Hi, everyone who has joined us this morning to this live webinar and those who will watch it later. It's our pleasure to welcome you to the first Indexo investor webinar. Today we're hosted by Indexo co-founder and Chairman of the Management Board, Valdis Siksnis, and Indexo co-founder and Member of the Management Board, Henriks Karmo. We will start with a presentation on Indexo business updates and most recent financial results, and then continue with a live Q&A session. If you would like to join the discussion or ask your question to the company, please use the Q&A window underneath the presentation. Valdi, I am now handing it over to you.
Yeah. Hello. Good morning, everybody, and welcome to this presentation. This is our first quarterly report presentation as a public company after our IPO, and we decided to do it in English because we already have a lot of non-Latvian speakers as our shareholders, and we would like to address with those presentations as wide audience as possible. In case this is a problem for some of our Latvian-speaking shareholders, please let us know. We will take into consideration. We may reconsider our English-only policy, but of course, using English as one universal language would be easier and cheaper for us. Give us a feedback after this one. So, talking about Indexo. S Ince foundation, Indexo mission has not changed.
Our mission is to provide modern, transparent investments, investment products at low cost to increase competition and transparency in Latvian financial services industry. Indexo was launched as a challenger brand. It was designed as a product we ourselves would like to use. Indexo was launched in the time when we were paying the highest fees in OECD countries. Returns were low and competition was non-existent. Since establishment, Indexo has managed to grow very fast, first with a second pillar product, and just a little more than a year ago, we launched innovative and modern third pillar product. Just a little more than one month ago, we successfully completed IPO and raised EUR 7.5 million for establishing the bank.
We have decided to enter banking industry because we see a lot of similarities in the banking, Latvian banking industry today, as it was with Latvian pension management five, six years ago. No competition, high prices, very little innovation. That is a perfect situation for a disruptor like ourselves. A little bit more about our IPO. That is a really most recent major development step for us. Most of the work for IPO was done during the reporting period during the first six months of this year, so we prepared a prospectus, we got all the regulatory approvals, we communicated a lot to a very wide investor audience, to existing shareholders.
Most of the work was done, but during the first six months. The IPO was completed in July, so all the positive sides of our IPO increased capital you will not see yet in our reporting today. That will be visible only in the next quarter reports. I'm very proud that we achieved a healthy oversubscription with our IPO. That shows strong support for our plans, for our ideas. Most importantly, we did it in a very difficult market environment doing everything ourselves. We didn't use any investment bank or placement agent. We are really proud after successfully completing our IPO.
During first six months there happened also some changes in our management team, significant changes in our management team. First of all, I'm very happy that Ieva Bauma, our marketing manager, joined management board. Her role as a marketing manager has increased significantly during IPO and now, after IPO for Indexo as a public company, it will grow even more when we will be able to enter the banking market and widen our product offering. I've been with Indexo myself since the very beginning, and we started to discuss with Henriks Indexo idea already in the spring 2016. Only now, in the beginning of this year, I really assumed a full CEO role.
I'm very excited to be able to play this very central role in a further development of Indexo and particularly when it comes to the banking services. To me it is a little bit like a déjà vu feeling, looking back at the situation in 2003 when I became CEO of Nordea in Latvia and we had managed to achieve then during the next 10 years, from 2003 to 2013, when I was leading Nordea in Latvia, we managed to achieve a lot and I believe we should be able to achieve even more now with Indexo. For our core business also first six months have been really great.
First of all, I would like to emphasize fantastic customer growth number. We have added more than 14,000 new customers, and that is our record. Never ever Indexo in its history has added such big customer number in six months period. That helped to increase the total customer number to 82,000. This growth of course is helping to raise our assets under management, and that was almost EUR 485 million at the end of June, and that has helped us to generate, you know, six months EUR 1 million commission income. Once again, about the customer growth number, it is indeed phenomenal result.
Phenomenal result because it's not only Indexo internal record, but in a 12-month period, you can see that we have added 20,000 customers, and that is at the time that most of the competitors actually were losing customers. We are the only ones in the market demonstrating any significant growth when it comes to adding customers. This is really outstanding result. Why I'm talking so much about the customer growth and why it is so important? Because the customer growth of course helps us to increase our assets under management. Our business model is very simple. The mainstay is asset management. We receive a small fee from the total assets under management we have. The higher
The more customers, the more assets under management, the higher commission income for Indexo. Our growth has resulted also in a significant growth, 50% growth, if we compare to the similar period year ago, in our commission income. Another very important thing is churn. What is churn? That is some customers leaving any company in the world or any service provider and so is the case with Indexo. We acquire some customers, some customers leaves us. Churn is the indicator which measures percentage of the customers which has left the company during last 12 months or one year. How many customers are leaving the company in one year. Our churn all the time has been under control.
It has been significantly lower than our ability to add the customers. A year ago, June 2021, it was 9.5%. Now it has decreased very considerably to 6.5%, and I believe that it is due to good performance of our pension plans. It's due to our ambitious development plans, and it is also thanks to extra visibility we gained during the IPO process. Lower churn is super important. It has a very significant impact on our long-term customer value. That combined with a high growth is really a winner's cocktail. Here I'd like to hand over to Henrik, who will tell more about things we have done for our customers and more about our pension management business.
Thank you, Valdis, and thank you all who have joined our webinar. It's great to see so many people interested in how Indexo is doing. As Valdis said at the very beginning, for us, our customers like long-term pension savings are extremely important part of our thinking, our philosophy, our mission. We are constantly working to improve our customers' terms at which they save money for the future. Here I'm really glad to sort of say that within the first seven months, for that matter, we have managed to you know make some significant moves for improving our terms for our customers.
We have managed to renegotiate with Swedbank about the custody fees that our customers paying. We have also managed to negotiate fees with BlackRock, which means that we are going to get better products for lower fees. That all in the long term will help our customers to save money more and you know have better savings at retirement. We'll obviously continue working on those improvements moving further as we grow. Our scale helps us to be more attractive for our partners, and that of course means that we are able to also pass on some of those savings to our customers.
The other important part about our pension fund management business is that during the first quarter of 2022, we managed to change our 100% equity plan to, well, from 75% to 100% fully. That was due to the change of legislation that allowed Latvian pension savers to be fully invested in equities, which is a very solid long-term strategy, as we know. As an asset class, equities over long term provide the best returns for saving for the retirement. When the legislation changed and that allowed us to convert the INDEXO Jauda to 100% equities.
We took a decision which to time diversify that change, so we didn't like sort of take a decision to change from 75% to 100% in one day, but put it on a sort of six-month transformation plan, and that was finalized in February 2022. Nowadays our [Aldai] investors will be expecting to get full equity indexes return to their pension plans. An important thing to talk about, obviously, as Valdis mentioned, is our assets under management because that drives our revenue. It is a highly scalable business. The more assets under management we have, the higher our revenue. Also our costs which are needed to operate this pension business are growing.
So, this is really a scalable business that drives our long-term profitability. Our second pillar assets were growing year on year quite significantly. As you see, we added more than EUR 113 million. And more importantly, especially in this time of market volatility, you know, when the indexes have gone down, our customer number in the second pillar has been steadily growing and that really is the sort of the best product for us because it's 6% contribution that comes on a monthly basis and you know, people who change from other fund managers to us, they bring along also already a significant saving pot that we will manage on their behalf.
Here we really like this graph because that's sort of the waterfall graph about our growth. It shows all our investors how we grow, what is actually the pillars of Indexo asset management growth. You can see there are monthly contributions, so these would be the 6% gross from gross salary payments that our customers make. As our customer number grows, then these grow. The EUR 119 million over the last 12 months came from our new customers bringing over their savings from other fund managers. For us, we think it's a cost, it's a churn, so these unfortunately are the customers who for whatever reason have decided to leave us.
For that particular period that we are looking at, 12 months, the market indices actually were like a headwind against our growth. We actually lost like EUR 30 million because of that from assets under management. As we know, equity markets are volatile in short term, but in long term they are growing. Just to kind of illustrate that point, as we speak, or basically on August 19th, as the market has been recovering from the drop, our assets under management already reached about EUR 580 million. EUR 100 million more than our quarter two closing figure.
We especially want to draw attention to this monthly contribution because this you should really understand this as sort of a very good, first of all, for our customers, it's a very important time diversification. You know, when markets drop, the monthly contribution buy the units at a lower price, and this sort of adds constantly to the pie that compounds for the future. As I said before, the growing client number drives the new money, the new money that we're getting. That money of course grows also as the wages grow. Importantly, Latvia has seen a phenomenal growth in average wage over the last years. That obviously also is driving the contribution rates.
This keeps growing and as we speak it is already much higher than it was at the end of the quarter 2022. Also important sort of strategic decision for us a year ago was to launch the third pillar product. The asset management services in the third pillar were extremely poor. Again, very expensive, very intransparent. We decided to basically come with our product offer, which means that we offer competitive pricing.
Secondly, very importantly, we have an automated product which is really like the best in the Baltics, allowing people not to worry about their age or how they should you know diversify the portfolio as they move closer to the retirement age. It's on an automatic Life Path. We start investing more into bonds as the person ages and gets closer to the retirement age. We have had a significant growth in customer numbers as you see, which is great. 90% of our customers choose our automatic allocation principle, which is also great. Although our tools allow customers themselves to make a choice if they so wish.
Of course, the assets under management is still very small for us. It's a small business, but in medium long term, we really expect that this is going to be a supplement, an important supplement for their first and second pillars of our pension system. As the Latvian general population disposable income grows, people are more and more interested in investing and saving through good tools that offer great service. Yeah, and this will give you like a sort of a track record of our five-year growth. I think it's quite important to understand that, as our business grows, our growth also kind of accelerates in terms of absolute terms.
You'd think that five years ago we really started in July 3rd we started this business, and by now we have grown to, you know, over 80,000 customers, is a phenomenal achievement of our team. As the assets under management grow, as the total clients grow, so does our market share. I think it's important here to notice that, starting from quarter two, 2021, we decided to measure our market share from the total market, both second and third pillar, so because both are in our products. That's why you can see that there's a slight drop there in the market share figures.
You know, this is the total savings market we are fighting for, which is, I may be wrong here, but around over EUR 6.5 billion, and it's been growing very fast over the last years. As our business grows, so do grow our revenues. If we look at the sort of a five-year growth of our revenues, then, that is, you can see that, it really adds up and keeps compounding. This year we will obviously be again much higher than we were in 2021. With that I will hand over, again, the floor to Valdis, who will walk a little bit through the financials of our company.
Yeah. Thank you, Henrik. Yeah, indeed, our commission income, we already mentioned figures several times in the first six months of this year was EUR 1 million. We have to deduct the cost to see what is our bottom line, what is our profitability. In order for everybody, most importantly our shareholders to understand our business, in our management accounting, we have decided to split the cost in three major components. The one component is costs expenses directly related to the management of our second and third pillar pension savings of our customers. Second component is our pension client acquisition costs. This phenomenal growth, this phenomenal number of customers we are adding, how much does it cost us to add those customers?
The third component is development costs. In our case, this is particularly the bank project. As you can see, we are profitable before the customer acquisition, and we have been profitable already for a long time before the customer acquisition. It is our conscious choice to invest money into our future growth. We invest money in acquiring new customers significantly below their lifetime customer value. This is not just another item in a P&L statement. This is investment into our future with very clear and quick payback period. We have invested in the first six months EUR 1 million in a new customer acquisition here in this P&L statement, you see about 80% of that.
Where comes the difference, I explain you in the next slide. Then there are development costs, the bank project, and there is one component IPO expenses. As I said, we did a lot of work ourselves. Here you see EUR 64,000, which is not whole IPO costs. The more are coming in the next quarter because IPO was completed in July, and we believe that the total IPO costs will be around EUR 250,000, which is good value for our shareholders. Probably this is one of the cheapest IPOs in the region. For the bank development, we are investing money. We are already recruiting people and that also takes into account management time allocation.
We invested in a bank development project already slightly over EUR 200,000. Of course, those costs are going to grow. Before we have received the license, and the licensing of course is a subject to ECB and Latvian Financial and Capital Market Commission approval. Before we have received that license, we have one legal entity. We don't, we haven't established or we can't establish a separate legal entity, which will become the bank. That we can do at the very end of the licensing process. There is still work to be done.
Adding everything up, we have slightly over EUR 400,000 loss, but that is because we have made a conscious choice to invest into our future, both for the bank development and acquiring new customers. Here is the split of the customer acquisition costs. As I said, we have invested roughly EUR 1 million in customer acquisition in the first six months. 80% of that, almost 80% of that you can see in our P&L statement in a previous slide. About 20% of those costs, according to international financial standards, we can capitalize and amortize over a seven-year period. That's what we are doing, and that's why you don't see those 20% straight away in our P&L statement.
That is, at large, all what we wanted to present to you today. Before we go to a Q&A session, there are three things which I wanted to emphasize. Thing number one is that Indexo customer acquisition machine is working. We have a phenomenal customer growth. We are adding more customers than we have added ever in our history and probably anybody in this market has ever managed. Our churn has decreased significantly. Significantly and in combination with a fast growth, that will have a significant positive effect on our assets under management development. Third thing, we are profitable. We are profitable before our customer acquisition, but we are consciously investing in a new customer acquisition, so that is our biggest cost item right now.
It shouldn't be perceived as just another cost item in any P&L statement because it's a true investment, and it's an investment with a very clear and quick payback period. Especially I want to repeat that, this customer acquisition costs, this is not a bad thing. This is actually a good thing. The faster we grow, the more customers we add, the better it is for Indexo medium- and long-term perspective, future opportunities. That's it, what we wanted to present, and probably it's time to go over to Q&A, and I hand it over to Ieva.
Valdis, Henriks, thank you for the presentation. A reminder to all the participants, if you would like to join the discussion or ask your question to the management of Indexo, please use the Q&A section that you see below the presentation. We do have a webinar question received from Oscars who would like to know how did Indexo manage to increase profits in falling markets.
Henriks, could you take this one?
Sure. I mean, again, I think this question relates really to the profit before our customer acquisition. As we also said during our presentation, really what you need to understand about our business is that it is highly scalable. As our assets under management grow, then our cost by and large, you know, remains the same. We, the same team as what we have today, can manage EUR 580 million assets under management, EUR 1 billion assets under management, EUR 2 billion assets under management.
For us, really the sort of moment where we are today, where the assets are growing very fast, also really accelerates the growth of our, let's say, profit before customer acquisition and investment into bank, as long as that sort of remains directly in pension fund manager books. Because as Valdis mentioned before, if we get the license, you know, in accordance to ECB and FKTK approvals, then obviously those costs will be passed on to a new legal entity that will establish the bank. From that point of view, really, as we grow, that's really good news for all the shareholders because that basically drives our operating profits.
Thank you. Edmunds is wondering, does Indexo Bank plan to provide broker services?
Well, definitely we will start, as we have communicated before, we will start with the basic services for private individuals, physical persons. Probably the broker services will not be in a first kind of, yeah, you know, in a first day we open the doors. We will look into that, and we can gradually add it. That is not simple service to add. It may take some time for us to develop, but we don't have any firm decision on that. The one thing we know it will not be from day one.
Definitely, Edmunds, thank you for this question. You are not the first one who actually asks us about this service because we are aware that, you know, the brokerage world has changed. I mean, for many people, great alternative was Interactive Brokers to do you know trading and we understand that, you know, this sort of service is not so easy to use nowadays, I suppose. This is definitely on our radar in terms of like improvements that we can provide for the Latvian financial services customers.
Thank you. Continuing with question from Zane. What is your unique position in the banking industry compared to banks already operating in the Baltic market?
Thank you, it's a question we hear a lot, and we heard also during the IPO process. First of all, the competition. A lack of competition or a gap in the market is so huge that actually you not have to be a very unique to find your place. As we communicated before, we have assessed that compared to, let's say, an average EU countries, Latvia needs at least 6 billion more loans. Latvia has, in Eurozone, the lowest volume of loans, bank loans issued relative to GDP, and we have one of the most expensive loans relative to GDP. The gap is huge.
There is clearly lack of competition, and it should not be too difficult to disrupt the market, which is currently dominated by a few large players. What exactly is our plan? We're still working on that, but we have, as we said already, over 80,000 customers, and by the time we will be able to launch bank, we probably will have around 100,000 customers, which are physical persons. We will start by providing service to the physical persons, which will be daily services. Then gradually we will go into serving SMEs and expanding our retail banking services. We will be modern bank.
We will not have a branch network, that I can tell you. Eventually, of course our development will be gradual, but we are not looking for some sort of a niche. We are not going to be a, let's say, niche bank, why some people are asking, "Yeah, what will be your niche?" Like in a pension market, we're going actually for the best, most educated, modern, open, customers and that's what we are going to do. In our IPO communication also in a prospectus, you can see that actually for this bank idea to be profitable, to create value for our shareholders, we don't need to destroy existing banks. It's sufficient by capturing relatively small market share.
4%-5% market share in five years would be sufficient really to generate a positive return to increase significantly value of this company. That's compared to almost 10% market share we have achieved slightly over 10% in five years with a pension business does not seem to be unrealistic or overly ambitious even. Henriks, maybe you want something to add because yeah, this is important question.
No, I think you have covered it all. Just for the sake of clarity, the 10% market share you meant was for the second pillar, so not the combined second and third pillar. But I think you're right. Also I think like anyone thinking about the usage of, let's say, the mobile apps in the current service providers in the Latvian market has noticed that they are quite dated compared to the alternatives that you have in the wider European and world context. I think we're also helped here that some of the larger banks are struggling with providing actually good quality service, so which should be a good tailwind for us.
I think that's as much as we can say for now.
Thank you. Our next question is about dividends. Will Indexo pay dividends?
Of course, one day, perhaps, but to be realistic, not in the nearest future. Of course, Indexo as asset management business is breaking even very quickly and will start to generate significant revenues, but that will be needed to invest in the bank, reinvest in the bank to keep the bank growing and expanding. As Indexo investor, I wouldn't count on receiving dividends very soon. And that we also communicated in our prospectus and financial projections, you can see there. It's more value growth story.
We are listed company, so we believe we will work hard for share price to appreciate, and if any of our investors will need some liquidity, then you can sell some of the shares, which hopefully will grow in value. In coming years, dividends are very unlikely.
How is your third pillar actually better, and why should I join from another pension manager?
Well, actually, a year ago when we launched, we actually demonstrated that the third pillar market has been as toxic as a second pillar, if not more, because the only value proposition from our competitors to the savers was, "Well, don't care about any asset growth. Be happy that you get the tax rebate, and that's your benefit." Fees were high, returns low, et cetera. We believe when we launched our product, which is very much like our second pillar, so following our second pillar philosophy, that probably it was the first third pillar product which actually made sense to invest in that already without the tax benefits. Of course Indexo has the same tax benefits as all other pension savers.
We have low cost. We are among the price leaders, so lower cost gives you better returns. It's same as a second pillar. It's passively managed. We're tracking indexes, and as you can see in a second pillar where we have a longer track record, we are beating our competitors. For instance, with our 50% Indexo Jauda product, which has been around for five years, we are actually beating any of our competitors quite significantly. That's the same investment philosophy. Third most important thing, it's a unique product that Henrik mentioned already in a presentation.
This is automatic rebalancing between the equity fund and fixed income fund, so you can trust Indexo to do automatic rebalancing according to your age profile and the time you want to retire, and that is truly unique because with any other competitor, you have to do that switching yourself, and you may forget it. You may not understand how to do it better. There are three advantages. Low price. Very wise investment philosophy, which is proven already with the second pillar products. This automatic rebalancing, which is absolutely unique. Henriks Karmo, if you want to add something.
Thank you, Valdis. This was crystal clear, I believe. The next question is coming from Edgars: What is the attitude of Indexo representatives towards cryptocurrencies?
Henrik, maybe you can take it.
Yeah. I think we as pension fund managers we do not invest in crypto. The reason is very simple. I think it's a quite new product and for the long-term saving what we're providing and this important part of people's lives and that is the sort of a retirement income we just feel that the current equity and bond markets serve that long-term interest better. Who knows?
Maybe in 10- 20 years' time when this industry has developed significantly and gone through the sort of a growing pains that come with any innovation, and also like, you know, has found a like, a more clear footing in the regulatory part of financial industry, which always exists, then it could be something that we could consider. At this given moment and also in the kind of medium term, I think we will stick to the things that we understand very clearly and which are well proven.
Thank you. When do you expect to get the bank license?
Not much has changed since our IPO process. We signal that we expect to. We will do everything which we are responsible for, and we submit the application this year. Of course we depend on Financial and Capital Market Commission and European Central Bank how quick they will be able to make their decision. We can't be 100% sure, but we expect or we work according to the plan that we are getting a license sometime in the beginning of the next year, and we can start to offer banking services, let's say, during the first half of next year.
If we manage sooner, faster, excellent, but that is the plan we are working to. What has changed since IPO? Of course IPO took a lot of management time and attention, which is now released from all IPO related tasks, and we are focusing and throwing all our energy into bank licensing and also bank development tasks. That is our top priority, along with keeping our pension business growing. As for development tasks, that is our top priority, and we don't need to worry anymore about the IPO related things.
Thank you. Can you describe what will be your focus as a bank after getting a license?
It's kind of a repetition of a previous question. Over a longer term or medium term, people sometimes use, you know, what will be your niche and so on, we will not be niche bank. We will be neobank for everybody who is open to use modern technology, mobile applications, internet banking as the main tools interacting with their bank. We will be really a modern 21st century bank. Of course, this development will be gradual. We'll start with private individuals because the private individuals is a little simpler to serve in the beginning and to start our bank journey.
The second reason is because we have already nearly 100,000 customers, which are loyal, happy and using our pension products. Adding the banking services would be the first natural step. Yeah, if I have to tell any difference, probably that would be the no branch network. Really modern distribution channels, digital channels. That is probably a clear difference. We yeah, and we'll pay a lot of attention to user experience, yeah, mobile apps, for instance. I remember 10, 15 years ago in this region, in the Baltic region, we were bragging that we have one of the most modern internet banks in the world.
We have the highest penetration levels here in the Northern Europe, when South Europe was lagging behind us and so on. Now in a mobile age, we are really lagging behind. We are really lagging behind in this region, not only compared to the fintech, but actually to many, many traditional banks, which in Europe and North America have better ways to serve their customers.
Thank you. Normunds would like to hear your view on how Indexo profitability could be impacted by depreciating euro and the possible recession.
I can take that one. Thank you, Normunds. It's a good question. We made a very conscious choice in terms of like choosing our equity strategy that we are currency agnostic. Basically, in our view, when we invest like into those indexes, most of those indexes are compiled of companies that trade globally, so they in themselves have baskets of currencies.
For that matter, we have actually run a sort of like a strategy whereby although let's say like for example, S&P 500, which is the U.S. index that we have, which is the largest part of our equity strategy, although the funds that we're buying are denominated in euros, the shares themselves obviously are correlating with the U.S. dollar behavior because the shares are denominated in the U.S. dollar. Again, I would remind you that, you know, you take Apple or you take, I don't know, LVMH or you take Microsoft, these are all truly large companies that operate everywhere in the world, and their financials fluctuate together with currencies.
Our strategy has always been that we try not to pay too much attention on the currency fluctuations, because again, like our savers are saving over a very long time. By not having a currency strategy in our mind, we are actually able to build a cheaper pension fund for our customers because everything that is hedged from the currency point of view always is an additional cost for our savers. At this given moment, obviously dollar versus euro has had some kind of a nominal most probably positive effect for our savers. But again, like, you know, the financials of the companies that actually are part of our investment portfolio, their financials fluctuate in the same way with the euro and dollar fluctuations.
I don't know how clear that is. In the most probably most sensitive part, which is our conservative funds, we are only euro denominated and only euro issued bonds. There we have no currency effect at all for our investors.
Thank you. Andris has a question about client acquisition costs. How much of EUR 0.8 million client acquisition costs could be attributed to the preparation of bank operations?
No, actually, nothing. This EUR 0.8 million, what you see in a P&L statement, that is only costs related to the acquisition of our second and third pillar pension customers. There is nothing else. The bank development cost, I don't remember the slide number. I think 16, 17. Slide 17. Okay. Yeah, well, or it's also disclosed in our report. You can see the bank development costs, slightly over EUR 200,000. Those are, in a management accounting, we split it separately. The customer acquisition costs are customer acquisition costs only.
Thank you. Indexo is trading in the market now for over a month. Your professional view, how is it going?
I can take this just to give Valdis time to sip some water. I think we're very happy actually, to be honest with you. I think first of all, given the volatility in the market, and also the history of IPOs of the Baltic market, to have an IPO where the stock is trading one month, you know, after IPO, the premium to the IPO price is, I think it's good news for all our retail investors who wanted to support us and, I think that's really great. I do, you know, like in a way, like to think of it in the long term.
I myself, for example, I'm not really looking at the stock market price too often because really our business is constantly growing. You know, hopefully that will translate also long-term into our stock market price. We are happy and we are really thankful for also those people who want to trade. There is certain free float. At times it's actually, given our size, it's actually quite disproportionately large compared to some of the other larger companies that are traded in the Riga Stock Exchange. Thank you all who are our investors and who have supported us.
Do you expect to have seasoned equity offerings in the near future?
It's likely that we will need more capital for a bank development, but there are no firm clear plans. We also in a prospectus indicated that it is likely if our bank development project is very successful, we manage to grow fast. To meet all the capital adequacy ratios, we may need additional capital. It's a good thing we are likely not going to need capital because we need cash, but we may need additional capital to fulfill all regulatory requirements, capital adequacy, et cetera, as the bank. Yeah.
If I may comment here again, like sort of for simplicity's sake, you can think of it like that our pension fund management company, and we actually if you read our management letter, which we're publishing with the second quarter results, you will see that where we're saying that, we will be cash flow positive from our pension fund asset management, most probably reaching around EUR 650 million-EUR 700 million assets under management. That is cash flow positive even after the client acquisition costs.
That means that we as representatives of shareholders, as management, can then, you know, keep on investing into client acquisition obviously, but also invest in bank and the bank once it starts lending, to grow that portfolio. We, if we can do that at the rate of return, which is attractive to all the shareholders, then we will obviously always, you know, grow the capital. Until we reach the scale that also the portfolio will start giving significant cash flow for us to grow that portfolio really by itself. We are actually very soon reaching this point where our cash flow will actually grow naturally our ability to serve our banking business.
If the growth of course and opportunity there is very good and to grow the loan portfolio, then obviously the capital raise is something we should consider.
Normunds would like to look into future a bit. You've reported that you hired a top IT expert to develop bank system. Can we expect internet INDEXO Bank to resemble Revolut platform or more like Swedbank internet bank?
Indeed we are happy that Gints Ozoliņš, really very experienced IT manager joined us starting from fifteenth of August. He has been with us nine days now or six, seven working days. Well, we feel we are making good progress with our systems. Of course, how exactly our internet bank or mobile application, etc., will look like. Well, we want to keep it secret until we will want ourselves to communicate, but we definitely believe we can make a difference when it comes to the user experience, user interface. We can make a difference compared to what we see currently in the Latvian market.
On that question, probably more like less like Swedbank, more like Revolut. Again, we are not going to copy any existing market participant blindly. We probably will adopt best practices from all over the world.
Thank you. Now currently the final question that we have received. Banking will be done in English or not only in Latvian as in this webinar?
Well, I feel a little bit sarcasm in that question, but that's why we started this webinar by explaining why we do it in English, so we can reach a wider audience. We have also a quite large number non-Latvian-speaking shareholders. That's why we decided to keep English as a universal language for those webinars. However, if that is a problem for some of our Latvian-speaking shareholders, we may reconsider that approach. Of course, that would be a complication and an extra cost for us when it comes to the webinars. When it comes to the banking, of course, we are going to be a local bank for local customers.
Latvian is definitely the first language, and so will be English, because we believe there will be some people not speaking Latvian and all other common languages what will be used in Latvia at that time.
Valdis, Henriks, thank you for all the answers provided. We have covered all the submitted questions. Participants, if you still do have anything that you would like to ask to Indexo, you're more than welcome to approach the company individually by sending an email to info@indexo.lv. The recording of the webinar will soon be available online. Therefore, please follow Indexo announcements to stay up to date with company's news. Thank you for your time. Thank you for the questions, and thank you for a valuable hour spent together.