Ayvens (AYV) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to Ayvens' Third Quarter 2026 Results Conference Call. Today's speaker will be Philippe de Rovira, CEO; and Patrick Sommelet, Deputy CEO and CFO. I now hand over to Mr. Philippe de Rovira. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen. Welcome to Ayvens' Q3 '26 Results Conference Call. I'm hosting this call with Patrick. First, we will present the highlights of Q3, then Patrick will comment on our financial results, and we'll then take our questions -- your questions. Let's now go directly to Slide 5 on the highlights of the financial performance. Thanks to strong margins and disciplined cost reduction, Ayvens delivered in Q3 '26 a solid financial performance in a volatile used car market environment. The group is on track with its financial road map. Underlying margins increased further, reached 620 basis points, up 27 basis points versus Q3 2025. Conversely, our net UCS result decreased to minus EUR 169 per unit compared to EUR 536 in Q3 '25 and minus EUR 62 in Q2. This reflects the constraint of used car markets impacted by the sustained high oil prices and interest rates, driving down our gross result per unit to EUR 118 versus EUR 1,110 in Q3 2025. Our continued focus on cost reduction has generated strong positive jaws. This has led to a further improvement in our underlying cost-to-income ratio at 49.2% versus 52.8% in Q3 2025. Bottom line, net income group share stood at EUR 240 million versus EUR 273 million in Q3 2025. RoTE stood at 13.2%. CET1 ratio stood at 12.8% as at September end versus 12.6% as at end of June. Our 2026 share buyback program of EUR 450 million, which was launched at the end of July, is advancing well and execution to date is close to 50%. On debt capital markets, Ayvens successfully completed in September a EUR 550 million green securitization in Belgium, marking the first green auto ABS issuance in Europe. This transaction attracted strong investor appetite. Let's now turn to Slide 6 on 9 months '26 results. The group's 9 months '26 results show that Ayvens is on track to achieve our full year targets. Margins are improving, totaling EUR 2.3 billion, up 3.8% versus 9 months 2025. Net UCS result dropped 91% at EUR 29 million with a decrease of EUR 400 million in gross UCS result, which reflects the deteriorating macro trends in the used car market. Costs are down 8.1%. The decrease results from higher cost synergies, lower CTA, and strong cost monitoring. Underlying cost-to-income ratio landed at 51.1% versus 56.1% in 9 months 2025. Net income group share stood at EUR 754 million, a limited decrease of 1.2% versus 9 months 2025 with better margins, lower costs, and lower effective tax rate, compensating for lower net UCS results. Group RoTE at 13.6% and earnings per share at EUR 0.90 improved versus 9 months 2025. These improvements were supported by the distributions of excess capital to shareholders of '25 and '26, the exceptional dividends and share buybacks for a total of EUR 1.4 billion. Overall, 9 months 2026 results demonstrate the robustness of our model, the relevance of the strategic actions we've taken in this volatile environment. Let's now turn to Slide 7 on fleet and earning assets. Earning assets stood at EUR 52.8 billion, up EUR 200 million versus both September 2025 and June 2026. Q3 '26 funded fleet decreased by 5,000 units versus June '26, a much slower pace than in the first half of '26 when defleeting totaled 50,000 units. Fleet management contracts stood at 574,000 vehicles, down 5,000 vehicles versus June '26. Looking at deliveries by powertrain over the quarter, the share of battery electric vehicles in our passenger cars and LCVs deliveries slightly declined compared to Q2 2026 at 30% versus 31% in Q2 2026, which was slightly up compared to Q3 '25 at 28%. PHEVs penetration was also down at 10% versus 12% in Q2 '26 and 11% in Q3 '25, while the share of hybrids progressed to 31% versus 28% in Q2 '26 and 26% in Q3 2025. I now hand over to Patrick to present you the details of the Q3 '26 financial results.

Thank you, Philippe, and good morning, ladies and gentlemen. So let me start with the evolution of our gross operating income on the left-hand side. At EUR 739 million, it is down 13.1% compared to Q3 '25, driven by the decrease in the net UCS results. Margins decreased 2% at EUR 761 million versus EUR 776 million in Q3 '25 due to a marked impact of hyperinflation in Turkey this quarter. Conversely, underlying margins increased by 4.6% and reached EUR 817 million, the highest level since the creation of Ayvens, supported by both higher leasing margins and higher services margins. Net UCS result stood at minus EUR 21 million versus positive EUR 75 million in Q3 '25 and minus EUR 8 million in Q2 '26. I will come back to the UCS evolution in a few minutes. Let's now move on the next slide on margin. Our total margin stood at EUR 761 million, which is down EUR 15 million versus Q3 '25, but they include a minus EUR 58 million impact from hyperinflation in Turkey as the gap between CPI and the auto price index in the country has widened further. CPI in Turkey is now projected at 30% for full year '26, in line with the country's latest projections, while used car prices are expected to remain broadly flat. Turning to underlying margin. They stood at EUR 817 million versus EUR 782 million in Q3 '25. In basis points of earning assets, margins reached 620 basis points this quarter versus 593 basis points in Q3 '25 and 600 basis points for the first 9 months of the year. So this is a strong performance, which comes mostly from the increase in leasing margin with lower interest charge across all funding sources and our focus on the most profitable segments. Service margins also increased, supported by better short-term rental activity. Let's move to the next page on UCS and depreciation results. So starting with the total UCS results, the evolution is represented on the right-hand side of the slide. So you see that the net UCS results shown as the green line in the graph decreased to minus EUR 21 million compared to positive EUR 75 million in Q3 '25 and minus EUR 8 million in Q2. This is primarily the result of a significant decrease in the gross UCS results represented by the black line. So this gross UCS results stood at EUR 15 million versus EUR 155 million in Q3 '25 and EUR 42 million in Q2 '26. This reflects the same trend as in the first half of the year. Increase in interest rates impacted the overall demand of used cars, and higher oil prices have shifted used car demand away from ICE to BEV. As a result, profit on ICE and hybrid vehicles, which represent most of our sales volume, have decreased with losses, while losses on battery electric vehicles have significantly reduced. This mix effect is reflected in the decrease in the gross UCS results per unit shown on the left-hand side of the slide, and it decreased from EUR 1,110 per unit in Q3 '25 to EUR 326 in Q2 '26 and EUR 118 in Q3. Turning now to depreciation adjustments. They amounted to minus EUR 36 million versus minus EUR 80 million in Q3 '25 and minus EUR 50 million in Q2. This minus EUR 36 million is the sum of 3 items, which are detailed on Slide 16 of our appendix slides. So there is minus EUR 35 million of new prospective depreciation on the running fleet in continuation of the fleet revaluation performed in H1 '26. So this relates mostly to our fleet of BEV. There is minus EUR 16 million of reversal of past positive prospective depreciation of the vehicles that were sold this quarter, and this number was minus EUR 39 million in Q3 '25. There is a positive EUR 14 million on other reversals, which is mainly relating to the vehicles sold in Turkey and representing the release of the impairment previously booked in the context of hyperinflation. The equivalent number for Q3 '25 was a positive EUR 6 million. Let's now turn to the next page on operating expenses. Operating expenses continued to decrease in Q3 '26. They reached EUR 407 million, down 5.1% compared to Q3 '25, where they stood at EUR 429 million. This decrease is driven by both CTA and underlying OpEx. CTA amounted to EUR 5 million, down EUR 12 million versus Q3 '25, while underlying OpEx stood at EUR 402 million this quarter versus EUR 412 million in Q3 '25. This decrease was notably supported by growing OpEx synergies at EUR 52 million this quarter versus EUR 39 million in Q3 '25. This decrease in operating expenses, combined with strong underlying margins, led to a cost-to-income ratio of 49.2% versus 52.8% in Q3 '25. So on the next slide, we have the remainder of the income statement, starting with the cost of risk on the left-hand side, which stood at EUR 25 million, representing 19 basis points, which is in line with previous quarters, except for Q2, which benefited from a favorable one-off. In the middle graph, you see that profit before tax stood at EUR 306 million versus EUR 390 million in Q3 '25. This decrease being mostly driven by the decrease in net UCS result of EUR 96 million year-on-year. Net income group share decreased by a much lower magnitude at EUR 240 million versus EUR 273 million, supported by a lower effective tax rate at 21.3% this quarter versus 29.7% in Q3 '25. And this low level of effective tax rate in Q3 is resulting from 2 one-off gains. First, we conducted a successful negotiation leading to the transfer of tax losses from a former Dutch lease entity to Ayvens. Second, the group benefited from a positive impact in Turkey. It relates to the reversal of deferred tax liability linked to inflation-related asset revaluation gains following the election of Ayvens to recognize these gains as nondistributable equity under local tax regulations. For the full year, we anticipate the effective tax rate to be at similar levels as in 9 months '26. The group return on tangible equity stood at 13.2% for the quarter versus 13.6% and 13.6% for 9 months '26, and this is in line with our full year guidance. If I now turn to our last slide on RWA and capital. So compared to Q2, RWA increased by EUR 200 million driven by earning assets, so in line with earning assets. Our CET1 ratio stood at 12.8% versus 12.6% in Q2 '26 and 13.2% in Q4 '25. The graph on the right-hand side illustrates our ongoing capital generation and commitment towards shareholder returns. Over 9 months 2026, the group generated 84 basis points of capital on top of ordinary dividend and AT1 provisions, out of which 22 basis points in Q3 '26. This has allowed the group to return 137 basis points of excess capital to shareholders at the end of Q2 in the form of share buybacks for 89 basis points and exceptional dividend for the remaining 48 basis points. So this concludes our presentation. Thank you for listening, and we are now ready to take your questions.

First question is from Jacques-Henri Gaulard, Kepler Cheuvreux.

I had 2. The first one, I'm referring to Slide 41 of your strategic plan 2029, which was about the new and used car sales price evolution. At that time, you had said, okay, ICE and hybrid slightly up and BEV downward scenario. I mean, obviously, that second bit is probably still going to happen, but the ICE is slightly up. Are you actually changing that in line of the fact that the ICE car price is really going sharply down by the OEMs? And does that change will have any sort of impact about that particular outlook you gave? That's the first question. And the second one on hyperinflation in Turkey, which seems to be a never-ending saga. When do we see the end of it? Or can we assume that minus EUR 58 million, I think, is probably the worst we'll see at least for this year?

For the 2 questions. I will answer the first one, and I will ask Patrick to answer the question on hyperinflation in Turkey. So on the CMD, yes, we gave indications on the scenario of powertrains. I agree with you that BEV prices will obviously continue to decrease. What is interesting is to see the recent developments on a number of factors on the cost of production on BEV. The first one is you can see that there is inflation on chips and very significant that if you take the last 12 months that some materials like lithium increased a lot in prices. So it means that compared to our basic scenario -- and sorry, on the third topic is in Europe, we see that the pressure of the OEMs to decrease prices due to their need to reach the CO2 targets has declined because now they are much more comfortable to reach the CO2 targets. So if we take the recent maybe 2 months, we can see that maybe our assumption on BEV can be slightly modified in the sense of being less conservative, a bit more optimistic on the evolution of prices. They will decline, but maybe not as much as what we were thinking. Conversely, on the ICE, it could be the opposite. But the number of factors is quite significant. And what is interesting is the change between powertrains. Our global scenario, which is evolution of price basically the weighted average of different powertrains, doesn't change significantly in this context because when you look at the production, not on the fleet, but on the originations that we are doing -- that we've been doing in the last year and what we do this year, we have a balance between the powertrains that is quite interesting, which means that when you've got one powertrain that goes up and the other goes down, it tends to balance the effects. So sorry for the long answer. So in short, BEV may be a bit less pessimistic on the regional price compared to what we said in CMD. ICE maybe the other way around, but it doesn't change for me the global scenario or only marginally at that stage. For the hyperinflation in Turkey, I will ask Patrick to.

Yes. So indeed, the hyperinflation in Turkey is a complex and volatile topic. The thing is that since the beginning of the events in the Middle East and actually the war that we have had, the side effect on Turkey is that the Turkish government has been increasing its forecast for inflation in '26 in last August. So indeed, something which we were seeing as a slowly decreasing but still material impact is now viewed as a bit of material impact for a bit longer. So I don't see an end to hyperinflation regime before the end of '28. That's one. Second, I think that hyperinflation should -- if the war and the situation in the Middle East doesn't increase, should get a bit lower in '27 and even more in '28. But again, it's very difficult to make forecasts because the previous forecasts have been postponed by the Central Bank in August and the Turkish government is even more cautious. Now for the quarterly impact, I think Q3 is -- this Q3 is a quarter where we have a significant discrepancy, as I said, between the CPI and the auto price index. We do not anticipate such a magnitude impact in Q4, for example. So it's a bit minus EUR 58 million stands on the high side.

Next question is from Geoffroy Michalet, ODDO BHF.

So 2 questions. First one, can you speak a bit about the impact of the maturity of the fleet on the margin? Because I have in mind that the most recent vehicles in fleet have slightly lower margins than the older vintages on the fleet. And I understand that you onboard a bit less new cars versus the past. So that might be also a kind of a booster on margin. Can you remind us the reason of the differences on margin, the magnitude of the impact and the level that you would have achieved if you had the kind of growth that you target for the 2029 plan? The second question is a bit on the competitive landscape because yesterday, the CEO of BNP Paribas, owner of Arval, mentioned that they had been more cautious since 2024. Others have been continuingly outperforming in terms of market share. So can you comment on what you see on the ground in terms of commercial positioning of competition versus you and the most recent developments?

Thank you, Geoffroy, for the 2 questions. So on the first one, there is a technical effect, which is when you got a new car on the fleet, when you put a car on the road, the first year the profitability is lower than the fourth year of the lease. It's a way that operating lease is accounted. So it's clear that mechanically, if your fleet is declining, it helps a little bit your margin. But we're not talking about something that is very significant. So when you grow, that's one of the 2 reasons that we had indicated in the CMD that when the fleet comes back to growth, there will be a slight softening. The other reasons being the mix of BEV and ICE. But we are not talking about a big order of magnitude. And this -- what influenced much more the margin is the commercial behavior on one side and the action that we perform on costs. And these are much more impacting than the effect on the average age of the fleet. By the way, the average age of the fleet is not something that moves very significantly and not very fast. So I would not take this factor as a Tier 1 factor. On your second question, which is the competitive landscape, if we talk about what we've seen this quarter, the reality is we've not seen anything moving really compared to the previous quarters. On our side, we have not seen any competitor making significant moves. On our side, we continue to originate at a gross margin that is year-to-date exactly at the same level as what we originated the previous year. And meanwhile, we've increased our order intake by 15%, and we've seen the effect of that in the fact that in Q3, the decrease in fleet has been much lower compared to the pace of before. The pace of H1, as we stated, was 50,000 for H1, so 25,000 per quarter. And third quarter, it was 5,000. So it's to say that the order intake increase has not come from a change in policy of pricing that remains stable versus last year.

Next question is from Sharath Kumar Ramanathan, Deutsche Bank.

Firstly, on margins. I understand that the current year funding plan is largely complete. So I wanted to check your conviction for margins remaining around, say, 600 basis points for 2027. How do you see the impact of higher funding costs and your ability to pass it on to customers? And related to this, you had aspirations of increasing the deposits in your funding mix. So if you can share any sensitivities on how impactful this could be or how beneficial deposits are versus other sources would be helpful. Second, on the extraordinary capital returns, can we expect something again with full year results over and above the 50% to 60% dividend guidance that you have provided? And lastly, a quick follow-up to the previous response on used car sales. Are you confident of UCS still being positive or not negative for 2027?

Okay. I will -- in fact, the 2 questions are 3 questions, if I understood well. I will ask Patrick to answer the second one. On the first one, the indication that we gave about interest rates is 100 basis points of increase in interest rate is worth around EUR 20 million because we've got a good capacity to pass the interest rate increase to our customers given the kind of contracts that we have. And we always have been extremely disciplined on passing the interest rate increase to our countries and in the commercial policy. Just for your reference, we've got a weekly meeting and decision on this to check that the rigor and execution is what it should be. On the deposits, it's correct that we continue to push on retail deposits. We've got -- you may have seen that in the Netherlands and in Germany, we've launched some promotional campaigns, which is quite traditional in this sector to increase the level of deposits. And this has proven to be working in Germany. The Netherlands is starting very recently. So it's too early to judge. But that remains a significant part of our funding strategy, knowing that at the moment, given the tensions on the bond market, the difference between retail deposits and bonds is at a quite high point. So it makes the interest of going to retail deposits even higher compared to the past. On the UCS, well, it's a bit early to talk about 2027 on that. Our process, what we do every year is when the full year '26 -- well, full year of '26 results are published, we have the call for the full year results at the end of February, and that's a moment where we guide on the different elements, including the UCS. And the environment is quite volatile. I think that makes sense. Maybe to give some color, when you look at the Q3 versus Q2, so there is a decrease in the gross UCS as we commented. What is interesting is to see that September was much better than August, August was a low point. And September was significantly better and above the average of the quarter. So just to say that drawing too fast conclusions on the curve can be misleading. So we will see how things evolve by the end of the year and give a guidance for '27 at the end of Feb as we always do. Patrick, can you answer the...

On capital, on extraordinary capital dividend, capital share buyback, dividend return to shareholders. So we are still in the process of executing the one that we have announced, and we anticipate that given the liquidity, it should take us until, say, the beginning of next year. And as you know, we have communicated during the Capital Market Day on a payout ratio of 50% to 60%. So there's a likelihood that the Board early December decides to increase the current 50%, but we need to wait until this period of time. But clearly, we have said it should be between 50% and 60%. And as you have seen also in the capital slide, we are currently generating significant capital. One should have in mind that it will keep going on, but probably with a growth in EA when the fleet returns to growth. So we have to take into account all these parameters before submitting a proposition to the Board early '27.

Next question is from Nicolas O Sullivan.

Actually, I have 2 small ones. The first thing is you described in the press release that Q3 underlying cost-to-income ratio of 49% is seasonally low. So what is exactly seasonal about the 49% this quarter? Is it driven by what you said earlier on leasing and service margin? Is it something in operating expenses? If you could point to what is the seasonal item here? And the second question is about -- so you disclosed that you have EUR 319 million of debt securities accounted through OCI. And I just wondered if you could provide what is the composition of this portfolio accounted through OCI, especially if that is sovereign debt or French...