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  • 2021.08.20
    XTB financial results for the 1st half of 2021

    In the first half of 2021 XTB reported a consolidated net profit of PLN 65,0 million compared to PLN 293,5 million a year earlier. Consolidated revenue amounted to PLN 242,0 million (H1 2020: PLN 518,2 million) and operating expenses amounted to PLN 163,3 million (H1 2020: PLN 138,3 million). In this period the Group noted a record number of new clients i.e. 108k compared to 52k a year earlier (an increase of 105,7% y/y).

     

     

    Revenues

     

    In the first half of 2021, the Group’s revenues decreased by 53,3% y/y, from PLN 518,2 million to PLN 242,0 million. This was due to the lower profitability per lot by PLN 199, which amounted to PLN 122 (H1 2020: PLN 321). This decrease is mainly due to: (i) low volatility in the financial and commodity markets in the second quarter of 2021 and (ii) the high base effect from the first half of 2020, when the markets experienced above-average volatility caused, among others, by the global COVID-19 pandemic.

     

    After a good first quarter of 2021, when the Group generated PLN 186,7 million in operating revenues, the second quarter (April and May) brought low volatility on the financial and commodity markets, which translated into a decline in revenues and profitability per lot. Along with lower volatility, the transaction activity of clients also decreased. There was a more predictable trend with the market moving within a limited price range. This led to market trends that were more likely to be predicted than in the case of greater market volatility, which created favourable conditions for range trading. In this case, XTB recorded
    a greater number of profitable transactions, which led to a decrease in XTB’s market making result. As a consequence, the profitability per lot amounted to PLN 63 and reached the lowest level in the last 5 years. Since XTB’s presence on the WSE,
    a lower level was recorded only in the second quarter of 2016 – PLN 59, which only confirms the exceptional nature of the last quarter.

     

    From the point of view of the conditions in the financial markets in the first half of this year it is worth noting that this was the period in which the upward trend in the cryptocurrency market continued until mid-May. This market is characterized by the fact that clients investing in CFDs on cryptocurrencies are willing to hold their open positions much longer and not close profits in a short time, as in the case with other instruments. Such market characteristics had a negative impact on the Group’s revenues (PLN 46,6 million loss on CFDs on cryptocurrencies in the first half of 2021). As a consequence, in mid-May this year XTB has decided to change the business model for CFD instruments based on cryptocurrencies, i.e. fully securing the market position on cryptocurrencies. Currently, the entire open position of the Company on these instruments is covered in hedging transactions with liquidity providers. The company plans to maintain this model indefinitely. The negative result from CFDs on cryptocurrencies can be attributed to the period when the market making model was still used, and the cryptocurrency markets continued to grow dynamically. When there is a correction in these markets in the second half of May, the market position of XTB was almost completely reduced.

     

    Looking at the stock and index markets in the second quarter of this year. it should be noted that they were characterized by much lower volatility than in the previous quarter. The DAX index in April and May unsuccessfully tried to break above the record levels, which was only achieved at the beginning of June. Additionally, the entire range of movement of this instrument in the second quarter closed to around 800 points. Price changes were much more pronounced in the case of instruments based on US indices, which translated into an increase in revenues in this group q/q, but to a much lesser extent than a decrease in revenues on the DE30 instrument.

     

    The group also reported a decrease in revenues on CFD instruments based on oil and precious metals. During the period, these instruments recorded upward trends, but it was largely due to long positions concluded by XTB clients. Additionally, in the case of oil-based instruments, the extent of price movement was lower than in the previous quarter.

     

    XTB has a solid foundation in the form of constantly growing client base and the number of active clients. This is the key to the amount of recurring income in the future. In the H1 of 2021 the Group reported a new record in the number of new clients amounting to 107 854 compared to 52 434 a year earlier i.e. an increase by 105,7%. This is the effect of continuing the optimized sales and marketing strategy, bigger penetration of already existing markets, successive introduction of new products to the offer and expansion into new geographic markets. Similarly to the number of new clients, the number of active clients was also record high. The number of active clients increased from 52 084 to 105 005, i.e. by 101,6% y/y.

     

     

    The increase in the number of active clients translates into an increase in the volume of their turnover, measured both by the number of contracts concluded in lots and the nominal value of the turnover. As a consequence, trading in derivative instruments amounted to PLN 1 986,7k lots (H1 2020: 1 613,9k lots) and was higher by 372,8k lots y/y.

     

    The priority of the Management Board is to further increase the client base, leading to strengthen the market position of XTB in the world. These activities will be supported by a number of initiatives, including introduced on 5th October 2020 a new offer for shares and ETFs (Exchange-Traded Funds) “0% commission” for monthly volumes up to EUR 100 000. This offer was received with great enthusiasm by current and new XTB clients. The company aims to be the first choice and comprehensive solution for every investor. Over the past few years, XTB has done a great deal of work – from expanding the offer by around 3,8k financial instruments (from 1 500 to 5 300 currently), to the continuous improvement of the web and mobile version of the award-winning xStation platform. Now with a free offer, XTB has opened the door wide to anyone interested in investing in both real stocks and ETFs. XTB currently allows clients to invest in over 2 900 real stocks from 16 of the world’s largest stock exchanges, including New York Stock Exchange, London Stock Exchange, Spanish Bolsa de Madrid, German Börse Frankfurt and of course Warsaw Stock Exchange. Besides stocks, XTB offers over 270 ETFs, including commodities, real estate and bonds.

     

    The „0% commission” offer is supported by a marketing and advertising campaign with the participation of the new XTB brand ambassador – one of the best football managers in the world, José Mourinho. The new XTB ambassador is the coach who not only won championships in a record number of countries (Portugal, England, Italy and Spain), but is also one of only three coaches who have won the UEFA Champions League twice with two clubs.

     

    The Company expects on the effectiveness of the new offer for shares and ETFs as well as the campaign with José Mourinho. In particular, the ambition of the Management Board is to acquire in 2021 at least 120 thousand new clients, that is an average 30 thousand new clients quarterly. The Management Board assumes that in the next quarter, the growth of new clients will approach the aforementioned assumptions due to the holiday season. In July 2021, the Group acquired a total of 12.7k new clients.

    XTB puts also strong emphasis on diversification of segment revenues. Therefore the Group develops institutional activities under X Open Hub (XOH) brand, under which it provides liquidity and technology to other financial institutions, including brokerage houses. Revenues from this segment are subject to significant fluctuations from quarter to quarter, analogically to the retail segment, which is typical for the business model adopted by the Group.

    XTB’s business model includes high volatility of revenues depending on the period. Operating results are mainly affected by: (i) volatility on financial and commodity markets; (ii) the number of active clients; (iii) volume of concluded transactions on financial instruments; (iv) general market, geopolitical and economic conditions; (v) competition on the FX/CFD market and (vi) regulatory environment.

     

    As a rule, the Group’s revenues are positively affected by higher activity of financial markets due to the fact that in such periods, a higher level of turnover is realized by the Group’s clients and higher profitability per lot. The periods of clear and long market trends are favourable for the Company and at such times it achieves the highest revenues. Therefore, high activity of financial and commodities markets generally leads to an increased volume of trading on the Group’s trading platforms. On the other hand, the decrease in this activity and the related decrease in the transaction activity of the Group’s clients leads,
    as a rule, to a decrease in the Group’s operating income. Due to the above, operating income and the Group’s profitability may decrease in periods of low activity of financial and commodity markets. In addition, there may be a more predictable trend
    in which the market moves within a limited price range. This leads to market trends that can be predicted with a higher probability than in the case of larger directional movements on the markets, which creates favourable conditions for transactions concluded in a narrow range trading. In this case, a greater number of transactions that bring profits to clients is observed, which leads to a decrease in the Group’s result on market making.

     

    The volatility and activity of markets results from a number of external factors, some of which are characteristic for the market, and some may be related to general macroeconomic conditions. It can significantly affect the revenues generated by the Group in the subsequent quarters. This is characteristic for the Group’s business model.

     

    Expenses

     

    In the H1 of 2021 operating expenses amounted to PLN 163,3 million and were higher by PLN 25,0 million in relation to the same period a year earlier (H1 2020: PLN 138,3 million). The most significant changes occurred in:

     

     marketing costs, an increase of PLN 19,1 million mainly due to higher expenditures on marketing online campaigns;

    • commission expenses, an increase of PLN 7,3 million as a result of larger amounts paid to payment service providers through which clients deposit their funds on transaction accounts;

    other external services, an increase by PLN 5,7 million as a result of mainly higher expenditure on: (i) IT systems and licenses (increase by PLN 2,5 million y/y); (ii) legal and advisory services (increase by PLN 1,2 million y/y) and (iii) IT support services (increase by PLN 0,9 million y/y);

     costs of salaries and employee benefits, a decrease of PLN 7,0 million mainly due to lower provisions established for variable components of remuneration (bonuses) and an increase in employment;

     

    In q/q terms, operating costs decreased by PLN 10,5 million, mainly due to lower marketing expenditure by PLN 8,0 million and lower costs of salaries and employee benefits by PLN 3,1 million, mainly due to the release of provisions for variable components salaries (bonuses) and commission costs lower by PLN 1,6 million, resulting from lower amounts paid to payment service providers through which clients deposit their funds in transaction accounts, and higher costs of other external services by PLN 1,5 million.

     

    Due to the dynamic Group development, the Management Board estimates that in 2021 the total costs of operating activities may be about a dozen percent higher than what we noticed in 2020. The priority of the Management Board is to further increase the client base and build a global brand. As a consequence of the implemented activities marketing expenditures may increase by over 20% compared to the previous year.

     

    The final level of operating costs will depend on the level of variable remuneration components paid to employees, the level of marketing expenditures, the dynamics of geographical expansion into new markets and the impact of potential product interventions and other external factors on the level of revenues generated by the Group.

     

    The value of variable remuneration components will be influenced by the results of the Group. The level of marketing expenditures depends on their impact on the Group’s results and profitability, the rate of foreign expansion and on clients responsiveness to the actions taken. The impact of a new product intervention on the Group’s revenues will determine,
    if necessary, a revision of the cost assumptions.

     

    Dividend and capital requirements

     

    The XTB dividend policy assumes recommendation by the Management Board to the General Meeting a dividend payment in the amount taking into account the level of net profit presented in the standalone annual financial report of the Company and a variety of factors relating to the Company, including prospects for further operations, future net profits, demand for cash, financial situation, the level of capital adequacy ratios, expansion plans, legal requirements in this area and KNF guidelines. In particular, the Management Board, when submitting proposals for dividend payment, will be guided by the need to ensure an appropriate level of the Company’s capital adequacy ratios and the capital necessary for the development of the Group.

     

    For example, the Polish Financial Supervision Authority, in its last Statement on dividend policy in 2021, published on December 16, 2020, recommended that the dividend in 2021 should be paid only by brokerage houses that have met, among others, the following criteria:

     

    A. Dividend in the amount not exceeding 75% of the net profit for 2020:

     

    I. for entities subject to capital adequacy standards pursuant to Regulation (EU) No 575/2013 of the European Parliament and the Council of the European Union of 26 June 2013 on prudential requirements for credit institutions and investment firms amending Regulation (EU) No 648/2012 (EU Official Journal of the EU L 176 of June 27, 2013, hereinafter referred to as: “Regulation 575/2013”) as of December 31, 2020:

     

    •  Common Equity Tier I ratio was at least 6%;

    •  Tier I capital ratio was at least 9%;

    The total capital ratio is at least 14%;

     

    II. for entities not subject to capital adequacy standards pursuant to Regulation 575/2013 as at 31 December 2020, the ratio being the share of equity in total assets is at least 50%;

     

    III. the last supervisory grade assigned in the BION process is 1 or 2;

     

    IV.  the entity in 2020 and until the date of approval of the financial report and adoption of the resolution on the distribution of profit for 2020 did not violate the provisions on capital requirements contained in Regulation 575/2013 and the Law of July 29, 2005 on trading in financial instruments (OJ, 2020, item 89) and the provisions on limits on large exposures, excluding breaches of limits relating to clients’ funds.

     

    B. Dividend in the amount not exceeding 100% of the net profit for 2020:

     

    I. meets all the criteria listed in A;

    II. for entities subject to capital adequacy standards in accordance with Regulation 575/2013, the criteria referred to in point (a) And points I are met at the end of each quarter in 2020;

     

    III. for entities not subject to capital adequacy standards in accordance with Regulation 575/2013, the criterion referred to in point (a) A point II is met at the end of each quarter in 2020.

     

     

    On June 28, 2021, the Company received a supervisory grade (BION) of 2 [2,46] from the Polish Financial Supervision Authority. The assessment was given on December 31, 2020. Published by the Polish Financial Supervision Authority on May 22, 2018. Announcement on the position regarding the dividend policy in the medium-term, aimed at facilitating financial market entities supervised by the Polish Financial Supervision Authority in terms of financial planning related to the payment of dividends in the average indicates that the current supervisory assessment for XTB is in line with the criteria recommended by the Polish Financial Supervision Authority, which should allow the Company to potentially pay dividends for the current financial year in accordance with these criteria.

     

    From June 26, 2021, XTB applies capital adequacy monitoring in accordance with Regulation (EU) 2019/2033 of the European Parliament and of the Council of November 27, 2019 on prudential requirements for investment firms and amending Regulations (EU) No. 1093/2010, (EU ) No. 575/2013, (EU) No. 600/2014 and (EU) No. 806/2014, hereinafter referred to as “IFR Regulation” It replaced, in the case of XTB, Regulation of the European Parliament and of the Council (EU) No. 575/2013 of 26 June 2013 on prudential requirements for credit institutions and investment firms, amending Regulation (EU) No. 648/201, hereinafter referred to as the “CRR Regulation”. Both regulations require maintaining an appropriate ratio of own funds to the risk incurred – in the case of the CRR Regulation, it’s measure was the total risk exposure, and the total capital ratio could not be lower than 8%, while in the case of the IFR Regulation, the total measure of the risk incurred is the highest of the values.:
    (i) a fixed overhead requirement, (ii) a fixed minimum capital requirement, or (iii) a “K-factor” requirement related to customer risk, market risk and firm risk; in the case of the IFR Regulation, the ratio of total own funds cannot be lower than 100%.

     

    In order to ensure comparability, the requirements from previous periods have been properly scaled; however, it should be noted that the value of the total risk exposure calculated in accordance with the CRR Regulation is calculated in a different way than the value of the capital requirement calculated in accordance with the IFR Regulation.

     

    The chart below presents the value of the total capital ratio (CRR) in the first half of 2021.

     

    The chart below presents the value of the total capital ratio (IFR) in the first half of 2021.

     

     

    The total capital ratio informs about the ratio of own funds to risk-weighted assets, in other words, it shows whether the brokerage house is able to cover the minimum capital requirement for market, credit, operational and other risks with its own funds. At the end of the first half of this year. the total capital ratio in the Company was 155,3% (the equivalent under the CRR Regulation 12,4%).

     

    It should be remembered that every year the PFSA publishes updated Positions on dividend policy applicable to brokerage houses when paying dividends for a given year. If the PFSA uses a simple scaling of the ratios in the future, the level of equity and capital requirements above which XTB could pay a dividend could be 175%. It should be noted that the Commission may set the appropriate levels in a completely different way, taking into account the ongoing supervision over brokerage houses. If the criteria are left unchanged in future positions, the position of the PFSA will apply, stating that for entities not subject to capital adequacy standards in accordance with Regulation 575/2013 (CRR Regulation), the ratio being the share of equity in total assets as at 31 December of the previous year was at least 50%.

     

    The Management Board maintains that its intention is to recommend to the General Meeting in the future to adopt resolutions on the payment of dividends, taking into account the factors indicated above, in the amount ranging from 50% to 100% of the Company’s standalone net profit for a given financial year. The unit net profit for the first half of 2021 amounted to PLN 62,0 million.

     

    Cash

     

    In an environment of low interest rates, which discourages the maintenance of deposits in banks, XTB started to locate part of its cash in financial instruments with a risk weight of 0% (treasury bonds and bonds guaranteed by the State Treasury). As at 30.06.2021 the total amount of own cash and treasury bonds in the Group amounted to PLN 768,0 million, that includes PLN 621,8 million of own cash and PLN 146,2 million of treasury bonds.

     

  • 2021.05.07
    XTB financial results for the 1st quarter of 2021

    In the first quarter of 2021 XTB reported a consolidated net profit of PLN 89,1 million compared to PLN 40,2 million a quarter earlier. It is an increase of PLN 48,9 million. Consolidated revenue amounted to PLN 186,7 million (IV quarter 2020: PLN 140,0 million) and operating expenses amounted to PLN 86,9 million (IV quarter 2020: PLN 83,6 million). In this period the Group noted a record number of new clients i.e. 67 231, which is an increase of 75,0% q/q.

     

     

    Revenues

     

     

     

    In the first quarter of 2021 XTB noted revenues increase by 33,4% q/q, i.e. by PLN 46,7 million from PLN 140,0 million to PLN 186,7 million. The significant factor determining the level of revenues was a constantly growing client base combined with their high transaction activity noted in the number of concluded transactions in lots and in the nominal value of the realized turnover. As a consequence the transaction volume in CFD instruments amounted to 1 115 thousand lots (Q4 2020: 801 thousand lots) and a profitability per lot amounted to PLN 167 (Q4 2020: PLN 175).

     

     

     

     

    XTB has a solid foundation in the form of constantly growing client base and the number of active clients. In the Q1 of 2021 the Group reported a new record in the number of new clients amounted to 67 231 compared to 38 413 a quarter earlier i.e. an increase by 75,0%. This is the effect of continuing the optimized sales and marketing strategy, bigger penetration of already existed markets, successive introduction of new products to the offer and expansion into new geographic markets. Similarly to the number of new clients, the number of active clients was also record high. The number of active clients increased from 72 346 to 103 446, i.e. by 43,0% q/q.

     

     

     

     

    The priority of the Management Board is to further increase the client base, leading to strengthen the market position of XTB in the world. These activities will be supported by a number of initiatives, including introduced on 5th October 2020 a new offer for shares and ETFs (Exchange-Traded Funds) “0% commission” for monthly volumes up to EUR 100 000. This offer was received with great enthusiasm by current and new XTB clients. The company aims to be the first choice and comprehensive solution for every investor. Over the past few years, XTB has done a great deal of work – from expanding the offer by around 3,7 thousand financial instruments (from 1 500 to 5 200 currently), to the continuous improvement of the web and mobile version of the award-winning xStation platform. Now with a free offer, XTB has opened the door wide to anyone interested in investing in both real stocks and ETFs. XTB currently allows client to invest in over 2 800 real stocks from 16 of the world’s largest stock exchanges, including New York Stock Exchange, London Stock Exchange, Spanish Bolsa de Madrid, German Börse Frankfurt and of course Warsaw Stock Exchange. Besides stocks, XTB offers over 250 ETFs, including commodities, real estate and bonds.

     

     

    The „0% commission” offer is supported by a marketing and advertising campaign with the participation of the new XTB brand ambassador – one of the best football manager on the world, José Mourinho. The new XTB ambassador is the coach who not only won championships in a record number of countries (Portugal, England, Italy and Spain), but is also one of only three coaches who have won the UEFA Champions League twice with two clubs.

     

     

     

    The Company expects on the effectiveness of the new offer for shares and ETFs as well as the campaign with José Mourinho. In particular, the ambition of the Management Board is to acquire in 2021 at least 120 thousand new clients, that is an average 30 thousand new clients quarterly. As a result of the implemented actions, in the first 20 days of April the Group acquired 10,6 thousand new clients in total.

     

     

    Looking at revenues in terms of the classes of instruments responsible for their creation, it can be seen that in Q1 2021 CFDs based on commodities dominated. Their share in the structure of revenues on financial instruments reached 53,8% against 51,2% a year earlier. This is a consequence of the high interest of XTB clients in CFD instruments based on gold, silver and oil prices. The second most profitable class were CFD instruments based on indices. Their share in the structure of revenues in Q1 2021 reached 39,9% (Q1 2020: 36,2%). The most profitable instruments among this asset class were instruments based on the German DAX stock index (DE30) and American stock index US 100. Revenues of CFD based on currency reached 2,7% of all revenues, compared to 11,1% a year earlier.

     

     

     

     

    XTB places great importance on the geographical diversification of revenues. The countries from which the Group derives more than 15% of revenues are Poland with the share of 37,8% (Q1 2020: 27,9%). The share of other countries in the geographical structure of revenues does not exceed in any case 15%.

     

     

     

    XTB puts also strong emphasis on diversification of segment revenues. Therefore the Group develops institutional activities under X Open Hub (XOH) brand, under which it provides liquidity and technology to other financial institutions, including brokerage houses. Revenues from this segment are subject to significant fluctuations from quarter to quarter, analogically to the retail segment, which is typical for the business model adopted by the Group.

     

     

    XTB’s business model includes high volatility of revenues depending on the period. Operating results are mainly affected by: (i) volatility on financial and commodity markets; (ii) the number of active clients; (iii) volume of concluded transactions on financial instruments; (iv) general market, geopolitical and economic conditions; (v) competition on the FX/CFD market and (vi) regulatory environment.

     

     

    As a rule, the Group’s revenues are positively affected by higher activity of financial markets due to the fact that in such periods, a higher level of turnover is realized by the Group’s clients and higher profitability per lot. The periods of clear and long market trends are favourable for the Company and it is at such times that it achieves the highest revenues. Therefore, high activity of financial markets and commodities generally leads to an increased volume of trading on the Group’s trading platforms. On the other hand, the decrease in this activity and the related decrease in the transaction activity of the Group’s clients leads, as a rule, to a decrease in the Group’s operating income. Due to the above, operating income and the Group’s profitability may decrease in periods of low activity of financial and commodity markets. In addition, there may be a more predictable trend in which the market moves within a limited price range. This leads to market trends that can be predicted with a higher probability than in the case of larger directional movements on the markets, which creates favourable conditions for transactions concluded in a narrow range trading. In this case, a greater number of transactions that bring profits to clients is observed, which leads to a decrease in the Group’s result on market making.

     

     

    The volatility and activity of markets results from a number of external factors, some of which are characteristic for the market, and some may be related to general macroeconomic conditions. It can significantly affect the revenues generated by the Group in the subsequent quarters. This is characteristic of the Group’s business model.

     

     

     

    Expenses

     

     

    In the Q1 of 2021 operating expenses amounted to PLN 86,9 million and were higher by PLN 14,4 million in relation to the same period a year earlier (Q1 2020: PLN 72,5 million). The most significant changes occurred in:

     

     

     

     

    marketing costs, an increase of PLN 16,3 million mainly due to higher expenditures on marketing online campaigns;

     

     

    costs of salaries and employee benefits, a decrease of PLN 7,9 million mainly due to lower provisions established for

     

     

    variable components of remuneration (bonuses);

     

     

    commission expenses, an increase of PLN 5,2 million as a result of larger amounts paid to payment service providers

     

     

    through which clients deposit their funds on transaction accounts.

     

     

     

     

    In q/q terms, operating costs increased of PLN 3,3 million mainly due to higher by PLN 3,2 million commission expenses as a result of larger amounts paid to payment service providers through which clients deposit their funds on transaction accounts and higher by PLN 2,8 costs of salaries and employee benefits resulting from an increase in employment and higher by PLN 2,2 million marketing costs mainly due to higher expenditures on marketing online campaigns, and also lower by PLN 4,2 million other costs and lower by PLN 0,4 million other external services.

     

     

    Due to the dynamic Group development, the Management Board estimates that in 2021 the total costs of operating activities may be about a dozen percent higher than what we noticed in 2020. The priority of the Management Board is to further increase the client base and build a global brand. As a consequence of the implemented activities marketing expenditures may increase by over 20% compared to the previous year.

     

    The final level of operating costs will depend on the level of variable remuneration components paid to employees, the level of marketing expenditures, the dynamics of geographical expansion into new markets and the impact of potential product interventions and other external factors on the level of revenues generated by the Group.

     

     

    The value of variable remuneration components will be influenced by the results of the Group. The level of marketing expenditures depends on their impact on the Group’s results and profitability, the rate of foreign expansion and on clients responsiveness to the actions taken. The impact of a new product intervention on the Group’s revenues will determine,
    if necessary, a revision of the cost assumptions.

     

     

     

    Dividend

     

     

    The XTB dividend policy assumes recommendation by the Management Board to the General Meeting a dividend payment in the amount taking into account the level of net profit presented in the standalone annual financial report of the Company and a variety of factors relating to the Company, including prospects for further operations, future net profits, demand for cash, financial situation, the level of capital adequacy ratios, expansion plans, legal requirements in this area and KNF guidelines. In particular, the Management Board, when submitting proposals for dividend payment, will be guided by the need to ensure an appropriate level of the Company’s capital adequacy ratios and the capital necessary for the development of the Group.

     

     

    The Management Board maintains that its intention is to recommend in the future the adoption of resolutions to the General Meeting on dividend payment taking into account factors mentioned above, at the level of 50% to 100% of Company’s standalone net profit of a given financial year. The standalone net profit for Q1 2021 amounted to PLN 87,0 million.

     

    The chart below presents levels of the total capital ratio in Q1 2021.

     

     

    As at the end of Q1 of the current year the total capital ratio amounted to 9,9%. The total capital ratio informs about the relation between own funds and risk-weighted assets. It shows whether the brokerage house is able to cover the minimum capital requirement for market, credit, operational and other risks with its own funds.

     

     

     

    Cash and cash equivalents

     

     

    In an environment of low interest rates, which discourages the maintenance of deposits in banks, XTB started to locate part of its cash in financial instruments with a risk weight of 0% (treasury bonds and bonds guaranteed by the State Treasury). As at 31.03.2021 the total amount of own cash and treasury bonds in the Group amounted to PLN 1 047,0 million, that includes PLN 642,8 million of own cash and PLN 404,2 million of treasury bonds.

     

     

     

    Foreign expansion

     

     

    XTB with its strong market position and dynamically growing client base builds its presence in the non-European markets, consequently implementing a strategy on building a global brand. The XTB Management Board puts the main emphasis on organic development, on the one hand increasing the penetration of European markets, on the other hand successively building its presence in Latin America, Asia and Africa. Following these activities, the composition of the capital group will be expanded by new subsidiaries. It is worth mentioning that geographic expansion is a process carried out by XTB on a continuous basis, the effects of which are spread over time. Therefore, one should not expect sudden, abrupt changes in the group results on this action.

     

     

    Currently, the Management Board efforts are focused on the start of operational activities in United Arab Emirates and Republic of South Africa. At the end of November 2020 XTB received the preliminary approval of the DFSA regulator to conduct brokerage activities in United Arab Emirates. It is an approval of the „in principal” type, that requires the fulfilment of conditions (mainly operational type) before the actual start of operations. One of the condition was the establishment of the company XTB MENA Limited in DIFC (Dubai International Financial Centre) which took place on 9 January 2021. The process is currently underway over the fulfilment of other conditions. The intention of the Management Board is to start operating activities in United Arab Emirates in the first half of 2021. In terms of Republic of South Africa, due to the complex local formal and legal conditions, the Management Board is currently not able to indicate the expected date of the start of operations on this market. Subsidiary XTB Africa (PTY) has been in the licensing process since February 2019.

     

     

    The development of XTB is also possible through mergers and acquisitions, especially with entities that would allow the Group to achieve geographic synergy (complementary markets). Such transactions will be carried out, only when they will bring measurable benefits for the Company and its shareholders. XTB is currently not involved in any acquisition process.

  • 2021.03.29
    XTB awarded ‘mWIG40 company of the year’ in Parkiet’s Byki i Niedźwiedzie competition!

    During the annual Byki i Niedźwiedzie (Bulls and Bears) competition, X-Trade Brokers DM SA was honored with the title of the company of the year from the mWIG40 index. Byki i Niedźwiedzie is one of the oldest and most prestigious competitions for companies listed on the Warsaw Stock Exchange. The list has been prepared by the editors of Gazeta Giełdy i Inwestorów Parkiet for over 27 years.

     

    – 2020 was a very good time for XTB and its investors. The company recorded over 350% growth on the Warsaw Stock Exchange, but also achieved record levels in terms of net profit. We have also reported records in terms of the number of customers, newly acquired accounts and turnover. We are very happy that we are one of the fastest growing companies in our industry and that customers appreciate the way we develop. – said Omar Arnaout, CEO of XTB, receiving the award.

     

    The full Byki i Niedźwiedzie 2021 award gala, which took place this year in a virtual formula, can be viewed at:

     

     

  • 2021.03.16
    Financial results of XTB for 2020

    For many companies 2020 was a time of struggle for survival – for XTB it was a time of building capacity and dominance to be an even better and stronger company in the future. High volatility on financial and commodity markets as well as interest rate cuts made trading on financial instruments very attractive for many investors. As a consequence, the Group noted a record-breaking number of new clients, i.e. 112 thousand compared to less than 37 thousand a year earlier (an increase of 206,5% y/y). Transaction volume in CFD instruments in lots almost doubled – an increase from 1,6 million to 3,2 million lots, i.e. by 98,8% y/y.

     

    The dynamic operating growth of XTB under favorable market conditions brought record financial results in 2020. Consolidated net profit amounted PLN 402,1 million compared to PLN 57,7 million a year earlier. Consolidated revenue amounted to PLN 797,8 million (2019: PLN 239,3 million) with operating costs at the level of PLN 282,0 million (2019: PLN 173,9 million).

    Revenues

     

    In 2020 XTB noted a record increase of revenues by 233,4% y/y i.e. PLN 558 446 thousand from PLN 239 304 thousand to PLN 797 750 thousand. The significant factors determining the level of revenues were high volatility on financial and commodity markets caused by among others coronavirus COVID-19 global pandemic and a constantly growing client base combined with their high transaction activity noted in the number of concluded transactions in lots. As a consequence the transaction volume in CFD instruments amounted to 3 175,2 thousand lots (2019: 1 597,2 thousand lots) and a profitability per lot increased by 67,7% y/y i.e. from PLN 149,8 in 2019 to PLN 251,2 in 2020.

     

    XTB has a solid foundation in the form of constantly growing client base and the number of active clients. In 2020 the Group reported another record in this area by acquiring 112 025 new clients compared to 36 555 a year earlier. This is the effect of continuing the optimized sales and marketing strategy, bigger penetration of already existed markets, successive introduction of new products to the offer and expansion into a new geographic markets. Similarly to the number of new clients, the number of active client was also record high. The number of active client increased from 45 837 to 107 287, i.e. by 134,1% y/y.

     

    The priority of the Management Board is to further increase the client base, leading to strengthen the market position of XTB in the world. These activities will be supported by a number of initiatives, including introduced on 5th October 2020 a new offer for shares and ETFs (Exchange-Traded Funds) “0% commission” for monthly volumes up to EUR 100 000. This offer was received with great enthusiasm by current and new XTB clients. The company aims to be the first choice and comprehensive solution for every investor. Over the past few years, XTB has done a great deal of work – from expanding the offer by around 3 000 financial instruments (from 1 500 to 4 500 currently), to the continuous improvement of the web and mobile version of the award-winning xStation platform. Now with a free offer, XTB has opened the door wide to anyone interested in investing in both real stocks and ETFs. XTB currently allows client to invest in over 2 000 real stocks from 16 of the world’s largest stock exchanges, including New York Stock Exchange, London Stock Exchange, Spanish Bolsa de Madrid, German Börse Frankfurt and of course Warsaw Stock Exchange. Besides stocks, XTB offers over 200 ETFs, including commodities, real estate and bonds.

     

    The „0% commission” offer is supported by a marketing and advertising campaign with the participation of the new XTB brand ambassador – one of the best football manager on the world, José Mourinho. The new XTB ambassador is the coach who not only won championships in a record number of countries (Portugal, England, Italy and Spain), but is also one of only three coaches who have won the UEFA Champions League twice with two clubs. The Portuguese will be the XTB’s global ambassador for the next two years.

    The announcement of José Mourinho collaboration with XTB also marked the launch of the new global marketing campaign “Be like José”. Its creative concept is based on the similarities between the challenges faced by investors and trainers on a daily basis. A well-considered strategy, the will to win and the ability to learn from mistakes are the main factors of success in both football and finance.

    The company expects on the effectiveness of the new offer for shares and ETFs as well as the campaign with José Mourinho. In particular, the ambition of the Management Board is to acquire in 2021 at least 120 thousand new clients, that is an average 30 thousand new clients quarterly. As a result of the implemented actions, in January 2021 the Group acquired 21,8 thousand new clients in total, while in February 23,6 thousand new clients.

     

    Looking at revenues in terms of the classes of instruments responsible for their creation, it can be seen that CFDs based on index dominated in 2020. Their share in the structure of revenues on financial instruments in 2020 reached 53,2% against 74,8% a year earlier. This is a consequence of the high interest of XTB clients in CFD instruments based on the German DAX stock index (DE30) and US indices US100 and US500 and contract based on volatility index listed on the U.S. organized market. The second most profitable class of assets were CFD based on commodities. Their share in the structure of revenues on financial instruments in 2020 reached 33,0% (2019: 5,2%). The most profitable instruments among this asset class were CFD instruments based on oil prices, gold and natural gas contracts. Revenues of CFD based on currency reached 11,5% of all revenues, compared to 18,2% a year earlier.

     

    XTB places great importance on the geographical diversification of revenues. The countries from which the Group derives more than 15% of revenues are Poland and Spain with the share of 37,0% (2019 r.: 39,9%) and 16,0% (2019 r.: 19,9%) respectively. The share of other countries in the geographical structure of revenues does not exceed in any case 15%.

     

    XTB also puts strong emphasis on diversification of segment revenues. Therefore the Group develops, besides retail segment, institutional activities (X Open Hub), under which it provides liquidity and technology to other financial institutions, including brokerage houses. Revenues from this segment are subject to significant fluctuations from quarter to quarter, analogically to the retail segment, which is typical for the business model adopted by the Group.

     

    XTB’s business model includes high volatility of revenues depending on the period. Operating results are mainly affected by: (i) volatility on financial and commodity markets; (ii) the number of active clients; (iii) volume of concluded transactions on financial instruments; (iv) general market, geopolitical and economic conditions; (v) competition on the FX/CFD market and (vi) regulatory environment.

     

    As a rule, the Group’s revenues are positively affected by higher activity of financial markets due to the fact that in such periods, a higher level of turnover is realized by the Group’s clients and higher profitability per lot. The periods of clear and long market trends are favourable for the Company and it is at such times that it achieves the highest revenues. Therefore, high activity of financial markets and commodities generally leads to an increased volume of trading on the Group’s trading platforms. On the other hand, the decrease in this activity and the related decrease in the transaction activity of the Group’s clients leads, as a rule, to a decrease in the Group’s operating income. Due to the above, operating income and the Group’s profitability may decrease in periods of low activity of financial and commodity markets. In addition, there may be a more predictable trend in which the market moves within a limited price range. This leads to market trends that can be predicted with a higher probability than in the case of larger directional movements on the markets, which creates favourable conditions for transactions concluded in a narrow range trading. In this case, a greater number of transactions that bring profits to clients is observed, which leads to a decrease in the Group’s result on market making.

     

    The volatility and activity of markets results from a number of external factors, some of which are characteristic for the market, and some may be related to general macroeconomic conditions. It can significantly affect the revenues generated by the Group in the subsequent quarters. This is characteristic of the Group’s business model.

     

    Operating expenses

     

    In 2020 operating expenses amounted to PLN 282,0 million and were higher by PLN 108,1 million in relation to the same period a year earlier (2019: PLN 173,9 million). The most significant changes occurred in:

     

    marketing costs, an increase of PLN 50,0 million mainly due to higher expenditures on marketing online campaigns;

     

    • costs of salaries and employee benefits, an increase of PLN 33,1 million mainly due to provisions for variable remuneration

    components (bonuses) and an increase in employment;

     

    commission expenses, an increase of PLN 14,2 million as a result of larger amounts paid to payment service providers through

    which clients deposit their funds on transaction accounts;

     

    other external costs, an increase of PLN 4,8 million as a result of higher expenditures on: (i) IT systems and licenses

    (an increase of PLN 2,6 million y/y); (ii) IT support services (an increase of PLN 1,0 million y/y).

  • 2020.11.10
    XTB financial results for the 3rd quarter of 2020

    In the third quarter of 2020 XTB reported a consolidated net profit of PLN 68,4 million compared to PLN 15,5 million a year earlier. Consolidated revenue amounted to PLN 139,6 million (Q3 2019: PLN 61,0 million) and operating expenses amounted to PLN 60,1 million (Q3 2019: PLN 43,0 million). In this period the Group noted a number of new clients above 21 thousand compared to 10 thousand a year earlier (an increase of 110,9% y/y).

     

    In the period Q1-Q3 2020 the Company reported a consolidated net profit of PLN 361,9 million compared to PLN 20,7 million a year earlier

     

    Revenues

     

    In the third quarter of 2020 XTB noted revenue increase from PLN 61,0 million to PLN 139,6 million, i.e. by 129,1% y/y. The significant factors determining the level of revenues were constantly growing client base combined with their high transaction activity noted in the number of concluded transactions in lots and higher y/y continuing volatility on financial and commodity markets. As a consequence the transaction volume in CFD instruments amounted to 760,4 thousand lots (Q3 2019: 423,3 thousand lots) and a profitability per lot reached PLN 184 (Q3 2019: PLN 114).

     

     

    XTB has a solid foundation in the form of constantly growing client base and the number of active clients. As a consequence the base for generating results is at a much higher level than it was in 2019. In the third quarter of 2020 the Group reported 21 178 new clients compared to 10 042 a year earlier. This is the effect of continuing the optimized sales and marketing strategy, bigger penetration of already existed markets, successive introduction of new products to the offer and expansion into a new geographic markets. Similarly to the number of new clients, the number of active client also increased. The number of active client increased from 28 136 to 55 760, i.e. by 98,2% y/y.

     

    The first half of 2020 was marked by above-average volatility in financial markets, what allowed XTB to achieve record revenues and significantly increase the client base. The priority of the Management Board is to further increase the client base in the subsequent periods, leading to strengthen the market position in the world. These activities will be supported by a number of initiatives, including introduced on October 5 this year a new offer for shares and ETFs (Exchange-Traded Funds) “0% commission” for monthly volumes up to EUR 100 000. This offer was received with great enthusiasm by current and new XTB clients. The company aims to be the first choice and comprehensive solution for every investor. Over the past few years, XTB has done a great deal of work – from expanding the offer by around 3 000 financial instruments ( from 1 500 to 4 500 currently), to the continuous improvement of the web and mobile version ot the award-winning xStation platform. Now with a free offer, XTB has opened the door wide to anyone interested in investing in both real stocks and ETFs. XTB currently allows client to invest in over 2 000 real stocks from 16 of the world’s largest stock exchanges, including New York Stock Exchange, London Stock Exchange, Spanish Bolsa de Madrid, German Börse Frankfurt and of course Warsaw Stock Exchange. Besides stocks, XTB offers over 200 ETFs, including commodities, real estate and bonds.

     

    The „0% commission” offer is supported by a marketing and advertising campaign with the participation of the new XTB brand ambassador – one of the best football manager on the world, José Mourinho. The new XTB ambassador is the coach who not only won championships in a record number of countries (Portugal, England, Italy and Spain), but is also one of only three coaches who have won the UEFA Champions League twice with two clubs. The Portuguese will be the XTB’s global ambassador for the next two years.

     

    The announcement of José Mourinho collaboration with XTB also marked the launch of the new global marketing campaign “Be like José”. Its creative concept is based on the similarities between the challenges faced by investors and trainers on a daily basis. A well-considered strategy, the will to win and the ability to learn from mistakes are the main factors of success in both football and finance.

     

    The company expects on the effectiveness of the new offer for shares and ETFs as well as the campaign with José Mourinho and plans to approach the possibility of repeatedly obtaining 30 000 clients in the coming periods. In particular, the ambition of the Management Board is to acquire in the fourth quarter of 2020 approximately 25-30 thousand of new clients and in 2021 an average 30 thousand new clients quarterly. As a result of the implemented actions, in the period from 1 to 31 October this year the Group acquired 11,4 thousand new clients in total

     

    XTB clients, looking for investment opportunities to earn money, generally trade in financial instruments that are characterized by high market volatility in a given period. This may lead to fluctuations in the revenue structure by the asset class, which should be treated as a natural element of the business model. From the point of view of XTB, it is important that the range of financial instruments in the Group’s offer is as broad as possible and allows clients to use every upcoming market opportunity to earn money.

     

    Based on the previous two quarters, the third quarter of 2020 brought a noticeable drop in market volatility during the holidays in July and August. Looking at revenues in terms of the classes of instruments responsible for their creation, it can be seen that CFDs based on stock indices dominated. Their share in the structure of revenues on financial instruments in the third quarter of 2020 reached 52,0% against 36,5% a year earlier. This is a consequence of the high interest of XTB clients in CFD instruments based on the US indices US100 and US500. The second most profitable class of assets were CFD based on commodities. Their share in the structure of revenues on financial instruments in the third quarter of 2020 reached 22,9% (Q3 2019: 8,7%). The most profitable instruments among this asset class were CFD instruments based on gold and silver. Revenues of CFD based on currency reached 20,1% of all revenues, compared to 51,7% a year earlier. Among this class of instruments, the EURUSD currency pair was the most popular between XTB clients.

     

    XTB places great importance on the geographical diversification of revenues, consistently implementing the strategy of building a global brand. The countries from which the Group derives more than 15% of revenues are Poland and Spain with their share in Q3 2020 of 34,5% (Q3 2019: 41,4%) and 15,9% (Q3 2019: 18,5%). The share of other countries in the geographical structure of revenues does not exceed in any case 15%.

     

    XTB also puts a strong emphasis on diversification of segment revenues. Therefore the Group develops institutional activities (X Open Hub), under which it provides liquidity and technology to other financial institutions, including brokerage houses. Revenues from this segment are subject to significant fluctuations from quarter to quarter, analogically to the retail segment, which is typical for the business model adopted by the Group.

     

    XTB’s business model includes high volatility of revenues depending on the period. Operating results are mainly affected by: (i) volatility on financial and commodity markets; (ii) the number of active clients; (iii) volume of concluded transactions on financial instruments; (iv) general market, geopolitical and economic conditions; (v) competition on the FX/CFD market and (vi) regulatory environment.

     

    As a rule, the Group’s revenues are positively affected by higher activity of financial markets due to the fact that in such periods, a higher level of turnover is realized by the Group’s clients and higher profitability per lot. The periods of clear and long market trends are favourable for the Company and it is at such times that it achieves the highest revenues. Therefore, high activity of financial markets and commodities generally leads to an increased volume of trading on the Group’s trading platforms. On the other hand, the decrease in this activity and the related decrease in the transaction activity of the Group’s clients leads, as a rule, to a decrease in the Group’s operating income. Due to the above, operating income and the Group’s profitability may decrease in periods of low activity of financial and commodity markets. In addition, there may be a more predictable trend in which the market moves within a limited price range. This leads to market trends that can be predicted with a higher probability than in the case of larger directional movements on the markets, which creates favourable conditions for transactions concluded in a narrow range trading. In this case, a greater number of transactions that bring profits to clients is observed, which leads to a decrease in the Group’s result on market making.

     

    The volatility and activity of markets results from a number of external factors, some of which are characteristic for the market, and some may be related to general macroeconomic conditions. It can significantly affect the revenues generated by the Group in the subsequent quarters. This is characteristic of the Group’s business model.

     

    Expenses

     

    In the third quarter of 2020 operating expenses amounted to PLN 60,1 million and were higher by PLN 17,1 million in relation to the same period a year earlier (Q3 2019: PLN 43,0 million). The most significant changes occurred in:

     

    marketing costs, an increase of PLN 9,1 million mainly due to higher expenditures on marketing online campaigns;

     

    costs of salaries and employee benefits, an increase of PLN 4,0 million mainly due to increase in employment;

     

    commission expenses, an increase of PLN 3,3 million as a result of larger amounts paid to payment service providers through which clients deposit their funds on transaction accounts;

     

    other external costs, an increase of PLN 1,3 million as a result of higher expenditures on: (i) IT systems and licenses (an increase of PLN 0,8 million y/y); (ii) IT support services (an increase of PLN 0,6 million y/y).

     

     

    In q/q terms, operating costs decreased of PLN 5,6 million mainly due to lower by PLN 4,4 million costs of marketing expenditures and lower by PLN 1,5 million costs of salaries and employee benefits.

     

    The Management Board expects that during the whole 2020 operating costs of the Group may be higher by approximately 50% compared to 2019, of which in the fourth quarter of 2020 marketing costs are expected to increase to levels higher than in the second quarter of 2020, whilst the cost of salaries and employee benefits will be at a similar level to that of the third quarter of 2020. As a consequence, the total value of operating costs in the fourth quarter of 2020 may be similar to that of the second quarter of 2020.

     

    The final level of operating costs will depend on the level of variable remuneration components paid to employees, the level of marketing expenditures, the dynamics of geographical expansion into new markets and the impact of potential product interventions and other external factors on the level of revenues generated by the Group.

     

    The value of variable remuneration components will be influenced by the results of the Group. The level of marketing expenditures depends on their impact on the Group’s results and profitability, the rate of foreign expansion and on clients responsiveness to the actions taken. The impact of a new product intervention on the Group’s revenues will determine, if necessary, a revision of the cost assumptions.

     

    Dividend and capital requirements

     

    The XTB dividend policy assumes recommendation by the Management Board to the General Meeting a dividend payment in the amount taking into account the level of net profit presented in the standalone annual financial report of the Company and a variety of factors relating to the Company, including prospects for further operations, future net profits, demand for cash, financial situation, the level of capital adequacy ratios, expansion plans, legal requirements in this area and KNF guidelines. In particular, the Management Board, when submitting proposals for dividend payment, will be guided by the need to ensure an appropriate level of the Company’s capital adequacy ratios and the capital necessary for the development of the Group.

     

    The Management Board maintains that its intention is to recommend in the future the adoption of resolutions to the General Meeting on dividend payment taking into account factors mentioned above, at the level of 50% to 100% of Company’s standalone net profit of a given financial year. The standalone net profit for nine months of 2020 amounted to PLN 380,5 million.

     

    Taking into account the position of the KNF published on 22 May 2018, regarding the dividend policy of brokerage houses in the medium term, it is recommended to pay dividends only by brokerage houses that especially:

     

    at the end of each quarter, have a total capital ratio of at least 14% – then it is possible to pay a dividend in the amount not higher than 100% of the net profit for a given year, or

     

    as at the last calendar day of a given year had a total capital ratio of at least 14% – then it is possible to pay a dividend at the level not exceeding 75% of the net profit for a given year;

     

    obtain a BION supervisory assessment of 1 or 2.

     

    The chart below presents levels of the total capital ratio in Q1-Q3 2020

     

    The total capital ratio informs about the relation between own funds and risk-weighted assets. It shows whether the brokerage house is able to cover the minimum capital requirement for market, credit, operational and other risks with its own funds. At the end of the first quarter of this year the total capital ratio in the Company amounted to 18,0%, at the end of the second quarter of 2020: 13,6%, and at the end of third quarter of 2020: 15,1%. This means that on condition of obtaining the total capital ratio as at 31.12.2020 at the level of at least 14% and meeting the other criteria, it will be possible to pay a dividend from the Company’s standalone net profit for the 2020 at the level of up to 75% of its profit.

     

    The Management Board wants to protect the interest of shareholders in terms of the possibility of paying dividends from net profit of 2020 and applied to KNF for permission to include part of the profit for H1 2020 (maximum to 24,9% of this net profit) to Equity Tier I. As a result of these actions, if the KNF approval will be obtained, the Company’s capital base and the total capital ratio should be increased. In the opinion of the Management Board, this will secure the achievement of the total capital ratio as at 31.12.2020 at the level of at least 14%.

     

    Cash and cash equivalents

     

    In an environment of low interest rates, which discourages the maintenance of high deposits in banks, XTB started to locate part of its cash in financial instruments with a risk weight of 0% (treasury bonds and bonds guaranteed by the State Treasury). As at 30.09.2020 the total amount of own cash and treasury bonds in the Group amounted to PLN 880,7 million, that includes PLN 680,0 million of own cash and PLN 200,7 million of treasury bonds. The Management Board assumes that the value of the portfolio of instruments of 0% risk will increase in the future.

  • 2020.08.21
    XTB financial results for the 1st half of 2020

    Consolidated net profit amounted to PLN 293,5 million compared to PLN 5,2 million a year earlier. Consolidated revenue amounted to PLN 518,2 million (H1 2019: PLN 88,8 million) and operating expenses reached PLN 138,3 million (H1 2019: PLN 83,6 million). In this period the Group also noted a record number of new clients i.e. 52.434, which means an increase by 225,9% compared to the first half of 2019.

     

    The results of the first half of 2020 were charged with the reclassification of negative foreign exchange differences in the amount of PLN 21,9 million arising from the translation of the XTB Yönetim Danışmanlığı Anonim Şirketi (former: X Trade Brokers Menkul Değerler A.S.) subsidiary’s equity from the position “Foreign exchange differences on translation” in equity to income statement. The recognition of reclassification in the above amount as financial cost in accounting records is an accounting operation. However, it did not affect the liquidity position of XTB nor the total amount of Group’s equity as at the date of its booking. The value of consolidated net profit, after adjusting it for the mentioned one-off event would be PLN 315,4 million.

     

    Revenues

     

    In the first half of 2020 XTB noted a record revenue increase from PLN 88,8 million to PLN 518,2 million, i.e. by 483,6% y/y. The significant factors determining the level of revenues were above-average volatility on financial and commodity markets caused by among others coronavirus COVID-19 global pandemic and a constantly growing client base combined with their high transaction activity noted in the number of concluded transactions in lots. As a consequence the transaction volume in CFD instruments amounted to 1.613,9 thousand lots (H1 2019: 779,7 thousand lots) and a profitability per lot reached PLN 321 (H1 2019: PLN 114).

     

    XTB has a solid foundation in the form of constantly growing client base and the number of active clients. In the first half of 2020 the Group reported a new record in the number of new clients amounted to 52.434 compared to 16.089 a year earlier. This is the effect of continuing the optimized sales and marketing strategy, bigger penetration of already existed markets, successive introduction of new products to the offer and expansion into a new geographic markets. Similarly to the number of new clients, the number of active client was also record high. The number of active client increased from 23.688 to 52.084, i.e. by 119,9% y/y. The intention of Management Board in 2020 and subsequent years is to further increase the client base.

     

    XTB’s aim is to provide clients with diversified investment offer simultaneously with comfort of managing the differentiated portfolio on one trading platform. The company analyses other possibilities of expanding the product offer, which could cause the introduction of new products in 2020 and subsequent years.

     

    Looking at revenues in terms of the classes of instruments responsible for their creation, it can be seen that CFDs based on stock indices dominated. Their share in the structure of revenues on financial instruments in the first half of 2020 reached 48,8% against 84,3% a year earlier. This is a consequence of the high interest of XTB clients in CFD instruments based on the German DAX stock index (DE30) and the US indices US500, US100 and contract based on volatility index listed on the U.S. organized market. The second most profitable class of assets were CFD based on commodities. Their share in the structure of revenues on financial instruments in the first half of 2020 reached 40,6% (H1 2019: 6,9%). The most profitable instruments among this asset class were CFD instruments based on oil prices, gold and natural gas contracts. Revenues of CFD based on currency reached 8,6% of all revenues, compared to 6,2% a year earlier.

     

    XTB clients, looking for investment opportunities to earn money, generally trade in financial instruments that are characterized by high market volatility in a given period. This may lead to fluctuations in the revenue structure by the asset class, which should be treated as a natural element of the business model. From the point of view of XTB, it is important that the range of financial instruments in the Group’s offer is as broad as possible and allows clients to use every upcoming market opportunity to earn money.

     

    The structure of revenue by asset class (%)

     

    XTB places great importance on the geographical diversification of revenues. The countries from which the Group derives more than 15% of revenues are Poland and Spain with the share of 34,1% (H1 2019: 40,8%) and 17,8% (H1 2019: 23,9%). The share of other countries in the geographical structure of revenues does not exceed in any case 15%.

     

    XTB puts also strong emphasis on diversification of segment revenues. Therefore the Group develops institutional activities (X Open Hub), under which it provides liquidity and technology to other financial institutions, including brokerage houses. Revenues from this segment are subject to significant fluctuations from period to period, analogically to the retail segment, which is typical for the business model adopted by the Group.

     

    XTB’s business model includes high volatility of revenues depending on the period. Operating results are mainly affected by: (i) volatility on financial and commodity markets; (ii) the number of active clients; (iii) volume of concluded transactions on financial instruments; (iv) general market, geopolitical and economic conditions; (v) competition on the FX/CFD market and (vi) regulatory environment.

     

    As a rule, the Group’s revenues are positively affected by higher activity of financial markets due to the fact that in such periods, a higher level of turnover is realized by the Group’s clients and higher profitability per lot. The periods of clear and long market trends are favourable for the Company and it is at such times that it achieves the highest revenues. Therefore, high activity of financial markets and commodities generally leads to an increased volume of trading on the Group’s trading platforms. On the other hand, the decrease in this activity and the related decrease in the transaction activity of the Group’s clients leads, as a rule, to a decrease in the Group’s operating income. Due to the above, operating income and the Group’s profitability may decrease in periods of low activity of financial and commodity markets. In addition, there may be a more predictable trend in which the market moves within a limited price range. This leads to market trends that can be predicted with a higher probability than in the case of larger directional movements on the markets, which creates favourable conditions for transactions concluded in a narrow range trading. In this case, a greater number of transactions that bring profits to clients is observed, which leads to a decrease in the Group’s result on market making.

     

    The volatility and activity of markets results from a number of external factors, some of which are characteristic for the market, and some may be related to general macroeconomic conditions. It can significantly affect the revenues generated by the Group in the subsequent quarters. This is characteristic of the Group’s business model.

     

    Expenses

     

    In the first half of 2020 operating expenses amounted to PLN 138,3 million and were higher by PLN 54,7 million in relation to the same period a year earlier (H1 2019: PLN 83,6 million). The most significant changes occurred in:

    costs of salaries and employee benefits, an increase of PLN 25,2 million mainly due to provisions established for variable

    components of remuneration (bonuses) and unused holidays and an increase in employment;

    marketing costs, an increase of PLN 20,2 million mainly due to higher expenditures on marketing online campaigns;

    commission expenses, an increase of PLN 6,6 million as a result of larger amounts paid to payment service providers through

    which clients deposit their funds on transaction accounts;

    other external costs, an increase of PLN 1,9 million as a result of higher expenditures on: (i) IT systems and licenses

    (an increase of PLN 0,7 million y/y); (ii) legal and consulting services(an increase of PLN 0,6 million y/y).

     

    In q/q terms, operating costs decreased of PLN 6,8 million mainly due to lower by PLN 11,9 million costs of salaries and employee benefits and higher by PLN 5,5 million marketing expenditures.

     

    The Management Board expects that during the whole 2020 operating costs will be higher than in 2019. The final level of operating costs will depend on the level of variable remuneration components paid to employees, the level of marketing expenditures, the dynamics of geographical expansion into new markets and the impact of potential product interventions and other external factors on the level of revenues generated by the Group.

     

    The value of variable remuneration components will be influenced by the results of the Group. The level of marketing expenditures depends on their impact on the Group’s results and profitability, the rate of foreign expansion and on clients responsiveness to the actions taken. The impact of a new product intervention on the Group’s revenues will determine, if necessary, a revision of the cost assumptions.

     

    In terms of remuneration costs and employee benefits, in the subsequent quarters of 2020 it is assumed that their amount may fluctuate between the levels recorded in Q2 2020, and those noted in Q4 and Q3 of 2019. In the third quarter of this year, due to holiday period, the Management Board plans to limit online marketing activities. This may result in a decrease in marketing costs by approximately 20-30% and lower client base growth. In turn, in the fourth quarter of this year the Management Board aims to strengthen branding activity in the Group.

     

    Dividend and capital requirements

     

    The XTB dividend policy assumes recommendation by the Management Board to the General Meeting a dividend payment in the amount taking into account the level of net profit presented in the standalone annual financial report of the Company and a variety of factors relating to the Company, including prospects for further operations, future net profits, demand for cash, financial situation, the level of capital adequacy ratios, expansion plans, legal requirements in this area and KNF guidelines. In particular, the Management Board, when submitting proposals for dividend payment, will be guided by the need to ensure an appropriate level of the Company’s capital adequacy ratios and the capital necessary for the development of the Group. The Management Board maintains that its intention is to recommend in the future the adoption of resolutions to the General Meeting on dividend payment taking into account factors mentioned above, at the level of 50% to 100% of Company’s standalone net profit of a given financial year. The standalone net profit for the first half of 2020 amounted to PLN 312,6 million.

     

    Taking into account the position of the KNF published on 22 May 2018, regarding the dividend policy of brokerage houses in the medium term, it is recommended to pay dividends only by brokerage houses that especially:

    at the end of each quarter, have a total capital ratio of at least 14% – then it is possible to pay a dividend in the amount not

    higher than 100% of the net profit for a given year, or

    as at the last calendar day of a given year had a total capital ratio of at least 14% – then it is possible to pay a dividend at the

    level not exceeding 75% of the net profit for a given year;

    obtain a BION supervisory assessment of 1 or 2.

     

    The chart below presents levels of the total capital ratio in the first half of 2020.

     

    The total capital ratio informs about the relation between own funds and risk-weighted assets. It shows whether the brokerage house is able to cover the minimum capital requirement for market, credit, operational and other risks with its own funds. At the end of the first quarter of this year the total capital ratio in the Company amounted to 18,0%, and at the end of the second quarter of 2020: 13,6%. This means that on condition of obtaining the total capital ratio as at 31.12.2020 at the level of at least 14% and meeting the other criteria, it will be possible to pay a dividend from the Company’s standalone net profit for the 2020 at the level of up to 75% of its profit.

     

    The Management Board wants to protect the interest of shareholders in terms of the possibility of paying dividends from net profit of 2020 and plans to apply to KNF for permission to include part of the profit for H1 2020 (maximum to 25% of this net profit) to Equity Tier I. As a result of these actions, if the KNF approval will be obtained, the Company’s capital base and the total capital ratio should be increased. In the opinion of the Management Board, this will secure the achievement of the total capital ratio as at 31.12.2020 at the level of at least 14%.

     

    Cash

     

    XTB, as an investment company, operates in the market making model for CFD instruments. It means that the Company offers liquidity on the market by accepting, on its own account, purchase and sale transactions of financial instruments concluded and initiated by its retail and institutional clients. The Group does not engage, strictly speaking, in proprietary trading in anticipation of changes in prices or values of the underlying instruments. The activity in market making model causes market risk which, in accordance with applicable law, must be covered by maintaining sufficiently high equity (capital ratio). On the asset side in the balance sheet, this is shown in the value of own cash.

     

    In an environment of low interest rates, which discourages the maintenance of high deposits in banks, XTB started to locate part of its cash in financial instruments with a risk weight of 0% (treasury bonds). As at 30.06.2020 the total amount of own cash and treasury bonds in the Group amounted to PLN 812,7 million, that includes PLN 681,3 million of own cash and PLN 131,4 million of treasury bonds. The Management Board assumes that the value of the portfolio of instruments of 0% risk will increase in the future.

  • 2020.05.07
    XTB financial results for the 1st quarter of 2020

    In the first quarter of 2020 XTB reported a consolidated net profit of PLN 176,0 million compared to PLN 0,8 million a year earlier. It is an increase of PLN 175,2 million. Consolidated revenue amounted to PLN 306,7 million (I quarter 2019: PLN 40,9 million) and operating expenses amounted to PLN 72,5 million (I quarter 2019: PLN 41,1 million). In this period the Group noted a record number of new clients i.e. 21 911, which is an increase of 220,2% y/y.

    The results of the first quarter of 2020 were charged with the reclassification of negative foreign exchange differences in the amount of PLN 21,9 million arising from the translation of the XTB Yönetim Danışmanlığı Anonim Şirketi (former: X Trade Brokers Menkul Değerler A.S.) subsidiary’s equity from the position “Foreign exchange differences on translation” in equity to income statement. The recognition of reclassification in the above amount as financial cost in accounting records is an accounting operation. However, it did not affect the liquidity position of XTB nor the total amount of Group’s equity as at the date of its booking.

     

    REVENUES

     

    In the first quarter of 2020 XTB noted a record revenue increase by 650,0 % y/y, i.e. by PLN 265,8 million from PLN 40,9 million to PLN 306,7 million. The significant factors determining the level of revenues were above-average volatility on financial and commodity markets caused by among others coronavirus COVID-19 global pandemic and a constantly growing client base combined with their high transaction activity noted in the number of concluded transactions in lots. As a consequence the transaction volume in CFD instruments amounted to 784,8 thousand lots (QI 2019: 394,4 thousand lots) and a profitability per lot increased by 276,9%.

     

    XTB has a solid foundation in the form of constantly growing client base and the number of active clients. In the QI of 2020 the Group reported a new record in the number of new clients amounted to 21 911 compared to 6 843 a year earlier i.e. an increase by 220,2%. This is the effect of continuing the optimized sales and marketing strategy and the successive introduction of new products to the offer, such as CFD based on sector indices, shares, ETFs and expansion into new geographic markets. The average number of active clients was higher by 23 415 y/y, i.e. 105,3%. The intention of Management Board in 2020 is to further increase the client base.

     

    XTB’s aim is to provide a diversified investment offer simultaneously with comfort of managing the differentiated portfolio on one trading platform. The company analyses other possibilities of expanding the product offer, which could cause the introduction of new products in 2020 and subsequent years.

     

    Looking at revenues in terms of the classes of instruments responsible for their creation, it can be seen that CFDs based on commodities dominated. Their share in the structure of revenues on financial instruments in QI 2020 reached 51,2% against 6,8% a year earlier. This is a consequence of among other large price fluctuations on CFD instruments based on oil prices and natural gas contracts. The second most profitable class were CFD instruments based on indices. Their share in the structure of revenues in QI 2020 reached 36,2% (QI 2019: 89,3%). The most popular instruments among this asset class were instruments based on the German DAX stock index (DE30) and contracts based on American indices. Revenues of CFD based on currency reached 11,1% of all revenues, compared to 1,1% a year earlier.

     

    XTB clients, looking for investment opportunities to earn money, generally trade in financial instruments that are characterized by high market volatility in a given period. This may lead to fluctuations in the revenue structure by the asset class, which should be treated as a natural element of the business model. From the point of view of XTB, it is important that the range of financial instruments in the Group’s offer is as broad as possible and allows clients to use every upcoming market opportunity to earn money.

     

    XTB places great importance on the geographical diversification of revenues. The countries from which the Group derives more than 15% of revenues are Poland and Spain with the share of 27,9% (QI 2019: 54,6%) and 19,0% (QI 2019: 17,0%). The share of other countries in the geographical structure of revenues does not exceed in any case 15%.

     

    XTB also puts a strong emphasis on diversification of segment revenues. Therefore the Group develops institutional activities (X Open Hub), under which it provides liquidity and technology to other financial institutions, including brokerage houses. Revenues from this segment are subject to significant fluctuations from quarter to quarter, analogically to the retail segment, which is typical for the business model adopted by the Group.

     

     

    EXPENSES

     

    In the QI of 2020 operating expenses amounted to PLN 72,5 million and were higher by PLN 31,4 million in relation to the same period a year earlier (QI 2019: PLN 41,1 million). The most significant changes occurred in:

    costs of salaries and employee benefits, an increase of PLN 19,0 million mainly due to provisions established for variable

    components of remuneration (bonuses) and unused holidays and an increase in employment;

    marketing costs, an increase of PLN 7,6 million mainly due to higher expenditures on marketing online campaigns;

    commission expenses, an increase of PLN 2,5 million as a result of larger amounts paid to payment service providers through

    which clients deposit their funds on transaction accounts;

    other external costs, an increase of PLN 2,0 million as a result of higher expenditures on: (i) IT support service (an increase of

    PLN 1,6 million y/y); (ii) IT systems and licenses (an increase of PLN 0,4 million y/y).

     

    In q/q terms, operating costs increased of PLN 25,2 million mainly due to higher by PLN 14,7 million costs of salaries and employee benefits and higher by PLN 6,5 million marketing expenditures.

     

    The Management Board expects that during the whole 2020 operating costs will be higher than in 2019. In the coming quarters the costs of salaries and employee benefits are expected to decline to similar levels to those we observed quarterly in 2019. In the second quarter of 2020 marketing costs are also expected to decline – similarly to the costs of salaries and employee benefits.

     

    The final level of operating costs will depend on the level of variable remuneration components paid to employees, the level of marketing expenditures, the dynamics of geographical expansion into new markets and the impact of potential product interventions and other external factors on the level of revenues generated by the Group.

     

    The value of variable remuneration components will be influenced by the results of the Group. The level of marketing expenditures depends on their impact on the Group’s results and profitability, the rate of foreign expansion and on clients responsiveness to the actions taken. The entry of new regulations may determine if necessary, a revision of the Group’s cost assumption.

     

    DEVELOPMENT PERSPECTIVES

     

    XTB with its strong market position and dynamically growing client base enters the non-European markets. XTB is consequently implementing a strategy on building a global brand. In 2020 the Group aims to increase its European market penetration and continue with building its position in Latin America, Asia and Africa.

  • 2020.03.11
    Financial results of XTB for 2019

    In 2019 XTB reported a consolidated net profit of PLN 57,9 million compared to PLN 101,5 million net profit a year earlier. Consolidated revenues amounted to PLN 239,3 million compared to PLN 288,3 million a year earlier, and operating costs PLN 173,8 million (2018: PLN 172,5 million). The Group gained a record number of new clients, i.e. 36 555, which means an increase by 76,8% y/y.

     

    REVENUES

     

    In 2019 the revenues decreased by 17,0 y/y i.e. PLN 48 997 thousand from PLN 288 301 thousand to PLN 239 304 thousand. One of the relevant factors which determined the level of revenues of XTB was the product intervention of ESMA. coming into force in August 2018. The regulations limited maximum permitted level of leverage for retail clients, which resulted in lower volume of transactions concluded by clients. Consequently, CFDs turnover in lots amounted to 1 597 218 lots compared to 2 095 412 a year earlier. Profitability per lot increased by 8,7% y/y i.e. from PLN 138 to PLN 150.

    In Q42019, the revenues increased by 109,3% compared to the Q4 2018, i.e. by PLN 46 785 thousand from PLN 42 786 thousand to PLN 89 571 thousand. This change was driven by: (i) higher profitability per lot – an increase by PLN 134 (from PLN 93 to PLN 227); (ii) lower financial instruments turnover noted in the number of concluded transactions in lots – a decrease by 64 723 lots (from 458 869 to 394 147 lots).

    XTB has a solid basis for growth in the form of constantly growing customer base and number of active clients. In 2019 the Group reported a record number of new clients amounting to 36 555 compared to 20 672 in 2018, i.e. an increase by 76,8%. This is an effect of continuing the optimized sales and marketing strategy and the successive introduction of new products to the offer, such as CFDs based on sector indices, shares, ETFs and an expansion to new geographical markets. The average number of active clients was higher by 5 303 compared to 2018, i.e. 24,9%. The intention of the Management Board in 2020 is to further increase the client base. This is confirmed by the data for January, when the Group gained a record number of new clients i.e. 4 480.

    XTB’s aim is to provide a diversified investment offer simultaneously with comfort of managing the differentiated portfolio on one trading platform. The company analyses other possibilities of expanding the product offer, which could cause the introduction of new products in 2020 and further years.

    Looking at revenues in terms of the classes of instruments responsible for their creation, it can be seen that in 2019, CFDs based on stock indices dominated. Their share in the structure of revenues on financial instruments reached 74,8% compared to 49,6% a year earlier. This is a consequence of the high interest of XTB clients in CFD instruments based on the German DAX stock index (DE30) and the US indices US 500 and US 100. The second most-profitable class of assets were CFD based on currencies. Their share in the structure of revenues on financial instruments in 2019 reached 18,2% (2018: 23,5%). Instruments based on the EURUSD currency pair were the most popular among this asset class. The revenues from commodity-based instruments accounted for 5,2% of total revenues, compared to 24,3% a year earlier.

    XTB clients, looking for investment opportunities to earn money, generally trade in financial instruments that are characterized by high market volatility in a given period. This may lead to fluctuations in the revenue structure by the asset class, which should be treated as a natural element of the business model. From the point of view of XTB, it is important that the range of financial instruments in the Group’s offer is as broad as possible and allows clients to use every upcoming market opportunity to earn money.

     

    The result of operations on financial instruments

    XTB places great importance on the geographical diversification of revenues. The countries from which the Group derives more than 15% of revenues are Poland and Spain with the share of 40,5% (2018: 25,2%) and 19,9% (2018: 14,7%) respectively. The share of other countries in the geographical structure of revenues does not exceed in any case 15%.

     

    XTB also puts strong emphasis on diversification of segment revenues. Therefore the Group develops, besides retail segment, institutional activities (X Open Hub), under which it provides liquidity and technology to other financial institutions, including brokerage houses. Revenues from this segment are subject to significant fluctuations from quarter to quarter, analogically to the retail segment, which is typical for the business model adopted by the Group.

     

    It should be noted that, similar to the retail segment, ESMA product intervention could affect the condition of the European institutional partners of XTB and thus the transaction volume in lots as well as the revenues of XTB from these clients. However, the Management Board cannot exclude that there will been increase in volatility of institutional clients in the future.

     

    OPERATING EXPENSES

     

    Operating expenses in 2019 amounted to PLN 173 892 thousand and were similar to those a year earlier (an increase by PLN 1 400 thousand y/y). The most significant changes y/y occurred in:

    salaries and employee benefits costs, an increase by PLN 7 546 thousand mainly due to new employment and employee

    severance payments;

    marketing costs, an increase by PLN 4 394 thousand mainly due to higher expenditures on online marketing campaigns;

    costs of maintenance and lease of buildings, a decrease by PLN 4 657 and consequently an increase in depreciation costs by

    PLN 2 822, relating to the entry into force of IFRS 16 Leasing;

    other costs, a decrease by PLN 9 746 thousand as a result of one-off event in Q3 2018 in the amount of PLN 9 900 thousand.

    The Management Board expects that in 2020 operating expenses should be at a level of several percent higher than in 2019. The final level will depend on the pace of geographical expansion into new markets, the variable remuneration elements (bonuses) paid to employees, the level of marketing expenditures and the impact of regulations and other external factors on the level of revenues generated by the Group.

     

    DEVELOPMENT PERSPECTIVES

     

    • The entry into force of product intervention by ESMA creates both opportunities and threats for XTB. On the one hand, there is a temporary drop in trade volumes among European brokers. On the other hand, the Management Board of XTB is convinced of the business’s vitality over a longer time horizon. The natural consequence of ESMA’s decision should be a wave of consolidation on the market that would allow XTB to consolidate its strong position on the European market. Less influential brokers, unable to withstand regulatory pressure and strong competition from a very significant brokers, will naturally disappear from the market. Consequently large brokers should expect the client base to grow.

    XTB with its strong market position and dynamically growing client base enters the non-European markets. XTB is consequently implementing a strategy on building a global brand. The Group aims to increase its European market penetration and continue with building their position in Latin America, Asia and Africa.

  • 2019.11.08
    XTB financial results for the 3rd quarter of 2019

    In the third quarter of the year 2019, XTB reported a consolidated net profit of PLN 15,5 million compared to PLN 2,9 million in the third quarter of 2018. Consolidated revenue was PLN 61,0 (Q3 2018: PLN 47,6 million) and operating expenses reached PLN 43,0 million (Q3 2018: PLN 48,8 million). In the third quarter the Group noted a record number of new clients, i.e. 10 042. This is an increase of 105,6% y/y and 8,6% q/q.
       

    In the first three quarters of 2019 the Company reported a consolidated net profit of PLN 20,8 million compared to PLN 97,5 million reported over the same period of 2018.

     

    REVENUES 

     

    The revenues in the Q3 2019 increased by 28,1% y/y, i.e. PLN 13,4 million from PLN 47,6 to PLN 61,0 million. Significant factors which determined the revenue growth were: (i) higher XTB clients turnover of financial instruments reflected by the number of executed transactions i.e. growth of 78 215 lots (from 345 118 to 423 333 lots), (ii) higher profitability per unit lot, i.e. growth of PLN 6 (from PLN 138 to PLN 144).

     

    XTB has a solid foundation in the form of a constantly growing clients base and number of active clients. The intention of the Management Board in 2019 is to further increase the client base. In the period from the beginning of 2019 the Group reported a record number of new clients amounting to 26 131 compared to 14 930 in the comparable period of 2018. In the Q3 2019 the number of new clients increased by 796 q/q i.e. 8,6% q/q. This is the effect of continuing the optimized sales and marketing strategy and the successive introduction of new products to the offer, such as shares and ETFs. The average number of active clients was higher by 7 859 compared to Q3 2018, i.e. 38,8% y/y.

     

    XTB’s aim is to provide a diversified investment offer simultaneously with comfort of managing the differentiated portfolio on one trading platform. The company analyses other possibilities of expanding the product offer, which could cause the introduction of new products in 2019 and subsequent years.

     

    Looking at revenues in terms of the classes of instruments responsible for their creation, it can be seen that CFDs based on currency dominated. Their share in the structure of revenues on financial instruments in the Q3 2019 reached 51,6% against 22,0% a year earlier. This is a consequence of the high interest of XTB clients in instruments based on the EURUSD currency pair. The second most-profitable class of assets were CFDs based on stock indices. Their share in the structure of revenues on financial instruments in the Q3 2019 reached 36,5% (Q3 2018: 18,6%). The most popular instruments among this class were instruments based on the German DAX stock index (DE30) and the US indices US100 and US500. Revenues on CFD instruments based on commodities accounted for 8,8% of total revenues against 58,9% a year earlier.

     

    XTB clients, looking for investment opportunities to earn money, generally trade in financial instruments that are characterized by high market volatility in a given period. This may lead to fluctuations in the revenue structure by the asset class, which should be treated as a natural element of the business model. From the point of view of XTB, it is important that the range of financial instruments in the Group’s offer is as broad as possible and allows clients to use every upcoming market opportunity to earn money.

     

    XTB places great importance on the geographical diversification of revenues. The countries from which the Group derives more than 15% of revenues are Poland and Spain with the share of 41,4% (Q3 2018: 38,4%) and 18,5% (Q3 2018: 12,5%) respectively. The share of other countries in the geographical structure of revenues does not exceed in any case 15%.

     

    XTB also puts a strong emphasis on diversification of segment revenues. Therefore the Group develops institutional activities (X Open Hub), under which it provides liquidity and technology to other financial institutions, including brokerage houses. Revenues from this segment are subject to significant fluctuations from quarter to quarter, analogically to the retail segment, which is typical for the business model adopted by the Group.

     

    It should be noted that, similar to the retail segment, ESMA product intervention could affect the condition of the European institutional partners of XTB and thus the transaction volume in lots as well as the revenues of XTB from these clients. However, the Management Board cannot exclude that there will been increase in volatility of institutional clients in the future

     

    EXPENSES


    Operating expenses in the third quarter of 2019 amounted to PLN 43,0 million and were lower by PLN 5,9 million compared to the same period last year. The most important changes y/y occurred in:

    costs of salaries and employee benefits, an increase of PLN 1,7 million related to new employment and employee severance payment;

    costs of maintenance and lease of buildings, a decrease of PLN 1,1 million and consequently an increase in depreciation costs by PLN 0,9 million, mainly due to a change in the approach to the cost of renting office space from 2019, relating to the entry into force of IFRS 16 Leasing;

    other cpsts, a decrease of PLN 7,8 million as a result of one-off event in Q3 2018, i.e. which was an administrative fine imposed by the Polish Financial Supervision Authority in the amount of PLN 9,9 million.

     

    In Q3 2019 operating expenses slightly increased by PLN 0,5 million q/q, mainly due to higher salaries and employee benefits costs by PLN 0,6 million.

    The Management Board expects in the Q4 2019 operating expenses to be at a level comparable to that observed in the previous quarters this year. The final level will depend on the variable remuneration elements paid to employees, the level of marketing expenditures and the impact of ESMA’s product intervention on the level of revenues generated by the Group. The value of variable remuneration components will be influenced by the results of the Group. The level of marketing expenditures will depend on the impact of the results and profitability of the Group and on responsiveness of the clients to the actions taken. The impact of product intervention introduced by relevant regulators on local markets of European Union countries on the Group’s revenues will determine, if necessary, a revision of the cost assumptions for further months of 2019.

     

    PERSPECTIVES

     

    The entry into force of product intervention, introduced by relevant regulators on local markets of European Union countries, creates both opportunities and threats for XTB. On the one hand, there is a temporary drop in trade volumes among European brokers. On the other hand, the Management Board of XTB is convinced of the business’s vitality over a longer time horizon. The natural consequence of relevant regulators on local markets of European Union countries decision should be a wave of consolidation on the market that would allow XTB to consolidate its strong position on the European market. Less influential brokers, unable to withstand regulatory pressure and strong competition from a very significant brokers, will naturally disappear from the market. Consequently large brokers should expect the client base to grow.

     

    XTB has a stable market position and dynamically growing customer base. The Group plans further development by expanding the customer base and product offer, penetrating existing markets and expanding geographically to new markets to build a global brand.

  • 2019.08.22
    XTB financial results for the 1st half of 2019

    In the first half of 2019 XTB reported a consolidated net profit of PLN 5.2 million compared to PLN 1.1 million in the second half of 2018. Consolidated revenue was PLN 88.8 million (H2 2018: PLN 90.4 million) and operating expenses reached PLN 83.6 million (H2 2018: PLN 89.7 million). In this period XTB noted a record number of new clients i.e. 16 089, which is an increase of 51.4% compared to second half of 2018 (h/h). 

     
     

    REVENUES

     

    The revenues in the first half of 2019 decreased by 1.8% h/h, i.e. PLN 1.6 million from PLN 90.4 to PLN 88.8 million. Significant factors which determined the level of revenues in this period were: the product intervention of the European Securities and Markets Authority (ESMA) coming into force in August 2018, which in case of the retail clients limited maximum permitted level of leverage. This had a direct impact on lower volume of transaction carried out by XTB clients. As a consequence the transaction volume in CFD instruments amounted to 779.7 thousand lots (H1 2018: 1 291.4 thousand lots, H2 2018: 804.0 thousand lots) and profitability per lot reached PLN 114 (H1 2018: PLN 153, H2 2018: PLN 112 ).

     

    XTB has a solid foundation in the form of constantly growing customer base and number of active clients. The intention of the Management Board in 2019 is to further increase the client base. The Group reported a record number of new clients amounting to 16 089 compared to 10 626 in the second half of 2018 (H1 2018: 10 046). In the second quarter of 2019 number of new clients increase by 2 403 q/q, i.e. 35.1% q/q. This is the effect of continuing the optimized sales and marketing strategy and the successive introduction of new products to the offer, such as shares, ETFs, indexes of technology companies FANG + and other sector indexes. The average number of active clients was higher by 3 265 h/h, i.e. 16.0% h/h.

     

    XTB’s aim is to provide a diversified investment offer simultaneously with comfort of managing the differentiated portfolio on one trading platform. The company analyzes other possibilities of expanding the product offer, which could cause the introduction of new products in 2019 and following years.

    Looking at revenues in terms of the classes of instruments responsible for their creation, it can be seen that similar as in the first half of 2018, CFDs based on stock indices dominated. Their share in the structure of revenues on financial instruments in the first half of 2019 reached 84.3% against 51.0% year earlier. This is a consequence of the high interest of XTB clients in CFD instruments based on the German DAX stock index (DE30) and the US indices US500, US100, US30. The second most-profitable class of assets were CFD commodities. Their share in the structure of revenues on financial instruments in the first half of 2019 reached 6.9% (H1 2018: 16.4%). The most lucrative instrument among clients was CFD based on quotations of the contract for natural gas and gold. Revenues on CFD instruments based on currency pairs amounted to 6.2% of total revenues against 29.3% a year earlier. Among this class of instruments, where the EURUSD currency pair was the most popular between XTB clients, there were more predictable trends in which the market moved within a limited price range. This led to the emergence of market trends, which can be predicted with a higher probability than in the case of larger directions of movements on the markets, which created favorable conditions for transactions concluded in a narrow range of the market (range trading). In this case, XTB has observed a higher number of profitable transactions for clients.

     

    XTB clients, looking for investment opportunities to earn money, generally trade in financial instruments that are characterized by high market volatility in a given period. This may lead to fluctuations in the revenue structure by the asset class, which should be treated as a natural element of the business model. From the point of view of XTB, it is important that the range of financial instruments in the Group’s offer is as broad as possible and allows clients to use every upcoming market opportunity to earn money.

     

    XTB places great importance on the geographical diversification of revenues. The countries from which the Group derives more than 15% of revenues are Poland and Spain with the share of 40.8% (H1 2018: 32.3%) and 23.9% (H1 2018: 15.0%). The share of other countries in the geographical structure of revenues does not exceed in any case 15%.

     

    XTB puts also strong emphasis on diversification of segment revenues. Therefore the Group develops institutional activities (X Open Hub), under which it provides liquidity and technology to other financial institutions, including brokerage houses. Revenues from this segment are subject to significant fluctuations from quarter to quarter, analogically to the retail segment, which is typical for the business model adopted by the Group.

     

    It should be noted that, similar as a retail segment, product intervention introduced by relevant regulators on local markets of European Union countries could affect the condition of the European institutional partners of XTB and thus the transaction volume in lots as well as the revenues of XTB from these clients. However, the Management Board cannot exclude that there will be increase in volatility of institutional clients in the further.

     
     

    EXPENSES

     

    Operating costs in the first half of 2019 amounted to PLN 83.6 million and were higher by PLN 0,8 million compared to the same period a year earlier. The most significant changes y/y occurred in:

     

    marketing costs, an increase of PLN 2.0 million due to higher expenditures on marketing online campaigns;

     

    costs of salaries and employee benefits, an increase of PLN 1.4 million related to new employment and employee severance

    payments;

     

    costs of maintaining and lease of buildings, a decrease by PLN 2.4 million and thus an increase in depreciation costs by PLN

    1.0 million, mainly due to a change in the approach to the cost of renting office space from 2019, in connection with the entry into force of IFRS 16 Leasing;

     

    other external services, a decrease by PLN 1.4 million as a result of lower expenditure on other external services (decrease by

    PLN 1.4 million y/y).

     

    In the first half of 2019 operating expenses increased by PLN 1.4 million q/q, mainly due to higher by PLN 1.1 million salaries and employee benefits costs and other expenses by PLN 0.5 million.

     

    The Management Board expects in the second half of 2019 operating expenses to be at a level comparable to that observed in the first half of 2019. The final level will depend on the variable remuneration elements paid to employees, the level of marketing expenditures and the impact of ESMA’s product intervention on the level of revenues generated by the Group. The value of variable remuneration components will be influenced by the results of the Group. The level of marketing expenditures will depend on the impact of the results and profitability of the Group and on responsiveness of the clients to the actions taken. The impact of product intervention introduced by relevant regulators on local markets of European Union countries on the Group’s revenues will determine, if necessary, a revision of the cost assumptions for further months of 2019.

     
     

    DEVELOPMENT PERSPECTIVES

     

    The entry into force of product intervention by ESMA creates both opportunities and threats for XTB. On the one hand, there is a temporary drop in trade volumes among European brokers. On the other hand, the Management Board of XTB is convinced of the business’s vitality over a longer time horizon. The natural consequence of ESMA’s decision should be a wave of consolidation on the market that would allow XTB to consolidate its strong position on the European market. Less influential brokers, unable to withstand regulatory pressure and strong competition from a very significant brokers, will naturally disappear from the market. Consequently large brokers should expect the client base to grow.

     

    XTB has a stable market position and dynamically growing client base. The Group plans further development by expanding the client base and product offer, penetrating existing markets and expanding geographically to new markets to build global brand.