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Good morning. Welcome to the Ferratum Q3 earnings call for 2020. [Operator Instructions]I would now like to hand over to Jorma Jokela, CEO; and Bernd Egger, CFO. Please begin your meeting.
So good morning, everybody. My name is Jorma Jokela. I'm the CEO and the Founder of Ferratum Group. And I'm really happy to go through with you today, the 9 months result publication on 2020 and let's start. So let's jump to Slide #3. So the few words about the Ferratum. So we have a 15 years profitability track record. We operate today in the plus 20 countries. We have 3 different business units. We have a consumer lending business, what is around 87% of our revenue. We have a SME lending business, what we call the capital books. That's around 12% of revenue. And then we have our mobile banking business. And all business, all activity, what we do is based in the 3 facts or 3 values. Everything is a fast, easy, pure digital financial solution for the customer anywhere, anytime and anyone. This is practically the base values, what we, as Ferratum have. And if we look at the key takeaways from today, our call, we, with my CFO, then Mr. Bernd Egger, we want to leave for you in the 3 main things on the place -- on the mind. The first 1 is we have reactivated our lending growth in the Q3, which looks really, really good. The second one, we have a financial metric, it's remained very, very strong. So if we look first, the revenue is around 10% down and adjusted -- adjustment revenue, 19% down on the total. EBIT, it's EUR 9.3 million and continued a very solid repayment behavior and liquidity stays at a very strong EUR 267 million. And then the third 1, that we have start to invest in the future growth. Here, our are example now during the last 3 months period, the CapitalBox business unit have acquired for the SME lending operation from the -- called the Spotcap from the Netherlands.Good. Let's go to the next slide. So Slide #4. This is one of my favorite slide on the way that here, you can see a little bit more detailed breakdown on our product and business. So we have 5 different products behind there. We have our Microloans lending, where we have started 15 years back. This is like small, short-term loans, which business is around the 9% of our total revenue today. It's coming to around 44% down. Of course, the very strongly driven by the discontinuity from the several market like New Zealand, Poland and Russia. And of course, we have an overall reduction to lending operation during this year from this segment. The PlusLoan, it brings around 18% of our total revenue. It's coming down around to 34% during this year compared to last year. One of the key drivers is that we have suspended the lending from the Poland in early 2020 this year. And of course, the third product is a Credit Limit, what is our -- can I say like biggest product. It's like our star product, it's around 60% of our revenue. It's down 11%, however, we can see that there's a very strong repeat customer segment there who have a supporting our business development on this product segment. Then we have our SME lending, where we offer the average loan amount is a little bit higher. It's EUR 15,000 or EUR 16,000. Maturity is around 1.5 years. 12% is around the revenue from the total revenue, this is up to 3%. Of course, it's coming very strongly our peaking of the year before the COVID-19. It was a really, really strong start. And now during the COVID time, the revenue -- the activity have a little bit slowing down. However, it's still -- we still benefit for the very strong starting on this year. And then it's our Prime Lending, what we do with our mobile banking, where we have loan -- consumer loans around EUR 6,000, EUR 7,000, and maturity is around 5 years. And this business is existing currently in the 4 different markets. And if we look at the strategy point of view, we can see that in the last 1, 2 years, the Ferratum, we have a strategic point of view, we have shifted our lending from the small and short-term lending for the larger loans and longer maturity. And one of the key driver is increase the customer lifetime value of their. And so we -- our profitability earnings is much, much higher from those segments. So -- and that's the reason why we have scaled down actively, example, the Microloans over the last several years now. Good. Let's go to the next slide. A short update about our action plan, what we -- related to COVID-19, what we're launching in the March, April on this year. So we put there in the 4 different elements where we want to focus. The first 1 was liquidity management. And there, I can report for you that the Q3 was very strong. We continued a very strong here. So we have a strong liquidity position. We have collected the cash flow very, very nicely there as well. And our net debt-to-equity covenants is staying in the low level. To control the risk was second one. And we have -- even that we start to Q3 to activate our lending volume, we have managed to focus the higher loan quality, like a higher -- like higher portfolio quality there. And our payment behavior has staying in the very, very strong during the whole pandemic time. Then we have a third element, what we call the reduced cost base. And here, I'm very happy to public as well that we have a headcount point of view and our staff cost, we have managed to scale down very nicely in the -- during this year. It's 22% down, our staff cost. All other operating expenses, categories are stable or declining as well. Of course, we have now a little bit activated more of the marketing investments. And this is the 3.7% -- EUR 3.7 million up comparison to Q2 on this year to reactivate those -- our lending activity and the marketing activities. And then the last one, the fourth 1 is scope for opportunities. And here, I think I want to highlight those 2 things. The first 1 is CapitalBox, what we do in this acquisition in the Netherlands about Spotcap. And second 1 is this all our acceleration to new loan sales during the Q3. I want to jump to next slide, Slide #6. Here, you can see the very nice our reactivation. So on the left hand, the picture, you can see that this blue color, it's our active market new loan disbursement. The loans that we -- what we -- the loan what we disbursed in the monthly base. And here, you can see that the gray part is suspended market. And if you comparison to active market, before the COVID-19 and where we have been in the last 3 months, you can see that we have start to recover really, really nice from the lending portfolio, the new -- the loan disbursement point of view. What will be supporting our lending portfolio as well. And of course, then the later on is supporting our revenue. And then the later on is supporting our profitability as well. But it's taken naturally a little bit time. It's not happened at everything in the one moment. So then I want to jump to Slide #7. What is the one of -- what's my last slide. So CapitalBox, our SME lending acquiring the Spotcap Netherlands SME lending activity. So our SME lending, we have now operated over the 5 years. It has been a very, very strong track record of growth there. Our team have been growing as well. And we have an extremely strong and active team there. We operate today to 6 different markets with the SME lending, and we are the one of the leader digital SME lenders on the Europe. About the Spotcap business, they founded their business in 2015 in Netherlands. They have originated a size backing around EUR 150 million credit lines. Their business model is slightly different. They have a very strong partner network in Netherlands with the different accounting companies and different partners. And the underwriting capability was really nice as well during COVID-19, there was no any material effect of the loan book or the payment behavior. And that's the main reason why we was extremely interested, and we are very happy to -- that we managed to closing this transaction. Because strategic fit, it's premium for us to access for the, of course, increase our market share in Netherlands, but in addition, it gives us the new distribution channel. And this is really, really interesting for us to start doing the lending activity through those partners, what the Spotcap cannot have used before. And that scaling this concept for the other -- our 6 other markets where we operate. And that's the main driver why it was extremely interesting, that one. And we are very optimistic on the future in that as well. I really recommend for you if you did not have time yet to visit or look our SME lending. You can go to website, capitalbox.com, and you can see the more detail how we do in our digital SME lending over time. Good. But that's it from my side, from the short update last 3 months, the Q3. And I'm happy to hand over to Mr. Bernd Egger about the financial part.
Good morning, everybody. My name is Bernd Egger, I'm CFO, and I'm happy to run you through the 9-month financials for Ferratum. On the financial metrics, the key messages I would like to bring across is, firstly, that from a profitability perspective, both third quarter and 9 months has been profitable, both on an earnings before interest and tax level, but also on a pretax profitability level. Let's start off with revenues first. Revenues have stabilized. So what it means is that Q3 revenue is on the level of EUR 55.5 million, which is exactly the same level as Q2 2020. Whilst Q2 saw a decline in loan portfolio size, the portfolio is back to growth mode in Q3 already. We will have a separate look on revenues in a minute, so I'll jump to profitability.Earnings before interest and tax had a very solid EUR 9.3 million in Q3 and at EUR 19.3 million for the 9 months in 2020. So what is actually driving this? This is, on the one hand side, clearly the stabilized revenue. That is also secondly, very strict cost discipline throughout the year 2020 and last but certainly not least, the very high-quality in underwriting. Adjusting earnings before interest and tax, EUR 47.8 million onetime macroeconomic impairment, yields an adjusted EBIT of EUR 27 million for the first 9 months which is actually not far away from the EUR 33.5 million in 2019. As regards pretax profitability, so earnings before tax, we show the second quarter in a row that we are back to positive figures. Q3 came in at EUR 3.6 million, 9 months 2020 at EUR 2.1 million. Again, earnings before tax was also obviously massively impacted by the macroeconomic impairment and also to a certain extent, by extremely high foreign exchange volatility. So we will have a look at earnings before tax in a little bit more detail also in a minute. On revenue, you might have noticed that if we compare 9-month revenues of EUR 218 million, very strong for the first 9 months 2019 through the first 9 months in 2020, which is EUR 177 million. There is a delta of EUR 41 million. It is important to understand what the key drivers of that are. EUR 21 million of the delta is related to revenue previously incurred in markets that meanwhile, have been suspended. What it means is that this is a consequence our focus on core markets. So this is an intended reduction. The other half, EUR 20 million, which is equivalent to 10% is driven by more risk-sensitive lending throughout the pandemic, throughout the full year 2020 and by a certain yield reduction. Thirdly, I would like to highlight that also for the first 9 months, 2020, the SME business is still developing very nicely, still on the same level. In fact, slightly above the level in terms of revenue compared to 2019, which is a very strong and solid development. As regards profitability, we have seen that both earnings before interest and tax and earnings before tax are now positive again for Q3 and also for the full period of 9 months 2020. In this context, we would like to emphasize that despite the fact that revenues will take some time to reach the levels of early 2020 or 2019, the operational performance is actually quite strong. We think that in analyzing profitability, the forward-looking macroeconomic impairment should be considered. Also, 2020 has been characterized by, to a certain extent, unfavorable foreign exchange movements as for instance, in Swedish crowns, Norwegian crowns, Czech crowns and others. So reflecting both in an adjusted EBT metric, yields an adjusted EBT for 2020 of EUR 14.1 million. How do we get there? Adding back, starting from EUR 2.1 million EBT for the first 9 months, adding back onetime macroeconomic impairment, which was EUR 7.8 million and also adding back EUR 4.2 million foreign exchange impact on profitability for 9-month yields and adjusted earnings before tax of EUR 14.1 million. The key drivers of, a, given the current market environment as we think, fairly decent adjusted performance, our focus on strategic products; secondly, again, very strict cost control; and thirdly, continued strong payment behavior. I would like to move on to -- actually to the balance sheet. I would like to move on to the balance sheet and bring across the key messages on the balance sheet for September 2020. Now the key messages are fairly simple. First of all, accounts receivables at roughly 10% below the level of the beginning of the year, however, we are getting closer. So we have increased the portfolio during Q3. The key drivers for that are Credit Limit. So whilst we see a reduction in loan portfolio in micro lending and PlusLoan, which is entirely in line with the strategy that we have outlined in the past. We've seen an increase, a fairly strong increase actually with Credit Limit, which is something that essentially supports the overall strategy to push the Credit Limit product to focus on sustainable client relationships, but also -- and I'm very happy actually to raise this and bring forth the good news. This increase during Q3 is also driven, actually, for the first time by [ defending ] the product prime lending. So during Q3, we saw an increase in the net accounts receivables in the size of the loan book, in the prime lending by a remarkable 36%, which underpins the strategy in that respect. Secondly, on cash, EUR 267 million, that is equivalent to an increase of more than EUR 110 million in 9 months. Thirdly, equity, currently at close to EUR 128 million, which means that equity is almost back to the level of the beginning of the year, which was EUR 129 million. In terms of equity ratio, this translates into a very solid equity ratio of 18.4%. I would also like to highlight very briefly the term structure of liabilities. Whereas current liabilities have essentially moved flat from the beginning of the year 2020 to end of Q3, it is important to note that noncurrent liabilities has gone up by some EUR 60 million. And that is essentially exactly what we have been striving for, the improved term structure of deposits. So we have, as I've highlighted also 3 months ago, we have tried to implement new products, new term deposit products and have very successfully achieved an improved term structure of deposits, which is reflected in the changed term structure of liabilities. I would rather say, improved term structure of liabilities. And finally, net debt equity. Currently at 2.35, which is also very solid. On the next slide, I would like to go a little bit more into detail about the cash position. The cash position remains strong. Essentially, total cash today, where at the end of Q3 2020, is 100% above the level of the 2019. So what that means is that from 1 year ago, at a level of EUR 134 million, we actually doubled cash, exactly doubled cash to EUR 267 million. Secondly, we've shown over the full period from the beginning of 2019 to end of Q3 2020, that we are able to grow the cash balance steadily. Thirdly, you might notice that from Q3 to -- from Q2 to Q3, we have reduced the deposit base and corresponding cash by some EUR 80 million. That is exactly the reflection of the strategy to change the term structure of the deposits, reduce excess deposits, excess cash from deposits. Now at the end of Q3, we are exactly at both the deposit level and also term structure that we have planned for. And finally, we have increased the level of utilization of deposit funding throughout 2020. So the conclusion of all that is that liquidity is in very good shape. What does the segment perspective looks like? As pointed out very briefly, the key revenue drivers are Credit Limit, which accounts for a revenue share of 60%; SME, which accounts for a revenue share of 12%, still slightly above the revenue level of 2019. Obviously, during the development of the last couple of weeks, we are holding back lending growth in SME a little bit. We don't want to go all in and would like to make sure that we keep the very strong track record in underwriting and credit risk management. So we are a little bit cautious on that. But for the first 9 months, a very strong performance in the SME business. In terms of expenses, we do not need to go into much more detail on cost reduction. I'll do that very briefly on the next slide, but what is important to note is that essentially, marketing and sales expenditures, you might recall from last time that we reduced marketing- and sales-related expenses significantly during Q2. So in 2019, to give you a figure, the quarterly level of sales and marketing expenses was roughly EUR 10 million. We reduced it significantly, especially in Q2 2020, where we were at the level of EUR 2.6 million. Obviously, in Q3, we have increased lending volume sales and marketing expenses increased to EUR 6.3 million with a focus on the strategically important products. Payment behavior, essentially very satisfying in most of the markets, obviously, not in all of those. That is essentially one of the reasons why we have decided earlier this year to focus on core markets and do less or actually suspend lending in less successful markets on an aggregate level, however, very strong parent behavior. I've briefly highlighted that, and I would like to reiterate that what is extremely satisfying with -- when we have a closer look at the segments is that we see progress in the strategic key segments, especially in the prime lending business, where we increased the portfolio throughout Q3. So within 1 quarter by 36%. I would like to move on and basically give you a very short update on where we stand with regards to active cost management strategy. What is it that we have done? We have continued on the path of creating a leaner and more agile organization. Operating, in line with that, operating expenses have been reduced significantly. Actually, we have achieved, in fact, in some cases, overachieved our cost reduction targets. Year-on-year, we have, for instance, reduced headcount by a little bit more than 230 headcount, from 888 to 645. So by 234, which I guess, is a remarkable achievement taking into consideration that this is not just a cost-cutting exercise. This is the reflection of the establishment of a leaner, of a more agile organization as I've pointed out already. Same -- pretty much the same holds true in terms of other operational expenses, obviously, with the exception of sales and marketing expenses. So if we disregard sales- and marketing-related expenses, we've also been very restrictive in cost management in all other operational expense cost categories. The ambition is to continuously focus on increasing efficiency also going forward, going forward meaning for the remainder of the year 2020 and also beyond that. Now Jorma has highlighted that already. This is an update on the actual payment behavior throughout this year 2020. The key message is on payment behavior are pretty much simple. Firstly, payment behavior remained strong throughout Q3, and it is also stable as per mid-November 2020. How has this been achieved? A, by adjusting scoring and underwriting criteria; and b, by focus on core markets, these are the markets that we refer to as the active markets. Thirdly, I would like to highlight that whilst we've seen a reduction, a drop in approval rates during the pandemic, approval rates have increased to almost pre-pandemic level at the end of Q2 and has increased in Q3. So we see a substantial progress on improving and actually growing our loan portfolios. This trend is also reflected on the next chart, which basically shows that the mid-term trend of improving asset quality continues. We see also continued improvement of core -- of the Core Parameter Probability of default. You might recall -- or might subject into your material that highlighted last time, that over 15 consecutive months, we've managed to reduce probability of default by some 23%. This trend has also continued during Q3. So actually, we see a continuous improvement of obviously -- the macroeconomic-induced impairment is highlighted in the chart, the EUR 87.8 million I've been referring to in the presentation -- earlier in the presentation. But -- and that is important to note, from our perspective, the impact of macroeconomic deterioration has been mitigated fully so far. Finally, also collection performance remains very strong. What that means to us is that the strategy to build up own core competencies actually to control the value chain is paying off. This slide doesn't really give you any additional information, but what it does is that it shows that after the negative EBIT in Q1, we have managed to go back to positive EBIT results, both in Q2 and in Q3. If we take into consideration the EUR 7.8 million adjustment in Q1, we essentially see 3 profitable quarters also during the challenging year 2020. On the funding structure, cost of that capital. I've spoken about the cash development already. What is important from a strategic perspective is basically that our strategic targets are, firstly, to increase the utilization of deposit funding. We have achieved that throughout the 2020. Secondly, to improve the term structure of deposits. I've highlighted the changed and actually improved liability structure; and thirdly, to maintain a healthy funding mix, especially throughout these challenging times. So in short, the funding structure is very stable. We have managed to bring cost of debt capital down. We'll not have any repayments due in -- during the remainder of 2020, so far in 2021. So next repayment is due only in 2022. So what is the summary? What are the key takeaways from my perspective? Firstly, risk development is very successful. So we have a very strong, very positive risk development throughout the year 2020. Secondly, the cost has continued to improve significantly. Thirdly, in terms of future growth, it's important to highlight that lending activity has picked up, especially -- and I'm really going to reiterate that now, especially in prime lending because we have spoken a lot about the prime lending business. In the past, now we see an increase of more than 1/3 in terms of volume growth in 1 quarter, which is successful. Finally, we've remained active in pushing strategic initiatives. We've spoken about the acquisition in Netherlands, the transaction. And finally, the financial metrics have remained strong during the year 2020. And that concludes my presentation for the first 9 months. Thank you very much.
[Operator Instructions] There are currently no questions via the audio conference. I will hand back to the speakers while we register any questions that may come through via the audio.
Okay. So looks like we don't have any question via audio, but we have several -- we have 6 questions through the Q&A box here. And I think Bernd and I, we are happy to start to answer those step by step. So first question over here. Maybe I can take that one. This is maybe some way, I have to answer that as well. So question comes from [ Stefan ] [indiscernible]. Are there any news regarding possibility dividend payment in 2020? For 2019 profit or the -- or share repurchasing program or things like that one? I think it's -- I think this share purchasing, we can say that we have think about that one. And like we have an earlier communication as well that during the AGM meeting in the June, we did not want to make the decision related to that one, but we want to leave the opportunity that we can answer that one, other that we can do in that one. We have a talk about this with the [ port ], but we don't have yet doing any final decision related to dividend or the throughout the share repurchasing program. But we have to think about the both of option. And -- but the final decision, it's not done yet there. So unfortunately, I cannot answer this more currently. But this is our -- this is the position where we are with that one. Then there is a next question. Next question is coming from Stefan as well. And the question is, I would expect the revenue to increase again quarter-on-quarter in Q4 after the low point in Q2 and Q3 with EUR 55.5 million. Can you confirm that one? And yes, that's a good question. If we look this year, the revenue quarter pace, we can see that the Q1, it was around EUR 65 million. Than Q2 and Q3, it was around 55.5% around. And we know that our lending portfolio was coming down through the Q2 and then the Q2 -- Q3 start to increase as well. However, I think, it's our position is that on that we didn't have a guidance, our revenue or the profit on this year due to uncertainty on the market. I think only what we can see that the lending portfolio have a start to the loan disbursement has start to increase, and that we are happy to report in there. How is this reflect to revenue in the Q4 or is that coming a little bit later? I don't want to start to guidance on today on this call, that one. I think it's -- I don't believe it's a right way to do in that one. But that's more or less -- we can see that in the -- we can see that the loan sales has increased, what is the most important. Yes. Good. Good. Then the third question is coming from the Stefan as well. It's related -- oh, sorry, the third question is kind of the [ Philip Powell ]. How should we think about the marketing cost going forward? Is the Q3 level what we should expect going forward as well? Great question. If we look at the marketing cost -- this is interesting. So on the last year, in the first 9 months, our marketing cost was 13.6% from the revenue. And over this year, it's around 9% from the -- it's around the 9% from the revenue. So based on that one, we are a little bit lower point on the marketing cost as well. If we look at historical, like a longer trend, we can see that we have always -- our marketing costs have been somewhere in the 10% between 14%, 15% range. And in the midterm, long-term, we can see that, that's our range on the marketing cost as well, especially, we have to remember when we start to now to reactivate for the marketing more. And if you look, the segment as well where we have been doing lots of reactivation, it's more the near prime lending and the lower-yield consumer lending business where the average ticket price is speaker, what actually mean that -- what's actually mean that the marketing costs are very front-loaded as well there. So that can be that it's a little bit effect for that one. And this is a little bit answer to Philip, on your second question as well, where your question is how should we think about the overall yield of the loan book? Should we expect it to decrease going forward? And I think the short answer is that yes, I think it's a naturally decrease when the balance and dynamic on the lending portfolio is going to a little bit more, the lower -- the higher quality portfolio. What means that it's a lower yield there as well. But of course, the midterm period, it's a customer lifestyle, but on profitability, will be increased behind there as well. I don't know, Bernd, do you want to comment or support any of those -- my answer and just to be sure that...
Confirm that naturally, with the increase in prime lending -- perspective for a reduction, but it's actually compared to what you said. Absolutely.
Okay. Good, good, good. Okay. And then we have a fifth question from Philip Powell as well. Will headcount to be reduced further? I can answer this on the way that I don't want to comment directly from the headcount. I think we have a little bit pressure there, naturally. However, we are doing a huge step now in the last 9 months. We have 200 people, unfortunately have to leave from the Ferratum. So this is the really, really, really big change there. And like Bernd's earlier explanation, our organization, we have started to moving more to agile organization structure. And this will be supporting to more efficient and more -- like a more efficient -- operation-efficient operating model. And that's what I can be sure. That's what I can promise, that we will see the future more efficient operating model. Is that directly mean that we have a little bit less headcount or it's the same level? I mean, that, I don't want to guidance on the future today. I don't know, Bernd, do you want to comment that one or...
Well, to understand the reduction, I think it's important to see that this was not just a [indiscernible] COVID, but we started with the creation of a lean organization in the second half of 2019. Naturally, the reduction reflects a change in the operating model, a leaner organization. What is important to us is that we continue on working on realizing cost potential by focusing on efficiency, on increasing level of automation, on increasing manual intervention in many areas. So from the overall perspective, the target is to keep operational expenses low. Obviously, as we continue lending activities, as we bring into the market new products and in the future, maybe also additional services, we will not stop hiring people with the market focus. But we will definitely move on in striving for a leaner organization.
Good, good, good. Okay. Then there is a next question. Comes from the -- how is the -- from Mr. [ Dieter Franke ]? How is the financial impact for CapitalBox in 2021? I think I have earlier in the -- around 1.5, 2 years ago, to say that 1.5 years back, that we can see that our SME lending is playing the bigger and more important role in our financial point of view as well. And this is the midterm view, what has not changed at all here. So we see that SME lending, it's this role of that one will be improved in our total numbers. Maybe that's the answer on that one. Bernd, do you want to comment that one or...
Yes. In CapitalBox, you need to understand the trade-off between increasing revenues. At the same time, we are in the second wave now. So I tried to highlight that also in the presentation, we're not going to go all in and keep a very close eye on the underwriting quality, in the non-portfolio quality. From a strategic perspective, we still think that this has a huge potential. This is also why we decided to go for the Spotcap transaction, to improve on our -- well, actually to increase the customer segment that we have not had on the books to essentially gain access to distribution channel that is extremely attractive. So from a strategic perspective, I think I personally am pretty bullish on CapitalBox business. I'm a bit reluctant from today's perspective now to give a specific number onto it.
Okay. Good, good. Then we have a next question here. Then we have a next question from here, Philipp Häßler. There's actually several, 6 questions. The first question, Bernd, maybe you can take that. That one is...
Yes, yes. So Mr. Häßler, first question, you are saying that paying behavior has improved in 9 months, but the NPL ratio, doubtful on loans. Loans has increased by 2% quarter-on-quarter to 42% in Q3. Can you explain why you're so positive regarding the payment behavior? So firstly, on the shift. We have to take -- to understand that the proportion of new loans is still fairly small. That is why we naturally see a larger proportion in doubtful loan losses. Secondly, where I get my optimism from is essentially the level of impairments in -- on a quarter-to-quarter basis. So we started off the year, as you know, inflated to a certain extent, by the EUR 7.8 million. But in Q1, the impairment level was at EUR 35 million. So if we take out the EUR 7.8 million, this is roughly EUR 28 million in Q2. The impairment level was at EUR 19 million in Q3 2020. The impairment level was even slightly below that. So below EUR 19 million, EUR 18.5 million roughly. So that is -- I think that is very satisfying, and that is driven by a very strong development in the underwriting performance. That is reason number one. And so positive on credit risk performance from today's perspective. Secondly, the payment behavior is strong. So the actual data supports this statement. We have an increase in percentages of payments within 7, 14, 30 days past due. So that is a factual measure. And then the third reason is that if we disregard volatility from 1 quarter to another and the impact decrease in loan book in the first half of 2020 and an increase in loan book in the third quarter going forward, the trend is very strong. So actually, the quality supports that the trend of credit losses of the net accounts receivable is reducing. So that is -- which means improving from a quality perspective. I'll maybe continue or if that is okay. Second question, Mr. Häßler, headcount reduction, is there more to expect in Q4? I would like to refer to the explanation Jorma just gave on headcount development. Third question, Mr. Häßler, revenue outlook for 2020. Now that we are seeing a second outlook -- okay, second outbreak, I guess, of the -- sort of second wave in many countries, are you cautious again in new business generation? Jorma, do you want to answer that? Or do you need to confirm...
I think this is a great question. I think it's -- if we look this second wave, I think we look and it's a little bit contradiction in the picture. At the same time, we see that consumers economy have staying on the quite strong. We see that the cash flow and the customer payments is staying very, very strong. We see that -- we know that in the several countries, there is government support what is very strongly direct for the consumers as well. And especially at those industry, what are the strongly impact for COVID-19. And people who work in there, we can see that this will be continued. So we don't currently see the situation where the European governments start to reduce their supporting for the consumers. So -- and at the same time, we see that second wave is still the limitation on the people consumption related to travel and different industry. So we believe that we currently don't see any evidence that second wave are impact and the negative our lending portfolio on the payment behavior point of view. We understand that, of course, the general loan demand have a little bit coming down because the consumption have reduced there as well. And if we looked at -- we have a very early stage on the COVID-19, we decide to be more careful with the several segment, the people who work in, example, the restaurants or tourism or the travel industry. And this situation, we still have this restriction, we have still under place. So we laid at our consumer lending and in the same time in our SME lending as well. So both business unit or segment, we have still a lots of restrictions there related for the industry example where people are working there. But what is the most important that our feel in the second wave is that one, that it's not -- will be -- currently, we don't see any impact in the payment behavior. We don't see that there is coming to like a significant impact for the payment behavior, unless assumptions are based in the that governments are in the different countries. They are continued to behavior, the rational and supporting for the economy. But of course, we believe that several industries will be staying very, very challenged. And SME lending, we don't want to currently take a position those industry, and we don't have it, that position, and we don't want to build in that position there. So we looked at very -- we looked like a careful optimistic on the future, if we can put that way. But of course, nobody don't know it. It's how the second wave will be really impact there. But that's -- we can only look -- we follow-up the daily base, our data, and that's what we see in our own data today. Bernd, do you want to take the next question?
Yes. On the deposit -- question #4, on the deposit side, will you keep deposits at current level? And could you please give us the terms -- the term structure of your deposits, in particular, the volume of deposits with term more than 9 months? Yes. Currently, at end of Q3, we actually achieved the level that we were aiming at. So this is not going to change massively. Obviously, with increased loan books, deposit volume should go up. But from today's perspective, we're absolutely fine with the level at which we are currently. The -- secondly, on the term structure, I think it's important to understand that during Q3 when we aimed at the reduction of the deposit volume, we predominantly aimed at obviously shorter maturities and to maintain a substantial portion in longer maturities. So currently, we -- at the end of Q3, we have roughly [ EUR 60 million ], a little bit more than that in the bracket with a receivable maturity of more than 1 year. Question #5?
Please, Bernd.
Can you please remind us again, in which countries have you currently suspended lending? Is it only Poland, Russia and New Zealand? It is also Spain and Canada. Question #6, why has prime lending increased so much? Any special reasons? Jorma, do you want to take that? Or do you want me to continue?
You can continue, Bernd. That's okay. I think you know that one as well as I.
So we wanted to highlight that for the simple reason that we have highlighted at the beginning of the pandemic that we would like to continue with making progress on the strategic initiatives and the strategic -- we defined strategic initiatives include prime lending, the mobile wallet and the SME business. I think throughout the pandemic and throughout the year 2020 -- I don't like to focus on the pandemic all the time, but throughout 2020, we have made substantial progress in that respect. Now the increase in Q3 starts from a not huge level, but we, from today's perspective, are in live with prime lending in 4 countries. We have a very strong team in place now. And it's just positive to see for us that we see the strategy going in the right direction and seeing that also in a fairly challenging environment, we are able to implement the strategy and start growing the loan book in the prime lending business by 36%. Still, that is -- it's by far not the biggest loan book, but from a dynamics perspective, it is very important, and that is why we highlighted that.
Good. And then there is a next question. I think next question coming, Mr. [ Catlin ] [indiscernible]. I was wondering why you had a negative result, in particular, in business segment PlusLoan. I guess it is still the impairment due to COVID. Why do you have those impairment primarily in the business segment and not in the others? Yes, that's correct assumption. So if you look at the segment reporting, the encumbers of Q3 2019 and Q3 2020, you can see that one of the big change in the PlusLoan and Credit Limit business segment is that where the Credit Limit credits reservation, the impairment have been more like not so much strongly impact. But in PlusLoan, it was increased from 42% to 73% on the segment report base. And of course, the cost point of view, we have been doing some more cost savings on the PlusLoan segment as well, like you can see the personnel expenses, it's coming to more -- the percentile is coming more down, what is in the Credit Limit. But, Bernd, do you want to comment that one or...
Just to add essentially 2 reasons exactly. One is related to the allocation of the COVID impairment. And secondly, some of the plus, and we've tried to also highlight that in the past, explain in the past, some of the markets where we have not been satisfied with the performance are related to PlusLoan, for instance, Poland and -- is one example. So that is -- these are the 2 reasons why PlusLoan, from a credit quality perspective, is currently -- from today's perspective, worse than the others. From the overall perspective, as pointed out, credit quality is good. And especially in those markets where we have pushed recently, where we are pushing currently is good. So these are essentially 2 reasons for the plus lending. And we don't essentially invest much in plus lending. And so that is why 1 [ reason ] also that, essentially, the revenues reducing plus loan business.
And I think what is very important to understand the answer to your question, why this is impact for the PlusLoan more, that when we do in the reservation model behind there, it's based in the IFRS and we have to make use in the macroeconomic future and macroeconomic fuel space in the parts of the unemployment ratio as well. And of course, now it's -- we're coming on the situation that what countries the PlusLoan are presented, and what countries the Credit Limit are presented because you have to always use the local macroeconomic drivers there as well. And that's one of the reasons why PlusLoan has been a little bit unlucky for the unemployment ratio have a bigger increase expectation on those countries, what the Credit Limit don't have it. So that's just like a 1 logical calculation behind them. Good. Bernd, do you want to comment that -- or is that good enough?
No, no, no. I agree.
Okay. Then we have a last question. Mr. [indiscernible], what is the main reason for discussing about the possibility change from oyj to SE? Bernd, do you want to take that one or should...
Yes. Essentially, the -- we see ourselves as a European institution, as a European company, as a European group. And there is nothing essentially wrong with the Finnish equivalent of an SE, so European society or European equivalents of acting essential, as we -- in Germany, would say. We have seen over the past couple of years essentially that quite a number of significant players in significant industries have transformed their legal form into an SE has made a very positive experience with that. And that brought us to the conclusion that it would make sense to analyze whether the instrument or the legal form of a European equivalent to an acting essential or a Finnish oyj would not make more sense. And we actually are fairly positive on that and see quite a number of pros in the transformation from oyj into the SE.Yes. Exactly, exactly. But it doesn't change -- maybe this is also important to highlight, it obviously doesn't change anything for -- neither for holders of shares nor for bonds. So that is maybe important to highlight.
Okay. Good. So we have 1 -- I think all our question-and-answer from the digital form is -- we covered. And just got the message that we have 1 audio question. So shall we jump that one?
Our question comes from the line of[Audio Gap]the revenues is just over 14%. You just explained it that there are pre-COVID credits that's been evaluated newly. And I understand this. And secondly, I want to talk about the decline of the personal stuff. If business are -- if business will recover, how will you be able to get people back in the business because maybe there will be some stuff needed then. And concerning the financial structure, I have 1 question. There's -- the balance sheet is still -- it's loading. The cash position is still strong. Does it make any sense to buy back bonds at an 85% level because most of the credits may be covered by deposits? And the bonds are just very, very expensive. As you can see that most of the EBIT is spent for finance costs. That's it.
Hey, it's Jorma here. And I think it's a really, really, really good and relevant question. And I really like it, those. Maybe I can start with the segment report shortly and then take the staff question. And then, Bernd, can you take this balance sheet-related question? Is that okay for you?
Yes, absolutely.
Good, good. Okay. So if we look at the second report, I think it's a really, really, really well spotted here that this -- our empowerment are not allocated like equal or the like weighted base in the revenue or the portfolio. It's -- and this is made a little bit hard to look in because it's -- when you look -- if you try to weigh this additional EUR 7.8 million extra reservation, what we have to do in the beginning of this year, we practically have to allocate this on those countries and those lending portfolio where the delta between this macroeconomic fuel, it's bigger. And if we look at the countries like where unemployment ratio have increased -- not increased, but expectation to increase based on the Oxford economy field -- that's the methodology, what we used behind there, have increased the expectation is higher. And that's, example, the Poland, Spain and those countries where we have had a bigger PlusLoan portfolio, it's actually impact for us negatively quite strongly there. Of course, it's Poland, it's a quite big driver behind there as well. And that's the unfortunate the situation there. So that's a little bit challenged spot. If I look at this personal and staffing cost, they're not the cost, but the recovery from the sales there. I think we have now have to doing this 200-people reduction. And we know that we will meet different -- we have to recruit in the new people. If you -- if we look at our website, we can see that we are currently recruitment position as well. We have several competence and what we need in the -- not in the different type of the people, and mainly the future, the recruitment that we have open and what we are looking there are very technology-driven and digital marketing-driven roles and when we talk about the example -- and data-driven. So where we talk about the data tracking and data engineering and these type of roles. And those are something where we have start to recruiting. We are currently in the recruitment process, in these type of the people are ongoing there. We don't see that thanks to this change, what we have done here as well, the transformation of our company more from the traditional hierarchy model more to agile model, we don't believe that we actually need to call back those same people that we can operate much, much larger volume on the same organization. But what we need is definitely in those digital marketing, data engineering, software architect. And of course, the risk part, we have the several risk- and data-related flows, it's opening currently as well. And I think one of the key things that we have done in the Ferratum during this change, that we have lots of take in the middle management after. And if the people move lots of responsibility more closer to business and countries because we know that they know the business much better than anybody from the central headquarters or central office. So that's the point why I'm pretty confident that we are not in a position to recall back the people who we unfortunately have to let them go. But we believe that we need different skills there. And that's of course -- yes, that's more or less our situation. It's how we see that one. Good. I hope I answered your question. And, Bernd, do you want to take the balance sheet question?
Yes. Did I understand that correctly, the question was on what we intend to do with the cash on the balance sheet? Was it essentially the key question?
Yes. This was mainly the question as the deposits are covering the loans as there's a large financial position left. And as you can see, the EBIT is largely spent to raise the finance costs. And so there's just a small effect and it's very expensive to these bonds. Just wondering why if it's not -- was possible to buy back the bonds at 80% in COVID-19 crisis. That would be immediately a profit that was possible and to buy back the shares for 2.5, it was, I think there will be too good opportunities, too small to decline the balance sheet and just make it smaller a bit.
Yes. First of all, from a Q3 perspective, first of all, we are happy to see that we achieved the target structure and the target level in terms of both deposit but overall cash position. So what that means is -- and we have explained that in Q1 and Q2, what we -- what it is that we are aiming at. Now from this perspective, we are exactly there. So we have exactly achieved this target. And from today's perspective, maybe a little bit different a couple of months ago. But from today's perspective, this means that we have -- I don't want to call it a luxury, but a positive situation, that we're in a position to both use the cash to fund future growth, but also to consider other initiatives and activities such as potential buybacks of outstanding bonds and/or shares. So now we are in a position to evaluate that. And I do not want to announce anything specific during this call. But you are 100% right in analyzing that this gives us the opportunity and the flexibility to take these options into consideration, and that is exactly what we're going to do over the next couple of weeks. So yes, I totally agree to your thinking process. Yes.
Okay. Thanks for you. And I understand we don't have more audio question and no digital question on the today here as well. So I think we are ready.
Thank you. This now concludes our presentation. Thank you all for attending. You may disconnect.