring on 20 May 2019. On 30 October 2018, another 0.00 per cent bond was issued for CHF 175 million, expiring on 15 November 2019. Both bonds were placed within a very short space of time, underlining the trust the capital market has in the Aduno Group. Credit Suisse and Zürcher Kantonalbank alike continue to rate Aduno Holding AG with the solid credit rating “Mid A, Stable outlook”.

Modern and well-equipped work environment

The Aduno Group aims to offer its employees a modern work environment that fosters their creativity, boosts their motivation and safeguards their wellbeing. With its “smart way to work” project, the Aduno Group is modernising not only the workplace but also work processes so it can keep pace with digitisation. The first new work environments have been rolled out within this context: at the Zurich site, the call centre and offices have been refurbished, and in December work began on renovating the call centre in Bedano, which will be completed in March 2019.

In October 2018, the Aduno Group was awarded the Friendly Work Space label from Gesundheitsförderung Schweiz, which recognises companies that successfully implement occupational health management and are committed to promoting good working conditions for their employees.

Investigation by the Competition Commission

In November 2018, the Competition Commission launched an investigation into multiple Swiss companies in the financial industry, among them Aduno Holding AG and subsidiaries affiliated to the Group. The investigation aims to determine whether an agreement is in place between the Aduno Group and other credit card issuers to boycott Apple Pay and possibly mobile payment solutions from other international providers. The offices of the Aduno Group in Zurich were searched as part of the proceedings. The Aduno Group is cooperating in full with the investigation by the Competition Commission. The Aduno Group is not commenting further on the developing situation.

Proceedings against former executive bodies of the Aduno Group

Concerning the ongoing proceedings against its former executive bodies, which were initiated by the Aduno Group through an independent investigation and a subsequent criminal complaint filed in December 2017, the presiding Public Prosecutor's Office of the Canton of Zurich bound the defendants in March 2018 not to disclose the contents of the proceedings to third parties. For this reason, the Aduno Group cannot comment on the details of the criminal investigation. It should be noted that the proceedings are not directed against the current members of the Board of Directors or against persons of the Aduno Group currently responsible for the operating business.