Earnings Call: H1 2021

Jul 22, 2021

Good morning, everyone, and welcome to the press conference call of Lintec's Half Year twenty twenty one Results. All presentation materials as well as the half year report can be found in the Investor Relations section of our website. In the same section, we have also published a time series Excel spreadsheet and a comparison of the analyst consensus summary versus today's reported results. With me today are Chief Executive Officer, Lukas Hoefflin and Deputy CEO and Chief Financial Officer, Marco Amato. We will start the presentation with an overview of the highlights of the first half of twenty twenty one. We will then discuss the financial performance Of H1 2021, continued by an update on our strategy and business before closing the presentation with a summary and outlook. The presentation will last about 40 minutes, after which we are happy to take your questions. We intend to close the conference call at 11 15 am. It is now my pleasure to hand over to our CEO, Lukas Rokhli. Thank you, Dominik. Dear ladies and gentlemen, dear shareholders, analysts and media representatives, Before we start today's presentation, I would like to quickly look back 3 years to mid-twenty 18. For those of you who followed us back then, we shared with you our plans regarding the journey we were embarking on as a company, A journey to overcome certain limitations we faced and to grow and transform our business. A transformation complemented by a set of strategic priorities that we would diligently execute on in the years to come. In February this year, I shared with you that the results of our efforts resulted in major strategic progress with our investments starting to bear fruit. And today, I want to start our presentation with a look at the financial and highlights of the first half of twenty twenty one, which are testament to the work we have done over the past 3 years. Let's begin on Page 4 of the presentation with a look at the financial highlights of the first half of twenty twenty one. I'm happy to report that we achieved record results for the first half of the year. Results that validate investments that we have made into our platform and into our strategic initiatives over the last years. And these investments are now starting to pay off. Concretely, Leontic's total income increased by 99% to approximately CHF 206,000,000 Whilst we saw an increase on the expense side to SEOKA under CHF 25,000,000 CHF, which overall resulted in a record net Profit of approximately CHF74 1,000,000. This compares to CHF 5,500,000 CHF in the prior half year. Our earnings per share accordingly amounted to approximately CHF 4 a share for the first half of twenty twenty one. And looking at the key at the few key performance indicators Depicted in the gray bubbles on the slide, the outstanding volume of platform assets increased by 9% to CHF, while turnover amounted to CHF 15,900,000,000 CHF, which compares to the number for the prior half year and thus represents a 3% increase. As expected, our margin remained at the level of around 100 basis points, which compares to the exceptionally high margin of 129 basis points we reported in H1 2020. Additionally, our capital base, which is defined as the sum of our shareholders' equity and deferred fee income amounted to CHF 800,200,000. With that, we have comfortably reached our capital targets 6 months ahead of the initial guidance we provided to you in February of this year. On Page 5, looking at the strategic progress we achieved in the 1st 6 months of 2021, You can see that we continued to execute on our strategic priorities. In terms of product offering and regional expansion, We have been busy working these past 6 months with the launch and expansion of several product corporations with financial news platforms as well as with Morningstar, and we opened our Dubai office at the start of the year. On the expansion of our Issuer universe, we completed the white tabling setup with Basler Cantonalbank and Bank Internationale Luxembourg in March June, respectively. Since the go live of these 2 issuers, we have already generated more than CHF 350,000,000 in turnover with the 2 of them. And in our IWPS business line, we delivered a new partner with Glarmer Cantonalbank, with whom we developed a new innovative pension savings solutions, which is the first of its kind in the Swiss market. Our initiatives to drive our digital offering also reached important milestones with the launch of our new growth module on our digital marketplace, Linx, which offers our clients a unique click and trade platform for more than 10 issues and with the go live of our new AMC gateway. Our sustainability initiative also yielded first tangible results with the launch of the world's first donation certificate. We have also won a number of prestigious awards, including for best technological solution at the SRP Europe Awards, the base CHESG product at the Swiss Derivative Awards. I would like to now hand over to our Deputy CEO and CFO, Marc Guermato, for a more detailed look at our financial performance. Thank you, Lucas. All the good morning and warm welcome to all participants from my side. Before I dive into the numbers you can see on Page 7, I would like to highlight 3 key points, which I will talk back at the end of my presentation. These are first of all, we delivered a strong fee income, also on the back of diversified revenue streams. 2nd, we continue to execute the disciplined risk management with regards to our trading books as well as the management of our bond portfolio. And last but not least, we continue to report a strong balance sheet, a strong liquidity and a strong capital position. Let's move into the financial performance for the first half of twenty twenty one on Page 7. The numbers in front of you are our key income statement items. Starting with the left hand chart, you can see that total operating income increased by 99% to approximately CHF206,000,000 in the first half of twenty twenty one. This strong development is primarily a result of a strong fee income of CHF 170,000,000 and a positive net trading result of CHF 35,000,000. As you will recall in the prior year period, Leontec reported a record fee income, which was exceptionally high at CHF 213,000,000, But at the same time, also reported a net trading result of minus €107,000,000 which was primarily an effect of the significant increases in hedging related costs and one off losses on the back of the COVID-nineteen related market turmoil. Moving to the middle column, total operating expenses increased by 27% to CHF125,200,000. This reflects investments in our key strategic initiatives and increase in variable compensation on the back of the strong performance and additional one off provisions for legal cases and legal costs. And lastly, in line with the guidance we provided in mid June, We're reporting a record group net profit, which amounted to CHF 74,400,000 for the first half twenty twenty one. Looking at the next slide on Page 8, we are putting our quarterly performance in the historic context. As you can see on this chart, our record H1 2020 result was a consequence of an exceptional Q1 2021 And a strong Q2 in 2021. On the fee income side, we registered high levels of client activity in a favorable market environment during the 1st 6 months of 2021. We saw strong client demand across our entire range of innovative investment solutions and further diversified our revenue streams across product, underlying and issuers. We also saw volumes and revenues in own issued products reached record levels. Concretely, net fee income from Laemtec products Grew to $86,200,000 which is an increase of 9% compared to the very strong performance in the prior year period. Further, we generated also a notable increase in large ticket transactions. Overall, our strong performance is also reflected by 24% increase in client transactions to a total of approximately 142,000 transactions and a 28% increase initial products to 20,610 products in the first half year. On the trading income side, we continue to focus on disciplined risk management and recorded positive contributions, both from our hedging activities as well as from our investment portfolio activities. Our hedging result amounted to CHF 21,200,000 compared to minus €99,400,000 in the prior year period. The prior year period was primarily affected by significant increase in hedging related Costs and one off hedging related losses in the amount of CHF 58,000,000. Following the significant market disruption in 2020, We saw overall the market for exotic derivatives to price risks at different levels than prior to the pandemic. An environment which was also characterized with historical low volatility levels in the years 2018 2019. Now, similar to the reinsurance market following significant risk events, the premiums charged by The Street increased, a factor we benefited from going into the year 2021. On the investment portfolio side, we continue to invest proceeds from our own issued products into bonds issued primarily by corporates and banks. Our investment portfolio comprises of AA rated bonds on average. This is a shift we introduced back in 2018 when the majority of all our investments were made solely in AAA rated government bonds. On the back of this On the back of this new investment strategy, our treasury carry amounted to CHF 14,200,000, which compares with minus approximately CHF 8,000,000 in the prior year period. On the cost side, you can see on Page 9 that the measured increase in cost base was driven by a couple of factors. If you look at the prior year numbers, you must take into account that the first half of last year's reported figure also included a release in the provisions for a pending VAT case, which benefited Leontec in the amount of CHF 4,000,000. That means we basically had an adjusted cost base of $102,700,000 that we were looking at for the figures in the prior year period. This year, we reported a cost base of CHF 125,200,000 in the first half year. There have been 4 main drivers that impacted our cost base. First, we saw a $2,000,000 cost benefit from our near shoring initiative in Lisbon. 2nd, we had an additional cost increase of CHF 4,200,000 for new strategic initiatives. 3rd, the strong H1 performance resulted in an increase in variable costs of approximately EUR 12,000,000, in particular in accrued variable compensation. Lastly, we also built provisions for legal cases and legal costs in the amount of CHF 8,100,000. I would also highlight The progress we have made on our new shoring initiative in Lisbon, which is being implemented in a phased approach. In Phase 1, which commenced in the first half of 2020 and has since been successfully completed, we established a serviced office setup, employing a handful of external IT development personnel as well as other shared services functions. As of the end of June 2021, we have a total of 36 employees Working in the serviced office setup. Phase 2 is currently a work in progress and consists of Laemtec setting up its own office and hiring up to 100 designated roles along the entire value chain. We expect to open this new office in the second half of twenty twenty one and complete Phase 2 by the end of 2022. We expect an even bigger benefit that we already reported in the first half of twenty twenty one through the optimization of our personnel expense cost structure from 2022 onwards. Let's now move on to Page 10. On Page 10, you will see the results of our Investment Solutions business line. On the chart on the left hand side, you can see that total turnover grew by 3% to $15,900,000,000 which was primarily driven by 26% growth in turnover from own issued products. Margins for Leontec remained at elevated levels of 111 basis points in the first half of twenty twenty one, which compares with the exceptionally high margin of 127 basis points in the prior year period, driven by the market turmoil and increased volatility, which we have seen in the first half year of twenty twenty. On the Platform Partner business, Margins continued to normalize to 96 basis points compared to exceptionally high levels of 130 basis points in the first half of twenty twenty and compared to 104 basis points in the second half year of twenty twenty. Looking at the fee income on the right hand side chart, We report that for the first time in our history, Leontec owned products contributed more than 50% to the overall segment performance. This positive development is also in part a result of our investment grade rating that we obtained in 2019 and that was reaffirmed in 2020. Fee income from platform partners decreased year over year by 35% to CHF 78,100,000, but increased by 35% if compared to the second half year of twenty twenty. Within our insurance and wealth planning solutions, the IWPS business line, which you see on Page 11, You can see that number of outstanding unique linked products continue to increase. All based somewhat at Slower pace with an increase with a 2% with a 2% increase to 52,500 policies from the end of 2020 to the end of June 2021. The segment income, which you can see depicted on the right hand side, amounted to €8,800,000 compared to $24,700,000 in the first half and compared to the same figures in the second half of twenty twenty. We have identified 3 drivers for this development. 1st, as Leontec depends on the external distribution channels of its insurance Partners and insurance brokers, communication and in person meetings with potential end clients have been severely impacted by the COVID-nineteen pandemic, also affecting our fee income development. The second driver for the significant drop It's due to one off revenues that we reported in the context of for the first half year twenty twenty, totaling EUR 6,100,000, which reflect the effects of the changes in future service obligations. 3rd and most importantly, The segment income was significantly impacted by the low long term interest rate environment in 2020 2021. As the below zero trends did break in early 2021, we remain confident that in the course of the second half of this year, Pricing attractiveness for products from our white labeling insurance partners is expected to improve. Let's now continue on Page 12 with a look at Leontec's capital base. Over the past years, Leontec has built up a strong shareholders' equity. Looking at the left chart, you can see that our shareholders' It increased from $647,500,000 at the end of 2020 to $721,400,000 at the end of June 2021. Then looking at the chart on the right, you see that we report a slight increase also in our deferred fee income to approximately €79,000,000 as of the end of June 2021. Aggregating shareholders' equity and deferred income together, We report a strong capital base totaling CHF103,000,000 at the end of June 2021. We have thus We reached our capital base target in the area of 800,000,000 6 months ahead of the guidance we provided with our full year 2020 results. Now before I conclude, I would just reiterate the three points I made in the beginning, Retreating that we have seen in the first half year twenty twenty one a very strong fee income on our top line. We have continued to execute a very diligent risk management approach with regards to our investment portfolio as well as our trading books. And we see a strong balance sheet, a strong liquidity position as well as a strong capital position as just mentioned. With that, I hand over back to you, Lukas. Thank you, Marco. As mentioned in the beginning of this presentation, today's results are a validation of our focused execution of our strategy And of the priorities assigned 3 years ago and the cooperation of those investments. The next few slides, I want to take into account this 3 year history and will refer to the situation I faced when I started as a CEO of Leontec in 2018 compared to the situation today. Looking at slide 14, The business dynamics for Leontec have fundamentally changed over the last 3 years. At the end of June 2018, we were in a pre pandemic environment with significant margin pressure in the structured products market. There were first trends towards digitization and environment was characterized by low interest rates, the historically low volatility environment. Our white labeling platform was focused on a B2B offering only. Furthermore, Lantek had just exited the restructuring phase, was an unrated company, Reported the total operating income of CHF 136,000,000 for the first half of twenty eighteen, The capital days of CHF 515,000,000 Now 3 years later, The environment has significantly changed. We are looking at the new world post pandemic, which affects all aspects of our life. There is less pressure on margins following the significant market turmoil from spring 2020. There is an acceleration in digitalization, a change in end investor behavior and more normalized volatility levels. Leontec has gained significant momentum following the last 3 years investment phase. We have also moved from a B2B model only to a three way white labeling platform and are now offering white label services in the area of Business to business, business to business for consumer, B2B4C and newly a direct to consumer model or B2C with our pioneering innovation in the retirement savings market in Switzerland. We just announced record revenues of CHF 206,000,000 in the first half of twenty twenty one, And we have significantly strengthened our capital base, which now amounts to around CHF800 1,000,000. This in mind, I can confidently confirm that Leontec is stronger than ever. In the same period, we have undertaken significant transformative work, which starts to show tangible results. Let me elaborate on this point on the next page. On Page 15, I want to underscore my my assessment by showing you how our initiatives have measurably improved our business diversification revenue since 2018. Let's start with our balance sheet light business. Today, balance sheet light turnover, which includes turnover generated by ship, 3rd party issuance and brokerage is contributing 9% to the group's overall turnover. From an issuer perspective, Leontec and its new issuers, I. E, excluding the 2 largest historic white labeling issuers on our TORM has improved their turnover contribution to total turnover over the last 3 years from 40% to 61%. Our new offices we established during the last 3 years in Japan, Italy and Dubai have generated revenues of CHF 22,000,000 in this half year alone, Up from CHF 40,000,000 in H1 twenty eighteen. We obviously did not yet have physical offices back then in these markets, But we were covering the markets from other location and that's the comparison we are showing to you. Our asset management like business, which comprises revenues from AMCs and trade cost certificates, generated €31,000,000 in revenues in H1 2021, up from EUR 18,000,000 H1 2018. This business is more akin to a recurrent revenue stream and today represents approximately 18% of the group's revenues. Leontec has also been one of the first innovators in the cryptocurrency area with our Innovative structure products offering with on a Bitcoin certificate and the 1st Short Trackers certificate on bit Coin as early as back in 2017. Since these initial products, we have continuously expanded our offering And we recorded CHF 9,000,000 in revenues from this recently evolving asset class, up from CHF 1,000,000 3 years ago. Finally, we significantly expanded our funds derivatives business, offering existing and new clients, Downside protection, upside potential or greater investment flexibility while keeping the exposure to their underlying fund exposure. In this context, we also announced last year a cooperation with BlackRock. As a result, we are diversifying our business both in terms of product offering and client franchise. The business recorded an eightfold increase in revenues to CHF 21,000,000 for the first half twenty twenty one. If you turn now to Slide 16. I would like to make an additional point about our journey besides delivering on our strategy and improving the quality and diversification of our business. In addition to this, we have also continued to invest significantly in our technology platform with the view to be able to exponentially digest more volume going forward. On the left hand side of the slide, you can see the number of transactions developing over the last 3 years compared to cost in the Investment Solutions business line and headcount figures. Concretely, number of transactions increased by approximately 140% in this period, RISE cost and headcount increased by close to 20%. We achieved this operating leverage through a number of factors that have also driven our improved scalability. 1st, we focused Weakestly on the automation of processes across the entire value chain. This is evidenced by The improvement of our straight through process rate to 63% in the first half of twenty twenty one compared to 50% in the first half of twenty eighteen. Maybe for you to understand this better, Trade through process means that the defined product goes through its entire life cycle from the setup of issuance through to all relevant systems and bookings automatically without any human intervention. Also in order to grow and scale in the future, we partnered with Google Cloud last year to enhance the flexibility of our infrastructure And lastly, on the back of our near shoring initiative, and also as mentioned by Marco before, We expect to further invest in talents whilst keeping our plans under control as our business continues to expand. Now let's move on to Page 17. I would like to put our past 3 year investment cycle in the context of Leontec's journey towards a scalable business model across technology, issuance, content, hedging and distribution. From the very beginning of its existence, Leontec developed its business model, focusing on a scalable platform with automation enabling very rapid and low cost issuance. We also were able to scale on the issuance side, thanks Our B2B white labeling investment and savings solution platforms and the cooperations we have built with partner banks and insurance companies. In 2018, we started to strengthen our ecosystem by partnering with industry leading in the field of asset management, technology, education and new services. 2018, We also in 2019, we also started focusing on our capabilities to scale on the hedging and balance sheet light side by launching Ship as well as expanding our 3rd party issuer universe. Since this year, we are focusing on scale distribution to our digital marketplace, Linx. This distribution offering extends to private banks and asset managers alike and aims to integrate LINKS into their own wealth management activities. By using our platform, Our clients and partners will get access to a fully white labeled marketplace in their own corporate branding and corporate identity. This is a unique offering that highlights our B2B4C business model. And I'm very happy to report that we have already onboarded 44 counterparties onto our platform under this white labeling format within a matter of only a few weeks. In due course, we also expect to have the direct to consumer model ready in cooperation with Gramer Pan Tonalbank, where we intend to offer innovative solution in the pillar 3 market in Switzerland. The pillar 3 market In Switzerland is a particularly attractive market with the size of CHF 125,000,000,000 in AUM, which is attracting additionally around €10,000,000,000 of new pension contributions per year. With that journey I laid out for you, we have built our ecosystem over the past year, which you can see now on Page 18. From our white labeling partners on the left side to our 21 third party issuers just below that. Directly across, we have listed our main client types of whom we have more than 1,000 that we interact with on a regular basis. On the bottom right, we have shown our 7 cheap hedging counterparties, our content, Product and technology enhancers, where we work with different experts from the various industries and disciplines in the pursuit of delivering High quality solutions to our clients are shown on the right hand side in the middle. These are then complemented by our digital solutions connectivity, where we have our award winning digital marketplace and stock exchanges, Axis among others. Moving on to Page 19. We believe that investments we have made into our talents and provides a solid basis for continued profitable growth in our business. It is also a solid foundation for Leontec to scale further across the following five dimensions going forward. First, we will be focusing on expanding the product offering by further building out AMC's systematic indices, Quantitative investment strategies as well as our offering of products with cryptocurrencies as underlines. 2nd, we plan to build out our existing white labeling setup and continue to onboard new white label issues. 3rd, looking at our digital marketplace links, we will build on the strong momentum we have seen recently with clients in onboarding them to our new white labeled format and plan to integrate the AMC gateway on to links. 4th, With our new savings solution offering, we plan to untap the pillar 3A market in Switzerland as a starting point. 5th and last, with the ambition to become a leading ESG provider, we are committed to offer our clients and partners As I close today's press conference, I would like to leave with you some key points, which can be found summarized on Page 21. Leontec achieved record results in the first half of twenty twenty one. This is a result of The favorable market environment and good client demand, but also validation of our strategy, which resulted in an exceptional Q1 and a strong Q2 2021 performance. We reached our target capital base ahead of schedule and are strongly capitalized. We continue to diversify our business through products, issuers and underlines, and we have improved the quality of our revenues. Also, we further innovated our digital offering for our partners and clients and expanded our ecosystem for investment In terms of outlook, the post pandemic environment brought with it some changes and trends that affect end investors' behavior globally, and it also spurred a change in digitization and online connectivity. These changes have accelerated Leontec's opportunity for growth in terms of product distribution and white labeling offerings, And we intend to capitalize on the strong business momentum from the first half of this year by increasing our annual investments in existing and new growth initiatives, while continuing to safeguard our profitability. At the same time, we are remaining mindful of the potential challenges given the current market environment and expect our performance to normalize in the second half of the year. We are targeting group net profit of more than CHF 100,000,000 for the full year 2021. We are also reaffirming our dividend policy, which we communicated to you with our full year 2020 results in February of this year, namely, We expect to propose a shareholder distribution of more than CHF0.75 per share For the financial year 2021. From the financial year 2022 onwards, we intend to move to a In closing, Leontec has demonstrated that the diligent and focused execution of our strategy over the past 3 years is starting to yield track these investment returns. We will continue to scale our business, expand our product offering and use issuer universe and accelerate our digital solutions. We are acting from a position of strength and are investing in our business to seize the opportunities emerging in the changed operating environment, And we are well positioned to deliver future growth. Thank you very much for your attention. We are happy to take now the questions. The first question comes from the line of Daniel Treggli From Octavian. Please go ahead. Good morning. I mean, congratulations to the strong set of results And thank you for taking my question. I mean, I have a lot of questions. You're stopping me if I'm getting too long. Maybe the first two questions. I mean, we probably all wonder about which part of the strong results we have seen in H1 It's kind of sustainable. Can I maybe ask you, therefore, to color a bit the picture around fee income, Particularly with regards to, let's say, monthly distribution of fee income during H1, Was there any kind of concentration to certain months? And then also maybe regarding the margin development, what do you expect in terms of margin For H2, respectively, and how far have you seen the margin pressure picking up again towards the end of H1 'twenty one. Then maybe second on treasury trading income. Obviously, we have seen the treasury carry Picking up from, let's say, around €2,000,000 to €5,000,000 negative per half year to now plus €14,000,000 I expect this is not Sustainable at these levels, but what is your expectation going forward with regards to the treasury carry given that you have changed your investment portfolio a bit? And then obviously the obvious question on dividend, apologies for this. And I know the dividend is finally Decided by the Board, but still, I mean, you paid out 35% in 2020. You guide For more than 50% in 2022, 2021 is set to be a transition. Now as you have achieved your capital target earlier, I would assume that the payout ratio would be rather towards 50% rather than 35% in 2021. Can you maybe Comment on this and then maybe 4th on balance sheet light turnover. Even though it has increased a bit To 9.4% in H1, it did not improve as much as I maybe expected Compared to H2020, where it was 9.2%, can you maybe elaborate a bit on why it has not Edged up more and what is your expectation in the near term there? Respectively, what are your Points of actions you could take. Yes, maybe I'll stop here. I would have some more questions, maybe I'll come back Later. Thanks a lot, Daniel. Thanks for the questions, and I'm more than happy to take them. I'll probably start with the first and then I'll hand over to Lukas for the dividend and balance sheet light questions 34. So to start off with the first question on fee income, You will appreciate that we don't give guidance or transparency on the fee income on a weekly basis or monthly basis. From our presentation on Page 26, you will see the weekly economic revenues, which include, obviously, the fee income as well as the trading result. We have also provided some guidance that the on the trading side, we had a rather strong Q1. So most of the Trading results, profits were generated in Q1. As a consequence, you can also a little bit elaborate that we had a good client activity throughout first half year twenty 21. Hopefully, that helps in terms of understanding that. But it's definitely not same picture as we had in the first half year twenty twenty, where most of the fee income was generated throughout March April. Then I think the second question on the treasury carry. You're right. We have we had a positive result of $14,200,000 positive treasury carry in the first half year twenty twenty one. I think that's a consequence of our changed investment strategy, which we communicated in 2018. And obviously, That's also changed from investing into government bonds and starting to invest more into corporate and banks. And also, our average rating came down from AAA AA, and that's obviously some of the consequences that we also benefited in terms of the first half year twenty twenty one. I think going forward, we expect the treasury carry to be breakeven or slightly positive. That's some sort of guidance that we would expect. And obviously, there is some volatility in those numbers as well. But I think the first half year twenty twenty one was certainly Somehow also exceptional in terms of profits from the treasury carry. And just probably the last question I you might have on the margin outlook. We have communicated after the first half year and also with Full year results 2020 that we would expect some margin compression to come back as we had it in 2018 2019. I would still expect margins to slightly come down compared to what we have seen now in the first half year twenty twenty one. But obviously, that depends on a number of factors, also External factors which we cannot influence. As such, it's very difficult to really guide the margins, but I would be not surprised if the margins would compress still a little bit From the current levels we have seen in the first half year. Good morning, Daniel. I guess you gave the answer yourself on the dividend, which is that it's really ultimately a Board proposal and the Board will obviously take Into account the full year 2021 results when the time comes, we'll take into our account our temporary weighted capital basis and The overall outlook for the firm and we'll make a proposal to the HN next year. So it's a bit of premature discussion. But what I can nevertheless Some say about this more detail is that first, as you are aware, our capital target was reached CHF800 million area, we have delivered well ahead of this ahead on schedule. Now revising a dividend policy, which we just announced in February, a couple of months later, is not very meaningful. In our particular case, it's also not sensible because by doing so along the lines of what you suggested, We would now short term obviously fall again below €800,000,000 So simply put, We will look at this when the time comes. Our Board of Directors will do so. They will make a proposal to our shareholders. What I can clearly say is that the stronger our earnings capacity and the higher our absolute capital basis, The more the likelihood that we can positively communicate on the dividend side. But again, it's premature to go into further details at this stage. Your second question was on the balance sheet light turnover Contribution. In absolute terms, and that's important to note, our balance sheet line turnover has increased by 26% to Approximately SEK 1,500,000,000 year on year, which I believe is a clear success and an evidence that the ship platform among others Works well. In relative terms, I do acknowledge that the development is a bit weaker, But I think it's very important you keep in mind that some of our new business initiatives in particular Are not covered by ship. So AMC, for example, fund derivatives or the crypto business would not be covered by ship. And of course, As those initiatives show strong progress, the relative number looks a bit weaker than it would otherwise. But as you can well understand, I'm very happy about that strategy. I wouldn't want it to be different. Now we will continue to focus on growing the total balance sheet light turnover, of course. And accordingly, I would also expect a relative contribution to increase in the reporting periods ahead of us. Okay. Thank you. Can I maybe ask for 2 quick follow ups? Maybe just one comment in my definition, it wouldn't be a change of your existing dividend policy if you would Go to, let's say, 49%, which do still lie between the 35% you paid out in 2020 and the 50% you guide for 2022. Yes. And then secondly, maybe can you quickly comment on the question about the low margin Business, you have obviously reduced in H2 2020. Given the current margins we're seeing, it has not Picked up or you did not decide to reengage in this low margin business. Is there any idea or plan going forward about this? Yes. Well, first on again on the dividend question. I think it's very important you read very carefully what We have said that the 2021 dividends will be higher than CHF 0.75. You didn't say more than that, but higher means any number which is higher than that figure. Now on the High turnover, low margin business, we have very selectively started again engaging there, but not to an Then that you would see it very easily in the numbers. So it's something, as I said in February, which we have evaluate Literally on a daily basis, and we might also change this on a very short term basis. So it's a bit difficult to guide because We are not just driven by our own considerations, but obviously also by clients' expectations. We are here every day to support our clients. And to the extent, we can help them also on high turnover, low margin Business and it's important for them that we are there, then we will certainly look at this again. And therefore, It's a difficult number to use as a guidance because it's something we decide where we ad hoc. Okay. Thanks a lot. The next question comes from the line of Andreas Brun from Credit Suisse. Please go ahead. Good morning. Just one question from my side. Could you give some more color on the legal costs because that's Figure or an issue, which I wasn't aware. Thank you. Yes. Thanks, Andreas. And just to highlight, we have made it very clear that we have additional provisions of 8,100,000 were built in the first half year, and you appreciate that the Leontex involved in legal proceedings and litigation that arise also at the normal course of the business. And such proceedings and litigation are subject to many uncertainties, and the outcome is often difficult to predict, particularly in the early stage of a case. We are not disclosing for each provision and for each legal case, but we have communicated that we have built these provisions totaling the 8,100,000, Which is definitely more than one case. And we have also explicitly mentioned the ongoing case with QuickGilter. That's It's formerly known as the Old Mutual International OMI case. In the notes, the interim consolidated financial statements, you will find that in Note 13. I do appreciate that we cannot comment on the case beyond this disclosure. That's fine. Thanks. The next question comes from the line of Michael Kunz from ZKB. Please go ahead. Yes, good morning. One straightforward question. Could you give some color on how much you get distributed through 3rd party distribution channels as opposed to your own sales force? Thanks. Thanks, Mr. Kuntz. Mark on the call. Thanks for the question. As you appreciate, we have I'm not giving that transparency anymore. We have stopped it, but we have given clear transparency on what's the amount of turnover generated with the partner business as well as with the Lemtek Business and also with the fee income generated out of the own business compared to the partner business. Okay, good. The next question is a follow-up question from Daniel Wegley from Octavian. Please go ahead. Hello. Good morning again, Maerskstein. Maybe quickly coming back to the costs And also regarding these provisions for legal cases, this €8,100,000 you have provisioned in H1, and I I'm aware you cannot provide any details on which cases you have provisioned, but was there any kind of, let's say, general provision Included in this, so was this all on specific cases you have running? And maybe secondly, on the strategic initiatives point, which of these strategic initiatives This EUR 4,200,000 you paid for strategic initiatives, let's say, you would have planned anyways and how much Did you prepone because you had kind of a strong top line and did you have the flexibility to invest more? Thank you. Okay. Thanks, Daniel. I'll take the first question regarding the provisions. The provisions of 8.1 obviously relate to specific cases. So there are no general provisions which we are not allowed to make under IFRS. So we have obviously came up with the 8.1, which are Specific provisions for specific cases. This may be important to understand provisions could also be made, for example, For legal costs in order to defend cases. So it is not a linear It's not possible for you to linearly deduct what for, for example, the provisions are built. We have very clear accounting guidelines in this regard, Daniel. So we could, as Markus said, not, for The general provision for the sake of it. On the strategic initiatives, the way we invest is that we very carefully assess An opportunity that we very diligently consider whether the opportunity sits within our wider strategic set. I think you can see that well if you look at the progress we have made in the last 3 years. We went from the very beginning about Building out an ecosystem. And therefore, we would never decide on a new bigger investment ad hoc. What you can assume is that we have decided on additional investment cases in the first half year. That is implied when we say that we will take advantage of the goods business momentum and want to The effective expenditure relating to such investments would, however, only Come through then in the subsequent periods because obviously the way we invest is we usually hire technology We develop technology tools. We hire additional knowledge carriers. So it's very much a people driven business. And of course, From an investment decision to then starting a new initiative, we have to go through recruiting processes, which all take time. So the additional money shown is not per se in new initiatives, which we wouldn't have talked about in the previous reporting periods. Okay. I mean, I didn't want to I say that you have started new initiatives. So let's say, thrown out the money out of the window now given you have the Judith, I just wanted to kind of find out which part of this increase in costs we have seen was based on management decisions To maybe soften a bit the P and L swings on the bottom line, yes. Look, we are again under IFI's accounting standards and also under our beauty surrounding Thank you, sure, Reni. We wouldn't make any such decisions based on such considerations. Okay. Thanks. Very clear. The next question comes from the line of Leitur Huber from Research Partners. Please go ahead. Yeah. Good morning, everyone, and also congrats from my side for your stunning results. I have one question, which again relates To the margin, on Slide 14, you're describing the market environment And compared the current situation 2018, and you're saying there that in 2018, in the environment, you Experience margin pressure and now there's less competition on the margin 3 years later. Could you maybe describe what happened during these 3 years that Which would explain why you now have less competition on margins? Yes. Thanks, Eitan. Thanks for the question. I think if you compare 2018 2019 with 2020 and then also the first half year twenty twenty one, we had a significant lower volatility in markets in 2018 2019. This also explains why There was quite a significant margin pressure, which we also anticipated as part of our guidance at that time. And then what happened obviously in 2020 was the COVID-nineteen It was a spike in volatility, which also led to a margin increase, especially in the first half year, but then we saw a continued high margin also in the second half year. And now it's somehow returning to a normalized level, even though still higher than what we have seen in 2018 2019. And one of the reasons which we highlighted is still the Volatility, which is slightly higher than what we had seen in 2018 2019. And I think the second element is obviously which you also have Consider and appreciate is that in the first half year twenty twenty on the back of the trading losses we have, but also other similar institution faced, There was a general change in the margins for structured products. So the margins generally increased, the risk appetite declined, And as such, also the margins generally increased in the structural product business, but also in similar other businesses. And we're obviously seeing this risk It's still not being at the same level as 2018 2019. And hence, I think it's a larger consequence to also see the margin still at the slightly higher levels than 2018 2019. Okay. So it's more explained by the market cyclicality and less something structural than what's going on in the I would say so because I think we see similar trends also with other market participants. Yes. Okay. Thank you. You're welcome. Okay, great. Thanks everybody for the question. I think we're done. Thank you for attending today's press conference. Carl, we wish you all a good day. Thank you all very much. Looking forward to seeing some of you in person or talking to you by video call shortly. Thank you very much. Thank you.