Earnings Call: H2 2019

Feb 21, 2020

Ladies and gentlemen, welcome to the Full Year Results 2019 Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Robert Oudmeier, CEO. Please go ahead. Thank you, Sandra, and good morning, everyone. I'm here with Pascal Paritas, our CFO and Volker Gloey, our Chief Risk Officer, To comment on the 2019 results, we have basically 3 sections before we go to questions. 1st, I give you some highlights, then Pascal and Volker will run you in detail to the 2019 financial results, and I will come back for the strategy and outlook. If you go to Page 3 to the 2019 performance, I think we can say that we are pleased with the there's a good performance in all business lines. The net income went up 3% to €159,200,000 which represents an EPS of €553,000,000 Total receivables up, what you can see, at 37%, with strong growth in Auto and Cards. The revenues up 9%, which is basically driven by cards fees, plus 9% and the acquisition of Cascade, which also only gives you 4 months of revenue in 2019. Loss rate, stronger than in the past, it's 0.8%. Volker will comment later in the deck on the reasons for this, and a little bit higher cost income ratio mainly driven by the acquisition of Cascade. Pascal will comment later on the cost income ratio. The ROE was at 15.7 percent with a solid Tier one capital ratio of 16.3 percent. And we proposed a 3.75 percent dividend stable despite the acquisition of Cascade and Align is what we said when we acquired Cascade. If you move to the next page, a little bit more detail on the products in the markets. Let's start with the personal loan market. So the personal loan market went up in the 2nd year in a row 6%. If you dig a little bit deeper in the 6%, it's mainly the ticket size that went up. So if you look at the number of loans, it went up, it's about 1% or 2%, and the main growth was in the ticket size. Probably the low interest rate environment pushes a higher ticket size. But it was the 2nd year in a row that the market ticket size. But it was the 2nd year in a row that the market went up after some years of declining in the past. If you look at CHEMRA, our core receivables in personal wealth were up 2%, and including cash cat was 39%. So why we only 2% and the market about 6%, what you typically see with this high ticket size loans is that price is very important. This is a lower priced segment. And as you all know, we're not the lowest priced in the market. So I think stable performance, market share of 44%, with fierce competition. I think we could mention that. There's a lot of pressure on price and a lot of people who are trying to get share on price. Loan book, more than 95% repriced. So basically, we are done with the whole repricing. Overall, I think a satisfactory year for Personal Loans with still a very strong market share. If you look at the auto loans and leases, first the new car registrations, so 4% up to 311,000. If you look 10 years back on this market, it is around 300,000, 320,000. So this was an average year. 2015 was a very good year. We also had some lower years, but we are basically still on a very stable new registration of new cars level. Also used cars are very stable. If you look at the last 5 years, it's also a market that is actually stable. If you look at the leasing market, the leasing market went up 7%. So market in leasing is growing faster than the new car registrations. And if you look at the performance of Market share, 23%, excluding Cascade, very stable at 70%. And basically, very strong year. Partnership performing very well. Good year for Hyundai, Hyundai, Harley Davidson. E vehicles is growing. If you look at the market, it used to be 1.7%. Last year, it was 4.2%. Also in our portfolio, it's growing in line with the market. So strong performance on auto loans and leases. And receivables was up extremely cascade at 7%, which in my view is a very good performance. Credit cards had another strong year. You see the transaction volumes at 5%. We went up 10% with the cards issues. The market share is now at 14%, so we're outperforming the market. Still all partnership performing very well. MIGO performing very well, Fnac performing very well. TESI is performing very well. Strong presence in Contactless remains as well. We are at 21% market share in NFC. So we are quite pleased with another very strong year in the credit cards. If you move to the next page, 2019 key focus areas. I just want to highlight a few of the focus areas of 2019 and basically on gross digitization and further development. If you look at growth and we talk about cash pay. So this is all extraordinary cash case. We renewed the partnership with Svanak, which I think is a good thing because we continue to diversify in our credit cards. Also, the Lippo is a new retail partnership that will go live somewhere in this year, but the contract was recently signed. I think also interesting is the cooperation with MIGRA Bank to develop a new credit card, which will bring us to a different market, because today we are typically very active in the retail market as retail customers. Here we come to service a bank, which is a different market with probably good volumes with lower markets. But basically, it opens up a new market for us. Executing on all the other partnerships, as I mentioned on the page before, so very happy with basically all the relations that we have. And also doubled the revenue of Swiss billing. So Swiss billing is getting step by step scale. If you look at the digital world that we're in, as we announced last year, we want to invest quite a bit in digital. We implemented the new CRM platform. The customer onboarding system is going to be a single system for basically all product lines. We have implemented it as we speak. So we did a piece last year. We're going to do a piece this year. Also, Cascade will be involved in this one. Quite some focus on the mobile first solution for cards or self servicing for cards. I think the next step for us in credit cards is really digitizing the whole customer service and being really mobile on credit cards. It will take a bit of time. I don't think we will be live this year, but I think we put the foundation in 2019 up there, starting execution in 2020. And hopefully, we will have some results in 2021 there. Then also investing in paperless office, we're getting more and more digital, and we're spending quite some money in basically new printing solutions and being more digital. On the product development side, two things. First, check our business. So I invite everybody after this call to just click on the website, the www.gembabusiness. Ch. You will see our value proposition there. We went live with family of brands basically in December. We tested the solution. And 17th February, we had a big go live. So we are live. There's quite a large market in PayNet right now. I don't think the goals are changing within my business, but we are live. I think it looks quite nicely. So let's see. It's a bit early to tell you the results as we are live only 3 days, but I mean the first signs look very promising. Then on the SwissBilling side, we signed a contract with Localserts, which is Swisscom, to provide invoice financing for all small enterprises. It's a 5 year contract that will start this year. So that will give SwissBilling even more size. And hopefully, we'll keep the growth going on SwissBilling as well. On the next page, a quick update on the Cascade integration. Basically, three topics. First is the whole consolidation from branches and offices. The second one is the business integration, the service to commercial consolidation. On the network, the consolidation, we combined already headquarters in Zurich and Lausanne in December. So basically, all the people who used to sit in the Cascade headquarters and the Aduna headquarters sitting with us now. Everything has moved. Then we have still to integrate the Chamber branch and the Cascade branches, which is foreseen for April, and it's fully on track. So we expect to close basically 7 branches in April, May, and then go back to 17 branches. Look at business integration. I think one of the nicest thing that we had was that we almost could maintain all the people from grades. So basically, I think 90% of the people signed new contracts and staying with us. They signed, it's closed. They will have their contracts starting the 1st March, but they're all here and they're all in. And I think we can really maintain a large part of the population, which what we wanted because we didn't buy cash back only for the assets, but also for the people. TSA agreements are strong in execution, so I think that's all on track. If you look at what we have to do this year on the single origination system, we also need to include cash case. So we will have basically all businesses on one single origination system in the coming years. And then the back end, it will take a bit longer. It will also proceed to take a bit longer. That will happen in 2021, 2022 when we basically got to replace our back end auto and loans. We're also on track. If you look at the commercial consolidation, the B2B, which is basically car dealers, brokers, everything has originated on one system. So we are single brand from the first of Jan. So basically, if you're a car dealer, there's only one way you can apply for a lease, which is through the CHEMRA single brand origination system. The same applies for brokers. On the B2C side, the branches are still basically dual brand till April. Of course, when we integrate other brands, it's going to be single brand as well. However, we also will have a cash paid online value proposition where you basically compete on the lower price level with Chembra, and that's going to be live as well. Since the 1st January, it's going to be live. While spending, I think in general, the whole customer experience and the digital transformation, that will be a journey that will continue for the next 2 or 3 years. With that, I'd like to hand over to Pascal, who is going to talk about the 2019 financial results. You, Robert, and good morning, everyone. I'm very pleased to report a very good performance across all businesses with the net income of €159,200,000 and EPS of €553,000,000 for the full year 2019. This is slightly above the range of €520,000,000 €1,000,000 we gave with the half year's results last summer. We also see a steady revenue growth across all businesses, driven by organic and inorganic activities. And I want to remind that the cash flow figures have been included in the Cambra full year results for the last 4 years of the year since the completions of the acquisitions on September 2, 2019. The net revenues rose by 9% to €479,700,000 or 4%, excluding Cashgate. The drivers for this 4% organic growth was the solid momentum in auto financing and the continued growth in the credit card business. The interest income grew by 9% as a result of these acquisitions and the higher credit card volumes. And the interest expense was 30 4% higher at €27,800,000 This is reflecting the 1.8 $1,000,000,000 increase in funding and partially offset by lower repricing of term deposits. The commissions and fees income increased by 14% to 14%. This is influenced again by the acquisitions and thanks to the strong credit cards fee income as well as other income, mainly Swiss billing related to the invoice financing. As already mentioned by Robert, the solid performance in the credit card business was driven by higher number of cards, plus 10%. In terms of number of cards, plus 10% in terms of volumes and plus 16% in terms of number of transactions. The growth of commissions of fees of the credit card business was 9% for the full year, respectively 11.3% for the first half of the year and 7.5% for the second half of the year. The reductions in the second half of the year was also impacted by the This change do not affect the domestic transactions or the transactions outside the EEA. For these transactions impacted, the average interchange was 1.6% and reduced since October 2019 to 30 bps for point of sale transactions and 150 bps for online transactions. The overall impact of this change is expected to be around 5 €1,000,000 on revenues in 2020. The share of the total net revenues generated from commissions and fees increased to 31% compared to 30% last year. The provisions for losses decreased by €5,000,000 despite the expanding loan portfolio, and Volker will later comment on it. The increase in revenues and the very strong loss performance were partially offset by a 20% increase in operating expense and largely attributed to the acquisitions. I will come back later on this point. Finally normalized for the acquisitions, the net income growth was slightly higher than the net revenue growth. On the next page, net revenue by sources. So the net financing receivables rose by 37 percent to a record €6,600,000,000 as a result of the conversations of Cascades. Despite the strong competitions, as already mentioned by Robert, CHEMBRA organic assets grew excellent cash gains was 6%. In the personal loan business, receivables increased by 38%, respectively, although 2% excluding cash gate. Interest income in the personal loan business increased by 7% and the yield was 7.5%. The yield of the CHEMBRA portfolio, excluding Cashgate, was slightly higher than the 8%, and we expect the combined portfolio to stabilize around 7.5% in 2020. The net financing receivables in Autoleas grew by 48% to €2,900,000,000 in the reporting period, respectively 7% excluding cash gains. Interest income was 12% higher with the yield of 4.5%. The reductions in yield is due to the change in the business mix of the CHEMRA portfolio with higher portions of electric vehicles as well as the cash cat incursions. The anticipated yield for this portfolio is to be around 4.5% in 2020. Finally, the net financing receivables on the cards grew by 9% and the interest income in the cards by 11% with 8% yield expected to be stable in 2020. On the operating expense, so we mentioned earlier the 20% increase to €231,800,000 Personal expense went up 14%, following addition 180 EFTs in 2019, including 134 employees from Cashgate. The general and administrative expense rose by 28%, mainly as a result of the integrations of Cashgate, together with continued investments in technology and in innovation. Last year, at the same period of the year, we announced that we would invest around €40,000,000 in digitizations and product development for the period 2019, 2021, and we incurred 13% for 2019. The costincome ratio increased to 48.3%. Excluding the acquisitions and its transactions, integrations costs, the costincome ratio was 45.5 percentage. On the balance sheet. I already commented the increase in the net financing receivables and the €1,800,000,000 increase in funding will be commented later. Increase in other assets is mainly driven by the €141,000,000 goodwill and the $52,000,000 intangible assets estimated at the close of the Cashgate transactions. The shareholders' equity increased by 17%, and this is predominantly related to the sale of the treasury shares in July 2019 and the retained earnings for the 2019 period. Let's spend a bit of time on Gate and the financial impact of the acquisitions. As Robert mentioned earlier, we are very pleased with the progress we make with the integrations, and we are on track to deliver the expected €25,000,000 to €30,000,000 incremental income from these transactions as announced at the time of the transactions in summer last year. Out of the 37% increase in net financing receivable for CHEMRA Group, €31,000,000,000 or €1,500,000,000 came as of from Cashgate. We incurred in 2019 €8,000,000 of integrations and transactions cost out of the €25,000,000 expected in total for the Cashgate integrations. And finally, the normalized net revenues of €27,000,000 were in line with the expectations. The net asset values acquired of €85,000,000 is 31% of the total of the purchase price, and this is in line with our estimate disclosed with the half year's results last year. Finally, with the acquisitions, we entered into the committed bridge facility of €1,450,000,000 and the €150,000,000 midterm loan. In the meantime, the 1 the bridge facility of €1,450,000,000 has been fully paid off through debt instruments, hybrid, equity and deposits. And for the €150,000,000 syndicated term loan, we paid €75,000,000 and the remaining debt at your end was CHF 75,000,000. On the funding, the portfolio the funding portfolio raised by 42 percent or €1,800,000,000 to €6,100,000,000 at year end. And this is, as we mentioned earlier, mainly driven by the capital market transactions mentioned earlier to finance the increase of the net financing receivables from the acquisitions. The weighted average remaining maturity was 2.9 years and the period end funding cost declined from 49 to 44 basis points. We slightly increased our maturity with the refinancing of our acquisitions to take advantage of the current favorable interest rate and environment. Finally, the leverage ratio amounted to 12.5 percentage. I would like to hand over to Holter to comment on the provision's policies. Please, Holter? Yes. Thank you, Pascal, and good morning, everyone. For 2019, I think we can report a quite strong loss performance of CHF 45,100,000, which translates into a loss rate of 0.8%. In comparison to prior years, this is rather low and it's also largely driven by a one off effect that was already highlighted during our half year earnings call. This one off related to a better synchronization of collections and write off procedures in a particular segment of personal loans, and these are the ones with the longer contractual tenants. Because in this segment, we saw an increasing number of accounts being written off prior to verifying the collectability of the underlying assets. Therefore, then the moment in time when an account in this segment is charged off the balance sheet was deferred by 2 months, which gives us now an extended time period to progress on collections activities and specifically also on the debt enforcement, which is a quite powerful tool in the collections process. And by that, we can better check the collectability of these assets. This was implemented in June 2019 and consequently led to this one off effect, which is a timing effect for 2 months as we implemented in June and valid for June July. So it affects both half year results. But nonetheless, despite the one off, it's important to highlight that also the underlying loss performance has been quite strong because if we normalize for the one off and adjust look at the adjusted loss rate, we report 0.9%, which is still quite strong compared to the previous years. We have always been oscillating around a loss rate of 1% in the past years. And while 2018 was slightly worse, we now in 2019 see a result that is slightly better, which is probably also a reflection of a strong macro environment in Switzerland in 2019, but probably also a reflection of the diligence and the consistency in our loss mitigation strategies. When it comes to the asset quality, we can report 30 plus delinquencies at 1.8%, which is exactly the same level as the past years. If we normalize that metric for the one off effect that was mentioned, it actually would have been 1.6%, so slightly better than the last year. Same goes for the NPL ratios. Here we report a number of 0.6%. But again, if we normalize for the one off, we would have been at 0.4%. Due to this stability that we have seen, we also for the current year, we would not foreseen any deviation from what we have seen in the past years, which leads us then to stating an expectation for 2020 that the loss performance will be in line with prior years. And with that, I hand it then back to Pascal to give an overview on the capital position. Thank you, Falkor. We remain very well capitalized with the solid Tier 1 capital ratio of 16.3%, which is within the 16% to 17% range indicated for 2019 at the time of the acquisitions last year. The risk weighted assets increased by 36%, in line with the net financing receivables growth. This is a stronger than expected increase at the time of the acquisitions, driven by higher receivables from cash CHEMRA's solid financial performance, the Board of Directors will recommend a dividend of 3.75 per share at the next AGM, which translates into a payout ratio of 68%. Given that the organic growth and the cash gate assets were stronger than expected and in order to maintain our financial flexibilities, CENGRANZRA does not propose to cancel the remaining treasury shares at the next AGM. Thank you for listening. And with that, I would like to hand over to Robert for the outlook 2020. Thank you, Pascal. Thank you, Volker. Just to wrap the whole story up. If you look at 2020, I think this is going to be a year that you have to focus on execution. Not that we normally don't execute, but I think we do always execute, but I think 2020 is especially a year where we have to deliver on what we basically start in 2019. So one is just to continue to deliver in all business lines. I think we have a very strong core business, and we will continue to deliver on all businesses. So maintaining organic growth and also compensated pressure on margins and fees by growth. There is pressure on margins. You've seen that on the personal loan side, on the auto side, to be growing also quite a lot. 2nd priority is really complete the integration of Cascade. Everything is on track. I think we're doing very well, but there's still a lot of work to be done, and we have to finalize as much as we can the integration of Cascade in 2020. The third part is really look at the cards business. Now we are are serving our more than 1,000,000 customers and more than all those almost sorry, we're serving our more than 1,000,000 customers and a large part of those customers are credit card customers. So we want to further improve the CRM and the self servicing, be a much better online provider also from cards. We want to develop a new card for MIGRO Bank and also looking at new partnerships again as always. So I think cards is getting more and more important for us, we want to try to continue to grow the cards business. Then the 4th one is capitalizing new products. SME is life. SME looks quite nice, I would say. Again, try to look at the website afterwards. We want to do this step by step. So there's no big rush there. We're not going to grow it a lot. But I think on the long term, this is an area of growth that we really see good opportunities. Then actually from the Swiss Billing partnership is Localsert. Localsert is the biggest deal that Swiss Billing ever signed. So we need to put it live now in the coming months, and we want to execute on really this partnership. The last one is basically a new point, but not an important point. Sustainability is getting more and more important also for CHEMRA. So we have now a Management Board Committee on Sustainability. Sustainability is part of the remuneration of management from 2020 onwards. In the annex is a page on sustainability, what we want to do. I think it goes a bit far in this call to really explain what we're doing, but it's going to be a part of our priority for 2020. And really, I recommend you to look at also the annual report that we will have quite a section on sustainability. If you look at the outlook and guidance, the outlook for 2020, a moderate organic revenue growth and also the full year impact of Cascade acquisition. I think one of the challenges we have, how much of the revenues can we maintain that we got from Cascade, but I think we are good on track there. Strict cost management like always, but even more important, think now with the Hockeschka integration, our focus at the stable loss performance in line with prior years and an expected 2020 EPS between €5.75 and 6.0 5. Looking at the medium targets. ROE remains above 15%, the Tier 1 capital of 17%. The dividend payout remains unchanged at 60% to 70% and return excess capital above 19%. And then as we promised, basically, at the acquisition of cash carried, we still have in our goals very strongly incremental net income of €35,000,000 to €30,000,000 expected from the cash carried acquisition and a cost income ratio below 44%. With that, I will hand it over to the questions. I'll be happy to answer all your questions. We will now begin the question and answer The first question comes from Andreas Vendetti from Sontobel. Please go ahead. Yes. Thank you for taking my questions. Actually, I have quite a number, but I will limit myself to a few and then maybe ask a few more later. First one on the cash gate. I think you mentioned it, Robert, one of the challenges will be to maintain obviously as much as you can of the business. When you acquired, obviously, you said some volume losses will be normal. Can you be a bit more specific what you see there in terms of what the agents are doing, for example, and what that might mean for this year? Next one in terms of the restructuring costs, I think EUR 17,000,000 remain. Will this be fully booked this year? Or is there going to be also some in future years? Anything you can say already of any impacts? Thank you. Okay. What we will do, I will take the Cascade question. I will take the sales and rental guarantee question. I give the restructuring costs to Pascal and of course, Volker, you get the last question as protein. So cascade, yes, that's a it's a good question, Andreas, also a difficult question. What you do is basically we combined all the brokers, all the agents into 1 channel and also all the dealers in 1 channel. And even the personal loan presence for Cascade is going to be a dual channel. On the agent volumes, I think it looks okay, but you don't know how aggressive competition is going to be if you're going to lose something. We will lose something, I'm pretty sure. It's almost impossible to say it is impossible to say, not almost, it is impossible to say how much we're going to lose. On the auto side, we also will lose something. I'll give you one example. Tesla, for example, Tesla always works with 2 suppliers. That was, CHEMBA and Cascade. They have engaged with the 2nd supplier, which is paying now as well. So there are 2 suppliers again, which is completely in line with the European policy. The question is, are we going to get 90%, are we going to get 70%, are we going to get 50% or now of that volume. It's difficult to say because it's the customer that's going to choose at the end of the day. So it's difficult to give you more color on this one. But we will lose some revenue, no numbers unfortunately. Pascal on the restructuring. Yes. So out of the remaining €17,000,000 we expect around 2 thirds to be P and L impact in 20 20 and onethree for later? On the sale of the rental guarantee business, there was basically no P and L impact in 2019. The reason that we want to sell it is not a core business for us. It is was a subscaled business line that we didn't think we could develop really significantly. So we sold it with no P and L impact in 2019. To actually answer it in two directions. 1 is to give you an overview about what we expect for 2020 and one also kind of rather going into what I think you are after, more an insight about the accounting piece of it when it comes to expected losses going forward and what will change there. So on the 2020 loss performance, since we have been seeing over the last couple of years always a number loss rate that is around 1%. We want to stay kind of consistent and prudent and also for 2020 wouldn't expect any major moves because we haven't changed our credit risk appetite massively. There are always a few pieces that move up and down, but I think we have a robust estimate by saying that we will be in line with prior years. When it comes to the accounting piece and the expected loss concepts that are currently discussed, there was recently a couple of months ago an update from the Financial Accounting Stability Board in the U. S. That said that the implementation of the new U. S. GAAP rules around the CECL standard, but they are kind of postponed by 2 years. So for us, they first become effective in 20 23. So it's far too early to give an update on what it means impact wise for us because the Class B also kind of granted this extension period to give banks, especially small banks, the opportunity to monitor what now the larger banks are doing in terms of disclosure and reporting. The next question comes from Flora Benhakoun from Deutsche Bank. Please go ahead. Yes, good morning. I stick to just a few questions for now as well. The first question I wanted to ask is regarding the interest expense, which was a bit higher than expected here. And I just wanted to understand if this is kind of a one off because of the maybe higher cost of the bridge facility that you had to quickly cover over the half year or if we should consider that this is maybe a more normal number that we should also expect for the outer year? The second question is regarding the credit card fees. So I understand you've guided for €5,000,000 hit in 2020 from the lower interchange fees. Shall we still expect a small growth in credit card fees year on year, namely the number of new credit cards and transactions would slightly more than offset that negative on the interchange fee? Then a question on the SME lending. I think you have started already a little bit, so I wanted to ask you how much you did and any commentary you have around your feeling having started with SME lending? And maybe as a last question here, if you could elaborate a little bit on what you intend to do on the card with Migros Bank, When do you think this is going to be launched? And when this would contribute to the P and L? Thank you. Thank you, Flora. I have a lot of questions for me, but the first one at least go to Pascal on the interest expense. So clearly, as of the €27,800,000 interest expense, so we had a Q1 also related to the bridge facilities, particularly the participation fees. But in total, look, though, we disclosed in the funding part in the slides the reductions in the cost of funding for 49 basis points to 44 basis points. And I would say everything which is below 50% is always basically a very good numbers. So yes, there are a few one offs. And ultimately, as though the cost of funding around 50 as though slightly below is a good number associated in 2019, despite this one off. On the credit card fees, it's a good question. It's also not an easy question. Yes, we expect a CHF 5,000,000 hit, but also we're growing quite a lot on credit cards. I think you can expect growth in credit cards. I can give you the number, of course, but you can expect growth. You won't see the growth, the big double digit growth numbers anymore because of this. But I think if you look at the production we have for the number of cards that we're going to do in the budget and in the number of customers we're going to sign up, I think you clearly can expect those on the credit card fees again in 2020. Quickly on the SME lending, we did some friends and family. So we basically had the website opened only for one partner to see and just to get some experiences with first applications. We did a few applications. We did a few numbers. They're not big numbers yet. I think it's early to say because we are open now since Monday. We got quite a few applications in the 1st week. We work both through partners and through our own website. So we also have signed up quite some partners, some agents or brokers or whatever you call it, insurance companies who can bring us elites as well. And we also have a marketing campaign, LifeDAU. So it's really early days. We booked a few contracts already in the system. So we have some volume in the system. I think it'll help you results. I think if you really some more flavor where we are. Your last question, Flora, on the Migo Bank credit card. I think we're going to be live with MIGRO Bank at Q3, Q4 this year with the first product. That's basically as far as we see now what we can do. So you won't see a lot of impact in 2020. I think long term, it's a pretty interesting value proposition because what we do is we're going to service the cards for a bank. So today, we service cards for a retailer. So basically, the assets in our book, the retailer is merely our customer, the end customer is our customer. If you're going to service credit cards for a bank, the If you're going to service credit cards for a bank, the assets probably going to be on the books back. And you're getting a service fee for basically serving their credit cards. So that means that you don't have any capital to do this one. You get just services fee, but also lower margins on these cards because you don't have the assets, you don't have the interest expense on the assets as well. I think it opens a new market for us where we have been quite be focusing on retail. And this really could bring us into the banking world. Let's see how this goes. But the first customer is there and this is certainly something that we want to explore more in the future. Thank you. The next question comes from the line from Michael Koons from ZKB. Please go ahead. Yes, good morning. I have a question regarding the Swiss billing cooperation with the local search. Could you elaborate a little bit how that works in practice? Do the companies that look for an invoice financing find an advertising banner on the local search page? Or kind of how do you bring the match together? Yes. Okay. Only one question, Michael. That's good. I could add another one regarding the Microbank Corporation. I could ask a question. Go ahead. Is your ambition to kick out VisekaAdunu completely out of the Migrobank? Or do people get an option when they bank with Migro Bank, which card they want? Or how should that work in practice? Okay. Two questions from me, I guess. So first, the Swiss billing local service deal. I think it brings Swiss billing a bit of a different league because it's not factoring anymore, it's basically billing services. So we're doing the whole billing and the collections for local search. It's not going to be immediately in the banner that say, no, go to check my business afterwards. But I think it gives us quite some addresses and some possibilities also to target customers from local service or the small SMEs. So basically, what we're going to do is from, I think, the 1st April now, we're going to be do all the billing for them. It's not going to be big banners immediately, but I think it gives us access to a quite a large customer base. And depending on how Chemba business is going to develop, this could be another source of bringing leads in. The Mikro Bank Corporation, it's never my ambition to kick out somebody completely. I think what we want to do as Mikro Bank is we want to bring a very competitive card, which also happens to benefit from all the micro advantages. So no annual fee, cumulus points, these kind of things. And I think micro is probably going to push the new customers to our current. I mean, that's probably what we want to do. What they do is the existing book that's obviously completed to MIGO Bank, and that's not really what we should look at. Okay, thanks. The next question comes from the line from Matt Nieves from UBS. Please go ahead. Yes, good morning. I have two questions, please. First one perhaps for Robert. If you could give us perhaps a little bit of an outlook on the personal loan market and also on autos. In all those, you clearly had a very strong period with the 7% growth. How sustainable do you see that? The Shelby has some reversion to the mean perhaps or another good year in 2020? And in personal loans, did you think this trend of larger ticket sizes still ongoing? And the second question for Pascal, in the context $575,000,000 $605,000,000 guidance, I'm just wondering how shall we think about the cost base for 2020? I hear you on the integration charges, but perhaps excluding that bit, if you could give us a bit of sense how the cost base should develop and also in the context of somewhat higher DNA and the digitization program? Thank you. So on the matter on the personal loan side, I think the trend of larger ticket size will continue clearly. I think one of the reasons that we put in Cascade online in there is that we can target now with a different value proposition in market ticket sizes. Because today, until today, our pricing is €79,000,000 to €99,000,000 and the larger ticket size are clearly below that price, the real life ticket size. I think with Cascade Online, the customer have less service, but I mean, they can get a better price. And we also we're not going to jeopardize the Gemma brand. So with cash and online, I think we can target this market a bit better because clearly, we see a trend moving into larger ticket sizes and pressure on margins. On auto, I think 7% growth on assets is amazing. Really because normally you get you need to do a lot of volume growth to get asset growth in there because you know that assets for an auto asset is about 3 years on the book. So if you do 7% asset growth, that's quite a bit. So I don't think we can repeat the 10% asset growth. Also, you combine JEMRA and Cascade in the auto book. So I can't tell you what it is going to be in 2020, but I will be very surprised if you would have another 7% as it goes in 2020. Francois? Yes. So thank you, Matt. On the expense and the cost income ratio, we disclosed basically, we reported 48.3 percent as a percent of costincome ratio for 2019. And I think about the future, including cash case integration investments, so we also said that we expect the synergies realization from the transactions in 2021. And basically, we also expect that then the P and L impact from these CNGs in 2021. And we clearly have guided that we want by 2021, the costing conversion of around 44% EDAV, so below the 44%. Well, I think in the 2020, although if you take 48.3% as of what we reported 2019, 2021 as our target to 40.40. Clearly, as of 2021 2020 as of this year, we still have quite significant investments related to the one off investments related to the acquisition. So I would say a little more closer to the 48% than to 2.44% in 20 20. Thank you. That's very helpful. The next question comes from the line from Andreas Bruehn from Credit Suisse. Please go ahead. Hello. In personal loans, can you quantify the organic yield pressure in 2020? And then in credit cards, how fierce is actually the currently the competition from fintech companies like, for example, Revolut? Lastly, we had that international interchange rate reduction in 2019. Was this the main reason that commission income per card did not grow anymore in 2019? And what are your expectations for the current year regarding commission income per card? Thanks. Thank you, Andreas. At least you have a couple of questions for Pascal here. The organic yield pressure, I would I mean, it's difficult to say now. I mean, we have we are now at a 7.5% yield on the personal loan side. Normally, I would give you quite a clear answer, but with the whole cash cat integration and the whole new cash cat online value proposition that we're going to have, it's going to be really difficult to talk about volumes and yields moving forward. I think we're well positioned. I think we will perform well. It is difficult to say because you will have some impact of cash cat online. And if you get a lot of high ticket size, you probably got some high volumes, but then you get probably a bit of lower yield or you get a bit of a higher yield and lower volume. So it's one or the other. It's difficult to give you more color around this one, honestly. And normally, I would love to do it, but I don't really know the answer here completely. On the credit cards, on the FinTech side, honestly, we don't fit it too much. I think if you look at our customer base, our customer base is the basically by large the micro customer. The micro customer is not a frequent traveler. I think the Revolut value proposition is very much Revolut is the only one that you could feel a little bit, I think. Revolut is the only one that it's a frequent driver customer. I don't think we see a lot of traction there at the moment. I think it will keep maintain the pressure on fees because I think everybody knows about this. But I don't think we lose a lot of customers there. So also, I think if you look at Revolut, the value proposition of Revolut is completely different than ours. We have a credit card. Basically, Revolut is still a prepaid debit card. And there's no asset there. There's no interest income there. So I think it's also a different value proposition there. On interchange, Pascal, you want to say a few words there? So look, ultimately, yes, the lower growth that we have seen in the second half of the year is mainly as we by the lower interchange, the international interchange fees. And yes, that's the response here. The next question comes from the line from Daniel Regli from Octavian. Please go ahead. Hello, good morning. Thanks for taking my question. Actually, my question goes a little bit in the same direction of one of the questions from Andreas. So it's risking that you give me the same answer. I wanted to ask on the yield guidance. Obviously, as I understood, you gave a yield guidance of being roughly stable at the current yields for 2020 versus 2019. And I was just wondering how this is possible given that you have the whole Cashgate integration, which obviously is at the lower yield than your Jambra book now coming in for the full year? Or if you just can give me some kind of idea where Let me give the question to Pascal. Maybe you get a different answer than me. I don't know so much. I think it's the same answer, but I give it to Pascal. Look, ultimately, as we ideally, we expect to be around 7.5% as we in 2020. I think it's also important to mention that in 2019, as what we report here as well, quite a few of the one offs, which one offs. So the impact of the cash gate ultimately as a driver of some one offs. So if we would exclude the cash gains, as I said before, the yield would be slightly higher than the 8%, which is exactly in line with what we said several times and for 2019. So actually in Cashgate, it would be around 8%. And now we expect basically with the Cashgate integration to go down to 7.5%. And we mentioned several times, ultimately, as all the Cashgate portfolio also is the different profiles with lower pricing and to some extent lower risk. I think it's a matter of either you do more volume and you do higher ticket size at lower yield, either you do basically higher yield and less volume. And I think we need to make a judgment every time that we speak. You won't see a big difference in the yield. If the yield will go down a bit, you should see more volume, so to be compensated. I think that is probably the judgment you have to make every time. And I think that also with the insecurity you see when you launch Cascades online, are you really able to attract at a pretty low cost base a lot of high ticket sizes and you might give a little bit on the yield? Or a not good and then you get a bit better yield and lower assets probably. But I think it should be quite neutral in there, honestly. Okay. But just maybe to clarify the number you gave on Slide 97.5 percent on personal loans and auto leasing loans at 4.5%. Are these exit yields? Or is this the average yield for the year? These are the 2 points average yield The next question is a follow-up question from Andreas Broon from Credit Suisse. Please go ahead. One last question from my side. On Page 11, you mentioned a timing effect from repayments in credit cards in December. Is this a recurring thing? And or could you elaborate on that point, please? Yes. I mean, what we mean here by timing effect is that we see a pattern of our customers that they are typically on weekends, on Saturdays when they go to the post office and kind of go with their invoice and pay the bill. Now the December of 2019 wasn't such a case that people received the salary payments prior to Christmas, which gave them very much time, a lot of time to kind of go to the post office and repay, which obviously has been driving the repayments, very late repayments in the month, which then kind of leads to a slightly reduced asset base than we otherwise would have had. It's kind of rather around the timing of the calendar, what we mean by that. But it doesn't have an impact on interest income because this is a basically a part of the asset that don't yield any interest income. Exactly. But you see quite but if you look month by month for the credit card assets, you see quite some fluctuation how the end of the month is basically is the how it fits. And sometimes you see it going up a bit, sometimes it's going down a bit. I think for December, it was a for the customer a good month, for the company another good month because it fitted very well and they could do scratch on repayments. And then you easily see on the €200,000,000 differences on credit cards, so €50,000,000 is €100,000,000 difference of credit cards. Correct, Fokker? Yes, it's rather around €50,000,000 I would say, because there is obviously also a sale based on interest bearing assets. But you're absolutely right. Typically, the repayments are coming in on the interest free asset size of the transactors. Gentlemen, so far there are no more questions. So I would like to thank you for a very lively call. I think the first time in a couple of years that you used really the full hour, But I think the business is growing. It's getting more complex. A lot of things happened in 2019. We're looking forward to a great 2020. And thank you, Elyse, for all your attention. Thank you and bye bye. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.