Earnings Call: H1 2021

Jul 22, 2021

Ladies and gentlemen, welcome to the First Half Results 2021 Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. At this time, it's my pleasure to hand over to Mr. Holger Laubenthal, CEO of Cambra Money Bank. Please go ahead, sir. Thank you, operator, and good morning, everyone, and welcome to the half year results conference call. I am here with my partners, Pascal Perita, our CFO And Volker Gloehr, our Chief Risk Officer. So look, before we get into the slides, I'd like to just set the scene briefly with a few Message is to highlight and start with saying I'm truly thrilled to be here. It's a great business and a strong team. So first, as you know, we are of course still in a challenging environment, but in spite of this, I'm pleased to see the business has Strong resilience as evidenced in several factors and amongst others in the outstanding loss performance. 2nd, it's important to me, We are establishing a renewed sense of urgency, really around 2 top priorities. 1 is personal loan assets and also our focus on costs. And I'm excited that we have implemented measures to reignite growth in the personal loan business through a dedicated task force. And for the balance of the year, We'll focus on accelerating recovery with continued strong cost focus. Lastly, we are conducting Strategic review, which I'm really looking forward to, we'll update on this later in the year, but already today, we leverage this to drive And as an example, we discontinued the SME activities in the current form. So now let's go to the results. We'll present those first And then I'll share some personal impressions after 4.5 months here at Chembra and implications. And finally, we look forward to taking your questions. So from a financial perspective, we've had a robust year so far. We recorded net income of CHF 78,700,000. Financing receivables declined by 1%, but we also have seen a rebound starting in May. Revenues were down 5%, net interest income Down 6% year on year due to development first in loans. Commissions declined by 3%, which really had to do with the extended lock And Pascal will talk about this in more detail. Cost to income ratio came in at 52.6 percent. And to be candid here, while This is largely driven through temporarily lower revenues and despite strict cost discipline. I want to be clear in my view that it's not an acceptable number And it's far from my ambition as to where we should be as a business. So I want to reassure you that this has Mayan our full attention And our aspiration remains in place as for the overall financial framework with regards to this number. We are confident to recover here as soon as revenues come back to normal. On losses, we're happy to confirm that we see no signs of any deterioration. Our underlying risk performance has been excellent again. Adjusted for a one off loan sale, our operating loss performance came to 0.7%, and Fotok will explain this in more detail. As a result, the annualized return on equity was 14.2%. This was achieved on a further improved capital base with Tier 1 capital at 18.3%. The overall resilient business performed in the first half, seeing a rebound in growth in revenues, and we confirm our outlook for the full year. Let me, on the next page, give you some more color on the different products and markets. So personal loans, we've already seen a decline in receivables last And this trend continued into this year. Consumer spending remained subdued due to the COVID-nineteen related restrictions, Which has an impact on reduced loan volumes. We've also seen the competitive environment evolving steadily with seeing including from some new and smaller players. In this context, however, there's also some good news. Part of the reduced top line is due to underwriting restrictions, We should put in place given the uncertain outlook on the environment and that again has driven the strong excellent loss performance. That said, these results are clearly disappointing. We have put in place that was one of my first priorities, a dedicated task force to get this business back on the growth track. And we're encouraged to see good momentum in the last few months, coupled with gradual lifting of underwriting restrictions, this will drive performance improvement. The auto business is very stable. New and used car markets are still experiencing some challenges given global supply chain issues, But transactions are starting to increase again versus a very low 2020, and our market share here overall is stable. In cards, we're pleased to see a gradual return to a more healthy national spend level. Domestic volumes have had a strong rebound And monthly card transaction volumes after 4 months were even slightly higher year on year. However, as you know, international card revenues continue to lag People only slowly return to pre pandemic travel patterns. However, here as well, we've seen noticeable improvements in the last few months that are quite encouraging. Next page in terms of operational highlights. Look, let me just update you on the Priorities for the year that we set out in February. And you'll notice we introduced one change, which is on the first one here, because I want to make sure we have a strong sense of urgency as As we accelerate to the late stage of the pandemic, I mentioned the personal loan task force to reignite growth. We have some early improvements. We reviewed and lifted a lot of the COVID-nineteen related underwriting restrictions. Olga can give more detail on this and already mentioned continued focused cost discipline. Card business, we're pleased to have successfully launched the IKEA relationship. We're excited about that And that in spite of the COVID-nineteen restrictions for outlets and reduced footfall, but very pleased with having launched this and our car innovation projects I'm excited about our continued focus on ESB. We've had strong progress. We've had rating improvements, And we're looking at new ways of working as we cautiously bring the workforce back into the office and implement flexible working policy and trainings around this. In terms of the transition, that's completed. And I want to thank Robert and the team for helping me and us through this period. So with this, let me hand over to Pascal for the first half financials. Thank you, Olga, and good morning, everyone. Let me start with reinforcing what Olga just said. Despite 4 and half months of economic restrictions on both domestic We delivered a robust business performance for the 1st 6 months of the year, and our assets are picking up again since May. This is encouraging for the second half of the year. We are very pleased with our excellent loss performance, addressing the seasonally our asset in personal loan business and manage our costs diligently in the pandemic period despite the disappointing cost to income ratio. So let's dig deeper into the numbers on the P and L. Total net revenue declined by 5% to $235,900,000 the interest income declined by 6% as a consequence of lower assets in personal loans. Interest expense was 4% lower due to lower debt. Commission and fees income decreased by 3%, mainly due to lower card fees income as a result of economic restrictions. Gemra delivered very solid loss performance. The provisions for losses decreased by $15,800,000 to $14,400,000 due to one off debt sale as well as excellent Underlying loss performance. This debt sales is to be seen in the context of the Cashgate integrations and Volker, our Chief Risk Officer, will further comment soon. The reported loss rate was 0.5 percent for the 1st 6 months, respectively, 0.7 percent adjusted as of for this one off. The total operating expense decreased by 1% to $124,100,000 mainly as a result of successful integrations of In 2020, offset by higher expense for information technology and personal expense. I will have a comment Let's now talk about the net revenue by sources. As you can see on the left side of this page, the interest income declined by 6% from $203,000,000 to $191,000,000 as a consequence of lower personal loans asset, as mentioned before. And Olger already provided some insights So in the person loan, receivable declined by 4%, attributable to lower market demand And Titan and underwriting in the context of COVID restrictions on the economy. As a consequence, interest income decreased by 12% with a yield of 7.1%. The net financing receivables in auto declined by 1% For the reported period and the interest income was stable with yield stable as well. And in the credit card, the net financing receivable increased by 6% to CHF 1,000,000,000 Interest income in the current business was Let's now talk about the cards transactions volume And the revenues. The card volumes increased by 11% for the 1st 6 months compared to 2020, 3% plus 3% compared to 2019 or pre COVID-nineteen. We are, of course, pleased with our continued outperformance compared As a reminder, last year in 2020, January February months had strong volume before the COVID-nineteen pandemic started, with 2.5 months of economic lockdown, followed by a strong rebound in June. This year, we actually had 4.5 months of economic lockdown, and the volumes since May During the COVID period, we observed a sustainable shift to card payment And away from cash resulting in an increase of domestic volume offset by lower international volumes compared to pre COVID period. We saw significant differences in volume growth by merchant categories or industries. And I just wanted to give a few examples. Hotels lodging, as we saw for the 1st 6 months compared to last year, plus 41%. Department stores, clothing, shoes, We saw an increase in volume plus 16%, grocery stores plus 11%. On the opposite, we saw as an example of the restaurants bars Minus 8%. This is largely due to the economic restrictions in Switzerland and airlines travel agencies car rentals was 24% Due to minus 25 percent due to travel restrictions. However, in the month of June, airlines, travel and agencies Increased strongly or very strongly as compared to June last year. Now let's talk about the card revenues on the bottom side. They decreased by 2% with interest income flat and commissions and fees income decreasing. As you can see, the interest income is very stable driven by stable interest bearing assets. The cards commission and fees remain at lower level compared to pre COVID time due to lower international volumes. However, since May, we have seen an increase in international volume Due to the lifting of the traveler restrictions, driving an increase in commission and fees. Of course, There may still be a lag for the consumer confidence to come back to previous year spending patterns. We are confident with the recovery of the credit card revenue in the post corona world. However, the biggest questions will remain the exact timing of it. Let's now move to the slides on the operating expense, please. Because the revenue were materially impacted by the economic restrictions, The costincome moved in the wrong directions during the period of the COVID-nineteen pandemic. However, On a run rate basis, we see a stable trend and we remain very cost cautious as we have demonstrated earlier. Our aspirations remain unchanged below 44%. The compensations and benefits cost increased by 4%. The increase is mainly due to salary inflations And actuals for variable compensations. Last year, we booked 80% of actuals in the situations of And this year, we booked 100% accruals for variable compensation. General and administrative expense reduced by €4,000,000 And let's go now through the details Professional services reduced by 17% mainly due to the one off integration Marketing expense decreased by 41%, mainly due to nonrecurring one off in the first half of the year related to the launch of our Gemra business. Rental expense decreased by 25% As a result of branch closure and branch consolidations in the context of Cashgate integration, The 15% increase in information technology are related to digitization project in the credit card business and other initiatives. The cost income ratio was 52.6% compared to 50.3% in the previous reporting period. The increase was predominantly driven by Balance sheet. The group total net financing receivables at the end of the period amounted to €6,200,000,000 A decline of 1% compared with year end 2020. Consequently, our funding reduced by 1% as well. The shareholder equity decreased by 3% to $1,098,000,000 after Chembra pay out the full 2020 dividend of €110,000,000 in April of this year. Let's give you a few comments on the net financing receivables and the rebound that we have seen as of since In personal loans, lower market demand and COVID-nineteen related underwriting rules resulted in lower volume, which were partially offset by lower attrition. Under all year leadership, we launched this task force To decisively address the drop in personnel and it's good to see some stabilization since May. Auto Bassets assets are holding nicely. We had lower new volumes for the 1st few months during the economic lockdown And also due to competitions in lower interest segments, we were pleased with the productions since May. Cards plus 6% higher assets due to increased volume and gradual release of COVID-nineteen restrictions after February. Let's say a few words about the funding. The group funding portfolio remained Stable at $5,800,000,000 largely in line with lower asset base. Overall, the funding mix With 57% deposit and 43% non deposit is good. The period end funding cost amounted to 44 This point, we have no issue in funding. It's balanced and diversified. We have a good funding pipeline and attractive on retail cash bond since a lot of banks charge negative interest. The durations at 2.5 years reduced slightly as the wholesale portfolio rolls down steadily. The 2.5 durations is close to our asset durations on a contractual basis. Now, I would like to hand over to Volker for the Yes. Thank you, Pascal, and good morning, everyone. For the first half of twenty twenty one, we report a loss Provision of €14,400,000 which translates into a loss rate of 0.5%. Let me give you some more details on this number. First of all, there is the debt sale that already has been mentioned that we executed in the first half and that generated €8,200,000 of additional recoveries. In the graph on the upper left, we normalized for this effect. But even if we detected this effect out and look into the underlying Loss rate, it came in at 0.7%, which is still better than in previous periods. A few more words on this debt sale. As part of the Cashgate acquisition, there was a portfolio of loss certificates that was serviced by the former mother company of So in the context of the integration of Cashgate, we would have needed to migrate this portfolio into our systems, which Sensible as we are talking about a portfolio that is already written off and that came into in the form of loss certificates. So a form that is easily transferable on the market to a third party. So we checked on the market our options basically and check for prices And received an offer to sell the portfolio of loss certificates that met our expectations and consequently we executed the sale. I want to highlight that debt sales are actually a normal part of our collection strategies. And it's not the first time that we did that. You might remember that the last one we did in 2018, Mainly on the credit cards portfolio, also in the form of loss certificates, because also at that time, we wanted To avoid additional kind of operational inefficiencies, so it's exactly the same rationale as this time with the sale in H1. I want to highlight that also the underlying loss performance with a rate of 0.7% has been good and a couple of drivers should be mentioned here. We generally observe a strong and diligent payment behavior of our customers. It probably also is supported by governmental measures to address Negative impact by the COVID pandemic on the economy, but it might be also as simple as that possibilities to actually spend money have been restricted Another factor is certainly in the measures that we implemented in the beginning of the COVID pandemic. In the context of strengthening our loss mitigation strategies, we tightened the underwriting rules, specifically in the personal loan book. We touched upon this topic when we saw the asset Development and yes, it certainly has an impact on volumes, but it also avoided any potential negative sensitivity on the loss line. Consequently, it now contributes to Loss performance in H1. The restrictions were cautiously, but consciously removed now and lifted in the first half, so that we Maintain the long term consistency in our credit risk appetite. Though we now might be in a late stage of the There are still residual risks related to that, such as for instance, second round effects on the macro economy. Consequently, we aim to maintain our prudence in risk management, which is also evidenced by the level of allowances for losses. During the first half, we increased ALLL balances by about $5,000,000 to now $89,000,000 and it still includes the environmental of currently $2,100,000 on the personal loan book that we put in place in the beginning of the pandemic to be prepared And when it comes to the asset quality And metrics related to that, we see that in line with loss performance, it's continuously robust quality with 30 plus delinquencies at 1.8% And NPL at 0.7%. As we now in the first half of the year reverted back underwriting rules to pre COVID levels, We would consequently also expect that the loss performance for now the second half will gradually move back to levels that are more in line with prior years. And with that, I hand it back to Pascal to talk about the capital position. Thank you, Volker. We have a strong capital position. CHEMBA remain very well capitalized with a strong Tier 1 capital ratio of 18.3%, respectively a Core equity ratio of 15.6%. In April, S and P reaffirmed the A- rating And revise the outlook from negative to stable due to the steady financial performance of our company. Thank you for listening. And now I would like to hand over to Olger for his observations and outlook. Excellent. Thanks, Pascal. So look, I'd like to share a few personal observations here and thoughts that I've had since starting at Chemba, so you get a bit of sense for who's sitting at the other end of the line here. So look, firstly, we have incredibly strong substance in this business. We spoke about the loss performed as an example. And there's great depth across the functions. The average tenure of our risk on our riders is over 15 years. Our auto sales force Has almost 2 decades on average and I could go on and the expertise this brings is really the backbone of this business. Technically, you may know, I worked in this business between 2,030,006, and it's just great to see some former colleagues again And then meet all the new colleagues. I want to share a brief story. The likes of many, I've encountered many when I started here. One of my first days here, a colleague of mine I met in the hallway, and she had the same broad smile that she had 15 years ago and was here. And I asked her what has kept her here all the time since then. And Luca's answer was simple. We have great people and this is where I belong. And I hear these things over and over. Everybody wants to win. There's passion. We care for each other and there's good commitment to deliver. I'm also very pleased in terms of Board and Management Board dynamics. We have a supportive Board of Directors And I'm pleased to see your robust dialogue, discussion on topics that matter and give me good confidence in terms of collaboration going forward. We really understand this business and the market and consumer finance. I've spoken with customers and partners And they all tell me they like us because we solve problems. We're available. We understand how they operate and we understand how we can best serve them And we're responsive to their needs. And we have been doing this for decades. The business model is a well oiled machine. We know the businesses, they operate well, And this really has allowed to develop a track record of profitable growth and resilience. And we continue to deliver attractive ROEs on the back of a solid capital position. We're committed to the dividend. Sustainability, close to my heart. I'm really glad this is getting more attention across the board And for us as well as we're building deep roots in the bank and in the culture and listen the regulator or stakeholder is involved. Finally, on a personal side, again, it feels a bit like coming home. It's good memories from the early 2000s. And so I'm excited about the journey ahead. On the next page, what does that imply in our focus areas going forward? I already mentioned briefly, we're conducting a strategic review of the business, and I'm actually really excited to craft our vision and strategy together with the team here. Let me just give you a view of the trends in the market as I see them and the implications for us. The first point is, the fundamentals in this market remain attractive in terms of consumer credit needs. And for all the reasons that I've just explained, we have a strong position to capitalize on this. That said, there are also some changes. Look, I've had the opportunity to run consumer finance business, banks, retailers, technology business in B2B and B2C across the world. And It's no surprise that as anywhere digitization, data analytics, technology, fragmentation of value chains, All come to play in Swifton as well. And consumer finance operating models and ways to create and deliver values to customers are evolving and changing. And so as one result, a leadership position in technology is a critical ingredient to sustainable success in this space. Lastly, and we've alluded to this as well, yield pressure is here and if anything, it's intensifying. It's not going to go away. And I think the way to succeed in this market and continue to succeed is to make sure you put the customer first and to ensure efficiency and business model scalability. So what does that mean for us as we conduct the strategic review? 1, I think it's really important for us To clearly define our ambition as a playmaker in this market, we are a leader in the markets we operate in and we need to actively build our future. Today, we're serving over a 1000000 customers, which I think is fantastic and the feedback is really positive. That said, I think it's important for us to look at how we even better leverage our customer understand to build real intimacy going forward, not just today, Not just what we've learned in the past, but really what we see happening in the next 2, 3, 5 and more years and how consumers And partners will need our services, how they consume them, where we find them and ensure that we build simple We spoke about the cost income challenge before and look one way to address this of course It's simplifying our operating model and technology landscape and ensuring alignment is simple model, which is both efficient and scalable and delivers for our customers. And finally, and it's obvious, but it's really important and something that matters deeply to me It's our culture, right, and making sure the culture and the capabilities evolve to keep track with all these challenges that I just explained. And so we're looking at how to strengthen the skill it takes and the ways we work together to make all this happen. Now all of this is in the context of who we are in our DNA. And at the core, that's a Swiss consumer lender, deep expertise in functions such as risk management, collections and many others. So this is what's going into our review. I'm quite excited about it and we'll look forward to updating you on this in December with more details to follow. So then just before we wrap here and get ready for questions, a few words on the outlook for the second half. As our focus will be on accelerating the recovery and continued strong focus on cost discipline. In In terms of the outlook, we're currently anticipating a stable economic and regulatory environment, pending the evolution of the pandemic. We do expect a rebound in card fee income in the second half following the forecast economic recovery and the gradual continued easing of travel restrictions and continued strong loss performance. Beyond that, we reaffirm our medium term targets. So now we look forward to answering your questions. We will now begin the question and answer session. Participants are requested to use only handset while asking a question. The first question comes from Andreas Mengietti from Vontobel. Please go ahead. Thank you very much for taking my questions. Thank you also for the additional disclosure In the slides, which is very helpful. You mentioned the task force in terms of private loans and the, Let's say, reacceleration of growth there. Can you maybe tell us a bit what we can expect In terms of business recovery and also in terms of yields, the yields came down again. Of course, you just mentioned in your closing remarks, obviously, that the yield pressure is there. But so maybe also in terms of outlook on the yield Would be very helpful. In terms of your initial remarks, in terms of strategic review, you mentioned something about the The activities, maybe you can I'm not quite sure I got it correctly, so maybe you could clarify what you meant. And Maybe finally on the card side, maybe you could add a bit of color in terms of the card innovations you're talking about. And also, I remarked the growth in the number of cards has been gradually coming down. I mean, still increasing, but The growth rates are coming has been coming down. Maybe you could tell us a bit there what you expect also from your new partnership with IKEA And also in terms of cards, how this looks like? Thank you very much. Great. Thank you so much for the question. Let me start this and then On personal loans and then Pascal can add a few words on the yield and I will also talk about SME and cards and the innovation there. So look, as we articulated, right, the challenge in personal loans is there are multiple items, right. One is The challenges from the pandemic that continue and that we've already seen last year, we also, as you recall, had some dis synergies last year, which reduced the asset Going into this year, the synergies from the Cashgate acquisition and then the cautious underwriting, which has some upside to it as well. Now, The task force, when I came in, this was one of my and our joint first priorities. And so I really wanted to make sure that we have a dedicated effort on getting this business back in growth mode. And what I would say is, Pascal has alluded to this too, we have seen a stabilization in the asset base in the last few months. And again, pending continued recovery of the markets, we also expect recovery in that book going forward. Pascal, why don't you add a few words on the yields and then I'll take the rest of the questions. Yes. On the yield, yes, For H2, we expect a similar level of yield compared to what we have seen in the H1 for Pilon at 7.1%. Olga mentioned before the continued price pressure and competitions in personal loan. On the other side, we also need to see that The yield is always only part of the story as what where we need to look at is the overall margin as well. And the margin is the Some of the pricing, losses and efficiencies. So at the end, looked at also the return on assets, which is, I think, Appropriate. But indeed, although the pressure remain and for second half of the year, as you would Expect so basically stable compared to what we have seen in H1. Very good. Thank you, Then let me take some of the other questions. On SME, look, you may recall we launched the SME Lending business a couple of years ago, a year and a half ago roughly, I think. And obviously, this was Before we came into the pandemic and with the situation where we are today, and the model that we had built And given the very strong across the board government support for that sector, this is just not a viable proposition. And to me, strategy is as much about what you want to do as it is about what you're not going to be able to do and what you're not going So this was really from my perspective, something for us to drive increased focus on the things that really matter, such as the personal loan situation that we just addressed. I hope that answers the question, but we can elaborate more otherwise. On cards innovation, look, there's a few things that we're working on with this project. The first is we want to re essentially digitize the processes And provided a digital virtual card if you want. Secondly, we want to increase self-service options for our customers, Including digital onboarding and others, and to really make the process simpler, more intuitive for customers. 3rd, as we build the solution, we're making sure that this is transferable across our products, Right, because we believe that these seamless, simple customer journeys matter across the board. And then lastly, we also believe, and we're getting some feedback there from our existing retail partners that this is a great tool to strengthen collaboration with them and jointly The value for the customers. So that's really on the car innovation product. In terms of your question regarding growth and the IKEA Your relationship. Look, we've had, as Pascal alluded to, we've had about twice as much time in lockdown this year last year, year to date. And so that's also had a bit of an impact on footfall in stores, on stores being partially closed and other things. That said, we do see revenues coming back. We've seen transactions coming back. We're pleased with our end market And we're also excited about the signs that the international fees come back. The IKEA relationship, Again, we're very excited about that partnership and having launched this in still during the pandemic And with some of their store closures in place. But we do expect this to be a great program for us. They are the largest loyalty program In the market with 1,700,000 customers, and we're excited about it. And so this should be a key contributor to growth going forward in a number of cards. Thank you very much. The next question comes from Nate Nammes from UBS. I have three questions, please. Firstly, on credit cards, the foreign spend in May June in particular. I'm just wondering if you could give us a sense of where this stood in June compared to normal pre COVID levels or also perhaps Compared to the same period last year, I certainly hear you that you're seeing an update, but if you could give us Some comfort that this is indeed heading in the right direction. And in the second half, we should be expecting a markedly better Results on that front. Secondly, the personal loan book underperformed versus the sector in terms of volumes. Obviously, this could be the result of perhaps a bit more cautious Appetite in terms of risk. I'm just wondering if you could talk a little bit about the drivers here. And lastly, on costs, we are now seeing basically a nice step down in terms of professional service fees, in terms of marketing fees and a number of the cost lines are heading in the right direction. And I'm just wondering if you could give us a sense How IT expenditures, especially in the context of card innovation and other digital investments, So how IT expenditure should be developing in the second half and perhaps in the years coming? Thank you. Great. Thank you for the questions. Let me just say a couple of quick things and then I'll hand over to Pascal for the bulk of this. Look, clearly, as we've alluded to, we've seen the uptick and it's the right question to ask. And our hypothesis always has been, right, That these lines will come back as the markets continue to open. We're pleased to see that, but Pascal, why don't you provide some more details on the cards As well as in the cost situation. And then we can circle back on personal loan underperformance. So specific to your question, Smart as compared to pre COVID time as though the month of June was close to the level as though we have seen though in Yes, very good. Do you want to take the cost point as well and then we'll get back The personal loan situation? Yes. So look as on the cost income on the cost side, there are a lot of things We like, though, in the way the cost has developed on the cost side, but obviously, as the The pressure will remain on the revenue side, which means that the cost income is always disappointing. Specific to your questions on IT, Look, as Olga mentioned as a couple of times the technology leadership And it's all about technology as a new future in this market. So honestly, as though this is not the line, as though IT is not really the line where I would The fundamental reductions in the short term. I would expect though, ideally, though, to remain broadly flat Depending on the future investments, I think in total, it's important to look at our cost income ratio And our cost and cost income ratio in the context of long term aspirations, which is unchanged. We refer to the 44 percent of the aspirations we have. And yes, we might have some IT investments required, which need to be offset with further efficiencies. Thanks, Pascal. And then let me just The comment on the personal loan situation. Look, I would say there's multiple That play into this, right. Firstly, we've seen some pressure on the book last year already and that was partially driven by the cash cat synergies, but also by Reduced activity in the markets in terms of consumer spending, consumer sentiment and resulting also in consumer loan appetite. Now, the other point is and Volker elaborated on this was our deliberately cautious underwriting, where we've dialed back quite a bit. We're now pleased to see that as the markets come back, we can release some of that. So that should give us some tailwind. And as I said, we've alluded to that. And then lastly, look, There is competition in the market too, right? And that's both from some of the bigger players, as you know, but there are also some smaller players that are Getting quite active. I think that's good for the market, keeps everyone out on their toes, including ourselves. And we've put this task force in place to really Get us back on growth track, and I'm confident that we'll be able to do that. Excellent. Thank you very much. Thank you. The next question comes from Andreas Bruhn from Credit Suisse. Please go ahead. Good morning. Two questions left on credit cards. Do you actually see pressure from the Mastercard debit Card launch in Switzerland, which happened by the end of last year? And secondly, Do you have pressure on fees on the cards or on other commissions from cards Despite of the lower usage of the card outside of Switzerland, is there like a market pressure on credit card fees in general? Thank you. Yes. Thank you, Andreas, for the questions. So, let me start with the first one and then I hand over to Pascal on fees. Look, the launch, as you alluded Look, most banks have started to replace the Mastercards right with the new Mastercard and Visa Debit cards and we'll complete this process over time. But I think it's also fair to say that these cards are meeting some resistance From Swiss retailers, right. The fees are significantly higher by a multiple than those in the Mastercard. There's been some complaints. Some of the supervisory Competition buddies have gotten involved. So that kind of remains to be seen, right? There's a healthy dose of skepticism, I would say, certainly from the retailer side. And then of course, as you may also know, these cards cannot be used in all industries and purchasing process in the same way, It's such as a bit of a challenge for rental car companies, hotels and the likes given the uncertainty about the ultimate fees on this. But look, I think these cards ultimately are going to be used in a very similar way as the previous Maestro cards. And that's what we see this trend going, I would say. Let me hand over to Pascal on the second part of your question. Look, on the fee side, this is, I would say, a dynamic environment. And we mentioned several Times that long term, so the pressure will remain. I think the beauty on the credit card The volumes are going up significantly. There are key trends in terms of usage of cards, in terms of cashless payment. And our job, Bazzo, is to ultimately offset So potentially lower margin with our higher volumes. And this is what we have to do as a short term. So obviously, we did have change in interchange. And that's both national and international. And as I said, ultimately, as our pressure will remain, but Maybe one add on there. We touched on the growth of the number of cards, which was only 4% year on year. Like going forward with stores being open again, do you expect an acceleration of growth of the number of cards Going forward without any further lockdowns? Look, as of first, I think it's important to realize that 4 Percent in the COVID situation is a good number. The year on year growth, 4%, people who do not Can't order to go in the stores, and this is part of our value propositions, it's ultimately acquisitions in the stores. So in that sense, I'm pleased with the plus 4% as we increase year on year in the cards. Going forward, It's on the total, as we said, that growth is important at credit cards. And of course, you would expect those some further applications, supported as well by partners Like IKEA as an example. Thank you. The next question comes from Benjamin Goy from Deutsche Bank. Please go ahead. Yes. Hi, good morning. Two questions left from my side. 1 on capital, 1 on IKEA. On capital, just wondering with cost income, you have a lot of initiatives there to improve it, but To improve your returns, also the denominator could help. So would you also review going through Strategy Day Your capital targets. And then secondly, relating to the IKEA launch, were there any meaningful project Cost you would call out that might fall away in H2 or yes, you would call it business as usual and nothing extraordinary to report? Thank you. Yes. Pascal, why don't you take those questions? Yes. So obviously, look, as on the capital side, as we have, as our capital policy In place, dividend and capital policies. And we always refer to ultimately as a 2017% as a to 19% Tier 1 as a target. And for now, these are the rules which apply, I think, in the situation COVID is good as to have a bit of excess capital. 18.3% is a good number, slightly above our target of 17%. But obviously, as of the more it's growing, as of the war with questions on what do we do on the equity side. On the your questions, I wouldn't expect a little extra new movements in terms of the investments for the second half of the year. Thank you. You want to further comment, Aurelio? I think we've got. The next question comes from Daniel Riggi from Octavian. Please go ahead. Good morning. Thanks a lot for taking my question. A lot of questions I've already been asked, but a couple of follow-up. Maybe quickly on competition in personal loans, can you maybe elaborate quick a little bit more on Where exactly you see the fierce competition? Is it from established players coming in with lower prices? Or is it from new entrants into the market? Then secondly, on the tax rate, it's just sort of Tax rate dropped a bit from the normal, let's say, 21% to 19% in H1. Should we expect This to normalize in H2 or was this driven by the sale you saw on provisions Or was this more sustainable drop in tax rates? And then maybe lastly on credit cards, Can you maybe establish a bit on changing client behaviors? Have you already noticed For example, people are using their credit cards more now also driven by the pandemic, which could deliver, let's say, a Or a higher base level of fees, should the revenues from FX transactions coming back? And also there, maybe quickly back on your comment about the June month. You said the June was almost on June 2019 levels. Are you talking about volumes or revenues? Thank you. Thanks for the question. Let me start with the competition and say a few words on cards, and then I hand over to Pascal for the tax rate and the particular Look, competition on personal loans, I think you get a bit of both. The big players like ourselves, they've been active, the BankNow and MIGO Bank, of course. But we also have seen recently and this is what I was alluding to with similar trends in other places. There are a lot of smaller, more technology driven players that come into the market, crowd lenders, Bob Finance and others that sort of take a out of the value chain, do that really well, partner with other players in the market and all that. Now, I think first of all, I think that's great. That gives Again, it gives a good dynamic into the market. It gives choice to customers. And at the end of the day, it's our job To make sure that we have the products and the service and deliver them in a way that the customer is willing to buy them from us, that's what we got to do, right? I think the other thing I would say is, and as I mentioned, I was in this business for 3, 3.5 years in the early 2000s and I've seen this at that time already. You will always have a few people trying to rapidly grow into this space because it is quite attractive. But we've also seen a lot of people fail because perhaps they don't have all the depth and expertise that it takes to sustainably succeed. We've been doing this And we're in this for the long game, right. And so that's I think one of our what we bring to the table with our expertise And with our experience. But that said, I do want us to watch this carefully. Always good to look a bit over your shoulder when you're a market leader And then we actively define how we continue to grow the business here. That's what I'd say on competition. Cards In terms of client behavior, I think, look, you're on the right track with the question. In this industry, As many others, the pandemic really has accelerated trends that were already visible before, right? And so, Penetration of card usage versus cash is growing. Mobile payments is growing versus cash, etcetera, etcetera. So I would say that global trend that you're seeing will continue. I think that does by and large provide some tailwind. And look, Overall, still north of 30% of transaction in Switzerland are cash. If you go to the Nordics, it's well below 10%, right? So there is room to grow In the space, and we're excited to continue to build our capabilities. So let me hand over to Pascal on the tax rate questions and also just On the FX side on the cards. Maybe just to finish, so first on the card side, I mentioned a little before the reference of June the month of June 2021 compared to 2019. It was referred To the volumes and the response referred to the international volumes of the cards business where I said, It's close to the 2019 level, hope as though it clarifies. On the TAC side, clearly, there was A bit of one off as we move to the 19.2% tax rate. We indicated for 2022 20%, so the reductions compared to last year and the 20% is basically as of the change in In Continental or Comunal, the Tax Agency in Switzerland. So H1 was in that sense, so extraordinary low. Great. Thanks a lot for the answers. And maybe just one quick Follow-up, did I get you right that you're planning for an Investor Day in December or will we hear your strategic review conclusion with full year results? Yes. We'll give you the details on this shortly, but we do want to make sure we can update where we are with the strategy development in December and the details will follow shortly. Okay, great. Thanks a lot. Good. Great. Look, Unless there are any other questions, we let me just thank you again for dialing in. Thank you for the range of questions. Look, we're pleased to see a gradual recovery here with some remaining uncertainty, of course, in the markets, but we're gearing up to accelerate our way out of this Strong loss performance and look forward to the balance of the year and thanks again for dialing in. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.