Good morning, everyone. Welcome to our call for the first half twenty twenty five. Great to be here. As usual, I'm with our CFO, Pascal Perica and our CRO, Volker Gruhl. Look forward to walking you through this presentation and then taking your questions.
So let me start with the key messages here I have for you as we continue to pace well towards our 2026 targets. First, our focused strategy execution continues to drive results, and we're pleased with a strong increase in net income of 11% versus prior year, underpinned by costincome reduction of almost three points and toward delivering an ROE increase of more than one point. Second, this performance uplift is driven by a number of levers, mostly benefits from efficiency problems as well as favorable loss and funding cost dynamics. Next, revenues and assets are stable. This is consistent with our approach of profitability maximization and softened macro environment and managing the triangle of price, volume and risk.
And this performance is also reflecting our strong capital position. Fifth, and with this solid H1 performance, we remain committed to achieving our 2026 financial targets, supported by increased growth momentum we're seeing in target segments, continued efficiency gains and active capital management. We go straight into the first half highlights. Net income came in at €87,200,000 up 11% with a strong focus on profitability. Net revenues and financing receivables are stable and roughly a three point decrease in the cost to income ratio.
Loss performance is in line with our targets and the ROE is up substantially to 13.8%, overall delivering strong capital ratio of 17.7% above our target level. Let me zoom in on the specific segments in the market. Personal loans, the market has been slow, in fact slightly down. And consistent with our profitability objectives, we've been disciplined here in our underwriting and focused on retaining strong pricing. We have seen nice recent growth momentum combined with a mix shift towards higher quality assets, and we'll have more on this a bit later in the presentation.
In auto, a strong first half, leveraging our new leasing platform. As you know, we rolled this out well received in the market, strong pricing actions taken and grown our receivables by 2%. Parts financing receivables are up as well by 2%, as is the number of cards with nice increases coming from both our co brand and proprietary card portfolios, offsetting remaining cumulus runoff. Also growth in our core BinoPelator platform with both volumes and invoices up. Billing volumes have reduced due to the planned exit of non core partnerships. So next page. We've talked in the past about the dual purpose of our strategic transformation. And clearly, efficiency is one key element, and we've talked about this. But equally, strengthening our value propositions more effectively using data and simpler processes and tools to drive engagement with customers and partners and resilience of our business model. And we're excited to see the continued improvement and momentum here. So these are just a few tangible examples across these objectives.
In both business units, the pace of product and service expansion is accelerating, driving good account acquisition and regaining volume growth, setting a strong foundation for growth going forward. We've discussed in the past that we're investing in expanding our data, our modeling and AI capabilities and these investments are also paying off. We've seen, for example, substantial uplift in the performance of some of our recent CRM campaigns as well as significant improvements in fraud detection rates using self developed AI capabilities and testing samples. So both of these just a couple of examples we want to apply across the organization and scale up as we go forward. Last but not least, we could not be more excited about the continued benefits from our new auto platform.
We've talked about this in a bit more to come. Processing times, for example, continue to drop now almost cut in half and straight processing rates are increasing. So again, just some specific examples from across the business, illustrating impact of simplification, digitization and innovation in delivering on our strategic transformation. So at this point, let me hand over to Pascal for a more detailed look at the financials.
Thank you, Older, and good morning, everyone. I'm pleased to report a strong financial performance for the 2025 with net income increasing by 11% to 87,200,000.0. These results reflect our successful strategic executions, improved efficiencies and favorable development in loss performance and funding cost. With that, let's turn to the profit and loss. The 11% increase in net income is driven by lower provisions for losses and reduced operating expense.
The net interest income remained stable at 84,300,000.0 with lower interest income offset by reduced funding costs. Commission and fees declined by 2% to 83,000,000 mainly due to lower credit cards and insurance fees. Provisions for losses decreased by 11% and our CRO Volker will comment in a few minutes. Operating expense came in 6% lower at 127,300,000.0 and this is driven by efficiency gains from our strategic transformation. The cost income ratio improved by about three percentage points to 47.6%.
Let's move on to the net financing receivables and yield development. The net financing receivable remained stable at EUR6.6 billion, reflecting deliberate selective growth and the focus on profitability. Personal loans declined by 3% to 2.2% due to the selective underwriting and focus on lower risk segments. Auto lease and loan increased by 2% reflecting continued growth and market share gains. Credit card receivables also rose by 2% supported by steady customer engagement and BNP receivables decreased by 18% or billion following the exit from non core partnerships.
Yield trends remain stable across product with parts repricing measures supporting return. Let's continue with the net interest margin or NIM. The NIM improved slightly to 5.4% compared to 5.3% in the last first half. Let me explain the waterfall chart. The adverse impact on the NIM, as you can see in the red columns, stem from lower volumes due to selective growth and reduced income from cash and cash equivalents, driven by easing of the monetary policy and are both expected to stabilize.
And looking ahead, lower future interest expense should offset the effect of reduced pricing on new business. As a result of this, we anticipate the NIM to remain stable at around 5.5 in 2025. I will now hand over to Volker to comment on the provisions for losses.
Yeah. Thank you, Pascal. As already seen in the P and L, we record for the first half a loss provision of 31,400,000.0 or translated into a loss rate that stands for 0.9% and with us slightly better than last year. One driver should be highlighted in that context and it goes back to what we communicated already in February when reporting on the 2024 results. Let me just briefly recap on that.
Due to a change that we saw in customer demand towards longer contractual tenors and personal loans, we were writing off an increasing number of accounts before all collections activities were exhausted, which means that the collectability of an asset could not be fully validated prior to the write off and hence we synchronized and better the collections and write off procedures to allow for this validation. That was implemented in Q4 last year and we extended that to the order book in Q1 this year. And this updated synchronization temporarily affects the loss rate positively. But we also see the opposite effect on delinquencies and NPLs as assets that are in the collections procedures are kept longer on the balance sheet, the ratios for delinquencies, surplus and NPLs are just mechanically going up. In the NPL graph on the upper right, we illustrated that and tried to adjust for this effect.
So instead of the reported NPL of 1.8% under the previous logic, and that would be the comparison then, it would have been rather around 1%. So also without this effect and the adjustment of this effect, underlying core NPL performance has slightly worsened. And the reason why is that we continue to see that certain customer segments are more exposed to the softened macro environment where past cost of living increases and here we are thinking about energy costs, rental health insurance costs, it still affects customers' debt servicing capacities. So as part of our regular credit risk management, we have already addressed the situation by adjusting our risk appetite through underwriting policy setting. And the effect of that is highlighted in the bottom chart when it comes to the CR rate distribution.
We see in the new business and that's the bar on the right side, a distribution that is materially better to what we already have on the book, which is the bar in the middle. So consequently all things being equal, we should expect that over time the asset quality improves. Nonetheless, I want to remind that we don't manage credit risk in isolation. As part of our DNA, we always manage this triangle volume price and risk to ensure that we get sufficient return for the risks that we are taking. And with a loss rate of 0.9% and the NIM of 5.4% that we saw on the previous page, this is certainly the case.
So when it comes to the outlook for the full year, so considering the H1 performance, loss performance in H1 and also our experience around the seasonality between H1 and H2, we would keep our expectation of a loss rate of around 1%. And with that, I hand it back to Pascal.
Thank you, Volker. Moving forward with operating expense. The total operating expense declined by 6% to €127,300,000 The personnel cost expense reduced by 12%, mainly from an 8% reduction in FTEs. Depreciation amortizations decreased by 25% due to the life cycle completion of past intangible assets and project costs. This resulted in an improved cost income ratio of 47.6% on track to meet the at or below 45% target for the full year.
Let's take a look at the trends of the operating expense. The efficiency gains from the transformations program are materializing. The auto platform rollout and process optimizations contributed to improved productivity. FTE declined by 8% year on year, I said before. As you can see in the waterfall chart on the right, the anticipated cost reductions of 35,000,000 to 40,000,000 expected to be driven by three main factors.
Lower personnel costs resulting from already implementing restructuring measures and continued disciplined approach to hiring. Efficiency gain in technology including consolidation and decommissioning of infrastructure, as well as reduced funding for strategic projects. And reduced depreciation and amortization expense for some software and intangible assets reaching end of lifetime in 2025 and 2026. Supported by increased growth momentum and further efficiency gains, we remain on track to achieve a cost income ratio at or below forty five percent 2025 and below 39 by 2026. Now let's move to the balance sheet.
Mentioned before, the net financing we see will stable at 6.6 with portfolio shift to higher quality assets. Our funding portfolio increased by 1% to 6,500,000,000.0, mainly driven by saving institutional term deposits and shareholders equity decreased by 3% reflecting the dividend payout of 125,000,000 in April. Let's continue with funding. The end of period funding declined to 143%, down from 153% at year end, driven by the easing interest rates and development. Following the successful redesign of savings offer in 2024, retail deposits increased by 112,000,000 this year.
The retail funding increase allowed us to reduce over funding source, leading to a more robust funding profile reflected in the NSFR of 120%. In June, we successfully priced our inaugural €150,000,000 auto cover bond further diversifying our funding source. This brings us to the capital. We remain very well capitalized with a tier one ratio of 17.7% and a go forward target of 17%. The adoptions of Basel III final standard from January 2025 led to increased risk weighted assets of 192,000,000, reducing the Tier one ratio by 0.6% as expected communicated previously.
Our capital and dividend policies remain unchanged. Through active capital management consistent with our disciplined approach since IPO and CONSIM as part of our strategy at our Investor Day in 2021, we aim to enhance shareholders return on earnings per share by redeploying capital above our 70% target threshold. Our capital allocation priorities remain one, organic growth two, disciplined M and A guided by rigorous financial and strategic criteria and three, return excess capital via share buyback and extra dividends. Before I hand over back to Roger, let me provide you with a deep dive on our two segments regarding our portfolio priorities. In lending, we aim to rebalance our portfolio towards more secure assets and higher quality assets and improving risk adjusted return.
You see on the left side the portfolio shift with our return on financing labels improving to 2.1% from 1.6% in 2023. In 2025, as mentioned as a bifocal before, we focus on higher quality risk segments as you can see in the middle, especially for the unsecured personal loans business. We are pleased to see that our personal loans assets stabilized in second quarter twenty twenty five and slightly increasing since Q2. Regarding payment, adjusted for runoff and non migrated cards, the underlying cards business grew again. We launched several initiatives in H1 including Scan2Pay, Click2Pay, Instant Card onboarding and new insurance offerings for the cards business.
The NPL billing volumes declined due to portfolio consolidations, but the core of the NPL volumes grew by 2%. Non core mainly refer to the pure invoice processing. We expect revenue and volume to grow growth to accelerate in the second half supported by our innovations pipeline in both cards and BNPL businesses. With that, I hand over to Holger.
Great. Thanks, Pascal. So, let me walk you through our strategy execution scorecard. You've seen the slide before. I'd say good progress across the four programs on the back of our strong DNA.
As you've heard this morning, continued strong profitability focus. And we're also pleased by the work our team has done in launching the covered bond program, which further aids our funding diversification. We have now migrated all auto customers to the new platform. And again, you've seen the efficiency and simplification benefits that continues to deliver as we go along. Also, range of steps forward on the commercial side.
So we launched a digital and simplified card onboarding process for buy now pay later customers. You've heard about the new insurance offerings and service launched in payments. And we signed several new partnerships notably with Globus, a large premium department store retailer and Zalando, one of Europe's leading online fashion and lifestyle platforms. Last but not least, we continue to strengthen our team's engagement activities, and we're quite excited about yet again being recognized as one of the best workplaces in Switzerland. You see how this is reflected in the financial metrics on the right.
Overall strong progress across capital cost losses and ROE. And with the recent momentum, also a good outlook on financing receivables growth as we're heading into the second quarter. Let me bring this all together in our outlook. Look, a clear set of priorities for the second half, as Pascal alluded to. For lending, continued growth in auto leveraging the new platform, delivering asset growth in personal loans on the back of recent growth momentum we see in our selected segments payments to drive growth based on the new service and features we shared as well as the revamped loyalty program, which we will be launching.
And beyond that, we will continue to deliver efficiency improvements through focused execution on our transformation programs. Overall, with that, we expect continued resilient performance across the business with net revenue growth at least in line with GDP, further improvements on the costincome rate and loss performance along our guidance. On the back of growth momentum, efficiency gains in active capital management, we confirm our ROE outlook for the year as well as our commitment to the 2026 financial targets. So with that, thank you for listening to now and to this presentation, and we look forward to your questions.
Anyone who wishes to ask a question may press and one on their telephone. You'll hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press and two. Questioners on the phone are requested to disable the loud The first question comes from Vinditi Andreas von Thoebel. Please go ahead.
Yes. Thank you for taking my questions. First one on personal loans. You mentioned that assets have stabilized and have started to increase again since the second quarter. Maybe you could explain a bit what's going on.
Is it a market effect? Or is this more from what you're doing? Actually, what you mentioned in terms of quality focus, especially on new business, this would still mean very selective. So maybe you could explain that. And maybe on this credit quality and quality focus, as Volker mentioned, there has been quite a shift on the new business side.
Can we expect this to remain and therefore, over time, to reflect to be reflected also in a lower loss rate over some time. Then on the net interest margin guidance, 5,500,000,000.0, around that for the full year would mean a slight uptick in the second half. I guess on the rate cap, there's going to be probably still some pressure, if I'm not mistaken. So would this mainly come from interest expense? And would you be able to provide any guidance on funding costs?
Excellent.
Thank you, Andreas, for the questions. Let me kick this off and then I hand over to Volker for some more color on the loss line side and then Karl on the other questions. So indeed, look, we're pleased with the recent momentum we're seeing in personal loans. And it does reflect a shift in terms of the recent quarter that we've brought in the books, right? You've seen this in Volker's slide with the second quarter new volume that we've originated.
Look, I'd say, Andreas, we talked a bit before about sort of a softened macro environment, right, and pressure on some households in terms of cost of living. And I'd say this is just regular diligence that we apply across the cycle. And we're just cautious in some of these segments and hence a focus on originations quality improvement that we've recently seen. So I'd say, we would expect to have continued focus on this quality improvement. And as always, this triangle of volume, price and risk, we'll fine tune it as we go along.
But I'll let Volker add a bit more color on this.
Yes. I can echo what you have been saying, Volker. So we remain focused on the quality on what we are putting on our book, especially in times where we deem it to be a softened macro environment because what we have been learning from the past is that in a softened macro environment better quality segments are less exposed to volatility, which and we want to have predictable results. Kind of on your question if that over time would also lead to improving loss rates. I think here I want to give some color in a sense that we do not intend to minimize the loss rate.
We try to kind of keep the loss rate around 1% also in line with our midterm targets and rather optimize for the profitability. So we are constantly managing it. But for the year 2025, we keep our guidance or our expectation of a loss rate around 1%.
Thank you, Andreas. And regarding the net interest margin, as we said, as we guided for the full year around 5.5%, roughly as stable. We have 5.6% year end and 5.4%, 5.5 so quite stable. Clearly, although in the midterm, we expect the cost of funding to reduce following the easing of the monetary policies. And basically, although what does it mean?
It means that the tailwinds from the lower interest expense expected to offset by the impact of lower pricing on your business.
The next question comes from Nemez Mate, UBS. Please go ahead.
Yes, good morning and thank you for the presentation. A couple of questions, please. Firstly, on the regulatory interest rate cap. Could you comment on the prospect of another percentage point cut to the interest rate cap? To what extent have you baked this into your statement that net interest margin could be stable beyond 2025 and the 5.5% level?
Any sensitivities would be very helpful. The second question would be on BNPL. I would be interested in a bit more color around portfolio consolidation, specifically the exit partnerships. What was the rationale behind this? They simply did not develop the expectation, did not generate the benefit volumes or anything else beyond that?
And also in the NPL, could you comment on the timing of Globus and Zalando coming online? And perhaps a last follow-up on on the loss rates and asset quality discussion. You very clearly shifted towards higher quality in new lending in the first half. You've been saying that you're seeing some some stabilization increase in assets again, and you you clearly intend to to optimize for profitability. Does that mean that you're open to higher growth in lower asset quality segments once concerns around cost of living is a bit?
Or what explains then the continued 1% guidance on loss rate? Because that seems quite conservative given the trends you've been mentioning.
Thank you, Matte, for the questions. Very good. Let kick this off and then my colleagues add additional color. So the look, what I would say on the rate cap, there's a clear mechanism, right? And it's been, I'd say, reliably delivered on in the past, which I think that's the good news to start with.
So look, basically, I'd say at a high level, Matteo, we run these scenarios. Of course, we don't know what as and when that will happen. But clearly, if you look across our book, right, different products will be impacted in different magnitude. And I'll let Pascal add a bit more color in terms of the details. But yes, I mean, if and when that happens, we'll obviously we would obviously have the offsetting on the funding side as well.
Pascal, what would you add in terms of the different products here perhaps?
Yes. So, in terms of if you look at the on the page 26, the segment results, you see that actually the interest income on the payment has already used by around 3,000,000 for the first And this is mainly driven by the reductions of the interest capital we had at January 1 from 14% to 13% for the cards business. So if you analyze, then you can call here the Doppler around. And clearly, looking forward, no information that we made around will change at this point in time.
But of course, this is calculated in our overall and our estimate around the whole net interest margin for this year and in the future.
Thanks, Baskar. Let me talk a bit about the binary related questions and then lead into loss rate with Volker, again, giving some more color. So, the portfolio consolidation is mainly around some activity that we've had in invoice processing, which is really a noncore product to what we're doing in buy now pay later. And as such, exiting that and the related relationships actually allowed us to focus much stronger on the core products that we drive and delivering growth against our ambitions. And as such, I think, again, it gives us more focus and also the confidence that we've articulated around returning make sure we get into growth on the payment side in the second half and going forward.
And Globus and Zalando are contributors to that messaging and the confidence. They're essentially coming live as we speak this quarter. So again, clearly, one element of lifting growth in the Banner Prelator and the broader payments business. Lastly, on the loss rate, I think your observations are right in terms of stabilization optimizing profitability. I think Volker sort of alluded a bit to this, right?
We guide the around 1%. I'd say we fine tune this regularly, right? This is something we look at on a quite frequent basis in terms of, again, volume price, risk mix and which segments we want to grow in to manage and maximize our overall profitability. I think that's essentially how we think about it. But Volker, please add some color.
You're absolutely right. And so kind of the focus on quality will remain. It's not that we now suddenly go into gross quality. That's not our intention. And probably also can be added into that discussion is that we compare obviously the new business against what we have on the balance sheet.
But the new business obviously is smaller than the assets that we have on the balance sheet, which means that the quality improvement of the assets will creep in over time. It will take some time. Therefore, we feel confident with the expectation that we have been giving for this year of around 1% loss rate and to maintain a prudent guidance for the year.
Excellent. Thank you very much.
Thank you, Batya.
The next question comes from Daniel Regley, Surgic Antonalbank. Please go ahead.
Apologies, I was a bit late to the call, so I might have missed the start. But nonetheless, first question is a follow-up on Martin's question about the eventual rates or cuts in maximum interest rates. And can you give an indication about how what percentage of your personal loan book is still affected by an effect an eventual cut in the maximum rates for consumer credits? And the second question is a bit on the cost development, where potentially have missed a part of your comments. But it seems like H1 was still costs were still a bit elevated.
So can I expect the majority of this reduction of EUR 15,000,000 to 20,000,000 you guided would come through in H2 only? And then, obviously, if you could just give me some more details on where the the the things are where you think you can still reduce cost? Or is this, for example, this IT decommissioning, is this already set in stone that this will happen? Or are there still kind of open tasks to perform to achieve this cost guidance you gave for '26?
Thank you. On the rate cut, the cost business, this has a direct impact. Although this is driven by the short term snatcher of the business where basically as though the the adjusted low interest rates applies to the full portfolio in the P loan business and the auto business. So this is basically on the new business only. Obviously, for the auto business, the impact is not material.
And for the P loan business, on one side with the further approach we had around better or high quality risk, the dependencies bit is lower than in the past. And basically, I noticed everything is considered in our net interest margin guidance and basically outlook. Regarding the cost, reductions of the cost. First, are pleased with the first sign of materializations of our efficiency gains. So we had around 8,000,000 of reduction, six percent 8,000,000 of reductions in cost.
This is nicely within guidance we gave EUR 15,000,000 and EUR 20,000,000 for the full year. We clearly though expect all these benefits to continue to come through as a month by month. And this is mainly as a related to continued reductions of the personnel costs. And basically, as of for this year, on the continuous lower or red reductions of of amortization costs related to go to end of life assets. Regarding the the IT as of the current year, the impact consolidations, strategic for project funding, decommissioning. This is more unexpected impact for 2026.
I see. Can you maybe just give me the amount of restructuring costs which have been in h one twenty five still?
We don't have in h one twenty twenty five restructuring costs.
Oh, okay.
Thank you.
Thank you, Daniel.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Mr. Horkle Obendijn for any closing remarks.
Yes. Very good, everyone. Thank you for listening in this morning. Thank you for the questions. Look, in summary, a strong start of the year with the 11% net income increase.
We're pleased with the progress that we're making with the continuation of the transformation and strategic programs across the board. And you've heard our outlook confirming 25% and the 26% target. And with that, have a great day, everyone, and thank you again for listening in.