Good morning, everyone. Thank you for joining us this morning. It's great to be here for the presentation of our Full-year Results for 2024. I'm here with our CFO, Pascal Perritaz, our CRO, Volker Gloe, and, as usual, I look forward to walking you through the presentation, and then we'll take your questions. Let me start on the first page with the key messages. We're two-thirds roughly into our 2022 to 2026 strategy, and we're pleased with the continued execution that has allowed us to deliver record results last year. First, net income and net revenues are up substantially at 8% and 7%, respectively, driven in part by a strong rebound of the net interest margin.
Second, we're happy and like that revenue growth comes from both business lines, particularly strong in payments. Next, and importantly, we're seeing real and tangible benefits from our transformation, and this is both visible in terms of our product suite and resulting customer benefits, as well as, and this is the fourth point, in our key metrics. cost-to-income ratio has reduced materially to 48.1% with a strong H2, which keeps us on track for our 2026 target. Point five, our loss rate is in line with the long-term trend and a result of very deliberate optimization for profitability, optimizing the triangle price-risk-volume, as we've discussed in the past.
With this performance, last point, we confirm our long-term target and are pleased to propose a dividend increase of 6% to CHF 4.25, which is an expression of confidence in the sustainability of our earnings, as well as a reflection of our strong capital position. Let's take a closer look at the results for 2024 on the next page. Net income just over CHF 170 million, plus 8% with strong profitability focus, as we've been very selective where to grow and have slightly reduced receivables driven by consumer loans. Revenues have grown nicely, and we're pleased with the increase in card fees post-MiGo migration, confirming the robustness of this portfolio.
Our transformation is also cost-to-income ratio improvements with a particularly strong second half, and the ROE came in at 13.4% with a strong capital position, and again, aligned with our policy of proposing a dividend of 4.25. I'll give you an overview a bit on the next page in terms of how we delivered across our product lines and in our markets. Personal loans, again, consistent with our profitability focus and a somewhat softened macro environment, we've been very disciplined in our underwriting. At the same time, we're pleased how the team continued to deliver quite well on pricing.
In auto, net financing receivables are up 1%. The new platform is rolled out, a bit more on that later. We also continued strong pricing focus here. Cards revenues have been quite strong. Our proprietary card program and co-brands have seen nice growth in terms of number of cards, and buy now, pay later fees are up. TWINT Pay Later is now fully rolled out across all partner banks, a bit more on this in the next slide. So when we launched this transformation as part of the new strategy in 2022, the technology transformation really, if you recall, had a dual purpose.
First was clearly efficiency, cost-to-income ratio, and we'll talk about that a bit more later, but equally to enhance our value proposition, both with our customers and our partners, to make it easier and more seamless for them to engage with us. Here we're really making progress across the board. I wanted to share a few examples. With the new auto platform, already we're 20%-30% faster in processing files, and we expect further improvements with coming releases. That's really a meaningful improvement of value for our partners, and we're pleased to hear how they like that.
We now have CHF 3.2 billion of assets on this new platform, and we significantly improved productivity, as I said, more on that later. Our app, we're really pleased with that development. We've got over 450,000 enrollments. We continue to systematically enhance it with new self-service features, with new insurance products that have come live, aligned with our core propositions. It's also we have our auto customers on this app, so it really becomes a central point of engagement for customers across the board.
Digital savings product, about a year in, really been a great success. The migration here is completed as well, CHF 1.3 billion of deposits on this new platform, and really a nice enhancement of our direct-to-consumer proposition, expanding our product offering in a category our customers really care about. Pay later feature with TWINT, as I said, fully rolled out, seamlessly integrated into the customer journey in this app, so set up for good growth here going forward.
So really good progress in transformation and digitization across our portfolio and across channels and partners and customer touchpoints. So with that, let me hand over to Pascal for a more granular look at the financials.
Thank you, Holger, and good morning, everyone. I'm pleased to report on our strong financial performance, with both top line and bottom line showing significant growth. The success is driven by combinations of the improved net interest margin, greater efficiencies from our transformation initiatives, and the continued disciplined risk management with a focus on profitability. With that, let's dive into the details. The 8% increase in net income to CHF 170.4 million is due to a strong increase in net revenue, plus 7% driven by the improved net interest margin of 5.6%, and partially offset by a loss ratio of 1.1%, in line with the long-term trend.
The 7% increase in net revenue to CHF 550 million is the result of the repricing measures started two years ago, which continues in 2024, leading to a 15% increase in gross interest income across our business in 2024. This was partially offset by the increase in interest expense following the continued rolling of the funding portfolio in the changing interest rate environment. Commission and fees income amounted to CHF 170 million. This is up 1%, with the largest contributions coming from the credit card business. Volker will provide more details in a few minutes on the loss ratio.
The operating expense increased by 1% to CHF 264.5 million, with realizations of initial cost savings from our transformations offset by restructuring costs and continued strategic investments, mainly the rollout of the auto core banking platform, as mentioned by Holger before, and investments in our IT cost-to-income ratio declined by 3 percentage points to 48.1%, respectively the first six months of the year, 50.4%, and the next six months of the year, second half, at 45.8%. Let me now explain how the net interest margin developed. As said, net revenue up 7% in 2024 compared to 1% in 2023.
As you can see on the walk on the left side, 2024 was the turning point, with the CHF 30 million increase in interest expense more than offsetting by the strong growth in interest income of CHF 64 million. As a result of this, the net interest margin rebounded from 5.2%- 5.6%. Following the successful repricing, the change in the interest rate cap from January 1st, 2025, the reductions of the SNB as a policy rate, and our portfolio rebalancing with focus on high-quality assets, we expect the net income to stabilize, the net interest margin to stabilize in 2025. Let's move to the financing receivables and the yield.
The net financing receivables came at CHF 6.6 billion, with yield improving across all products. The 1% decrease was mainly due to a 4% drop in the net financing receivables in the personal loans, reflecting the continued selective underwriting and disciplined pricing in a softened economic environment. For decades of underwriting experience, it's critical to navigate in this environment with a sound risk-reward balance and continued calibrations between risk, pricing, volumes.
In 2025, we expect the personal loans assets to return to growth through portfolio steering measures by focusing on higher-quality assets, using analytics to attract most profitable of the customer segments, as we successfully did for credit card migrations, aligning incentives, and further growing online direct channel. In the auto loan and lease business, net financing receivables grew by 1% to CHF 3.2 billion. Despite lower car registrations in Switzerland and despite a drop in used car price in Switzerland, our auto assets continued to grow, although due to our diversified portfolio and supported by our new leasing platform. Credit card net financing receivables decreased by 2%.
Adjusted for calendar effect, the cards assets remained stable. With measures in place, we are confident to return to asset growth targets in 2025. Now I would like to hand over to Volker for the risk performance.
Yes, thank you, Pascal. We saw already in the P&L that loss provisions came in at CHF 74.2 million, which has been translated into a loss rate of 1.1%, and we deem that to be in line with the expectation that we stated mid-year that we would land around 1% loss rate. At that time, we also mentioned already that we don't look at credit risk and losses in isolation, but rather manage for a sound risk and reward balance, and we saw on the previous pages an increase in yield and also a NIM of 5.6%, so I guess that's the context how we look into risk management as part of managing for the overall profitability.
When it comes to the portfolio details and dynamics, we still observe in the current environment to be kind of slightly affected by recent cost of living increases. And here we are thinking about the rental costs and housing costs, health or health insurance expenses. So in some exposed customer segments, this then might affect debt servicing capacities. And as the post-COVID asset growth that we have been seeing on the balance sheet is now maturing into this more softened economic environment, hence, or consequently, we have already adjusted our underwriting procedures for also a risk and reward balance that is sound in the future.
It's part of our DNA to continuously optimize that and to be diligent, selective on the areas of growth, and then also gradually move the portfolio towards higher credit quality segments. In this recent environment, we also observed the customer demand towards longer contractual durations on loans. It probably needs to be seen in the context of our own repricing activities, where customers manage their monthly expenses by moving towards longer contractual terms.
This is a dynamic that we addressed in the second half of 2024, as longer contractual terms lead to insufficient time for our collections activities to be executed before writing off loans that have been falling into arrears. In simple words, we observed more and more accounts where we couldn't exhaust collection activities before writing them off. Hence, we implemented and updated the synchronization of collections procedures and write-off procedures to allow for sufficient time for validating an asset's collectability prior to the write-off. This has an effect on our metrics.
There is a one-off benefit of CHF 6.7 million on the loss provision for 2024, but there is also an effect on the delinquency metrics, as these assets, where the collectability is not evidenced yet, will stay longer on the balance sheet. Hence, we normalized in the graph on the upper right for this effect. If we want to look into the NPLs in a like-for-like comparison, we should compare the 0.8% with the 0.9% from 2023- 2024. Once more, I want to stress the point that in our DNA, it is the constant optimization of this triangle, these dimensions of growth, credit risk, and pricing.
We continue to manage the portfolio towards profitable segments with an elevated credit quality, and by that, calibrate the overall portfolio towards our midterm targets. For 2025, we should then, on the loss picture, not expect something that is very different to last year, meaning that loss performance is not expected to materially change from current levels. With that, I would hand it back to Pascal.
Thank you, Volker. Let's move to the operating expense. The personnel expense declined by 2% to CHF 134.8 million. This is reflecting the ongoing streamlining of our organization. The decrease was mainly driven by a lower number of FTEs, partially offset by severance costs and restructuring programs. At the end of 2024, the number of FTEs stood at 812. This is a decrease of 90 FTEs or 10% compared to 2023. Cost for professional services increased by 18%, and this is mainly due to some additional outsourcing expense and the continued strategic investments. The marketing expense decreased by 15%.
This is due to lower spend on card retention post-migrations. Depreciation and amortization decreased by 2% to CHF 26.8 million. This is mainly driven by decommissioning of software. Overall expense variance was driven by lower capitalizations and pension fund costs. In combination, this results in a significant decrease cost-to-income ratio to 48.1%. Operating expenses in 2024 included around CHF 5 million of one-offs related to restructuring activities, mainly restructuring costs of CHF 3.2 million and CHF 1.6 million U.S. GAAP as a pension cost, with the restructuring cost not expected to incur again. Let's talk about the trend related to the cost-income ratio.
Holger mentioned in this opening the improvements of time to decisions as an example in the auto business. As you can see, on the left side, we realized significant efficiency gain in the course of 2024 through our transformations and our operational excellence strategic initiatives. For 2025, we expect CHF 15-20 million cost reductions and cost-income ratio at or below 45%. This is driven by the following items. On one side, the non-recurring restructuring expense I mentioned before should not incur again in 2025.
Second, the group average number of FTEs stood at 857 in 2024, and we expect the full run rate benefits from our 2024 measures to materialize in 2025 P&L. Third, lower amortization expense in intangible assets expected in 2024, with some capitalized intangible assets reaching the end of their amortization period. And finally, over time, the strategic investments are expected to slightly reduce to decline in 2025-2026 compared to the period 2022-2024. As a result, we expect this cost-income ratio at or below 45% in 2025, and we are on track towards a 39% target or below by 2026.
And this is fueled by continued growth, higher automations with further streamlined organizations from operational excellence initiatives and lower strategic investments. Let's move to the balance sheet. On the asset side, the 1% reduction in net financing receivables was driven by the selective growth and the focus on profitabilities, mainly in the lending business, as we discussed. On the liability side, the funding decrease largely reflects the trend in financing receivables, and the shareholder's equity has increased by 3%, with the net income contributions for 2024 partially offset by dividend payment in April 2024. Moving to funding.
Group funding portfolio decreased by 3%, although reflecting the trend in receivables following the successful launch of our digital savings offering. Retail deposits increased by CHF 451 million in 2024. This retail funding increase allowed us to reduce overfunding sources, leading to a more robust funding profile reflected by an improved NSFR to 123%. End-of-period funding cost increased slightly from 147 to 153, and this is mainly due to the rollover historic of funding replaced at slightly higher price.
The end-of-period funding costs reduced compared to the mid-year 2024, so June 2024, driven by the continued ease of monetary policy by the Swiss National Bank, started in March 2024 and accelerated since June 2024. In 2025, based on the current interest rate environment, we expect the funding rate to stabilize or slowly reduce with lower interest rates for new funding, offsetting the increase arising from rollover of funding raised at the time of negative policy rates. Moving to capital. Cembra remains very well capitalized with a strong Tier 1 ratio of 17.9%.
The final Basel III standards have a negative impact of 0.5 percentage points on the capital ratio from January 1st, 2025 onwards. This effect is actually at the lower end of the previously disclosed indicative range of 0.5 to 1 percentage point. Risk-weighted assets remain stable. Given the Cembra's solid financial performance, the board of directors will recommend a dividend of CHF 4.25 per share at the general meeting on April 24th, April 25th. This is representing a payout ratio of 73% and an increase of 6% on the previous year for the dividend. The 2024 financial performance is driven by consistent executions on our strategy.
Looking ahead, we remain focused on sustaining this good momentum, strengthening marketing positions, steering our asset portfolio towards sound risk-balance, realizations of efficiency, and delivering our strategy and financial targets by 2026. With that, I hand over to our CEO, Holger.
Excellent. Thank you, Pascal. So look, as we're heading into 2025, we wanted to also provide you with a brief update on the environment, how we see it, and look, we said we like this space. We're deeply embedded in the Swiss economy and as a leading player in financial services by providing credit to consumers to fulfill their aspirations and enabling thousands of retailers, car dealerships, and other partners to successfully conduct their business. We play an important role in this economy. Without credit, there can be no growth, so as I say, we like this space, and I won't go into a lot of detail on this page, but just a few key messages for you.
First, the Swiss economy remains in good shape. It continues to show strong resilience, which is a good place to be. Unemployment is low. Inflation under control. We like the regulatory framework and institutional reliability. Second, the lending markets you see on the top right are healthy with continued growth along GDP, as we said before and given our product breadth, our diverse distribution channels and partnerships, both in the personal as well as the auto business, we're well positioned to participate in this growth in 2025 and beyond.
Third, on payments, we're playing in the segments that are growing, whether that is with our diverse cards and co-brand offerings or with our partnerships such as TWINT, and importantly, here too, we see the need for credit that remains intact, and again, we're in a good position to continue capitalizing on it, so in summary, fundamentals of our market remain attractive. We like this space. We're in a good position to play and continue to succeed. We also want to continue on the next page to give you an update where we stand with regards to strategy execution and the key metrics that we're tracking. And as you're aware, we're delivering our strategy along four key programs.
And we're building on our core strengths, our DNA. Here, we've continued to deliver well this year with strong discipline in managing growth risk, price triangle, as we said, and a clear focus on profitability. In operational excellence, we feel good about the progress that we're making. A lot of these have already been talked about today. In addition to the auto platform, we're very pleased with the growing presence in Riga, a center that provides top-quality services to the group, strong access to talent, as well as with our progress in decommissioning legacy systems to simplify our technology landscape and architecture aligned with our strategic ambitions.
On the commercial side, business acceleration and new growth, strong performance in pricing, again, underlying the strong value proposition of our product and the strengths of our teams, our relationships in the market. We've shown how we simplify and digitize customer engagement and customer journeys, such as developing our app as a central engagement tool for all our customers. With regards to culture, we streamlined the organization. The new setup is working well. In a year marked by significant productivity measures, we again achieved Great Place to Work certification.
That's something we're particularly proud of, this achievement and the feedback our teams are giving us. We've done a tremendous job this year, and we're very pleased about this recertification. You see on the right how this is reflected in the financial metrics with good performance in 2024. Again, most of these we talked about, and we're on track for the 2026 target. Let's bring this together on the next page in our outlook. Look, with the progress that we've made last year, with the visible improvements in productivity, with the efficiency gains, with the digitization of our front end, we really have gained some traction and momentum.
And that's how we talk about 2025, leveraging that momentum as we head into the last couple of years of our strategic cycle towards our strategic ambitions and targets. And that's what this year is going to be about. In operational excellence, the new platform is out, live with all dealers. We're excited about this new way of working, the efficiencies and process improvements, strong proposition. We will continue to build on that. We also look to drive continued benefits from decommissioning and leveraging our strong presence in Riga.
In the lending platform, we're pleased with the performance last year with a strong profitability focus that's paying off. This focus will remain important, and at the same time, Pascal talked about our objectives that we're well on track in terms of driving deeper engagement in specific segments and channels to shift into growth again consistently in this business unit. Payments, we're excited about the over two million customer base, a tremendous opportunity to accelerate cross-sell.
We'll further broaden our product propositions with our partners, both existing and new ones, and introducing new features and services around our product base, so what this means for 2025, we expect net revenues at least in line to grow at least in line with GDP, stabilization of the net interest margin. We will see continued improvement in cost income with a full year at or below 45%. Solid loss performance, stable versus 2024, ROE 14%-15%, and the targets through 2026 you see on the right-hand side.
So in summary, a very strong year in 2024, significant progress across strategic initiatives, strengthening our commercial position as well as driving efficiencies. And with that, we're in good shape to achieve our 2026 target. With that, we look forward to taking your questions.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Anyone who has a question may press star and one at this time. The first question comes from the line of Mate Nemes from UBS. Please go ahead.
Yes. Good morning and thank you for the presentation. I have a couple of questions, please. The first one is on the net interest margin. You mentioned that you expect the net interest margins to stabilize in 2025. I just wanted to clarify whether you mean stabilization at 5.6% that you printed in 2024 or at a slightly higher level, perhaps the exit run rate shown in H2. The second question is related still partly to interest income and to risk. I think, Volker, you mentioned that you're shifting or adjusting the profile a little bit towards lower risk exposures. And I'm just wondering, what is the implication then for interest income in NII?
Are we going to see perhaps some pressure on yield in personal loans or credit cards? And that is perhaps offset by somewhat lower cost of risk going forward. Is that the right way to think about it? And the last question would be on capital allocation. Clearly, you had 50 basis points better than expected. Tier 1 ratio. Also, the Basel IV impact is at 50 basis points, the lower end of the previous guidance range. So that just suggests you should be in a position to have quite meaningful surplus capital in 2025. Could you share your thoughts about capital allocation?
Are we likely to see perhaps somewhat higher payouts, maybe special dividends, or do you have aspirations perhaps on the M&A front? And if so, are there perhaps interesting targets on the horizon? Thank you.
Thank you for the question, Mate, and good morning. Let me just set this up quickly, and then I'll hand over to Pascal and Volker to run through the specifics. Look, the way to think about the first two questions, NIM, net interest margin, interest income risk equation, this goes back to our DNA, right? We manage these metrics in combination quite regularly to optimize the profitability, right? And that's the way to think about it. That's also why we guide around the ROE for the full year, as we've explained, but let me hand over to Pascal and Volker to go a bit more into detail on these questions.
Yes, Mate, so regarding the first questions, the NIM is always expected to stabilize at current level, actually, at around 5.6, and as I said, it's on one side following the successful repricing, but we also have the changing interest rates cap. We have, as we expect, on the other side, some reductions, slowly reductions on the cost of fund, as mentioned, and of course, with the portfolio rebalancing, we focus on high-quality assets, maybe some segments a bit at lower price, so in total, net interest margin to stabilize in 2025 at current level. For the second question you had, I hand over to Volker.
Yeah. Thank you, Mate, for the question. And you highlighted that we have already been taking measures to adjust our underwriting policies to get better access to segments that have a higher credit quality. What I nonetheless want to highlight is that it's not given that price is the only measure to get access to these segments. So it's not kind of a one-to-one equation that we should assume here. And as Holger also mentioned, in the end of the day, we are kind of managing this triangle. We want to get the volumes in. We want to get them in at the right price and at the right risk level. This is the constant optimization. As mentioned, we have been taking measures.
These measures obviously apply on the new volumes that we take on the book, which is also the reason why I've been highlighting when it comes to the expectations for 2025. There is not the immediate change that we would see because it needs to creep in slowly on the portfolio, and hence, we have been saying that we don't expect a material change from current levels when it comes to the loss performance in 2025.
Regarding your last questions, Mate, on capital and capital allocations, so we don't have any change in our approach to capital management. Obviously, as a priority number one is organic. And then we said as well, we want to return to some asset growth, which will require a bit of use of the excess capital. Our second approach has always been an opportunistic case for business developments, M&A, remain. And in that sense, to have a smaller excess capital could help. And if one and two are not available, then obviously, payout of extraordinary dividends or buyback could be the last options. We currently have no plan for the last one.
Thank you very much.
Any further questions, please press star and one on your telephone. The next question is from Daniel Regli from ZKB. Please go ahead.
Good morning, and thanks for having my questions. I have actually three. One is on cost income ratio, one is on the net interest margin, and one is then again on the credit quality. And sorry, here, maybe it's a little bit of a follow-up to Mate's questions. So first, on the cost income ratio, so you aim to be at below 45%, and you aim to be at below 39% in 2026, so one year later. So can you maybe just help me understand a bit the bridge between 2025 and 2026? What exactly are the moving parts here to get from, let's say, below 45 to below 39%? And then on the net interest margin, I was just wondering of obviously a good performance on the net interest margin in this year.
However, we have seen the Federal Council already reducing the maximum rates beginning of this year. Probably given the moves we have seen by the central bank and expected further moves by the central bank, most likely we will see another reduction in maximum rates towards the end of this year or in H2. What do you expect would this have in terms of margin impact for, let's say, 2026? Then last but not least, on the credit quality, obviously, we have seen a slight pickup in the loss rate at 1.1%. If I understand it correctly, it would have even been 1.2%. Adjusting for these one-offs, I think you mentioned CHF 6.7 million one-offs.
Can you just first tell me these one-offs, did they happen in H1 or H2, or were they spread across the whole year? Secondly, shouldn't we then kind of in the short term expect a slightly higher loan loss rate, particularly looking at the non-performing loans measures and the kind of 30-day due measures? Thanks.
Yeah. Good morning, Daniel. Thanks for the questions, and again, I'll let Pascal and Volker take them respectively.
Yeah. Thank you, Daniel. So first, on cost-to-income ratio, obviously, we are pleased with the progress we are making and our ambitions toward 39% or below by 2026. As we discussed, cost-to-income ratio is a ratio, although in a sense, we clearly expect some revenue growth going forward. As mentioned on the page on the cost-to-income trends, two to four points would come from the denominators and the rest from the numerators.
Clearly, in the context of 2025, I think I listed the expected improvements coming through the non-recurring restructuring expense, the full materializations in 2024 P&L of the benefits from the 2024 measures or the past measures, some lower amortization expense, and ultimately strategic investments. I would say for 2026, it's a bit more of the same. We are not stopping our efficiency program. We continue to look at where we can further optimize our organizations, streamline our organizations. We will look carefully at our project portfolio as well.
As we know, we had quite significant investments for the first three years also as strategic programs, means coming more to the usual run rate of project cost. With that, we are confident to come to the 39 or below.
Sorry, can I maybe quickly follow up on this one? Just this CHF 15 million-CHF 20 million cost reductions you state for 2025, so will they kind of be fully visible in the 2025 cost line, or is this kind of the exit run rate of cost reductions you will have achieved by year-end 2025?
We expect the CHF 15 million-CHF 20 million to be fully realized in the P&L in 2025.
Okay, and then more to come in 2026.
More to come, depending on the development of the revenue lines and on our continued project initiatives.
I see. And just restructuring expense, you don't plan any for 2025 anymore, I heard you say.
Currently, we don't have plans.
Okay. Very clear. Thanks.
On the third question that you asked, Daniel, first of all, thanks for the question. And it's about the one-off that relates to the synchronization of the operational collections procedures with the more financial write-off procedures. This is a change that we have been executing on in the second half of the year. So not in the first half, and consequently, it's not an effect that has been rolling in over time. And I probably need to go a bit more also into the details to explain then the link into the delinquency metric that you have been rightly observing and highlighting.
So what we have been doing is giving ourselves more time for collections measures to materialize before writing off accounts. So we validate the collectability of accounts better before we charge them off the balance sheet. Hence, we are keeping these accounts for a longer period on the balance sheet. It might give them the positive effect, the timing effect, or the one-off effect on the P&L, but the portfolio metrics, so delinquencies and PLs, these are balance sheet metrics. So we still see these assets on the balance sheet. Hence, we see the delinquency development.
That means that even with higher delinquencies that we are now seeing in these metrics, it would not lead to the conclusion that mechanically or automatically, also the loss provision going forward would increase. As mentioned, it's just a mechanical impact, one on the P&L and the other one on the balance sheet. Hence, we also are kind of giving the guidance saying that the loss performance. There's no material change expected to current levels.
Okay. I think now I got it. Thank you for the explanation.
Thank you. And Daniel, regarding your second question on the net interest margin, so first, obviously, reductions in the max interest rates are also driven by ease of monetary policy from the SNB. So obviously, this is driven by lower SNB policy rates, which would also have a positive impact in meantime on the interest expense. So in total, we guide for 2025 with the net interest margin to stabilize at current level. And I think this is a good level of net interest margin we are ambitioning.
Okay. But can you maybe give some kind of color on what do you expect for 2026 in terms of net interest margin? I assume that the reductions on the central bank rates are more immediate, and then obviously, the effects on the asset side or the yields comes with a certain time lag. In the moment when the central bank reduces rates, it kind of helps you a bit on the net interest margin, but in the moment when the Federal Council reduces the maximum rate, it should kind of negatively affect your net interest margin. So is this more or less correct, or would you disagree with this statement?
Look, ultimately, the net interest margin is an important KPI we are tracking, and we want to stabilize in the current level. As we also said, it's ultimately not only a pricing topic. It's a pricing, it's a commission level we pay, it's portfolio mix. So we also look at the net interest margin in the overall context of the risk pricing and volumes. And as I said, it's clearly interest margins with the objective to stabilize in the current level in 2025.
Daniel, another way to think about this, right? These things, as you're alluding to, right, obviously, they can be shifted from one quarter to another. But think about it this way. We were at very similar levels in previous low interest rate phases as well, right? So there's a number that we're managing towards, as Pascal is saying, with various levers, and hence the guidance on stabilization.
Okay. Thank you.
Thank you.
Once again, to ask a question, please press star and one on your telephone. The next question comes from the line of Serge Rotzer from Lombard Odier. Please go ahead.
Yes. Good morning, gentlemen. I would like to come back on cost-to-income ratio topic. You mentioned before that 2026 improvement will be more or less about the same as we will see in 2025. But when I looked at the improvement, it looks very different. You improved cost-to-income ratio by 300 basis points in 2024. You target another improvement of 300 basis points in 2025, and then 600 basis points improvement in 2026. So this tells me that you are too cautious for 2025, or it's very back-loaded in 2026, and I don't know for what reason. Can you help me to understand this disproportionate improvement in 2026 or 2025?
Thank you, sir.
Thank you, sir.
First of all, I wanted to remind again that we are talking about a ratio. And for the first time here, we are also introducing in our indications an absolute number, the CHF 15 million-CHF 20 million. So look, the 45% we are referring to for 2025, we said at or below. And honestly, yes, it depends on some expense on the development on the revenue. We have also given guidance, at least in line with GDP growth, the net revenue. And we are focusing on what we are controlling, but that's why here we have some flexibility in the cost income ratio the way we have indicated in 2025. No change in our ambitions, as we said. We have a clear path how to come to at 39 or below by 2026.
We have a set of actions which have already been fully triggered, as we discussed in 2024. By the way, we have shown 15% reductions in FTEs over the last 18 months, 10% over the last 12 months, the streamlining of the organizations, and the other measures I mentioned. So yes, 2025 at 45 or below, and depending a bit on how ultimately the revenue will develop in the next two years. We are confident they deliver the ambitions, the efficiency targets, and the related cost income ratio at 39 or below.
Okay. This is very helpful. Thank you. [moving Angelo]
Thank you.
We have a follow-up question from Daniel Regli from ZKB. Please go ahead.
Hello. I have another question or two, if I may. Just one on buy now, pay later, and the second one on kind of the growth outlook. On buy now, pay later, I remember you have been talking about portfolio optimizations with H1 results. Can you maybe talk a little bit about what do you expect from buy now, pay later over the next, let's say, 12 months? Have you concluded with this portfolio optimization exercise, and can we expect buy now, pay later to return to growth in the next 12 months, or is this kind of still ongoing? And then secondly, obviously, we have seen financing receivables down slightly year on year. What do you expect going forward?
Is this also kind of an ongoing thing that we should expect the balance sheet numbers to rather, let's say, be stable or slightly down while margins are kind of improving, or do we see a return to growth there as well?
Yeah. Thanks for the follow-up questions, Daniel. So look, buy now, pay later, you're right, right? We spoke about it at mid-year, the ongoing portfolio optimization, and that's certainly still been the case a bit in the second half. But if you look at it, we merged the businesses. We concluded the merger of the two businesses. We have an organization that's set up on a new baseline to grow, and that optimization effectively, as you said, is done. The big picture here, right? We were quite pleased with the payments performance overall. We've had a great year in terms of revenues for that business unit. We do still see that excitement with well over 2 million customers.
And if you look at H1 and H2, then in the second half, the fee side in buy now, pay later did grow 3%. We did regain some momentum and traction there, and we plan to leverage that into this year. And again, we gave clear guidance as to the CHF 10 million-CHF 20 million net income contribution by 2026, which we're happy to reiterate again today. That's on the buy now, pay later side. More generally, your growth question, look, as we explained before, right, what you've seen in personal loans in the last year has been quite deliberate. We talked about the triangle between risk, growth, and price, and managing that for profitability. And I think that's exactly what we've done.
And so in a sense, that's been quite deliberate. At the same time, as we also alluded to, number one, we have a growth ambition for all our businesses. And secondly, we are planning to return this business to growth as well. We gave an overall guidance, right, at least in line with GDP from a revenue perspective. And we have specific measures in place around the personal loans business to return to growth in terms of some of the things Pascal mentioned with specific segments where we see growth opportunities as well as certain channel incentives and sales force incentives. So those plans are in place or ongoing.
And so the short answer is yes, we do plan to return to growth in that business as well.
Okay. Can I just quickly ask a follow-up question on the buy now, pay later business? Can you give us some kind of indication where we stand today? Obviously, in two years, we want to have CHF 10 million-CHF 20 million net profit contribution, but is it break-even today, or is it, yeah, how much is the gap to the CHF 10 million-CHF 20 million?
Yeah. So I would say, Daniel, we have all the ingredients and actions in place to make it into that range, and hopefully, it'll give you some comfort. So we adhere to the guidance, and we reiterate the guidance.
I see. Okay. Thanks.
Thank you.
Bye-bye.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Mr. Holger Laubenthal for any closing remarks.
Excellent. Thank you, Operator. Thanks, everyone, for dialing in. It's been a pleasure. We're excited about the 2024 results, record net income. I think we've got the right actions in place to deliver 2025 as well, reiterating the 2026 guidance. And so with that, everyone, have a great day, and we'll talk to you soon. Thank you.
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