PPF Financial Holdings B.V. Annual accounts 2019 Content: Board of Directors report Annual accounts 2019 Consolidated financial statements Separate financial statements Other information Independent auditor’s report 1 Directors’ Report Description of the Company PPF Financial Holdings B.V. Date of deed on incorporation: 13.11.2014 Seat: Netherlands, Strawinskylaan 933, 1077XX Amsterdam Telephone: +31 (0) 208 812 120 Place of registration: Netherlands, Amsterdam Register (registration authority): Commercial Register of Netherlands Chamber of Commerce Registration number: 61880353 LEI: 31570014BNQ1Q99CNQ35 Authorised capital: EUR 45,000 Issued capital: EUR 45,000 Paid up capital: EUR 45,000 Principal business: Holding company activities and financing thereof Management Board of PPF Financial Holdings B.V. (the “Company”), is pleased to present to you the Directors’ report as part of the financial statements for the year 2019. This Directors’ report aims to provide a comprehensive overview of significant events within the Company as well as within the group of companies with which it forms a group. Board of Directors (the “Management Board”) Jan Cornelis Jansen, Director Rudolf Bosveld, Director Paulus Aloysius de Reijke, Director Lubomír Král, Director Kateřina Jirásková, Director General information The Company is the parent holding company of the group of companies (the “Group”) that operates in the field of financial services. The Group is composed of four main investments: Home Credit Group B.V., PPF banka a.s., Mobi Banka a.d. Beograd and ClearBank Ltd. The Company is a 100% subsidiary of PPF Group N.V. (together with its subsidiaries “PPF Group”). Except for the role of holding entity the Company generates significant interest income from intercompany and external loans. The Company is not dependent on the dividend income from its subsidiaries. Home Credit Group B.V. and its subsidiaries (referred to hereafter as “Home Credit” or “HC Group”), is one of the leading global providers of consumer credit with a focus on emerging markets. Home Credit Group B.V. is the parent which holds the equity stakes in leading consumer finance companies (“operating entities’) in 10 countries which are split into five clusters: China; South and South East Asia (“SSEA”) which includes our businesses in India, Indonesia, Philippines and Vietnam; Commonwealth of Independent States (“CIS”) which includes our businesses in Russia and Kazakhstan; Central and Eastern Europe (“CEE”), which includes our businesses in Czech and Slovakia; and Other which includes our business in the USA as well as other projects or entities which are in early stage of development. The majority of Home Credit subsidiaries are regulated companies which are fully licensed by a national government regulatory body and compliant with local respective laws. The HC Group have banking licenses in Czech, Russia and Kazakhstan. The HC Group’s mission is to provide responsible lending primarily to individuals with little or no credit history. The HC Group’s goal is to provide financing wherever and whenever potential customer may need it through our omni-channel distribution model both online and offline. Home Credit acquires 1 customers primarily through online and offline point-of-sale (“POS”) loans and thereafter focus on building relationships through a customer lifecycle by cross-selling cash loans, revolving credit and other relevant potential protection products. The HC Group’s inclusive approach to lending services is enabled by superior data analytics and technology to process high volumes of data regarding a potential customers’ behaviour pattern in order to gain strong predictive power for taking decisions regarding potential loans. As at 31 December 2019, companies held by Home Credit Group B.V. served almost 27 million active customers across its operations: the Czech Republic (operational since 1997), Slovakia (1999), the Russian Federation (2002), Kazakhstan (2005), China (2007), Vietnam (2009), India (2012), Indonesia (2013), the Philippines (2013) and the United States of America (2015). PPF banka a.s. (the “Bank”) is an integral part of PPF Group from 2002 and it significantly participates in its domestic and foreign activities. The Bank acts as PPF Group’s treasury bank, conducting international payment operations for companies within PPF Group as well as providing underwriting and other investment services such as brokering finance in the capital markets. Besides the activities for PPF Group, the Bank’s services are primarily tailored to Czech clients in the municipal and corporate segments. It also operates in the premium private banking sector. The Bank’s principal activities comprise all types of banking transactions, and the provision of banking and financial services, both in domestic and international markets. The Bank does not compete with large universal banks or operate in the mass market and standard products. The Bank is the market maker for Czech government bonds, it is very active in the field of corporate bonds, foreign exchange markets and interest rate financial derivatives. Mobi Banka a.d. Beograd, acquired in 2019, is a mobile and online bank based in Belgrade that provides its services primarily to retail customers in Serbia. ClearBank Ltd. is a start-up bank licensed in the United Kingdom in 2016 which is focused on providing clearing services. The Company holds a minority interest in ClearBank Ltd. For more information, visit www.ppffinancialholdings.eu Highlights PPF Financial Holdings – holding level In June 2018, the Company signed an agreement for the acquisition of a 100% stake in Telenor Banka a.g. Beograd, a Serbian mobile and online bank providing also consumer loans to the customers of Telenor Serbia, a telecommunication operator that PPF Group acquired in July 2017. The transaction was subject to regulatory approvals and closed in February 2019. In October 2019, the bank was renamed to Mobi Banka a.d. Beograd. The funding and debt structure of the Company has not changed significantly in 2019. The Home Credit Group The HC Group retained its leadership position in POS lending, ranking number one in most markets in which it operates with the exception of India where it ranks number two. New business volume in 2019 was BEUR 21.4 and total assets and equity were BEUR 26.6 and BEUR 2.9 respectively. The total number of customers served stood at 132 million at the end of 2019. Home Credit had a net profit of MEUR 400. The growth was supported by increased distribution capacity and more effective CRM. The HC Group further leveraged on third parties and technology for distributing its products. It entered into a number of 2 important partnerships including amongst others with Webank in China and Vodafone in India. Home Credit deployed technology for self-serving or remote sales as well as referral programs, the number of tippers grew to more than 763,000 at the end of 2019 after being rolled out in 2018. In 2019, the HC Group granted close to 27 million loans or 1 loan every second. Technology was further deployed across the HC Group in particular in KYC and antifraud through the use of biometrics and optical character recognition. The launch of voice bot and chat bots is now widely in use for the early part of Home Credit collection processes in countries supporting higher activity volume at lower cost with no negative impact on customer satisfaction. During the year, the HC Group obtained new credit card license in Philippines and it rolled out new revolving products in CEE, CIS and China, some of which have encountered great success. Revolving products had a strong growth in CEE and CIS with a number of new features launched successfully but also in China after the introduction of new payment products imbedded in app. Home Credit has received awards and been recognised across different markets for instance as the Consumer Finance Company providing the best customer experience in China based on Tsinghua University or in the Czech Republic based on KPMG; in the Philippines, Home Credit was named the Best Consumer Finance Company by Global Banking and Finance. The HC Group has also been recognised as the best employer in Asia Pacific, India and Philippines according to Kincentric. PPF banka 2019 was another successful year in PPF banka’s history. The bank made again a net profit of more than MEUR 80 and significantly strengthened the Bank’s capitalisation. The Bank also very active in the financial markets, where it again ranked among the top three dealers on the primary Czech government bond market and actively participated in the issues of many securities. Not least, PPF banka invested heavily in new technologies and projects to streamline the Bank’s operations and benefit our customers and employees. The Bank’s investments in new technologies and IT systems continued in 2019. In early October, the Bank became one of the first Czech banks to launch instant payments, allowing its clients to make transfers within seconds, 24 hours a day, 7 days a week. Throughout the year, the Bank also worked hard on a new CRM system, which successfully launched at the beginning of 2020. Mobi Banka Mobi Banka specialises in innovative online financial services, being the first fully mobile and online bank operating in Serbia. Its business synergy with Telenor telecommunications services in Serbia held by PPF Group is also unique. At present, it offers a full range of financial services for retail clients. The bank currently has more than 450,000 clients and as at 31 December 2019, it managed assets worth MEUR 170. ClearBank Since 2016, the Group started to invest into a newly incorporated company in the UK, which was authorised to operate as a credit institution in December 2016 by the competent domestic authorities. The digital bank is jointly regulated by the Prudential Regulation Authority and the Financial Conduct Authority, and since 2017 it started to provide clearing and settlement services to non-retail customers as part of its core business model.