MeDirect reports €50.1 million losses amid COVID-19 impact

The MeDirect Group reported a loss after tax of €50.1 million for the six months ended 30 June 2020, compared to a profit after tax of €6.9 million for the first six months of calendar 2019 as a result of the effects of COVID-19.

The Group’s balance sheet increased by 23% to €3.8 billion during the first six months of 2020, from €3.1 billion as at 31 December 2019. This was principally driven by the €463 million increase in the Dutch government-backed mortgage portfolio.

The total customer deposits grew by 8% to €2.6 billion as at 30 June 2020 from €2.4 billion as at 31 December 2019.

Arnaud Denis, Chief Executive Officer of MeDirect Group said: “The Group is implementing new digital solutions to provide customers with straightforward services and a seamless banking experience. The successful launch of the Group’s new mobile application in Malta in early May and in Belgium in July was one of the key milestones of this transformation.”

MeDirect Group’s client base grew by 8% in the first six months of 2020, from 66,500 to 72,100, in line with the compound annual growth rate (CAGR) of 15% during the past two years. The Group’s attractive savings products and wealth solutions have continued to drive growth in client assets, which have reached €3.7 billion as at 30 June 2020, up 9% from €3.4 billion as at 31 December 2019, in line with the 13% CAGR during the past two years.

Throughout the first half of 2020, the Group continued to diversify its balance sheet and is on track to meet its target of a €1 billion Dutch government-backed mortgage portfolio by December 2020.

During the peak of the COVID-19 outbreak, MeDirect Belgium was the first issuer to securitise a portfolio of Dutch residential mortgages with a third party investor through a Residential Mortgage-Backed Security (RMBS). As a result of the transaction, MeDirect Belgium raised €350 million of long-term lower cost funding and diversified its funding sources. The successful placement of the senior tranche of this large debut transaction in the midst of the crisis reinforced investor confidence in the Group as an issuer.

The group continued to de-risk its historical pan-European international corporate lending business as part of the strategic transformation. This portfolio comprises working capital facilities and other loans which finance companies in the real economy that employ thousands of people across a wide range of sectors, some of which have been more exposed to the impact of COVID-19.

MeDirect Malta’s local corporate banking business in Malta, accounting for less than 10% of the Group’s corporate lending, remains sound and profitable. MeDirect Malta has become an accredited financial intermediary under the Malta Development Bank’s COVID-19 Guarantee Scheme and has launched its MeAssist product in early May 2020 in order to enhance access to bank financing for its clients.

“The COVID-19 outbreak has substantially increased the uncertainty in the macroeconomic environment, which MeDirect has considered in its forward-looking provisioning approach. The Group carried out a comprehensive review of all lending portfolios and individually assessed borrowers on a loan-by-loan basis within its international corporate lending portfolio to identify problem exposures,” Denis said.

The review resulted in the recognition of impairment provisions of €55.7 million for the first six months of 2020, capturing expected credit losses.

MeDirect estimated that if COVID-related impacts were excluded, MeDirect Group would have recorded a profit after tax of approximately €1.7 million for the first six months of 2020 while continuing to invest actively in the implementation of its transformation, including the build out of its digital platform and the diversification of its balance sheet.

MeDirect Group liquidity reserves remain strong at €666.8 million as at 30 June 2020, and LCR stands at 569%, €549.7 million above regulatory requirements.