Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net income increased by 4% to CHF78.3 million.
- Revenues grew by 6%, driven by strong performance in payments and cards.
- Cost-income ratio improved, with a target to reduce it further by 2026.
- Successful launch of a digital retail savings product with positive market response.
- Strong Tier 1 capital ratio of 17.1%, indicating robust capitalization.
Negative Points
- Loss provisions increased to CHF35.2 million, reflecting post-COVID normalization.
- Buy now pay later business remained flat due to portfolio cancellations.
- Interest expense increased by CHF23 million, partially offsetting revenue gains.
- Personnel expenses rose by 2%, with restructuring costs impacting the cost-income ratio.
- Loan loss provisions are expected to remain around 1%, slightly higher than previous targets.
Q & A Highlights
Q: Can you provide a bit of color on how far the repricing has gone, mainly on the interest income side? Also, on the funding cost side, you mentioned stabilization. Does that mean stabilization at the exit rate?
A: We tackled repricing very actively when the SMB first started increasing rates, and we continue to push that as our contracts roll off and new ones come on. Regarding funding costs, the end-of-period funding cost increased from 0.79% at the end of 2022 to 1.62% now. We anticipate this to stabilize.
Q: On the expense side, FTEs went down quite a bit. Should we expect an impact in line with the decrease in FTEs?
A: We expect the cost-income ratio to be below 49% for the full year 2024, which means it will be a little below 48% for the second half. We have clear line of sight given the revenue outlook and realized automations and streamlining of the organization.
Q: On buy now pay later, we had flat growth. Is the shift in focus on profitability done, or should we expect further impact on growth in the second half?
A: We had some consolidation coming out of the combination of the two businesses, focusing on profitability. We do expect this business to return to growth in the near term, say 6 to 12 months. We also reconfirm the CHF10 million to CHF20 million net income contribution.
Q: On dividends, you said at least CHF4. Should we assume that the dividend will go in line with profit growth?
A: We confirm the dividend policy of CHF4 at least for 2024, and then increasing in line with sustainable earnings growth.
Q: Could you provide additional clarity on the timing of the net interest margin rebound to 5.5%?
A: We are confident that we will move towards the 5.5% net interest margin by 2025, latest 2026, considering the current capital market and interest rate expectations.
Q: Can you share any initial experience with the TWINT buy now pay later rollout?
A: We are progressing well with TWINT. We have a new consumer finance proposition live and expect higher growth from this relationship in the near term, say 6 to 12 months. We reiterate our guidance for the business.
Q: What are your expectations regarding the maximum rate for consumer credit and credit card debt after the SMB rate cuts?
A: We are not aware of any change in the interest rate cap at this point. However, given the methodology used, it is not unlikely that the interest rate cap may change in the next 6 to 12 months.
Q: Should 2024 be considered an exceptionally high loan loss provision year, or do you expect to trail at this 1% level going forward?
A: Our midterm target is less or equal to 1%. We are seeing post-COVID normalization, and we expect the full-year loss rate to be around 1%. We triangulate growth, pricing, and risk-taking to deliver on our midterm targets.
Q: Can you give us guidance on restructuring expenses for H2 and next year?
A: We incurred CHF2.7 million in restructuring costs in H1 2024. For the second half, if any, it will be lower than this amount, and there are no plans for 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
