Earnings Call: H2 2020

Feb 19, 2021

Ladies and gentlemen, welcome to the Chambra Full Year 2020 Results Conference Call and Live Webcast. I am Paolo, 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. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Robert Aoudmeier, CEO Mr. Pascal Perita, CFO and Mr. Volker Glue, CRO of Sembra Money Bank. Please go ahead, gentlemen. Yes. Thank you, Paolo, and good morning, everyone. I'm here with Pascal and Volker to talk about the 2020 results. And let's Just start immediately with the 2020 highlights. I will talk a bit about the highlights and then Pascal and Volker talk about the financial results, and I will come back to you then on the outlook and then of course, as always, we have the Q and A. If you look at the 2020 highlights, our net income was €152,900,000 It was reduction of 4% versus 2019 and EPS is €5.21 what I would call Resilient results. Receivables were 4% lower. We say more resilient business, especially in the auto business in the second half of twenty 20, we will really talk a bit more in detail afterwards about the receivables. Net revenues were up 4% with interest income up 30%, Mainly driven by the acquisition of Cascades and commission fee income was down 17%, completely driven by COVID-nineteen lockdowns and restrictions. I would say a fairly strong loss rate at 0.9%. Higher costincome ratio, a little bit higher, driven by 2 things, the acquisition of Cascade and of course also the lower revenues. ROE was at 13.8 percent with strong Tier 1 capital ratio of 17.70%. Proposed dividend is unchanged at CHF 3.75 Swiss francs, which will mean a payout ratio of 72%. If you look at the next page to the products and markets. First of all, I'll talk a little bit about the personal loan market. What you see in general is that in a composite like this, people are starting to Save more and basically take less credit out. Savings quota, for example, it's Switzerland for 20% to 27%, Sort of a higher savings. Volumes were lower. So you see that the market was down 3%. Also the volumes at Chimbra were lower. We also saw lower attrition. We We also tightened the underwriting rules quite a bit at the start of COVID and then we had some of the cascade effect. I'll talk a bit more about the assets in the next page here, But the market share went slowly down from 44% in 2019 to 43% in 2020. If you look at the auto market, auto market and the new car registration were down 24%. If you remember, the first half of the year, they We're down 34%, so they recovered a bit in the second half, but still minus 24% is in line with Europe. Used cars were pretty stable, minus 2% market, where the first half of the year still showed a minus 7%, but basically almost unchanged. If you look at CHEMBA, our financing receivables went down 2%, but it was slightly increasing in the second half of the year. Our leasing share went down from 23% to 21%. It was already at 22% at half year, mainly due to aggressive Pricing by captives now. You saw that the new cars that were sold were set pretty aggressively in the market With very, very low prices. We moved more and more to used cars as well, which also has a higher share of loans. Partnerships are performing well. E vehicles are outperforming the market. Maybe one word on E vehicles. The new e vehicles registration were 14% in Switzerland, up from 6%. So it is really taking off in the Swiss market. Moving to credit cards. The transactional volumes were down 15% over the year. Gemba cards issued by 5% up. So we have now more than 1,000,000 credit cards despite closure of partner retail outlets. So we saw that Fnac, conference number have been closed quite a bit in 2020, but still we had 5% more cards issued. The market share of card transactional volumes increased from 12% to 14%. So we did, I think, a good job on the transactional volumes. And contactless is still very strong. We have a 20% market share in the total market of contactless. I think probably more interesting to talk a bit more about It's the asset evolution. If you look at the next page to the receivables. So we've tried to give you a little bit more color on The year on the assets evolution. So you clearly see that the chamber assets were down on the lockdown. We lost assets at 3% on the lockdown And the restrictions in November December also give us a 1% lower assets. Outside the lockdown, we are bestly flat. So, three product lines. Let's start with the personal loans. We're at minus 8% on So we saw clearly that there is lower demand. You see that the market effect is about 3%. Then we had reduced activity in the end Operation, we lost 2% of assets due to much lower volumes in the Enercooperation. And then there was a 3% loss, which I would say was a mix between underwriting We always said that when we take over Cascade, you will see some dis synergies By losing some of the volumes by the same agents, these kind of things. So in total, minus 8%, what was in line with our expectations. And it's also clearly market driven people just very cautious in a personal loan market. If you look at auto, You see a minus 2%. You see really an effect of the lockdown in April, May, June, and then it recovers in August. And you see basically That we had a nice rebound in the second half of the year. So auto is still doing quite well in 2020. Cards is really driven by volumes. You see that in lockdowns or in restrictions, the volumes go down. The Interest bearing assets are quite stable. The non interest bearing assets are really going up and down with the volumes. So lower volumes in December And also in November, due to COVID-nineteen, I had also an effect on the asset base. If we move to the next page, The operational highlights, I would just focus on 5 things really quickly. First of all, I think Chemba has been proven to be very resilient. The business performance has been resilient. We have long term partnerships in place. I think we are very disciplined to cost management. Our cost of funds are long term and very stable. Risk performance is extremely good And better than the long term average. So this is a very resilient business that also in the year in 2020 can perform very well. Cascade integration was completed in 11 months, and we will deliver on the expected benefits. So in July 2020, we integrated Cascad completely. We're also looking at growth. So 2020 was also a year. How do you prepare to rebound to growth? So Swiss billing is growing. There are new partnerships. You've seen the announcement. The SME value proposition was launched in February 2020. It was on hold due to COVID-nineteen, and it's still on hold, but it was launched. And then also we signed a partnership agreement with IKEA for quartz and other products, and we will be live in March or April this year with the IKEA partnership. Then another focus on digital transformation. I think there's an acceleration on the digital transformation. We have digital solutions for personal loans SMEs in place, personal loans also thanks to the Cashgate acquisition. We're investing heavily in digital card solutions. We will have a Improved value proposition for cards in the digital side this year. And we're reducing our branch network. If you exclude the Cascade branches, we also went down from Branches to 13 and we're consolidating step by step the branches. Remember, about 2, 3 years ago, we still had 26 branches. Last but not least, an enhanced focus on sustainability. For the details, you can look in the appendix at Page 2 afterwards, but we have improved ESG ratings everywhere and recognition in sustainability indices. The Great Place to Work was Renewed and had improved results. So also as a company, I think we're on a good track here. For the details On the financial results, I'm going to hand over to Pascal now, and he will start with the P and L. Thank you, Robert, and good morning, everyone. Let me start with reinforcing what Robert just said. Chambra had a strong business performance in 2020, And our business model proves resilient. Our conservative, disciplined, Consistent risk management approach is really as a paying off. And yes, the lockdown in Switzerland and abroad had a clear impact on our business, particularly on the credit This was partially offset by our solid loss performance as well as our tight and timely expense management. Let's now dig deeper into the 2020 numbers, starting with the profit and loss. The net income decreased by 4% To €152,900,000 or €5.21 per share. This translates into a 13.8 percent return on equity. The net revenues rose by 4% to €497,200,000 Net interest income grew by 13%, mainly as a result Of the 12th month of cash cash revenues in 2020 compared to the 4 months in 2019. Interest expense Was down 3% lower at 26.9%, and this is due to the lower debt and favorable repricing of our funding portfolio. In total, the commission and fees income decreased by 17% to CHF 122,300,000 The increase In insurance and loan, lease fees are due to the effect of the acquisitions. The decrease in car fees was mainly driven by the lower spending abroad Due to the continued travel restrictions following the COVID pandemic, I will further comment on the card revenue in one of my next page. Gemra delivered a solid loss performance despite COVID-nineteen impact on the economy. The provisions for losses Increased by €11,300,000 to €56,400,000 primarily due to higher financing receivables following the acquisitions again. The loss rate remained in line with prior years and falls under our Chief Risk will further comment soon. The total operating expense increased by 7%, mainly due to the acquisitions and integrations of CashCall. The costincome ratio came to 49.8% compared to 48.3% in 2019. Finally, the reductions in the ROE Largely due to the increase of the average equity from 2019 to 2020. Let's spend a bit more time as well on the revenues now. The net revenue grew by 4%, as stated earlier and that you can see on the left side, With interest income increasing by 12% to €402,000,000 mainly due to acquisitions of Cashgate. In his 2020 highlights, Robert already provided insight behind the reductions in the net financing receivables by business. In a personal loan, interest Com increased by 10% to 190.7% due to the acquisition of Cascades, the yield remains stable. Similar as in auto, interest income was 17% higher at 129.4%, with a stable yield at 4.5 percentage. And finally, in the credit cards, interest income as a grew by 5% with a yield of 8.3%. I think this is important to remark that this change in the yield is not driven by pricing changes, but by lower noninterest bearing assets Some words on the cards, cards volume and revenues. As you can see, the 1st economic lockdown from March to June as well as the economic restrictions from November had a clear impact on the card transaction volume and the card revenues. The volumes declined as about 5%, respectively 7% for the first half of the year And almost back at 2019 level in the second half of the year. We observed sustainable shift due to card payment And away from cash resulting in an increase in domestic volume offset by lower international volume due to the travel restrictions. We are, of course, pleased with our continued outperformance compared to the rest of the credit card market during this period. We have seen difference in volume growth by industries in 2020, and I want to give you a few examples. Volumes for grocery stores went up 63%. Garden, do it yourself, building materials went up 39%. Electronics, digital growth went up by 26%. On the opposite, Airlines went down over 75%, travel agencies, rental core, 69% lodging, 32%. The overall card revenues decreased by 14%, as you can see on this page, with the interest income increasing by 5% and the commission and fees Income decreasing by 29%. During the COVID-nineteen situations, we observed a shift in our source of revenue from cards With higher interest income driven by higher interest bearing assets, mainly due to the increase in issued cards, more than offset By lower commission and fees income due to the significant reductions in the spending abroad, mainly due to the travel restrictions, as I mentioned before. Not only transactions volume rebounds in June, but also the card net revenues variance to prior year improved Minus 29% on a year on year comparison in April to 11% In November, before the second economic restrictions had an impact late in the year, respectively, in December. Some further comments on the operating expense. As mentioned before, total operating expense increased by 7%, and the costincome ratio increased to 40 9.8%. Adjusted for the integration cost and the transition services agreement with the Cashgate seller, The cost income stood at CHF 48.1 million. The personnel expense came to CHF 129,500,000 Raising 8% as this is due to the increase of the average number of FTEs compared to 2019 and predomain The number of the full time equivalent employees Declined from 963 to 928 by the end of 2020, and this is largely driven by the synergy realizations from the acquisitions. Professional Services included in 2019 some extraordinary one offs related to the cash case transactions The increase in IT was largely related to cash cat integrations under run as well as strategic investments, As an example, digital platforms, digital cards, as mentioned earlier by Robert. Underlying depreciation and amortizations, the 36% increase was mainly due to the €11,700,000 amortizations of the intangible assets For the full year 2020 compared to CHF 4.3 in 2019 for 4 months only. As you might remember, these intangible assets we have booked with the acquisition of Cashgate and are mainly related to customer relationships, Trade marks and are depreciated over 5 years. At the end of the remaining at your end, The remaining intangible assets related to Cashgate was 44.6 Robert already mentioned in his opening though the Cashgate acquisitions and the successful integrations. We paid back €1,450,000,000 bridge financing after 6 months and completed the integration in 12 months. People, Commercial, Financial Integrations as well as IT carve out went smoothly because of the 4 row integrations planning, Extraordinary teamwork, commitment and an excellent collaboration with the seller to execute the carve out. We are particularly pleased with the asset quality and the underlying loss performance of this business. The Total integration costs for Cashgate came to around €21,000,000 compared to the original assumptions mentioned of €25,000,000 We incurred in 2020 €8,000,000 after €8,000,000 incurred in 2019. And in addition, we capitalized around CHF 5,000,000 costs, which we will depreciate over 5 years. The expense synergies have been triggered in the course of 2020. We've closed off branches from 26 just after the cash gate acquisitions to 13, Reductions of net FTEs across the bank from 963 to 928, as mentioned before, vendor consolidations, marketing synergies as Robert also commented earlier on the revenue dis synergies related to kilo and auto assets as expected. We are confident to configure the run rate net incremental income out of cash gate in 2021 of €25,000,000 to €30,000,000 Or simply said differently, without these acquisitions, our net income will be around €25,000,000 to €30,000,000 lower in 2021. We are very happy to report to our shareholders today that the delivery of the cash Now business is fully integrated into Chimbra. Keywords on innovations. And in 2019, we announced that we would Invest around CHF 40,000,000 in digital and product development for the period 2019, 2021. We incurred CHF 13,000,000 for the full year 2020. In 2021, our main investments related are related to digital card innovations. Let me finish these sections with our overall approach to expense management. Common to all industries The need for greater speed control amid ongoing and unprecedented uncertainties due to COVID. In 2020, we carefully assess our discretionary spend and take necessary measures to address the lower revenues for the green card, but without jeopardizing our long term strategic investment and ambition. As always, we remain as a discipline in our approach On the balance sheet. The group total net financing receivables at the end of the year amounted to CHF 6,300,000,000 which is 4% compared to 2019. For personal loan, the decline of 8%, 3% attributable to lower demand due to the consumer confidence in COVID 2% related to Reduced activities without any corporations and 3% related to underwriting restrictions and cash gains dis synergies, as mentioned already Before by Robert. On the auto side, we are pleased with the rebound we have seen in the second half of the year. And the lower assets were largely due to the lower volumes in December following the restated economic restrictions in Switzerland since November. The shareholder equity increased by 3% to EUR1 1,000,000,000 after CHEMRA payout below the 2019 dividend of CHEM110,000,000 in April 2020. Few words on the funding, stable funding. In 2020, our funding portfolio declined by 5%, in line with lower asset base. The funding mix remains stable with a well balanced And device diversified funding profile of 44% non deposit and 56% deposit. The durations the weighted average durations was 2.7 year, and the period end funding cost was stable at 45 basis points, close to the contractual maturity of the asset side for the durations. The main transactions in 2020 was our 6 ABS in March amounting to €250,000,000 at 0% with a contractual maturity of 10 years And an optional redemption date of 4 years from the date of issuance. And due to the increase in assets Following the acquisitions and in line with our prudent risk management approach, we opportunistically increased our undrawn revolving declined by €50,000,000 from €350,000,000 to €400,000,000 With that, I would like to hand over to Volker for comments On the loss line. Thank you very much, Pascal. Yes, for 2020, we can report a loss provision of €56,400,000, Which is at first sight and in absolute terms considerably higher than the 45.1% in the previous year, but there are 2 items that need to be mentioned. Firstly, in 2019, we considered only the 4th month of loss provision for the cash debt portfolio due to the timing of the acquisition. And now for 2020, we have obviously in for 12 months, so for the full period. Furthermore, in 2019, there was a One off effect related to the synchronization of the collections with the write off procedures that gave the 2019 number a benefit of around €6,000,000 So a normalization would be needed. So if we normalize and rather look at the loss rate as the better metric to make the comparison over time, 2020 2019 loss numbers are absolutely comparable at a level of 0.9% and also very consistent with the longer term coverage The underlying asset quality also evidence this consistency and the level of 30 plus delinquencies stayed at 1.8%, exactly on the same level as in all the years before. The NPL ratio came in at 0.7%, which is a slight uptick to the year before, but this is rather related to rounding because the change is just very small than the 2nd decimal. Considering the pandemic and its consequences in the macro environment, we can say that the overall loss performance and also general credit risk performance in 2020 has been quite solid. The consistency and also discipline in the risk taking, but also the implemented measures in the beginning of the COVID-nineteen pandemic are certainly paying off. Governmental measures to support the economy in Switzerland probably also played a certain role, but what should be highlighted is that we observe the customer behavior That can be characterized as both cautious and diligent, which means that there is a generally good discipline in fulfilling contractual payment obligations, but Customers also show a certain degree of caution when taking up new loans or increasing existing loans. Going forward, we obviously aim To continue to be prudent in our risk taking, but as you can imagine, it is in the current environment rather difficult to come with any exact I guess what we can say though is that based on the risk metrics in the last year and also in the prior years and also considering what we know today, Our base scenario for the current period is that we would expect a continued resilience in the loss performance. And with that, I hand it back to Pascal for the capital We remain very well capitalized with strong Tier 1 ratio 17.7 percent and a common equity has a Tier one ratio of 15%. Around 50% of the increase in Q1 capital ratio is related to the increase of the numerator of the capital and 50% by lower risk weighted assets, in line with the reductions of the net financing receivables. Given our resilient financial The Board of Directors will recommend a stable and attractive dividend of €3.75 per share at the Annual General Meeting. This represents a payout ratio of 70%, which is slightly above our mid term payout target range. Thank you, Fotenix Link. And now I would like to hand over to Robert for the priorities and outlook 2021. Thank you, Pascal, and thank you, Holger, for the detailed explanations of the numbers. If you look at 2021, We've been focusing on basically on 4 priorities. The first one is really continue to deliver in a Difficult environment with COVID-nineteen. We have a resilient business. We think we can regain organic revenue growth with Continuation of risk management, funding and cost management, we have been proven to be very disciplined on this one. We will continue this discipline. Then Innovator Card business now, I mean drive new and existing partnerships. I'm excited that we have announced that we have IKEA and we're going to be live with Zincaya in the coming months, not only with cards, but with other digital solutions, including SwissBilling. We continue to invest in digital card solutions. We will have a cards mobile first program live somewhere in the second half Of this year, and we think that will really change the way we work with cards. We also, a third priority will maintain a focus on ESG. So sustainability is extremely important to us. And I also think that we are preparing for a new way of working. I don't think we're going to be all in the office anymore. And the way we're going to work is And as you know, this is my last earnings call as a CEO. I'm leaving the business after 12 years. I'm very happy that the Board has chosen Holger Lumental as my successor. I know Holger since 2005 and it is a really good choice. It's Person who is really very well known and very well home in consumer finance. We will have a smooth transition. It's not only me. I have also a very strong team in place with a good CFO, with an excellent Management Board. I will stay here in March April to do a small solution to Holger, and I think this will go very well. If you look at 'twenty one, at the outlook, look, I know it's not an easy time at the moment, but I'm personally convinced that whenever people Have the time and they can go again. They will go traveling again. So I think the second half of the year revenues will go up again if the measures The COVID restrictions are tough for everyone, also for us. So you see an impact on the current spend, But I'm convinced it will come back. So we expect a resilient business performance with revenue being impacted by COVID-nineteen, but also in the second half Following the forecast of the economic recovery, a growth in currency fee income again. As Volker spoke already, we are confident that we have a solid loss performance for the year 2021. And as Pascal already confirmed, net income delivery on Cascade is as planned. So our midterm targets basically Are still the same. ROE of above 15%, a Tier 1 capital ratio of at least 70% and a 60% to 70% dividend payout ratio And return excess capital when we are above 19% capital. With that, I would open it up for Question and answers and the 3 of us are very happy to take all your questions. We will now begin the question and answer session. Questioners on the phone are requested to use only handset and eventually turn off the volume from the webcast. The first question comes from the line of Andreas Venditti from Vondobel. Please go ahead. Yes, thank you. Good morning from my side as well. A couple of questions. On the auto business, you did quite well. That was a good achievement. We have now, I think, a new entrant as a Market entrants as a partner for Tesla, which is Swissquote. Can you comment on anything that you see in terms Impact on the market from this new entrant. Then second one, maybe if you can comment on your or what you see for the new IKEA partnership, which I think is going to be launched in March. What do you expect there? I guess you also had costs for the project possibly or likely already in 2020. Maybe you can quantify that. Then also in terms of the SME, obviously, it's on hold. What's the outlook there? When do you plan a relaunch? And also, do you think there's any changes in the business case Compared to pre COVID for this business? And finally, maybe an outlook on the yield for Thank you, Andreas. Almost all questions for me, but the last one I can at least give to Pascal, but I will Try to answer the first one. So the first question was about Swissquote and the essence of a new Allegiant company there Together with Tesla. Look, Tesla has big plans to grow their market share in the market, and they need more partners I mean, they cannot rely on 1 or 2 partners. So I think it's logical that they have a cooperation with another partner. I think 3 partners is fine. I don't think you can have only one partner. I don't know what the effect I mean, we are still with Tesla on the commercial side. We are planning to have a loan product with Tesla as well. We did great volumes in Last year, Tesla will continue to grow in my view. I mean, they're in a good shape. They have new models coming out. There will be another player in the market that It's completely fine, because this is a market practice. On the UK partnership, the second question. I'm personally excited to know. It's I don't want to raise expectations that it's going to be that everything is going to be fantastic on day 1. However, they have 1,700,000 family members in IKEA. We're going to target those family members to get them to a credit card. Also have Swiss billing in there. We also are going to have some other products there. Kratz Mobile first, what's going to be live in the second half of the year, Will be first used for our Care customers and then for other customers. So I think over time, and again, I'm hesitant to give you a number right now because I don't even know when the shops are opening again. So but over time, I think it's a huge opportunity for us. It's much bigger than Conferheim or Fnac. It's not as big as Mikkel, of But 1,700,000 family members, which is extremely good brand, I think gives a very good opportunity for CHEMRA. Happy to give you any numbers, Andreas, and I think you understand that. On the SME, the third question. Look, The day almost that we launched the SME business, we had a nice competitor in a market that's called government. Now they offloaded the market with loans There's no interest and no amortization for 5 years. I think that provide a lot of liquidity in the market, And I think the liquidity is still there. So I think it will be wrong to relaunch SME right now. I think on midterm, I still believe in SME. I think it's a very good value proposition. It's I don't think the 1st 6 months of this year, we launch it. It's probably too early. And I think after the summer, we have to see How the world is changing, how the world is developing. So it might possible that we launch in the second half, maybe even a bit later. But the moment, I will be very I know Von Volker, I think, is agreeing with me there. I will be very restrictive in doing SME Labs because I think there's still a lot of liquidity in the market. Then the first question was an outlook on the yield. Pascal, do you want to say a few words? Yes. So first, in 2020, we have been able to defend our pricing strategy Despite the COVID situations, of course, you would like us to keep as all the overall yield is stable also in 2021, but I think we need to be Much more agile than in the past. We see also what could be the impact of COVID and access on a regular basis. Well, I think maybe in addition to this one, we really defended the yield in 2020. And for me, it's the right thing to do. So I don't think we're going to trade heavily price for assets. No, that's not in our DNA. We have never done this and I don't see that happening in 2021. I think yield is very important for us. I hope that answers all your questions, Andreas. Yes. Thank you very much, Robert, and all the best from my side. Thank you, Andreas. Thank you. For the future. Yes. Thank you. The next question comes from the line of Andreas Bruhn from Credit Suisse. Please go ahead. Hello. Thank you. I've got four questions. The first one, did you release the additional loan loss provisions made in H1? Then the second one, you showed that net financing receivables during lockdowns came down on your sites. Does this hold true also for the current year for 2021 so far? And then two questions on the credit cards. Could you please elaborate on the growth of the number of cards? It was 5% versus 10% in the last couple of years. Is this only due to COVID or is there also a general like downtrend in the bond? And then the second one on the credit card. Like if one would adjust for FX related fees, Which are not there currently. Do you see pressure on fees per card in general and especially in Switzerland? Yes, that's it. Thank you. Okay. Thank you, Andreas. I will give the first question to Volker, then I'll take 2 and 3, and the 4th one I'm giving to Pascal. So, On the release and our loss provisions, Volker? Yes. The quick answer is no. And just kind of to give a bit of context. So in the first We booked an additional reserve, which we still have. At the end of the year, it was €2,200,000 which is something that we call an environmental reserve, which we booked on key loans, To be prepared for any kind of effect that a macroeconomic downturn might show that we would have not captured in our standard reserving models. But we're also there, we run a very prudent approach. We didn't see the need to release it because it's still an macroeconomic situation that is fragile, so we keep it enabled. Andreas, could you just repeat your second question? I'm not sure if I completely captured it. On your slides, you showed that net financing receivables during periods of lockdowns came down. They were negative versus The periods during summer. And my question is, if this holds true year to date in 2021 as well? Yes. Look, we are again in lockdown. So is it like can we expect that during phases of lockdowns, It's still on the negative side. It's difficult to say. It's a good question, but it's difficult to say. What we see So far, but we're only 8 weeks into the new year, is that application levels or personal loans and auto are much better than they were in the 1st lockdown last So we seem to do better as a country with this lockdown. What we saw basically in 2020 that we've had a Sharp drop in personal loan applications and in older applications in March, April, May. We had a bit of a drop this year in January February, but it's much lower than we had last year. So I can't answer your question, what I see is our auto business is basically almost continuing as normal. It's a little bit lower at the moment. It's only 8 weeks, so I don't know what's going to happen in the next 3, 4, 5 weeks. I can't But that's what I say. In general, I think on the car side, it's very clear that when you have much lower volumes, you get lower assets. And when the volumes come up, they pick up. Less, much more fluctuation there. Your third question was on the credit cards and the growth on the numbers of cards, which was 5% last I think it's mainly due to COVID. I think the if you look at the cost growth, normally we are about normally about 10%, and I think there was really a slowdown on conference. Also, we're going to launch IKEA, so expect also some credit cards there, but it's difficult to say how much it's going to be In this year, but I think the 5% was really now driven by back office measures. The FX adjustment, Pascal, So obviously, when we refer to international revenues in card business, this is, of course, on one side of the pure FX markups we have, but this is also related to the International Auto Interchange, Lucif, where you might know that actually The higher than the domestic fees. And yes, we see the pressures on the fees, On the margin, like we have seen as of for many, many years, there are new market entries. So there are new some strategic moves. But on the other side, though, we have been always able to offset with some further growth of our business. And this is what we plan to do. This is what We are doing, because we have announced the cooperation with IKEA Switzerland as an example, and this is how we want though to basically offset potentially the lower fees and commissions with higher growth. Okay. Yes. Thank you. We now have a question from the line of Benjamin Goy from Deutsche Bank. Please go ahead. Yes. Hi, good morning. Two questions from my side, Geez. First, on loan growth. Just wondering, will we see a recovery only in H2 2, given the broader macroeconomic recovery or do you think it's already sufficient when lockdowns are lifted in H1 to see somewhat of a volume recovery? And then secondly, you commented at least on some trends in 2021 on the yield. I was wondering if you have any thoughts on the Potential entry of Post Finance into lending amid their privatization plans and your impact or and impact on CHEMBA or why you are more Defensive meaning. Thank you. Yes, Benjamin. Thanks for your questions. I think I will take them both. First of all, the loan growth, From what we see is that people are very cautious and people are waiting to spend the money and to the savings hold went up significantly in 2020. People are very cautious. Personally, I think that whenever we get out of lockdown, people want to go traveling, people want to spend money and people also need loans. So I guess the loans will pick up as soon as we are really out of lockdown and people can start traveling again. That's why you will see, in my view, spending in the market and that will also have an effect on loans. How much it's going to be, I cannot tell you. But My personal expectation is that it will not be only in a half year depending when we have really loosened the measures, It will it does start happening. Your question on Post Finance, I don't see any impact there. I think Post Finance will be In finance, it's probably more maybe more and more consistent in personal loans also. So I don't think that's going to have any effect on us. I might be wrong, but I think I'm right. So I don't see them as a competitor, so I don't see any impact from their entrants in the 21 Market. Thank you, and all the best, Robert. Thank you, Benjamin. The next question comes from the line of Mate Nemes from UBS. Please go ahead. Yes. Thank you for the presentation and good morning. I have three questions, please. Firstly, just a follow-up on the year to date applications For personal loans, autos and perhaps cards as well. I'm just wondering, have you seen any change in terms of the Quality of applications and if you perhaps compare the acceptance rate of these applications Currently versus pre COVID, has there been any change from this perspective? And secondly, A question on cost base, perhaps for Pascal. Would it be possible actually to discuss the main moving parts of the cost base going into 2021, shall we expect actually further decline, for example, in professional service fees and maybe any major change on the IT expenses line. And lastly, a question, a broader question maybe for Robert. Do you see an increased threat from buy now pay later solutions in Switzerland that some of the large retailers Started offering these payment solutions. Is that a credible large, medium term threat? And if so, what can you do what are you doing to mitigate that? Thank you. Okay. Thank you, Matt. I think we all have a question here. So I think the first one is for Volker, The application is changed. Yes. When it comes to the quality of the year to date application, also here the short message is there is no significant change over And I think this is also something that we have been showing in the past when we looked into the distribution of consumer ratings, We are very consistent in our risk appetite and when necessary, we change a bit here and there to ensure the stability of the loss rate. When it comes to the through the door population also there, as mentioned, customers are cautious, but it doesn't give a big shift in the customer profile that is applying for loans. So, overall, there is no big movement that we see not only in year to date, but also basically in the Pascal, on cost base. So on the cost base, so first, I will say a few words on the cost And then on the cost ratio, on the cost income ratio. On the cost side, if you look at our compensation and benefits, It's clear that we have taken some measures, though, and ultimately realized the synergies in the context of Cashgate, so that we are pleased with that. You mentioned in the questions of IT, and obviously, we see some increase of IT from €31,000,000 to €39,000,000 Look, this is one post where I wouldn't expect to fundamentally change, though, in the context of digitization, in context of COVID, there is a line where I would expect even more standard going forward. This is this line, the acceleration in the digitalization To enable us better as a customer experience. And on the Professional Services, also linked to the ultimately as a project we have, Wouldn't expect too much changes. So we are still actually quite comfortable with the cost in total. Obviously, the challenge is more the ratio because there are a lot of uncertainties around the revenue side, at which point the economy will recover. Our long term aspirations remain unchanged. We said, though, also in the context of cash grade acquisitions, we would like it to be as about 44 or even below. But by when can we achieve this? It's something which It's difficult at all to estimate now. Yes. On the buy now, it's interesting thing now. I mean, Volker knows very well because he was in the Nordics for a long time and Nordics has been very popular. First of all, we have buy now, pay later. So on our credit cards, we can do buy now, pay later. We've done Some of the test is confirmed, Hama. And in general, I would say that the Swiss market is not very eager to do this. I know now in Australia, it's having a revival, a lot of retailers doing it. I think if people want to do it, we can do it. We could do it for our retailers. In general, I've never seen it been a big success in We tried it also about 10 years ago in this business to really do a bina operated product. It never worked very well. So we are able to do it. So if it's coming very popular, we will do it. But so far, I don't see the trend moving into the Swiss market to buy now, pay later. That answers your questions, Barthe? Absolutely, it does. Thank you very much, Robert, and I wish you all the best in the future. Thank you, Matt. The next question comes from the line of Daniel Regli from Octavian. Please go ahead. Good morning. Thank you for taking my question. I have one follow-up question to Matti's question and then four Other question, if I may. First on the cost, in the cost measures you have taken after or the realization of synergies with Cascade, is there everything already visible in the H2 twenty 20 number or shall we see some further realization of the benefits you have the measures you have taken? And then I have two questions on Page 5, where we see the monthly trends In the receivables, first, maybe on personal loans. Compared to the other two businesses, personal loans seem to depreciate or go down quite Consistently over the year, whereas in out leasing and cards, we clearly see, let's say, the impact of the lockdown or lockdowns, if you want. Can you maybe elaborate a bit what is the difference in nature that we see this kind of consistent decline with personal loans, but not On the other two businesses and then secondly, maybe also looking a little bit on the cards number and the dynamics on the Yields or interest income on the different businesses is this, let's say, slight pickup we have seen in gross Yield, meaning net interest income divided by average receivables mainly driven, let's say, Because of the monthly average being above the simple average between beginning of period and end of period in H2, Were there other dynamics? I think you hinted to it when you were talking about the rate changes with non interest Building business on your balance, if you just could elaborate a bit more on this. Then quickly on loan loss provisioning, I think you already talked about it, but can you give me kind of an idea or an indication on what you are modeling for in terms of Pickup in default rates going into 2021 because I would assume that when all these government Support measures are running out. We should see an increase of default rates, particularly for, Let's say smaller businesses, what are you already modeling in? And yes, what would you Well, what could you take wrong footed on the provisioning? And then the last question regarding partnerships and Let's say more general or strategic outlook going forward, where do you see opportunities to further expand your business? Is there Are there businesses you could imagine Chambra doing, which you don't do yet? And What kind of partnerships are left after you're having, let's say, Micro, IKEA, a lot of others? Are there many other companies you could work together, Les? Okay. Daniel, if you keep asking questions, we lost the first one almost, but we'll go for it. Yes, I'll take it as the first one, as well, Daniel, as well. Obviously, H1, as well was We had the integration cost and majority of the integration cost, as I mentioned, of €8,000,000 was in H1. I would say the majority of For H2, the majority of these images from the cash gate acquisitions and the actions we have taken So on the P loan assets, your second question, why there's a difference with auto? I think in general, I think this is a trend that you see in crisis like this. People are just very cautious now. So people don't take loans at the moment. We saw very low attrition, very low volumes on applications. I think it's getting a little bit better this year, but I think people are just waiting. People have the money. People are saving the money. That's also why you see the savings squad. And people are just waiting to go out again and to spend money again. So they don't want to spend money. The restaurants are partly closed, the holidays, people don't need money for these kind of things. I think auto is different because I think people just want to avoid public transport and people want to invest in cars. And that's what you clearly saw on the used car. The used car market was basically unchanged last So it was the new car market was really stopping for a while also because the industry stopped for a while. But used car market people want to have transport And Transport is something that people are not going to save on, in my view. So look, I expect P loans market to pick up. I always said, though, And now for the ones who have been more years with us that now pre loans is a very stable market. The And you have good years and bad years. And we had a couple of good years and now we have a bit of a bad year. It will come back, I didn't understand it today now. But if you look at the long term trend on personal loans, The asset base is quite stable in the market. On the cost dynamics, I think on the yield one, there are so many influential factors there. I think you should Stick to more or less the yield that we have in 2020. There's always some ups and downs there. It's very difficult to explain it into detail. If you want, we can have a separate call afterwards with Markus to talk about it a bit more in detail. But I think for this call, we would get a very technical discussions, and I think we would probably Most of the audience here. Volker, the loan losses, there was a first question from Andreas from Daniel, sorry. Yes, thanks for the question on the losses. It's actually a bit $1,000,000 question when it comes to the expectation for the futures when it comes to a potential pickup of default rates, because this risk would not only exist for 2021, it would also have existed for 2020. And what we did at that time is that we basically took countermeasures. So the exposed Segments we identified and were a bit tighter on the underwriting in these segments and also kind of more focused in our collections activities to ensure the And that was actually also the reason why we took this environmental reserve of €2,200,000 that we still carry on the balance sheet. So if we would come into a Which would be an unexpected increase in default rates, and we would have booked the reserve already this year. On the partnership, Pascal, you want to say some words? Do you want to say some words? Look, of course, we are keen as well to sign additional partnerships. We always said one To do the partnership would be nice. We have a permanently as a pipeline we are looking at. So we cannot win as a whole as every time that we offer. This is clearly as a part of our strategy as we try to sign a little more partnership in the future, Particle in cards, Petuto in auto or even in pillow. Maybe I can give you a little bit more color on this because I think No, the fact that the Board Swiss billing is paying off because I think retailers are all under pressure in the market. They need to be more on customer loyalty And they need to capture the customer more and more. I think the I mean, one of the reasons we won IKEA was IKEA never wanted to do a credit Because but now I think they move. We spoke about 5 years, I think, with them. I think retailers need more loyalty. They need payment solutions as well. So I think with the combined offering SwissBilling, Chimbra and also have been having the opportunity to give loans Lisa is in there. I think there is a good site for more retailers in the future. Do we have does Abigail to sign EVA Numigro? No, no. But I think IKEA It's a great brand to sign. And I think there are more opportunities in the market. So it's always a matter of now is the hands half full, half empty. But there's a good pipeline, and we will be building further on this business is becoming more and more cards business now, if you look at the last couple of years. It's less a personal loan business, More and more cards basically over 1,000,000 cards now. And the revenue stream on cards is getting more and more important for us. So yes, we are very interested in signing more partnerships. Thanks. Very clear. Maybe just one follow-up on, let's say, adjacent businesses. Obviously, a couple of years ago, you have bought the SwissBearing, which was A new business, but leveraging your existing capabilities and platform. Are there other businesses which you're currently not doing, but you could imagine I think this is more of a strategic discussion that we can have, but I don't think we have the time because this is going to be an answer of about 10 minutes for me, if you really want So I'm happy to take you through it a little bit afterwards now in the 1 on 1 or whatever, if you want to or Pascal can do this. But this is more a strategic question for the I think, yes, there are some adjacent businesses, but there's also some timing effects there that we have to look at. I think for the rest, at the moment, we should We focus on recovering at the current business and building out the cards business. This is the priority for 2021 for Gemra. Okay, very clear. So thanks a lot. I would appreciate, let's say, if we could just take this offline and Absolutely, absolutely. Thank you, Daniel. All the best. Thank you. The next question comes from the line Currently, the theme is reflation and higher interest rate. Can you please remind us what are your levers on both sides of the interest income? So On the pricing, I don't remember the exact parameters with which the ceiling works. And then on the funding side, what are the levers? Are you tempted To go with longer bonds or something like that currently to protect future yields, please? Thank you very much. I'll give you quick few on the how the system works, and Pascal gives you a few on the funding side. So the funding how the funding how the interest The next way to work is, especially that there is a 3 months short term interest rate and there is a 10% upside there for loans and 12% for cars. So you can increase basically 10% for loans and 12% for cars. The floor is 0. So if interest rates are negative, it's still 0. If the interest rate is random interest rates are and the measurement is every year in September. If the interest rates are above 0, the 50 basis points, you can basically have now 50 basis points plus 10% and 50 basis points plus 12 Every year the measurement is in September. I don't think it's going to change a lot. I think we will be at the current interest rates of the maximum interest rate of 10% to 12 You want to say a few words about funding? Yes. A bit high level, but ultimately, we are prudent as well in our Certain liability as a management. Duration, 2.7 is on the funding side as always, not too far from our contract The durations we have on the asset side, so no, we don't have tactical measures to change from this approach. For us, the asset liability is matching. It's always something that we try otherwise to look at. We are fine with the current deliberations. Thank you very much. We now have a follow-up question from the line of Andreas Venditti from Vontobel. Please go ahead. Yes. Thank you very much. Just 2 smaller items. On the slides, you mentioned the Eni Corporation, which had a 2% impact from reduced activity, you say. And I'm surprised by the size, 2% Impact for this cooperation seems to me quite large. So maybe you can explain what's going on there? And the second one, maybe Swiss Billing is growing very nicely. Maybe you can explain a bit where this comes from and where we might be heading in terms of Swiss Billing Growth September. Thank you. Yes. On Eni, we had a SPV with Eni. So and we don't have a lot of Volumes coming into the SPV, they are now to an agent agreement with us. So for the agent agreement, we still got volumes. It's not booked in the SPV anymore. Basically, we don't book a lot of volumes anymore in the SPV. So then if you know that portfolio has a 3 year Our run rate, I mean, it goes down pretty quickly. We still work with Steb on an agent basis. So we still book volumes with Steb on an agent basis, which is not booked at any anymore Just in Canberra. On the Swiss Billing side, I think Swiss Billing is doing 2 things nicely. First of all, they are The billing as a service, so that's what they had some big corporations there. And also, I think on the IKEA side, So I think they're getting profitable. They're getting profitable really this year. I think they're growing nicely. I think they have a good value proposition, And we have good expectations. Is it going to be significant for 2021? No. But I think Swiss Billing is also incremental in getting businesses for us. I mean, The IKEA deal, I think, I mean, it was great that we had Swiss Billing because they are really needed for this kind of retailer. So in my view, So, it's billing pays for itself only by helping us with IKEA. But also on their own, they are profitable, they are growing nicely, and we have very good expectation from them. It's not going to be significant event in 'twenty one. Good. I think we're running a bit over time, so I think we should finalize it here. I think also there are no more questions. So I would thank you for listening into the call. To the all the analysts, I think most of us have been there for many, many years. I want to personal thank you all the analysts that you've always been very fair to us, critical, but very fair and very detailed. So thank you for the great cooperation. I hope you can have the same cooperation with Holger. I think so you will have the same cooperation with Holger. Then you will we have Pascal and Fokker So I think it will be business as usual. Thank you for listening in, and I wish you all the best. Thank you. Ladies and