Good morning and welcome to Indexo Investor Webinar. We will start with a presentation on Indexo business updates and continue with a live Q&A session. I encourage every one of you to share your questions in the Q&A section on the bottom of your screen. Questions can be submitted either anonymously or with your name. The session is being recorded and will be available for re-watch shortly after the call. That being said, let me now hand over to the management of the company.
Good morning, everyone. It's nice to welcome you to our webinar. I think we have a great half a year of 2024. Lots of interesting and exciting news to report. Initially, let me say a few words of who we are here. As you can see, this is the first time we have three people doing this information sharing session with our investors. We are joined by Ivita, who is CFO of our company as of May of this year. She was previously working as a council member. In a way, we feel that we are in safe hands, that she has already been working with us, actually, for a long time. Then, obviously, Valdis and myself, who have been doing this reporting since we have been listed in the stock exchange. In between ourselves, our roles have also changed over the last couple of months.
From the moment when we received a banking license, Valdis has been focusing much more on developing the bank side, and I will give him that space and time and take care of the day-to-day business of our group and also the pension fund management side of our activities. With that introduction done, let's move on to our results. Just a reminder that we are still very happy to be in the pension fund management business, although we are excited also of our banking venture. We are still one of the fastest growing pension fund managers in the Baltics. Our funds are performing really well. In May, we received a banking license, which means that we will be launching banking activities very soon. More about that later on in our presentation. We are one of the largest Latvian public companies in terms of shareholders.
Our shareholder number is already over 6,000 and growing. Of course, the second quarter and first half of 2024 was also great from a financial point of view, especially for our pension business. In our banking business, obviously, as we'll talk later, this is still an investment case. The highlights of the first half of 2024, I will not go over the main parts of it, but we are today at 1.15 billion assets under management. That obviously drives also revenue, which for the first half of this year was at over EUR 2 million. We are making a profit, both on before the group and bank expenses and as also a net profit after the group expenses. Our customer growth has been significant, so we are now at almost 135,000 customers.
Looking at the growth rates, I think we are extremely pleased to report another solid growth. If we look at the year-on-year growth rates, our assets under management have been growing 53%. Our commission income or our revenue is basically 45%, which is good news for our shareholders. If you look back at the five years, then really that compounding growth, which we have shown basically year-on-year now for many years, really tells a remarkable story where if we look at over five years, we have grown nine times our assets under management, our clients have grown six times, our revenue has grown 8.7 times. As we are scaling and now we are there with our pension business, we are also becoming increasingly profitable.
This is also represented here on this slide where we say that we are in fourth quarter in a row profitable after excluding the non-pension business. Yeah, this slide shows also that together with the client assets under management growth, our market share grows. We are already at 13% of the total market, so we are the third largest player in Latvian second pillar pension business. We still have room to grow, especially if we look at the fact that our client base is smaller as a comparison to our market share. That is, of course, due to also the fact that we have extremely good customers who have higher assets under management. Still looking at the switching data, how customers join us, then we are doing a good inroad to grow further. We are the fastest growing second pillar manager in terms of absolute numbers of customers.
Also, if you look at the total growth in our assets under management, our growth rate already in absolute terms is second largest number after one of the largest, let's say, financial institutions in the Baltics. This sort of repeats what I said before, that we are the third largest pension fund manager, and we are making inroads to grow further. What are the main sources of our growth? We like this slide because it tells a story of how things compound in our business. Our growth in assets under management and thus revenue is grown by monthly contributions. Also, the new clients joining with inflows, then it's deducted from the customers that are leaving our business with their assets. Then obviously also the market returns will play a role in how our assets grow.
Now looking into more detail into the growth pillars, then we can see that the monthly contributions are growing nicely. That means that both the customer number has increased, and also the salaries are increasing. That means also that the contributions are growing. Together with that, then if we look at the inflows from new clients, then that's really a function of how many customers join us. Market returns obviously has been predominantly the American stock market performance over the last 12 months, which has been extremely strong. We know that there has been certain volatility going on in the last week or two, but as we like to say, pension business is saving in the long term, so short-term volatility has no effect on the long-term saving gains of the customers.
To illustrate that point, we also wanted to show you actually what our largest pension fund, Jauda, how it has performed for our customers. If we take the five years, which for us really is more representative of our kind of long-term results of our fund, then we have outperformed both the markets or our competition in the 100% equity funds category and also the consumer price index increase, which means that we have actually, in real terms, grown our customer money, and that means that our customers will have a better retirement when they get to that age where they need to rely on their savings. One of the things that we are really focusing on going forward in the next 12 months is managing our churn. We have been driven by very successful growth.
That also means that we have clients who maybe not always 100% understand the benefits of being our customers, despite the fact they're not having a rational reason to join or to leave Indexo. Increased competition when we have grown, we are an easier target, and that means that there are certain things that we will be improving in our services over the next 12 months to drive that figure down. If we look at really our customers versus other asset management customers, then our clients are with the highest assets, which means that they are good earners, they are dedicated savers, and what is really important for us in that sense, that also is a kind of very good customer group to talk to about our banking services. Our third pillar, which is the voluntary pension business, is also growing strongly.
That is also something that we will start focusing much more once we have launched the bank app because there will be a lot of opportunities to use the platform for helping people to put themselves on a good saving path. Very importantly, we can also see that our customer number who are doing regular contributions is increasing, which is really good news because it is very important in the third pillar to start saving early and to do it regularly because, with the market volatility, there are always going to be great buying opportunities, and you take away also the volatility affecting your saving. Maybe I would give over now. Actually, I will say some last words regarding the financial results. That yeah, as we told before, revenue is growing very nicely.
Our operating costs are more or less on an administrative level in the same level where they were a year ago, which means that we have a significant growth in operating income. We are still investing into client acquisition, which then is like sort of a cash outflow and a cost for us because we are not capitalizing everything of it. The pension management operating results is already positive, and that means also that we are making a real net profit in our pension business at this given period. This profit should be growing as our assets grow in the future. Then, Valdis.
Yeah. Thank you. So far about the pension business and now a little bit about the bank. As it was mentioned already, obtaining banking license in May was probably one of the largest achievements in Indexo history. Our preparatory works are proceeding according to plan. We have joined the SEPA payment system, Visa network. We are doing tests in live environment. We have set the launch date for the bank, which is already less than three weeks away from today.
It's very close. Launching the bank, I believe, will be a truly historical moment, not only because it is the first bank in Latvia launched in more than a decade, not only because it is the first bank launch since Latvia joined the Eurozone, but this is actually the very first instance when a publicly listed company owned by thousands of Latvian investors are launching a new bank and basically entering direct competition with much larger regional players at the moment. Despite the fact that the licensing took longer than we anticipated, and actually we are able to launch the bank later than we initially anticipated, it is still a perfect time to launch a new bank in Latvia. Firstly, because this is very, what we hope, a holistic market with four large players controlling, in some instances, almost 100% of the market.
This is a very profitable market and limited competition, high profitability, that is an invitation basically to compete there. Lending opportunity, we have spoken about that a lot. Latvia is in the last position in Eurozone when it comes to loans to GDP ratio, so Latvian economy needs a lot of new lending, both for corporate and household customers, and we see that opportunity. The one market which we compare ourselves a lot is Estonia and one difference what we can see that in Estonia, there are a number of local competitors, local champions, which are increasing competition and also forcing the foreign players to be more competitive. That is what Latvian market lacks, and I think we are well-positioned to take that position. About the interest rates, of course, as consumers, we may not like high rates.
Of course, rates are decreasing a little bit, but they will remain rather high for foreseeable future, and which is good news for us launching a new bank because it positively is going to affect our profitability. This is not only a perfect time to launch a new bank, but it is almost a self-evident next step for Indexo because we are so well positioned, actually, to do that, to enter the banking market. First of all, because of our existing customer base. Henrik already mentioned this is 134, actually 135,000 large, and it's not only large, it's a very good, very high quality customers. Assets under management for our pension savers are more than 50% higher than average in the market. Also current sales channels are really well positioned to sell not only pension products but also banking products.
We even believe that having much wider product offering will not only help the, as I mentioned, the banking products, but it will help also selling the pension products. There are more ways how to start the conversation and more ways how to invite customer to join IPAS Indexo as a group. Our brand is well known in Latvia. It's positively perceived and different market survey shows that on top of our existing customer base, there is still a very significantly large group of people which are positively disposed towards starting cooperation with IPAS Indexo as a group, not only pension products, but also looking at other services we may offer. When it comes to IT, since we are starting from scratch, we don't need to deal with any past legacy systems. We can build the most, and we are building the most modern cloud-native IT infrastructure.
Those are not only fancy words, but I think the most visible part where our customers will feel the difference is our mobile app, which will be the main tool in the beginning, how the customers will be able to interact with the bank. As I mentioned, we are piloting our services already and I've been using our app in a live environment with real money, real payments, already almost two weeks, and I can say that this works very well. It almost creates addiction to check different things, to experiment, to make payments because it works so well. It is indeed fantastic and I am sure that most of you who will be able to try it after 28th of August will have a similar opinion. Our app has more than 1,500 screens, and believe me, that's a lot for a mobile application.
That shows we have thought about different products and services and different scenarios using those services our customers may experience. We will launch the app with all most important banking services already in the beginning and then add more as we go in the coming months and years and so on. In the beginning, we'll have both term deposits for savings with very attractive rates. Consumer loans also will be completely built in our app and actually with fully automated decision-making, and the decisions will be made in seconds instead of hours and sometimes days, what is a current market standard. You'll have Visa cards, and I'm also already a user of one of those and all works fine. Our app is cloud-native app without any web-based screens, et cetera, so it will work on iOS and Android phones, devices, and that will be truly native.
When we speak about the payments, when we started to work on our mobile application, we made a number of market surveys. Interestingly, the payments was something people liked the most about the app and also hated existing apps available in the market. It sounds paradoxical in the beginning, but when we dig deeper into that issue, people liked the payments through that app if they paid to the known receivers, repeat the payments within the same bank, but they start hating that app when they have to make international payments to another bank in Europe, to unknown receiver, to receiver in another bank, et cetera. We have really worked hard, and I think we have cracked the problem and our app users will like our payments sorry, in all instances. At least, I am enjoying that already.
Here I will give a word to Ivita to tell a bit more about our financial results.
Yeah. Thank you, Valdis. I'm very happy to be here today with my colleagues and present you the first interim report of the bank. Let's try to find out what will be the result. Of course, as you know, the bank has not started yet operations, so that means that we do not generate any operating income. We are very happy to see the commissions and fee income with the EUR 9, which is the income from our first two customers, because at the end of June, the bank had already two customers. Despite that, of course, the bank continued very large IT investments to secure the bank's development, because as you can understand, the IT investments is the largest category of the expenses when you build the bank.
As you can see, our administrative expenses this year have been almost EUR 2 million, and out of that, 40% has been the IT expenses. The rest, another biggest part is the personnel expenses, which has been around 16%. Obviously because of that, the bank's loss for the reporting period has been at EUR 2.1 million. If you look into our balance sheet, then here you can see also that the bank's capital has been invested in intangible assets, which also is predominantly our IT infrastructure. From there, the three largest items is our wonderful mobile app that Valdis has been mentioning to you. The other largest item is our customer relationship management system, and then the third-largest item is our core banking system, and these three parts together make approximately one third of these total investments.
The total is EUR 3.1 million over all the years we have been working on the bank's development, and out of that, EUR 1.2 million has been invested only this year when we escalated the investments because we got the license. The rest of the capital we keep in the central bank as a liquidity reserve. On the balance sheet, we can see the impact from our two customers. You see that we have deposits of EUR 11. Of course, we are also happy for that, and that, of course, is the line in the balance sheet we want to see growth every time we will be delivering to you our results. Of course, for the bank, it's very important what happens with our capital, and we believe that we have built it very adequately for our start of the operations.
At the end of June, we comfortably fulfill all the regulatory requirements related to liquidity and capital. As you can see from the slide, for the first 12 months, we have been setting higher internal minimum for the capital adequacy requirement, and this is to be prepared for the ICAAP and SREP processes that we will have later next year, most probably in the first half of the year. Then after those, then our bank's individual capital requirement will be set. Then, of course, in the longer term, we look more to the level of 14%-15% as a capital adequacy ratio to be able to ensure continuity of the bank's operations and also ability to generate adequate return for our shareholders. I am very excited to have the bank open. Valdis, would you like to tell more about our launch event?
Yeah. Okay. Today we scratched just the surface, and of course, we also don't want to reveal all the cards right now. We have a lot of very important and positive news to you on 28th of August coming. As I said, I think it will be truly historical event because indeed, the publicly owned company owned by thousands of Latvian investors is entering this banking market and trying to compete in Latvian financial market with international players like we did before when we entered the pension business. A lot of positive news coming. Use the QR code to register for this event, and we believe that we will be watched by thousands online. There will be also a lottery for lucky 200 who will be able to join our event physically.
Please, when you register, you have a chance to click if you are interested to participate in that lottery and be one of those lucky 200. That is all what we wanted to tell you. We hope to see you, hear you very soon already in our event on 28th, which is already less than three weeks away.
Okay. Thank you, Valdis. Thank you, Ivita. I think it's a good opportunity to go to the questions, that there are many. Why don't I give Valdis a pick from all those, because there's mostly bank related, and then we can see meanwhile also whether there's anything else that we want to cover.
I think. Yeah.
Yes. Thank you for the presentation. Exciting times ahead. Let's start with the most popular question that we have received from the audience. When will you start offering banking services to the general public, and is the launch date August 28th already set, or it's just the forecast?
The 28th is the date, and we are working towards that, and the date is set. Of course, if we think of any nightmare scenarios, there is always things which may change whatever plans, but a date is set, and 28th it is.
Thank you. What services does INDEXO Bank plan to offer upon launch?
Yeah, as it was mentioned already in the presentation, we will start with servicing Latvian residents, private individuals, and it will be all the most popular daily banking services, including consumer loans. Mortgages will not be available at the launch date, but they will follow a few months later because we have that product well in process, but it'll take another couple of months after the launch to start offering that product.
Who are the targeted or the potential customers of the new bank?
Yeah. As I said, the physical persons, the private individuals, Latvian residents, and as the mobile app will be the main tool how to interact with the bank, so that must be somebody who has a smartphone and feels comfortable with using the mobile applications. I don't want to say that there is anybody unwelcome, but of course, this will be a precondition, really, to enjoy our services. Yeah.
From private persons to companies, when and how will the financing of companies begin?
Of course, in several years, in 3-4 years, we want to be the bank that provides all most important or all traditional banking services to all customer groups, including companies of different sizes. We are starting with the private individuals because of the two reasons. First of all, that is our existing customer base, and actually, it's a little easier from AML and other perspectives to design the service for the private individuals. Actually, step from going from private individuals to companies is not that big, and we believe we will be able to make that in 6-9 months after the launch. Tentatively, it's not a specific date set, but tentatively, that should be somewhere in the beginning of the next year.
Let's talk about the competition. How do you plan to compete with the banking giants?
Yeah. As I mentioned, I think it's a right time to enter the banking market. It's a very profitable market, limited competition, and we have a lot of reasons why everybody in Latvia should actually try out our services. But as I said, we don't want to reveal all our cards right now. On 28th, I will tell you more, and I think there is a lot of positive news coming.
I think I want to add here also that I don't think that we need to view the market as a sort of constant pie that if you put your knife in there and try to cut a piece, you inherently take away something from somebody else. I mean, the same way, like the pension business has grown. I think the total market, when we launched, was around, let's say, EUR 3 billion assets under management. Now it is almost EUR 8 billion assets under management. The same with the banking market. I mean, it's growing all the time together with people's income growth, together with the nominal growth of the economy. We don't need to see it as a sort of like if we get something, we'll take something away from another player.
Mm-hmm. When would you expect banking business to become profitable?
We have communicated during our capital raises the long-term financial plan. I think that is what we have said about it, and actually, there is not much to add. I don't think there was a specific breakeven event they calculated. The balance sheet of few hundred million EUR is the moment where it can be achieved.
Mm-hmm. From that, yep.
What is also very important to emphasize, what Henrik tried to explain today, of course, the bank has only costs right now, no income, so bank is losing money. Our pension business is already making significant profits and will be able to support the bank going forward.
On the pension business topic, do you plan to increase your share there?
In the pension business, absolutely. We believe that we have a very good product, and that means that there are still a lot of customers out there who would benefit from our approach to the savings market. I think I'm really hopeful that we will have also some product development features which will make us, again, stand apart from the rest of the market in the next six months.
What are the saving opportunities and what are the potential returns?
Okay. Depends if you talk about
Pension business
... the pension business, then Henrik can comment. For a bank, we will have fixed income saving opportunities and, of course, as a new entrant in the market, and we intend to do it with more attractive rates than established competition right now in the market. Again, let's keep intrigue until 28. I think we'll have a very, very nice news coming your way. From the app point of view, then the pensions has a sort of central role as well in our bank product offerings. We believe that obviously everybody should save on top of the second pillar, also in the third pillar products. We will have a very convenient way of how you can top up your third pillar pension plan, how you can actually make the regular payments, how you can get information about it.
I think it's going to be super convenient, super easy to make it take that problem away from you in terms of how to manage it and just automate them. I still want to underline and reiterate that our product is the most, let's say, progressive product in the market in terms of automatic rebalancing, which is for every individual, unique, dependent on their age, incomes, et cetera.
Continuing on the profitability topic, what profit margins are expected in the first five years to consider this a success?
I think we will more measure our success in the beginning in terms of volumes and market shares, and then the profits will come. I think our plan for the bank, which we communicated at the end of last year, I think that plan still stands. This is very, I think, rather careful conservative assumptions. I think we can do better than that, and probably number of customers, deposit volumes will be the key metrics in the beginning. Now in a high interest rate environment, that is where all banks, including ourselves, can make profits. That's how we start. That's also the fuel for the lending. We need customers also keeping their money, account balances, deposits with us to be able to lend.
What will be the bank's strategy for mortgage lending to individuals for the construction of energy efficient homes?
Definitely, I think the mortgage market is the large part of the lending problem in Latvia. If you compare to Estonia then, with a smaller population, the market is twice bigger, twice higher, the mortgage volumes. We see a lot of opportunities, and including energy efficient housing. I think we'll come up with solutions how to make it super attractive. That is also what we have communicated before. We see a lot of opportunities also in remortgaging real estate, which has been already paid down fully or partially, or mortgaging and doing so-called equity release loans for the real estate which the customers already own.
Yeah, if I may add here, just bear with us in the sense that we want to, of course, start lending mortgages or give out mortgages as soon as possible. We are a little bit dependent on the funding side of the bank, right? Because mortgages tend to be longer-term credits, which means that our funding really needs to evolve to the deposits and not only overnight for us to actually start extending those credits. We need to see the stability of our funding base evolve. That's why. We would like to start doing it from day one, but it really is driven a little bit by our growth. That's an important notion to have in mind.
A participant would like to know whether you would be able to take over liabilities from other banks.
Absolutely. When it comes to the mortgages, I think it's meant for the refinancing. Absolutely. I think that is also a huge opportunity because I know also among my friends and relatives, somebody who took a mortgage 30 years ago as 50% paid down, the margin is still the same old high, and banks are very, very unwilling to renegotiate anything. I think we see opportunities to refinancing such mortgages, offering lower rates, longer extended repayment schedules, maybe increasing the amount at the moment of refinancing. There is a lot of opportunities, and I think we'll be a very active player in that. That will mostly start, I think, next year, because right now because of those mortgage rebates or subsidies offered through the solidarity contribution, which is enforced this year, very few are actually willing to refinance right now.
Next year, the situation will be completely different.
From services to your shareholder structure, who holds the majority of shares and are Swedish banks also among the shareholders?
We haven't really followed up in that detail to our shareholder list because, yeah, it's a public company, so it changes every day. Maybe the Swedish banks are quietly buying a couple of shares in our company because we are a great investment opportunity. At least they are not visible anywhere. We are a truly public company, so with a huge free float. Nobody exercises any significant control over the company. Nobody controls over 51% of the company. I think if you look at individual shareholders, then Valdis and myself, I suppose, are the largest shareholders. Again, this is a public company where corporate governance is built from the perspective of every shareholder. Even if you have one share, you feel that your rights are as well represented as those who hold 100 or 1,000 shares.
Again, we are almost 6,000 shareholders, a company dominantly Latvian, smaller retail investors. This is truly local bank, where the shareholder meeting, the board selected by the shareholders, is supervising the management board. We are truly a local bank, going to actually fight or challenge those dominant Swedish banks like we did and are doing in a pension management business.
Can you please tell us more about the investment services potentially offered by the bank? Are there any plans and forecasts about the possibility to invest through INDEXO Banka, and are you planning any investment section in the new app?
Definitely. I think it's a very important part of our story. We want to allow people to have, or our customers to have the best services in the market, and give them access to financial tools to empower them to make their own decisions. It is not going to be the product that we'll launch in the first, let's say, 12 months of our banking development. We are scouting, we are building relationships with service providers. We will not develop this product within our own organization because frankly, I think there are very good opportunities out there, both from technical side, from pricing side. We are looking to most probably cooperate with somebody who will provide that as a white label service. Yeah, so this is as far as I would go. It is on our map.
We are discussing with different service providers the ideas, and we will put it into the fixed development plan soon enough. Obviously, being a public company, we would love to offer a service for our shareholders to keep the shares with us and to also be able to trade with our shares through our application. It's a priority for us from that perspective.
One of the attendees refers to a quote, "The end of low interest rate era." The question is the following: will the banking business offer its clients to invest funds in money market funds to capitalize on the interest rates?
Again, I think we'll expand our all sort of savings and investment product offering going forward. On day one, it will be more traditional banking services, vaults, current accounts, and term deposits. We'll have a very competitive and interesting message on 28th. Again, we'll expand the product offering going forward. Please, I understand, we ourselves also want every possible thing on day one ready. We need to be patient and please also be patient that we have to build that huge offering step by step and launch with something which is already meaningful and reasonable, and then add all the nice fancy things one by one going forward.
Yeah, I think it's important to iterate that we have also selected the product offering from a point of view of, let's say, what customer needs, let's say, for operating 98% of their time within a bank services realm. I think our service is also designed to solve problems that exist and where we can really do it quickly for our customers.
Mm-hmm. A very practical question. When I will get my shareholder card, and will it also be a debit card or similar, like two in one?
We will tell more about the features of our cards also on 28th, but it'll be really two in one. It'll be same card or even maybe better because it's shareholder's card, as other cards. It'll be on 28th already during onboarding process, you will be identified if you have invested as a private individual, during onboarding process, you'll be identified as a shareholder which qualifies for the card, and you'll be offered that opportunity, and you'll be able to receive your shareholder's card and other benefits already at that moment.
Since there are many investors present at the call, will the investors enjoy some specific benefits from banking services?
Yeah, there is this special shareholder offer, but it goes for the ones which had more than 50 shares at the end of the completion of our last fundraising round, which completed in early January this year. Those shareholders will have a right, not obligation, but right to choose the special design card, and they will also have other benefits, discounts which we'll tell more also on 28th what exactly that will be.
How much share options are left to be released?
I have to check exactly that figure. I cannot recall, but we have two basically option programs. The first is fully exhausted and fully used or almost fully used, very few options left. Second program, which consists of two steps, and how it works, it has been approved by shareholders and can be seen at shareholder resolution. They are somewhere halfway. Unfortunately, I'm not prepared right now to give exact figures. Again, just to remind those listeners or investors, so the second layer of options are driven by the share price, so they are out of the money at the moment and rely on the management team who are beneficiaries of those options to only gain in case the share price will increase and in some sense, quite significant. We find it motivational.
What is the long-term goal of the INDEXO Banka in terms of market share acquired in Latvian banking sector?
I would say that the official communication is based on what we communicated, and that shows that in four or five years, if we get 4% or 5% of deposit market share, the bank certainly will be profitable. At the same time, my humble opinion is that is very conservative assumption, and we should aim for more. We should aim over the time for a similar market shares than we have in pension management business. Internally, we have discussed that most likely, once we have launched the bank somewhere in late autumn, when we're preparing also the budget for next year, we will actually do an update on our financial goals and then release it also to all the shareholders.
Talking about the people driving the business, how many employees does INDEXO Bank have?
At the end of June, the bank had 53 full-time equivalent number of people.
What is the bank's people strategy in this scarce and competitive labor market to execute the strategy and succeed? Will you acquire foreign experience to fill the competence gaps?
I think it's a very good question, and I think we may go almost for an hour to answer that. I think the people we are trying to find, of course, we need experience, and sometimes the experience can be obtained working in other banks and so on, and we try to have the right mix. We try to find the people with the right spirit. Our mission is to fight for a better financial environment in Latvia, and we want people who really, truly believe in the positive changes we are making and approaches that job the same way. Just to remind how INDEXO was built, we just tried to create a pension product we ourselves are happy to use, and that was the time we paid the highest fees and returns were miserable, actually.
Looking at the situation or the problem from a customer perspective, trying to solve the customer problem, was the way how we became actually a successful company. We really try hard to keep that mindset, that way about thinking about the opportunity. Of course, we pay fixed salary, but we already mentioned about the option programs. I think the option programs also are a good motivator and especially the second one, as Henrik mentioned, is currently out of money. We have to do a lot of good things, be successful with the bank, and then that will be very rewarding for our 6,000 shareholders, our 6,000 investors, and it will be rewarding also for employees and people working here. For me personally, I think, of course, this is a business opportunity as well, but I think it very well coincides with this very positive, important social agenda.
I think the pension market is completely different as it used to be seven years ago. I would say that as of today, that is the only segment in a financial industry where we can see a true competition for every customer. Finally, everybody wants to have everybody as their pension customer. We don't see that at all in banking. I think we can do a lot of positive things there, and that is motivating, actually, for a lot of people, also the ones who are joining us as employees. Sometimes, we, of course, as you noticed, we send ads out, and some positions is not that easy to fill in. But then there are also instances when the people are applying themselves. They say, "Okay, I have that experience. Do you have something for me to do in INDEXO Bank?
Mm-hmm.
It sounds like a fun, really, to be part of this new project, yeah.
At the moment, the last question that we have received, so once again, about the trading opportunities potentially offered by the bank. Would I be able to buy stocks through my bank account, and what about the crypto in the future?
Yeah. As I said before, it's in our, let's say, to-do list. We are exploring the opportunities to integrate, let's say, a white label service provider with our app in the future. We have not put it on a very defined schedule. Definitely, there will be possibility to buy stocks through Indexo app in the future. What is the kind of, let's say, the product that we will launch in that segment, we are not absolutely sure yet. You will definitely be able to buy and sell. Trade, yes.
Whether crypto is going to be part of our product offering, that remains to be seen and how the crypto market develops and what are the, let's say, what we would consider safe products that our customers would benefit, because we really are adamant, in a way, that we want to empower customers, but we want to empower them in a positive way, so that we wouldn't really definitely consider all the crypto market as something that is positive for our customers. I think, if the person who is asking this question is a sort of active trader, then most probably we will not be providing a very deep professional trading platform like Interactive Brokers or some others that are huge, because we don't feel that we would be able to add anything on what is already done by some of the really focused players in this realm.
Another question from a participant, "Why are INDEXO fees higher now compared to other pension funds? And what motivates customer not to switch if product is the same?
I'm not sure, what do you mean they're higher now compared to other pension funds? There are, as you know, the pension fund legislation in Latvia is determining the fund fees dependent on the volume. There are, let's say, some large players who, yes, because of the size of their assets and their direct management fees that they have been charging are maybe a little bit, a few basis points lower than us, but we are also reducing constantly our fees. The other thing that I would really encourage people to look at is the ongoing cost figure of funds. That is actually the true measure of how much the customer is losing between their money and their stake in the financial markets. I'm absolutely certain that we are extremely competitive there.
I think the other thing is look at our performance. You might say that we wouldn't like to talk about our performance because, we are not active managers. We are just providing a market, let's say, results. There are still a lot of the competition are pretending that they are active managers and adding value. If you look at long-term results of our funds, then you can see actually that their approach does not really benefit the customers in long-term as much as they would like to believe.
I also like to say that, okay, even if the competition laughs or criticized us in the beginning that the index funds are such a bad idea for Latvian pension market. Now, very many of them, or almost everybody in the second or third pillar are doing something with index funds. Then again, be careful when something is called indexed product. It is not always truly indexed, that it's kind of indexed, but we make some active choices. Like we are more green or more this, more that. Basically not everything which is called indexed is really, truly passively managed.
Yeah, so I would say, don't forget to ask your pension fund manager about the ongoing cost figure. I think that's really important. We brought this standard of transparency to the market, so to empower again, the customers to make the right choice. There are always nuances in terms of how the fund is, what the fund is composing of. There has been certain move towards the life cycle fund management, which we are not 100% certain that is really the right way how to manage, let's say, customer funds. The third pillar fund management style that we are doing with INDEXO is the perfect product. It's an individual account. This is really something that we will hopefully be able to announce some new approach very soon from our side.
Thank you. All questions are now answered. It's always a pleasure to see such an active engagement. Thank you, participants. The recording of the webinar will soon be available. Please follow Indexo announcements to stay up to date with company's news. On behalf of Indexo, thank you for joining us today.
Thank you very much.
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Thank you.