Zaim Credit Systems (ZAIM ), the Russian focused fintech group, reported a strong quarterly performance for 4Q20 as it increased its lending by 65% as its online business surged.
The Company recorded £3.8m worth of loans issued over 4Q compared to £2.3m in 3Q20 with the number of loans issued online increasing by 250% during the quarter to £2.9m.
The Group said its online business is now at ‘substantial and sustainable levels’ comprising 76% of the overall business. Zaim said this continues ‘to be the main engine for growth’.
For the year to 31 Dec 2020, Zaim oversaw a successful transition from an ‘offline to online’ focused business model, bringing with it lower fixed costs base and greater flexibility.
Overall, the Company lent £10.3m over the period, representing growth of 11% from FY19, while the growth of loans issued online increased to £4.8m from £0.3m in FY19.
At the same time, the Company also saw a decrease in loans issued offline to £5.5m (FY19: £9.0m) as a result of closed stores and the transition to an online-focused business model.
Zaim said it saw an increase in weighted average default rate for the first nine months of 2020 to 14.1% (FY19: 7.6%) in line with management expectations due to a greater portion of first-time clients. It said this is a direct result of the rapid growth of the online business.
Commenting on the update, Siro Cicconi, Zaim's CEO said, "Last year posed a serious challenge for all of us and I am pleased to report that it became a turning point in Zaim's transition towards a predominantly online business model. The lockdown measures taken by governments and the world-wide migration to online services accelerated this change.”
He said the business “acted swiftly and decisively” by putting the majority of the resources of the group into development of online business which he said, “is now beginning to bear fruit.”
He added, “As a result of these efforts, loans issued online grew at an impressive rate during the year, from a near standing start to £2.9m in Q4 and now accounting for 76% of the Group's business. This part of the business is now very well positioned for future growth.”
Cicconi said the business continues to be cash-generative which it is reinvesting in order to accelerate further growth of the online business. He said the online-focused strategy allows for lower fixed costs and faster growth that makes us confident in long-term development.
He added that, “Our investment in our proprietary platform and process is delivering impressive results and we will be very focused on continuing to drive growth during 2021.”
A strong performance for the company for both 4Q20 and the full year. From an operational perspective, the pivot to online lending was key in delivering such a strong performance during FY20. Importantly for investors, the Company remained cash generative for the period and continues to invest in further growth, particularly across its online business platform, which should deliver faster growth and expanding margins during FY21 as the platform gains traction in the loan markets. Shares in Zaim Credit Systems have increased by over 80% in value since the beginning of November 2020 to open 5.69% lower this morning at 3.74p following the announcement.
Reasons to FOLLOW ZAIM
Zaim Credit Systems plc is the holding company of a Russian based financial services company Zaim Express. Zaim’s core product is providing microloans to Russian consumers.
Improving Financials
In a previous post-period, end update from its subsidiary, Zaim-Express, Zaim confirmed continued record growth with volumes of total lending approaching pre-lockdown levels.
Zaim’s accelerated online transition and cost savings through store closures have helped offset the previous impact of the COVID-19 pandemic as outlined in its results for H120.
COVID-19 related restrictions were lifted in Moscow at the beginning of June with subsequent further lifting of restrictions occurring later in July. As a result, the business has since seen positive momentum and observed ‘a continued increase in demand.’
Positive Outlook
ZAIM previously outlined its expectation for 4Q20 - that it expects a continuation of the business growth driven mainly by the online segment ‘combined with slight improvements in the default rates as a result of continued advancements to the credit scoring process. ’
“We are confident that the group is going to benefit from this strategy regardless of the future development of the Covid-19 pandemic situation, as the online segment of the microfinance market is growing at an impressive rate and we have a competitive advantage via our online platform and bespoke IT system,” Cicconi told investors in September 2020.