Ladies and gentlemen, welcome to the first half results 2020 conference call and live webcast. I am Moira, the conference 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&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Robert Oudmayer, CEO, Mr. Pascal Perritaz, CFO, and Mr. Volker Gloe, CRO of Cembra Money Bank. Please go ahead, gentlemen.
Yeah. Thank you, Moira, and good morning, everyone. My name is Robert. I'm here with Pascal and with Volker to talk about the first half year results from Cembra. If you go to the summary page, as you see, there's a net income of CHF 74.1, which is 6% lower than last year, but quite resilient. In my view, also, the financing receivables are quite resilient. They went down 3% with lower volumes and lower attrition. We had some lower application levels in the second quarter. What we see is that people stay where they are, they would try less. You see quite resilient receivable levels. Net revenues increased by 22%, mainly driven by the acquisition of cashgate. You see an 11% decrease in commission and fee, really linked to the lower cost spent as a result of the lockdown.
We'll give you some more insight, of course, in this one afterwards. Loss rate, very stable, 0.9% during the first six months of this year. Return on equity at 13.8%. Capital ratio at 70%. Last but not least, the cashgate integration successfully completed at the 4th of July. If you move to the next page, I want to talk a bit about the markets. We'll start with the Personal Loan market. The Personal Loan market went down 2% year-over-year, which is also very resilient. If you look at the Cembra receivables, we went down 4%. Basically, I would say that is a very good number. Remember one thing, when we did the cashgate acquisition, we said that we would expect to lose some receivables due to the cashgate acquisition in both Personal Loan and in auto.
So far, the market share is stable at 44%. The dyssynergies from the cashgate integration so far has been very limited. I think we have to be a bit cautious with this because also remember that we didn't get too much new volume in there. We had a lot of low attrition. People normally stay in these kind of situations in their loans, and they don't go. I think basically we should lose a bit of market share after the cashgate integration. So far, it's very stable at 44%. Same story basically on the auto. Our market share is at the 22%, versus the 23% in December 2019, very limited dyssynergies from cashgate integration. Also, we haven't lost a lot there. The market is a bit different there. You see that new cars went down 34% in the first half of 2020.
The used car is only 7%. Typically, what you see is that in this time of crisis, people move a bit more to the used car market. When you order now a new car, you probably have a waiting time of four or five months because some of the factories have been closed. You see that the used car market is still doing quite well with this crisis in the new car market. 34% is, of course, a huge decrease, and also the expectation for the full year 2020 are not very positive on the new car market. Our net financial receivables went down 3%. We've been doing quite well on the used cars. We saw basically when after reopening of the market at mid-May, 11th of May, that we saw a lot of auto applications coming in again.
The auto business, in my view, is in a relatively very good shape. Credit cards, we went over the 1 million credit cards, the cards issued were 7% up year-over-year. We are now over 1 million. The good news is that Cembra outperformed the market in the first five months because those numbers are from the first five months. The market was down 19%, we were down 9% on the transactional volumes. Why was that? I think we are more a local card, we are not a typical travel card. We are also very strong in Migros. Also, the retail spend on cards has been quite nice in the second quarter. I think we are, in that sense, more resilient. Market share slightly increased at 14%, NFC, very strong still, 20% market share as of May 2020.
On the next page, I'd like to give you a bit more insight in the card transactional volumes and the revenues. What you see is basically, this is the first time that we really disclose the volumes by month. You see a strong start of the year in January, February. In March, went down, - 16%. April, really the biggest downtime, basically, not a lot of spend. In May, recovery, and basically in June, in my view, very positive numbers at the same level as last year, even a little bit better than last year. You also see the market there. We're outperforming the market. The revenues are not recovering as quickly as the volumes. What you typically see is that two events, probably important. One is the last of May when the dealerships and the retailers reopened again. You see also in May the rebounds.
The next big event was, of course, the 16th of June, where the international borders reopened again. In the first half-year numbers, you don't see a lot of effects from the international volumes because only the 16th of June, the borders reopened. We see some nice traction now. It's coming back step by step, but in the first half-year, you see volumes recovering where the international spend has not been recovering a lot. The other message that it gives you is that the market is moving from cash to cards more and more. We have seen several studies where the cash payments are coming down and down. Also, I think helpful was the increase from the contactless limit from CHF 40 to CHF 80. You see more and more people spending the cards and not paying cash anymore.
One last remark on this page is on the interest income that went up. You see that interest income went up from CHF 38.3 to CHF 41.6, which tells you that the default rate also went up quite a bit. Moving to the next page, cashgate integration. A few words on this one. The branch network is completely consolidated; we combined already the headquarters in Zurich in December 2019. Also, the service center, Renens, was combined in December 2019. The branches have also been now completely integrated in July, two months later than planned due to the COVID-19 situation. We couldn't move the people. We also took advantage of the whole situation to accelerate the branch consolidation with BANK-now down from 17 to 13 branches, what you should consider as a stable number for the next period.
I think the whole situation showed us that the digitalization is accelerating, and we took advantage to close a few more branches. The business integration, the complete integration was done early July, so 95% of the transactional service agreements are terminated. One is still in place. It was also foreseen. That will be the collections TSA until next year. We transferred already all the employees to Cembra, and all the systems were migrated as well. Basically, the integration was completed in 11 months with no surprises on cost and benefits. A few words on the commercial consolidation. We originating basically from one system on auto and for brokers since the 1st of January. We also built cashgate as an online brand, so there we're also completely on track on the commercial consolidation.
What has to be still done is basically do the legal merger, which is foreseen for next year. Some further back-end consolidation, which is probably in 2022, and some synergies. I think the synergies are gradually coming in, and we're well on track to deliver on the benefits as we announced last year with the cashgate acquisition. With that, I would like to hand over to Pascal, who's going to give you more details on the first half 2020 financial results.
Thank you, Robert, and good morning, everyone. Cembra reports resilient half-year results with a strong business performance during the COVID-19 pandemic and the consequent lockdown of the Swiss economy, as already mentioned by Robert. Let me dig deeper into the numbers, starting with the P&L on page eight. The interest income grew by 22% as a result of the cashgate acquisitions. Excluding cashgate, the underlying interest income growth would have been around 1%. The interest expense was 28% higher at CHF 13.7 million. This reflects the CHF 1.4 billion increase in funding for the acquisitions of cashgate. The overall 11% decrease in commission and fees income was due to lower card spend as a result of the lockdown in Switzerland, partially offset by higher insurance and loan and lease fees, mainly from the acquisitions. SWISSBILLING mainly drives the increase in overall.
As already mentioned by Robert earlier, the overall card revenues decreased by 11%, with interest income up 9%. As you can see here, the commissions and fees income decreasing by 27% or CHF 13 million. During the COVID-19 situations, we observed a shift in our source of revenues from cards, with higher interest income driven by higher interest-bearing assets and lower commissions due to the significant reductions in spending abroad, mainly due to travel restrictions. The number of cards issued continued to increase, up 7%, above 1 million, with the transaction volume declining by 7% year-on-year, respectively, or 9% for the first five months, compared to the 19% reductions on the market. We also observed differences in volume by industries for the first six months. I just want to give you here some examples. Transactions volume for grocery stores went up 40%.
Volume for electronics went up 31%, furniture, 20%. On the opposite, travel agencies, car rental went down 60%, airline 60%, hotels, lodging, 45%. The provisions for losses increased by CHF 11 million. This is primarily due to the acquisitions. Despite the unfavorable environment, this result in a loss of 0.9%, in line with the prior years. Volker will mention later, we also recorded a so-called environmental reserve of CHF 2.3 million to strengthen the allowance for losses of the personal loan portfolio and to proactively reflect the changing economic environment in the context of COVID-19. Again, as Volker will provide more insights in a couple of minutes. Finally, although the OpEx operating expense increased by 21%, the cost income was 50.3% for the first six months compared to 46.5% in the same period last year. Adjusted for the integrations cost of cashgate, the cost income would have been 47.9%.
I will further comment in one of the next slides. Next page, the net revenue by source. In the personal loan business, the receivables declined by 4%, and the repricing of the P loan book, though following the implementations of the interest cap in 2016, is more or less completed. Therefore, the 23% increase in the interest income to CHF 97 million is primarily due to the acquisitions in the second half of 2019. The yield of 7.4% was as expected, and I would expect this yield to remain stable for the full year 2020. On the auto loans and leasing, the net financing went down to 3% in the reporting period. The interest income, 32% higher with a yield of 4.5%. Again, here is the increase due to the acquisitions. I would also expect this yield to remain stable for the full year 2020.
In the credit cards, net financing declined by 4%. The interest income in the card business grew by 9% with a yield of 8.2%. The change in the yield is not driven by pricing change, but by lower non-interest bearing assets during the lockdown. Let's go now to the next page and discuss the operating expense. Personnel expense or compensations and benefits came to CHF 65.8 million. This is up 15%. This is following the addition of 134 FTEs, which are related to the cashgate acquisitions as well as some additional FTEs to support our growth in card, SWISSBILLING, and online business. The increase in marketing is largely driven by cashgate online and the launch of the Cembra SME business in February, partially offset by temporary reductions of our marketing spend during the COVID-19 situations.
The 98% increase in depreciations and amortizations are due to the CHF 5.9 million amortizations of the CHF 52 million intangible assets that we booked at day one of the acquisitions of cashgate to be amortized over or depreciated over a five-year period. On the cashgate, already mentioned by Robert, though we are pleased with the progress we made with the cashgate, and we completed the operational integrations in line with timeline and cost related to the transactions. Integrations and transition agreement were lower than expected. After the people and the commercial integrations last key milestone was the successful IT carve-out achieved this month. Remaining will be the legal merger planned in 2021. We incurred CHF 6 million integration and transitions cost for the first half of the year related to cashgate, after the CHF 8 million incurred in 2019 as already disclosed in our full year 2019 results.
We capitalized around CHF 5 million of costs to be depreciated in the next five years. In total, the integrations and transactions costs related to the cashgate acquisitions are expected to be around CHF 20 million compared to the original assumptions of CHF 25 million. Adjusted for the integrations cost and the transition services agreement with the seller, the cost income ratio stood at 47.9% compared to the 50.3% including all these costs. Finally, last year, we announced that we would invest around CHF 40 million in digitizations and product development for the period 2019 to 2021. We incurred CHF 7.1 million for this H1 2020 compared to CHF 6.5 million for the period in 2019. Let's go now on the balance sheet. On the balance sheet, the group total net financing receivables amounted to CHF 6.4 billion.
A decline of 3% compared to year end 2019. This is largely attributed to the impact of the COVID-19 lockdown in Switzerland. The decrease in funding was in line with the decline in assets. Finally, on the equity, the shareholders' equity decreased by 3% after Cembra paid out the full dividend in April 2020 of CHF 120 million for the financial year 2019. This was obviously partially offset by the net income for the first six months of this year. On the funding, the group funding portfolio declined by 3%, as just mentioned, in line with the lower asset base. The funding mix remains stable compared to the end of 2019, 57% deposit, 43% non-deposit.
The weighted average durations was slightly reduced to 2.8 years compared to 2.9 years we had at the end of 2019. The period end funding cost was 43 basis points versus 44 basis points we had at the end of 2019. The reductions of the cost of funds is mainly driven as though by lower costs related to the ABS. As already mentioned several times, we placed an ABS in March with CHF 250 million as of principals. I would like now to hand over to Volker for the provisions for losses.
Thanks, Pascal. Good morning, everyone. For the first half of 2020, we can report a stable loss performance with a loss rate of 0.9%, which is in line with the normalized number from the same period last year, also in line with what we have been seeing in the years before. Translated into absolute numbers, the loss provision for the first half came in at CHF 30.2 million, which is around CHF 8 million higher than the adjusted for one-off number in 2019. The main explanation, Pascal highlighted that already here, is the loss provisioning for the cashgate portfolio that obviously was not part of the 2019 number, hence we also see that the loss rate as a percentage then is stable. There is one more item that should be mentioned around the loss provision in the first half of 2020.
The loss provision contains the booking of an additional allowance of CHF 2.3 million that we call an environmental reserve. Due to the current COVID-19 environment, its implications on the macroeconomy, and the fact that we haven't seen any material impact on the credit quality of our portfolios yet, we decided to book an additional allowance due to this uncertainty. This is obviously a very prudent approach, the macro future will then show if and to what extent this additional allowance is actually needed or not. As mentioned, so far, we haven't seen any clear impact of COVID-19 on the loss performance. Portfolio quality metrics with 30 + delinquencies at 2.1% and NPL ratio at 0.7% remain strong and stable relative to prior periods when normalized for the one-off effects in the past, so in a like-for-like comparison.
In the current environment, we obviously continue to remain cautious around our risk-taking. When the outbreak of the pandemic started, we were very fast in implementing measures to protect the credit quality of our portfolios by strengthening collections activities and also by restricting specific higher risk segments in our product lines. So far it has paid off, and we see a solid loss performance that we, based on what we know today, also would expect for the full year of 2020. With that, I hand it back to Pascal to talk about the capital position.
Thank you, Volker. On the capital, the Cembra remain as very well capitalized with a solid Tier 1 ratio of 17%, which is at target level compared to 16.3% as we had as of December 2019, and a core equity ratio of 44%. The risk-weighted assets decreased in line with the reductions of assets. With that, I would like to hand over to Robert.
Thank you, Pascal. Just a few words on the macroeconomic outlook. I just want to really keep it short here. We followed here basically the second numbers, the latest second numbers, which predicts a shrink of 6.2% in 2020 and a 5.3% recovery on the GDP in 2021. You also know probably the interest rate expectations. They are supposed to remain negative for long term, and then the unemployment rate going to 3.8% this year and 4.1% next year. This is basically what we've taken in general in our predictions, but I think the next bit is probably more interesting. This is the H2 priorities, and how we adjust to the new economic reality. Basically, five things on this page. The first one is continue to deliver despite COVID-19. I think regaining organic revenue growth in all business lines is important to us.
Manage costs very tightly aligned with the revenue development. You know that we have been quite restricted on marketing expense and external expenses. Accelerate digital transformation. Continue to deliver in an economically difficult environment with a supposed recovery in 2021 where we will not jeopardize any of the long-term plans that we have. It's a short-term management of the crisis. That also brings me to the next point, so continuous focus on risk performance. We have implemented tighter underwriting rules and some additional risk assessments. We strengthened collections processes, and we have increased the staffing and training on the collections side. We deployed limited debt restructuring solutions. We don't use them a lot, to be honest, because we've implemented this in March. We have not seen a quite high usage of those restructuring solutions. Now focus on risk performance.
I always say now being successful in consumer finance is being successful on risk management, and I think it proves a little bit, and probably it helps a lot to focus on risk performance. I think the cards business is very important to us. We are investing in CRM. We're also investing in the self-servicing of cards. I think with 1 million cards, part of the cost management and part of also CRM is really getting more self-serving of cards. On the Migros Bank, the card launch of the Migros Bank has been delayed. Basically, the reason for this is that Migros Bank has a new CEO. They're also in the middle of a COVID-19 crisis, and they're reviewing the project portfolio. It's not off. It has been delayed so far. Drive existing and new partnership.
We have a healthy pipeline as well for new partnership on the current business. A few words on the new products. We haven't spoken about SME and about SWISSBILLING. SME, we launched our SME business the 14th of February, was probably the most unfortunate date to do it. With all the COVID-19 loans, we stopped originating new business. I think we regain this one in early next year. I don't think it makes a lot of sense now to try to book a lot of volumes on the SME side. I still believe strongly in the product. I still believe strongly in the setup. I think we're going to restart the SME launch early next year. That will be my best guess so far. SWISSBILLING, we continue to scale up SWISSBILLING. They were live, they are completely live with Swisscom Directories.
The live went a little bit later than planned, but they're live since beginning of April. That's probably why the revenues are a bit lower in the first half than expected. They also signed another big contract with the TX Group, which is a form of Tamedia. They expect to be live early next year. It's also billing as a service, so we really see scale in SWISSBILLING coming up. Last but not least, on the ESG performance, I think some good successes there. We got upgraded to A in April 2020 from MSCI, after the upgrade from to BBB in June 2019. Sustainalytics upgraded us to low ESG risk. Ranked as number one amongst 122 consumer finance companies. Also I think on ESG, we're making quite some very nice improvements. Finally, the outlook before we hand over to the Q&A.
In general, I think Cembra is well positioned to manage the future. The assets are of a strong quality, 100% Swiss consumer finance, proven historic risk performance. The capital position is solid, and we have secured the long-term funding. For 2020, we expect to deliver a resilient business performance with revenues being impacted mainly by overall lower volumes in credit cards and also with solid loss performance expected for the full year 2020. The midterm targets remain unchanged, an ROE above 15%, a Tier 1 capital of at least 70%, 60%-70% dividend payout ratio, and a net income delivery on cashgate as planned. With that, I would like to hand it over to the Q&A session.
We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. You will hear a tone to confirm that you've entered a queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and one at this time. The first question is from Andreas Venditti from Vontobel. Please go ahead.
Yes. Hi, thank you for taking my questions. Maybe to start on the credit cards, obviously most impacted business. Thank you very much for the additional disclosure on a monthly basis, very helpful. Did I get it correctly that basically, what the usual pattern is that, after transaction volumes increase, we should see also revenues obviously follow? Second one also, is the reason for the delta there driven by foreign travel, which is obviously still very slow, I guess. Maybe on the operating expenses side, you mentioned the branch closures that obviously had some costs in the first half. Can you maybe quantify that? Also can you maybe quantify the benefits we should see going forward, and whether these will already be in the numbers of the second half?
Maybe a bit more of color in terms of the loss performance and how you manage that basically on the risk management. Maybe you can add a bit more of color in terms of what you're doing in terms of managing that regarding the collection processes, what has been changed, and also this debt restructuring solutions you mentioned, how this really looks like. Finally, did I get it correct that by solid loss performance for the full year, basically this means a similar loss performance as in the past, i.e., around 1%? Thank you.
Thank you, Andreas. I think you're splitting the questions nicely among the three of us. I would take the first one, and then OpEx will be taken by Pascal, and the loss performance is, I think, the piece for Volker afterwards. On the credit cards, what you typically saw is basically as of beginning of March, the international spend stopped completely. There are basically three ways for international spend that we normally see in our business. One is cross-border shopping, how people go on the weekends. Again, now we're not a travel card. Our customer only use the card when he goes on holiday or when he does cross-border shopping. We're not a frequent traveler card. Three ways of shopping. One is basically the weekend cross-border shopping. Second one is people who start to book holidays in March and April.
The third one is basically spending in the summer when they are abroad. Those are basically the main resources of international spend. Well, the cross-border shopping stopped completely, basically because the borders were closed till the 16th of June. People did not book any holidays, so hotels, airlines, all those things, they were basically not happening. What we see now is that people go on holiday, they start booking holidays, and they also start spending money in Italy, when they're in France, spending on the cards. Basically until the 16th of June, basically, nothing happened there. You basically had two, three completely lost months. I'm not sure it comes completely back. I think the long haul is still far away.
We're not in the U.S. yet with holidays, but I think the European travel is coming back, and that also will help the credit cards. Really, the foreign travel was the bigger issue for us in the second quarter. I think the spend on itself is not so bad because you see it really coming up already in June, which is basically domestic spend. On the OpEx side, Pascal, please give some info there.
Regarding the branch closure, the group, we recognize an impairment loss of CHF 575,000 on operating lease for this period due to the planned closure of the various branches. This is here, though, what we reported. Look on the synergies, ultimately, we are very pleased with the progress we make on the realizations of synergies related to cashgate and also these synergies. We are fine as of to confirm that we will deliver the incremental net income, run rate net income between CHF 25 million-CHF 30 million in 2020 as planned and as already mentioned several times.
A few comments on the loss performance and giving a bit more color on how we are managing that. Obviously, in an expectation of an economic downturn, the things that you obviously need to do is to manage collections for the credit risk that you already have on the balance sheet, and you need to be cautious on the additional credit risk that you're taking on the balance sheet. We were very early in March already in rolling out collections strategies and also staffing up collections to ensure that the collections processes are really running smoothly. We are monitoring them closely. We have been additional resources in so that we don't run into any backlogs in collections. We are also applying some collections tools to help customers that are in financial difficulties. Here you can think about prolongation.
If a customer has a personal loan, we've just prolonged it by one month in the end, and the customer has a payment-free month in between, or we do a short-term payment plan with the customer. As Robert mentioned earlier, these tools are actually not very much used because we put some thresholds in place so that the customer needs to evidence that he or she is actually hit by COVID-19 and the consequences of that. We are quite cautious in using these tools. Over the last weeks, we actually see also that the demand for these tools is decreasing. It's an insignificant portion of the portfolio that is affected by that. On the underwriting, it has also been mentioned that we are cautious on SME lending. We are cautious on exposed segments.
Think about people that work currently in the travel industry or in restaurants. Here we're obviously extra cautious in granting new credits and loans to these. Then you asked the question about the solid loss performance. What do we mean by that? We're always not guiding to a loss performance on a number level, but I think we can say that we wouldn't, based on what we know today, expect any material deviations from the loss performance that we have seen in the past. The environment is still very fragile. We don't know if a second wave is coming, and therefore we chose the more cautious wording to talk about the solid loss performance.
The next question is from Martin Emnett from UBS. Please go ahead.
Yes, good morning, and thank you for the presentation. I have a couple of questions, please. Firstly, on development of net financing receivables. We saw the details, 3%, 4% decline in most segments. Robert, I think you alluded to the fact that some of it actually might be just simply attrition as a result of the cashgate integration. Could you give us some color or your best guess, what is really coming from the cashgate attrition, and then what is perhaps lower demand or on the flip side, lower lending appetite from your perspective? Also, maybe an outlook for the second half. How much of this could be coming back and what could be the key levers? Follow up on the card fees. I think it's much appreciated, the detail on the monthly revenue run rates or revenue performance versus last year.
Could you talk a little bit about what has happened really since the opening of the borders and what are you seeing in July numbers? Is that trend continuing? Is really foreign spend coming back? Should we expect basically an extrapolation of the current trend perhaps not to completely full year last year's levels, but something close in the second half? Thirdly, a question for Volker, maybe. The CHF 2.3 million environmental reserve. If I understand correctly, this is a general provision. Could you give us a little insight in terms of how this is calculated and then what are the key drivers of this? Thank you.
Thank you, Martin. I will take the first two questions, and then the last one is, of course, for Volker. On the receivables, it's not easy to say. I think if you look at the market now, the market of personal loans went down 2%. I would say that if you look at our performance, 2% is probably driven by the market and 2% probably driven by the cashgate integration. What we always said is, if we acquire somebody who's number three in the market, and we combine the assets, we're going to lose some market share. I give you one example on the Tesla side now. Tesla was working exclusively with Cembra and with cashgate. They always have a second provider in the market, they took Ping now as second provider.
We will lose some of the Tesla volumes, which is logical, and I think normal. I think, it's difficult to guide this for the rest of the year now, but I think in our business plan, when we acquired cashgate, we have really put some loss of market share in there. We always said we think we can deliver CHF 25 million-CHF 30 million net income because we don't know how much market share it's going to be, and it's going to be a mix between synergies on the cost side and some dyssynergies on the revenue side. So far, the dyssynergies are very limited, but also the new applications have been a bit lower than expected, so you don't really know. I expect that we will lose some market share this year. I think that would be normal.
I'm very hesitant to give you an outlook for the second half. On the card fees, I understand the question. I understand everybody wants to know how it's going to be in the second half. Honestly, I don't know. What I've seen since the opening of the borders is that international spend is coming up. Not at the level as last year because the big international volume, the big international long-haul travel is not there, but it's picking up nicely. July and August are important months for us. I can't comment basically on the July numbers, though. As I said, so far, I think it would be not very prudent to tell you now what I think it's going to be. I think we see a pickup in volumes in July. We see also a pickup in international spend.
Again, a bit like Volker, now let's see if it's a second wave or not. The environment is still very volatile. You also see some releases about potential second waves, countries locked again. I will be very hesitant to give you an early expectation for the second half. I think I can't do it at the moment, but it's turning into the right direction for sure.
Yes. One more item around the environmental reserve. The standard reserving models that we are using for calculating allowances for future losses, they basically look into the past and they look into the present distribution of the receivables along risk classes. They are not looking too much into the future. We are now in a situation where we know that we have probably a macro downturn ahead of us, and the standard reserve models have not taken that into account. There is a timing gap until they have considered that. Because of that, we put the environmental reserve in place, and we calculated the amount by using benchmarks that we had from the 2008, 2009 financial crisis. At that time, and we mentioned that before, also the portfolio has been quite resilient, so we also expect resilience now.
There can be a tiny impact by the change of the macro variables into what it means for the default behavior on our book. We just didn't want to wait until we see it in reality in our book. We just had wanted to anticipate that and accelerate that and took it therefore already into the loss provisioning for the first half.
It's maybe a bit prudent, but we like to be a bit prudent, and I think we're known for running the business quite conservatively.
Excellent. Thank you very much. That was very helpful.
The next question is from Michael Kunz from ZKB. Please go ahead.
Yes, good morning. One question regarding the dividend. With the setback in commission income due to the coronavirus lockdown, you might get in conflict with keeping the dividend stable and staying within your 60%-70% range. Based on what would you decide which of the two rules you would follow, keeping stable or sticking to the not more than 70% by all means? Thanks.
I can take it. Pascal looking at me, You should take it. Look, I think first of all, I want to remind everybody that we paid a very nice dividend this year as one of the few banks in Switzerland. We haven't changed the midterm target, so the target is 60%-70% dividend payout. I think it's too early to say it's going to be 60% or it's going to be 70%. I think it depends on the full year, it depends on the resilience. I think it should give you some comfort that we're maintaining our midterm targets. We mentioned again that we count to maintain our dividend target of 60%-70%. I'm not in a position to comment if it's going to be 69% or 71%, something like this. The target is still there.
We don't think we should change it. I think we're in a very good position to pay a dividend as well early next year.
Okay, thanks.
The next question is from Andreas Brun from Credit Suisse. Please go ahead.
Hi. I have got two questions left, one for Robert. The card for Migros Bank is delayed. How long is it delayed, actually? Can you be a little bit more specific? One for Pascal. If the cashgate integration is completed all else equal, given that we had CHF 6 million costs in H1, or put it differently. There will be no costs from the cashgate integration in H2 anymore?
Yeah. Thank you, Andreas. I'll take the first one. Look, the Migros got a new CEO, I think he started April or May, something like this. They also, like us, though, they are in a COVID situation, and they decided to review all the projects. I know I can't say how long it's going to be delayed, but I think it's kind of expected when you have a new CEO, that the person is going to say, Look, I want to look at all the projects. For them, this is an interesting project, but I cannot judge how important it is for them. I think for us anyway, the impact is not going to be material because we didn't expect anything for this year, and we said maybe we can launch it at the end of this year.
The income of this contract is much lower than on the Migros contract. It has nothing to do with the Migros contract. It's completely separate. It's with Migros Bank. It has nothing to do with the Migros deal or with the Migros contract. I cannot force the guy to tell me exactly when you decide on your project, I don't have the answer. As soon as I have the answer, I'll let everybody know. Pascal?
Yes, on the cashgate integrations, Andreas. First, at the time of the acquisitions, we announced that we would spend around CHF 25 million for the integrations, for the transactions cost, as well as the transaction service agreement with, I don't know what's the seller. In the meantime, as we incurred out of this 25 plan, we incurred CHF 8 million in 2019 as reported last year. We incurred for the first six months of those CHF 6 million, and CHF 14 million. What I also mentioned before is that we have a CapEx of around CHF 5 million in addition to that, which will be depreciated over the next around five years. In total, I expect instead of CHF 25 million now, CHF 20 million of total costs related to the integrations, transactions, and transition agreement.
The remaining cost now for the next five years is around CHF 5 million to be amortized linearly.
Thanks.
The next question is from Benjamin Goy from Deutsche Bank. Please go ahead.
Yes, hi. Good morning. Two follow-up questions from my side as well, please. The first one, also on card fees. Thank you for highlighting the importance of international spending. Just generally, I was wondering whether international spending is more important for H1 with the booking or H2, as you said, with July and August travel holiday times. The second question is on your credit grade migration. I guess no big surprise that the CR1 declined a bit, and it moved into CR2 and CR3. Maybe you can give a bit more color in terms of products and the movements you're seeing there. Thank you.
Hi, Benjamin. I'll take the first one on the card fees, then Volker is talking about credit grade migration afterwards. On the card fees, there is quite some volatility in the international spend and also on the total spend. What you typically see is peaks in July and August on the international spend because this is the holiday time, and you also see quite a big peak at the end of the year in December on total spend. Those are basically the biggest months for us are July, August, and December. December is more the total spend, and July, August is more the international spend. You see normally quite a low spend on January, February, then it's picking up in March, April, May because people start booking the holidays.
It peaks in July, August. It's coming down a little bit in September. It's pretty slow in October, November. There's quite some pickup again in December. That's normally what you see on the card fees. Volker.
On the credit grade distribution, it's actually a very good observation that you're doing here because, I mean, the credit grades, they reflect a probability of default. What do we expect in defaults going forward? You will see that kind of the high-risk credit grade, they have been kind of increasing slightly. This is driven mainly by the personal loan book, which is actually also logical. Obviously, secured lending is unsecured lending, so in an economic downturn, these are the portfolios where we would also expect the default rates to increase or they're worsening. That is exactly also the reason why when we have been talking about this environmental reserve, we have been applying it on the personal loan book and not on the other books.
Very clear. Thank you.
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