Interim Report January–September 2016

· Growth in number of customers remained strong in the third quarter. During
the nine-month period the number of new customers was 73,700. The annual target
of 46,760 new customers was surpassed already before the end of the second
quarter
  · Net inflow in the third quarter was SEK 5,920 million, an increase by 18 per
cent compared to the previous year. For the nine-month period net inflow
increased by 5 per cent compared to last year
  · Operating income increased by 9 per cent compared to the third quarter 2015,
primarily due to increased income from Avanza Markets and higher fund
commissions. Compared to the second quarter, income was slightly lower as a
result of seasonally low Corporate Finance activity
  · Operating expenses increased by 4 per cent compared to the previous year,
primarily due to increased number of employees. Compared to the second quarter,
expenses were lower, mainly due to seasonally low personnel costs. The announced
increase in full-year expenses of 8–10 per cent remains unchanged
  · Net profit for the third quarter was SEK 105 million, an increase by 13 per
cent compared to the previous year. Compared to the second quarter, net profit
increased by 12 per cent, mainly due to lower operating expenses
  · Increased digitisation and pending regulations for the financial sector
provide good opportunities for Avanza to further strengthen its position. The
pace of development will therefore be increased, which is expected to generate
increased expenses at a rate of 15–20 per cent in 2017 before returning to a
rate of 8–10 per cent

                  Q3       Q2  Change       Q3  Change  Jan–Sep  Jan–Sep  Change
                2016     2016       %     2015       %     2016     2015       %
Operating        220      225      –2      203       9      671      652       3
income, SEK
m
Operating        –98     –113     –13      –95       4     –323     –307       5
expenses,
SEK
m
Operating        122      111      10      108      13      348      345       1
profit, SEK
m
Net profit,      105       94      12       94      13      298      297       0
SEK m
Earnings        3.53     3.18      11     3.19      11    10.06    10.19      –1
per share,
SEK
Operating         55       49       6       53       2       52       53      –1
margin, %

Net inflow,    5,920    9,430     –37    5,010      18   20,300   19,400       5
SEK m
No. new       24,500   23,100       6   20,400      20   73,700   72,700       1
customers
(net)
Savings      222,900  199,200      12  170,700      31  222,900  170,700      31
capital at
the
end of the
period, SEK
m

Quarterly highlights

  · Avanza’s new CEO Johan Prom, who was presented in July, will assume his
position by 7 November 2016. Henrik Källén remains as Acting CEO until then
  · New price list for Private Banking customers which allows them to choose the
brokerage fee class best suited to their trading
  ·  Top score of 70 in Net Promoter Score, concerning customers’ recommendation
rate
  ·  Record high market share of 15.2 per cent regarding number of transactions
on the stock exchange

Comments of the CEO

Innovative product development an important part of our business model

Avanza began the summer with a strengthened customer offering. The mobile
customer experience was improved by allowing direct deposits from other banks
and the Private Banking offer was made more attractive through lower mortgage
rates and a new price list. Equity trading for savers with a smaller savings
capital was improved as well, through the introduction of Avanza Start. These
efforts, coupled with our existing offering, paid off with a net inflow of SEK
5.9 billion and 24,500 new customers during the third quarter. This resulted in
a higher profit than both the second quarter of this year and the third quarter
of 2015 and underscores the strength of our business model and the importance of
innovative product development.

Good customer activity and higher risk appetite

After Brexit pounded the stock market in late June, we saw a rebound in the
third quarter, with the Stockholm Stock Exchange posting a 10 per cent gain. The
number of Avanza customers who trade stocks stayed at record levels and impacted
trading data. We consolidated our top position on the Stockholm Stock Exchange
and First North with a share of transactions of over 15 per cent. Our customers
were net buyers in the stock market, which is reflected in lower deposits and
higher risk appetite. Margin lending as well as equity trading on foreign
exchanges increased.

We were especially pleased with reaching a NPS of 70 during the quarter in our
regular survey of customer satisfaction. The Net Promoter Score shows our
customers’ recommendation rate. This is an extremely high result which we will
continue to make the most of.

Increased profit and a strong cost position

Although lending increased during the quarter, negative interest rates continued
to put pressure on net interest income. Brokerage income rose by 3 per cent
during the quarter. Fund capital grew and savings gradually shifted more to
equity and mixed funds, which strengthened commission income. The Portfolio
Generator, Avanza’s first digital decision-making support tool for fund savings
launched just over a year ago, continues to attract fund capital. Our customers
have invested as much as SEK 1.3 billion in various funds through the Portfolio
Generator, an increase of 30 per cent since 30 June. This encourage us to make
further investment in digital decision-making support. Avanza Markets continues
to develop strongly, with a market share of 67 per cent during the quarter, and
now accounts for a growing share of other income. Corporate transactions were
seasonally low on the other hand, but are expected to increase later in the year
if the investment climate remains.

Expenses are seasonally lower in the third quarter. The previously announced
rate of an increase of 8–10 per cent for the full-year 2016 remains unchanged,
which means that costs for the forth quarter will increase around 20 per cent
compared to the same period 2015.

Avanza’s business model is based on scalability in order to always give our
customers a less expensive, better and easier offering than any other bank –
more for the customer and less for the bank. This is what is driving customer
inflows and growth in savings capital, which in turn generates income. Our cost
position is a critical success factor and also our way to offset lower income
due to changing customer behaviours and market trends. During the quarter, we
further cut our costs per savings ratio. We continue to improve efficiencies and
automate internal processes in order to lower costs. Our strong cost position is
an important competitive advantaged, which also allows us to continue to invest
to attract customers and savings capital.

We increase our efforts

The financial sector is facing major changes as a result of digitisation and
regulatory changes. We see good opportunities in this regard to strengthen
Avanza’s position as Sweden’s best platform for savings and investments. During
the year, and especially in the third quarter, we saw confirmation that our
digital decision-making support and an improved mobile user experience have a
positive impact on growth. In order to raise the growth rate and further improve
our customer offer we will invest greater resources during 2017, with a focus on
an improved user experience. Avanza is bursting with innovation and everything
we want to do to improve our savings offer while truly focusing on the customer.
More resources will give us the best opportunity to develop Avanza’s offering
without losing momentum in an industry where competition is increasing from new
Fintech companies as well. We estimate that expenses will rise by 15–20 per cent
in 2017 before returning to a rate of
8–10 per cent in 2018.

On 7 November, Johan Prom will assume his position as CEO. Personally, I will
return to my role as COO and Deputy CEO. We welcome our new captain to Avanza!

Stockholm, 18 October 2016

Henrik Källén, Acting CEO Avanza

This information is information that Avanza Bank Holding AB (publ) is obliged to
make public pursuant to the EU Market Abuse Regulation and the Securities
Markets Act. The information was submitted for publication, through the agency
of the contact person set out below, at 08.15 (CEST) on 18 October 2016.

This Interim Report is published in Swedish and English. In the event of any
difference between the English version and the Swedish original, the Swedish
version shall prevail.
For further information please contact:

Henrik Källén, Acting CEO
Telephone: +46 (0) 70 861 80 25

Birgitta Hagenfeldt, CFO
Telephone: +46 (0)73 661 80 04

Sofia Svavar, Head of IR
Telephone: +46 (0)8 409 420 17
Avanza is an Internet bank founded in 1999. The Parent Company, Avanza Bank
Holding AB (publ), is listed on the Stockholm Stock Exchange. Avanza’s customer
promise is a better return on your savings than with any other bank or insurance
company in Sweden – due to low fees. Services include saving in shares, funds,
savings accounts and a strong pension offering. Avanza has more than 500,000
customers and more than SEK 200 billion in total savings capital. This is
equivalent to 3 percent of the Swedish savings market. Avanza is largest in
terms of number of transactions and the second largest in terms of turnover
among Swedish banks on the Stockholm Stock Exchange including First North.
During the last six years Avanza has won SKI’s (Swedish Quality Index) award,
“Year’s Most Satisfied Savings Customers”. For more information visit:
http://www.avanza.com