On May 20th Creditstar held an Investor Webinar to give updates on the company’s latest developments, introduce the June 1st bond issuance terms, and answer investors’ questions. In this article, we will give an overview of the topics that were covered in the webinar.
Overview of Creditstar
Creditstar’s CEO Aaro Sosaar started the webinar with a brief presentation about Creditstar Group. Here are the key points from the presentation:
- Creditstar Group, established in 2006, is a provider of consumer financial services in Europe.
- The Company has more than 1 million customers across 8 European countries: Estonia, Finland, Sweden, Poland, UK, Czech Republic, Spain and Denmark.
- The team consists of more than 135 people from 30+ nationalities of different ages and backgrounds.
- Creditstar has been profitable since its establishment. The Group had a successful 2020 with a net profit of 6.5 million euros.
- The Company has been technology-oriented from the start: running on efficient automated processes and conducting operations online from the first step.
- The highlights of Creditstar Group in Q1 of 2021 include launching Monefit in Finland, transforming to a product organisation, and receiving recognition in Estonia.
Due to the online nature of the business, Creditstar has been running as normal throughout the COVID-19 period. Client repayments and non-performing loans have remained within expected levels and the plan is to continue growing credit volumes in the coming quarters. In order to manage the risk coming from the coronavirus crisis, Creditstar changed its loan issuing underwriting strategy.
Creditstar is one of the most seasoned bond issuers in the Baltic bond market with over 27 successful bond issues since being established. Currently, the Company has more than 300 bond investors from different countries and backgrounds.
Business Operations Highlights
Creditstar Group’s COO, Aleksei Kurov, continued the webinar by sharing the business operation highlights of 2020 and 2021.
During the COVID-19 times, Creditstar took a conservative approach towards risk and issuance volumes. From April to summer 2020 the active portfolio decreased temporarily. In Q1 of 2021, it is growing again and doing better than a year ago. Currently, Creditstar is actively lending in all countries where they operate.
The decisions made in 2020 proved to be successful and Creditstar is well-positioned to grow strongly in the future. Among the underwriting and risk adjustments implemented in 2020 were limiting issuance in high-risk sectors and scaling up in safe sectors; making more automated decisions; improving bank statement automated data analysis and re-launching lending in the UK.
These adjustments allowed the Company to react flexibly and swiftly in 2020 and 2021. As a result, the portfolio has grown and default levels have reduced from 8,8% in Q1 of 2020 to 4,5% in Q1 of 2021.
At the beginning of 2021, Creditstar transformed from a functional to a product organisation. The Company’s three product categories are Revolving Credit, Instalment Loan and Debt Management.
Due to increasing demand from the customers, Creditstar’s main focus is currently on the Revolving Credit product. This category includes the Credit Line and ‘Buy Now, Pay Later’ services. The plan for 2021 is to scale up the Revolving Credit product line in Creditstar countries of operation.
Monefit Credit Line
Creditstar’s Chief Business Development Officer, Valter Kaleta, gave an overview of Creditstar’s newest business – Monefit credit line. The product was first launched in Estonia in 2017. One of the core ideas of Monefit credit line is to help customers finance their purchases when point-of-sale financing or hire purchase financing is not available. The product works on the principle of Revolving Credit. Each customer is assigned a personal credit limit that they can use at any time in the exact amount they need. The maximum credit limit is currently 10 000 euros.
In 2020, Monefit Estonia launched a new service called Monefit Split. Split allows customers to apply for up to 1000 euros for 3 months without any interest. This is a good opportunity for the Company to gain new customers and convert them to credit line users in the future.
In 2021, Monefit credit line was also launched in Finland.
Specialised bank license
Creditstar has officially filed a Specialised (Fintech) Bank License application to the Bank of Lithuania. Currently, they are in the final phase and expect to get the bank license in approximately one year. With the banking license, Creditstar is allowed to provide almost all traditional banking services within the EU/EEA area.
The main advantages of obtaining a specialised bank license include the opportunity to lower the cost of funding and offer products with a lower financial cost to their customers. In addition, it makes it easier to introduce new products and enter new markets where the bank license is required.
The webinar concluded with answering questions received from the investors. Here is an overview of the questions and answers.
This year, Creditstar has signed a contract with a new auditor – KPMG. The annual reports are currently being audited and will be ready in the summer. In addition, the team has compiled a portfolio report with a statement from KPMG and shared it with the investors.
Creditstar has a growth expectation of 25-35% per year. The exact growth rate also depends on the COVID-19 situation in the second half of 2021.
Creditstar has always done their bonds as a private placement. So far, this method has worked well and the Company doesn’t plan to change it. However, it might be considered in the future.
The interest rate level depends on two factors: platform demand (the demand on Lendermarket) and market demand (the demand on other P2P platforms). The changes in the interest rate are mostly driven by this. In addition, Lendermarket often organises different campaigns for investors that increase their returns.
Offering more flexibility for investors is a useful idea. Although Creditstar and Lendermarket are in close cooperation, the final decisions about product development are made by the Lendermarket’s team.
No, Creditstar doesn’t plan to concentrate exclusively on Lendermarket. Having diversity is beneficial for risk management.
Although Lendermarket started its business in cooperation with Creditstar, it is not the ultimate goal of Lendermarket to be exclusively focused on Creditstar. Lendermarket’s objective is to grow and establish itself as a solid investing and funding platform.
Since the beginning of Creditstar’s establishment, the question has been on the table whether the Company should move from consumer loans to other products, like car loans, mortgages etc. Creditstar has decided to keep to its niche which is private consumer lending and unsecured credit line.
Currently, there are no immediate geographic expansion plans. The Company expects to launch additional products related to purchasing financing and e-commerce in the 8 markets they are operating in. However, there is a plan to expand in the future and some potential countries have been shortlisted.