Cembra Money Bank AG (CMBN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the First Half Results 2021 conference call and live webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Holger Laubenthal, CEO of Cembra Money Bank. Please go ahead, sir.

Thank you, operator, and good morning, everyone, and welcome to the half year results conference call. I am here with my partners, Pascal Perritaz, our CFO; and Volker Gloe, our Chief Risk Officer. So look, before we get into the slides, I'd like to just set the scene briefly with a few messages to highlight and start with saying I'm truly thrilled to be here. It's a great business and a strong team. So first, as you know, we are, of course, still in a challenging environment. But in spite of this, I'm pleased to see the business has shown strong resilience as evidenced in several factors, and amongst others, in the outstanding loss performance. Second, it's important to me, we are establishing a renewed sense of urgency, really around 2 top priorities. One is personal loan assets and also our focus on costs. And I'm excited that we have implemented measures to reignite growth in the personal loan business through a dedicated task force. And for the balance of the year, we'll focus on accelerating recovery with continued strong cost focus. Lastly, we are conducting a strategic review, which I'm really looking forward to. We'll update on this later in the year. But already today, we leverage this to drive focus. And as an example, we discontinued the SME activities in the current form. So now let's go to the results. We'll present those first, and then I'll share some personal impressions after 4.5 months here at Cembra and implications. And finally, we look forward to taking your questions. So from a financial perspective, we've had a robust year so far. We recorded net income of CHF 78.7 million, financing receivables declined by 1%, but we also have seen a rebound starting in May. Revenues were down 5%. Net interest income down 6% year-on-year due to development in personal loans. Commissions declined by 3%, which really has to do with the extended lockdown, and Pascal will talk about this in more detail. Cost-to-income ratio came in at 52.6%. And to be candid here, while this is largely driven through temporarily lower revenues and despite strict cost discipline. I want to be clear in my view that it's not an acceptable number, and it's far from my ambition as to where we should be as a business. So I want to reassure you that this has my and our full attention and our aspiration remains in place after the overall financial framework with regards to this number. But we are confident to recover here as soon as revenues come back to normal. On losses, we're happy to confirm that we see no signs of any deterioration. Our underlying risk performance has been excellent again adjusted for a one-off loan sale. Our operating loss performance came to 0.7%, and Volker explain this in more detail. As a result, the annualized return on equity was 14.2%. This was achieved on a further improved capital base with Tier 1 capital at 18.3%. So overall, resilient business performance in the first half, seeing a rebound in growth in revenues, and we confirm our outlook for the full year. Let me, on the next page, give you some more color on the different products and markets. So personal loans, we've already seen a decline in receivables last year, and this trend continued into this year. Consumer spending remains subdued due to the COVID-19-related restrictions, which had an impact on reduced loan volumes. We've also seen the competitive environment evolving steadily with seeing activity including from some new and smaller players. In this context, however, there's also some good news. Part of the reduced top line is due to underwriting restrictions, which we put in place given the uncertain outlook on the environment. And that again has driven this strong excellent loss performance. That said, these results are clearly disappointing. We have put in place, that was one of my first priorities, a dedicated task force to get this business back on the growth track. And we're encouraged to see good momentum in the last few months coupled with gradual lifting of underwriting restrictions that will drive performance improvement. The Auto business is very stable. New and used car markets are still experiencing some challenges given global supply chain issues. But transactions are starting to increase again versus a very low 2020, and our market share here overall is stable. In cards, we're pleased to see a gradual return to a more healthy national spend level. Domestic volumes have had a strong rebound and monthly card transaction volumes after 4 months were even slightly higher year-on-year. However, as you know, international card revenues continue to lag a bit as people only slowly return to pre-pandemic travel patterns. However, here as well we've seen noticeable improvement in the last few months that are quite encouraging. Next page, in terms of operational highlights. So let me just update you on the priorities for the year that we set in February. And you'll notice we introduced one change, which is on the first one here, because I want to make sure we have a strong sense of urgency as a team as we accelerate to the late stage of the pandemic. I mentioned the personal loan task force to reignite growth. We have some early improvements. We reviewed and lifted a lot of the COVID-19-related underwriting restrictions. Volker can give more detail on this. And already mentioned continued focused cost discipline. Card business, we're pleased to have successfully launched the IKEA relationship, excited about that. And that despite of the COVID-19 restrictions for outlets and reduced footfall, but very pleased with having launched this, and our card innovation project is on track. I'm excited about our continued focus on ESG. We've had strong progress. We've had rating improvements, and we're looking at new ways of working as we cautiously bring the workforce back into the office and implement a flexible working policy and trainings around this. In terms of the transition. That's completed, and I want to thank Robert and the team for helping me and us through this period. So with this, let me hand over to Pascal for the first half financials.

Thank you, Holger, and good morning, everyone. Let me start with reinforcing what Holger just said, despite 4.5 months of economic restrictions on both domestic consumptions and international travels, we delivered a robust business performance for the first 6 months of the year. And our assets are picking up again since May. This is encouraging for the second half of the year. We are very pleased with our excellent loss performance, addressing decisively our assets drop in personal loan business and manage our costs efficiently in the pandemic period despite all the disappointing cost-to-income ratio. So let's dig deeper into the numbers, on the P&L. Total net revenue declined by 5% to CHF 235.9 million. The interest income declined by 6% as a consequence of lower assets in personal loans. Interest expense was 4% lower due to lower debt. Commission and fees income decreased by 3%, mainly due to lower card fees income as a result of economic restrictions. Cembra delivered very solid loss performance. The provisions for losses decreased by CHF 15.8 million to CHF 14.4 million due to one-off debt sale as well as excellent underlying loss performance. This debt sale has to be seen in the context of the cashgate integration. And Volker, our Chief Risk Officer, will further comment soon. The reported loss rate was 0.5% for the first 6 months, respectively, 0.7%, adjusted for this one-off. The total operating expense decreased by 1% to CHF 124.1 million, mainly as a result of successful integration of cashgate 2020, offset by higher expense for information technology and personnel expense. I will further comment in one of my next page. Let's now talk about the net revenue by sources. As you can see on the left side of this page, the interest income declined by 6% from CHF 203 million to CHF 191 million as a consequence of lower personal loans asset, as mentioned before, and Holger already provided some insights behind the reductions of the net financing receivables. So in the personal loan, receivable declined by 4% attributable to lower market demand and tightening underwriting in the context of COVID restrictions on the economy. As a consequence, interest income decreased by 12% with a yield of 7.1%. The net financing receivables in Auto declined by 1% for the reported period and the interest income was stable with yield stable as well. And in the credit card, the net financing receivable increased by 6% to CHF 1 billion. Interest income in the card business was stable as well with a yield of 8.2%. Let's now talk about the cards transactions volumes and the revenues. The card volumes increased by 11% for the first 6 months compared to 2020, respectively, a 3% -- plus 3% compared to 2019 or pre-COVID-19. We are, of course, pleased with our continued outperformance compared to the rest of the credit card market. As a reminder, last year, in 2020, January and February month had strong volume before the COVID-19 pandemic started, with 2.5 months of economic lockdown followed by a strong rebound in June. This year, we actually had 4.5 months of economic lockdown and the volume since May are encouraging, as you can see on the chart on the top right side. This is largely driven by the lifting of travel restrictions and increasing international volumes. During the COVID period, we observed a sustainable shift to card payment and away from cash, resulting in an increase of domestic volume offset by lower international volumes compared to pre-COVID period. We saw significant differences in volume growth by merchant categories or industries, and I just wanted to give a few examples. Hotels, lodging, as we saw for the first 6 months compared to last year, plus 41%. Department stores, clothing, shoes, we saw an increase in volume plus 16%, grocery stores plus 11%. On the opposite, we saw as an example of the restaurants, bars minus 8%. This is largely due to the economic restrictions in Switzerland. And airlines, travel agencies, car rentals plus 24% due to -- minus 25% due to travel restrictions. However, in the month of June, airlines, travel agencies increased strongly or very strongly as of compared to June last year. Now let's talk about the card revenues on the bottom side. They decreased by 2% with interest income flat and commissions and fees income decreasing. As you can see, the interest income, very stable, driven by stable interest-bearing assets. The cards commission and fees remain at lower level compared to pre-COVID time due to lower international volumes. However, since May, we have seen an increase in international volume due to the lifting of the travel restrictions, driving an increase in commission and fees. Of course, there may still be a lag for the consumer confidence to come back to previous year spending patterns. We are confident with the recovery of the credit card revenue in a post-corona world. However, the biggest questions will remain the exact timing of it. Let's now move to the slides on the operating expense, please. Because the revenue were materially impacted by the economic restrictions. The cost income moved in the wrong direction during the period of the COVID-19 dynamic. However, on a run rate basis, we see a stable trend, and we remain very cautious as we have demonstrated earlier. Our aspirations remain unchanged, below 44%. The compensations and benefits cost increased by 4%. The increase is mainly due to salary inflation and actuals for variable compensations. Last year, we booked 80% of actuals in the situations of uncertainties around COVID-19. And this year, we booked the 100% accruals for variable compensation. General and administrative expense reduced by CHF 4 million. And let's go now through the details of the G&A cost. Professional services reduced by 17%, mainly due to the one-off integration services in the previous reporting period. Marketing expense decreased by 41%, mainly due to nonrecurring one-off expense in the first half of the year related to the launch of our Cembra Business. Rental expense decreased by 25% as a result of branch closure and branch consolidations in the context of cashgate integration. The 15% increase in information technology are related to digitization projects in the credit card business and other initiatives. The cost/income ratio was 52.6% compared to 50.3% in the previous reporting period. The increase was predominantly driven by a decline in net revenue. Balance sheet. The group total net financing receivables at the end of the period amounted to CHF 6.2 billion, a decline of 1% compared with year-end 2020. Consequently, our funding reduced by 1% as well. The shareholder equity decreased by 3% to CHF 1.098 billion. After Cembra payout the full 2020 dividend of CHF 110 million in April of this year. Let's give you a few comments on the net financing receivables and the rebound that we have seen ever since -- particularly ever since May. In personal loans, lower market demand and COVID-19-related underwriting rules resulted in low volume, which were partially offset by lower attrition. Under Holger's leadership, we launched this task force to decisively address the drop in personal loan, and it's good to see some stabilization since May. Auto business assets are holding nicely. We had lower new volumes for the first few months during the economic lockdown and also due to competition in lower interest segments, but we were pleased with the productions since May. Cards, plus 6% higher assets due to increased volume and gradual release of COVID-19 restrictions after February. Let's say a few words about the funding. The group funding portfolio remained stable at CHF 5.8 billion, largely in line with lower asset base. Overall, the funding mix with 57% deposit and 43% nondeposit is good. The period end funding cost amounted to 44 basis points. We have no issue in funding, it's balanced and diversified. We have a good funding pipeline and attractive offering on retail cash bonds since a lot of banks charge negative interest. The duration at 2.5 years reduced slightly as the wholesale portfolio rolls down steadily. The 2.5 duration is close to our asset duration on a contractual basis. Now I would like to hand over to Volker -- to -- yes, to Volker for the commentaries on the loss performance.

Yes. Thank you, Pascal, and good morning, everyone. For the first half of 2021, we reported a loss provision of CHF 14.4 million, which translates into a loss rate of 0.5%. Let me give you some more details on this number. First of all, there is the debt sale that already has been mentioned that we executed in the first half and that generated CHF 8.2 million of additional recoveries. In the graph on the upper left, we normalized for this effect. But even if we detected this effect out and look into the underlying loss rate, it came in at 0.7%, which is still better than in previous period. A few more words on this net sale. As part of the cashgate acquisition, there was a portfolio of loss certificates that was serviced by the former mother company of cashgate. So in the context of the integration of cashgate, we would have needed to migrate this portfolio into our systems, which obviously would have led to additional operational effort and consequent complexity. We assess this as not being particularly sensible as we are talking about a portfolio that is already written off and that came in the form of loss certificate, so a form that is easily transferable on the market to a third party. So we checked on the market our options basically and checked for prices and received an offer to sell the portfolio of loss certificates that met our expectations, and consequently, we executed the sale. I want to highlight that debt sales are actually a normal part of our collection strategies. And it's not the first time that we did that. You might remember that the last one we did in 2018, mainly on the credit cards portfolio also in the form of loss certificate. Because also, at that time, we wanted to avoid additional kind of operational inefficiencies. So it's exactly the same rationale at this time with the sale in H1. I want to highlight that also the underlying loss performance with a rate of 0.7% has been good and a couple of drivers would be mentioned here. We generally observe a strong and diligent payment behavior of our customers. It probably also is supported by governmental measures to address potential negative impact by the COVID pandemic on the economy. But it might be also as simple as that possibilities to actually spend money have been restricted during the lockdown. Another factor is certainly in the measures that we implemented in the beginning of the COVID pandemic. In the context of strengthening our loss mitigation strategies, we tightened the underwriting rules, specifically in the personal loan book. We touched upon this topic when we saw the asset development. And yes, it certainly has an impact on volumes, but it also avoided any potential negative sensitivity on the loss line. Consequently, it now contributes to the loss performance in H1. The restrictions were cautiously but consciously removed now and lifted in the first half so that we maintain the long-term consistency in our credit risk appetite. Though we now might be in a late stage of the pandemic, there are still residual risks related to that, such as, for instance, second round effects on the macro economy. Consequently, we aim to maintain our prudence in risk management, which is also evidenced by the level of allowances for losses. During the first half, we increased ALLL balances by about CHF 5 million to now CHF 89 million, and it still includes the environmental reserve of currently CHF 2.1 million on the personal loan book that we put in place in the beginning of the pandemic to be prepared for any potentially unforeseen negative impact on unemployment levels. When it comes to the asset quality and metrics related to that, we see that in line with loss performance, continuously robust quality with 30-plus delinquencies at 1.8% and NPL at 0.7%. As we're now in the first half of the year, we reverted back underwriting rules to pre-COVID levels, we would consequently also expect that the loss performance for now the second half will gradually move back to levels that are more in line with prior years. And with that, I hand it back to Pascal to talk about the capital position.

Thank you, Volker. We have a strong capital position. Cembra remain very well capitalized with a strong Tier 1 capital ratio of 18.3%, respectively a core equity ratio of 15.6%. In April, S&P reaffirmed the A- rating and revised the outlook from negative to stable due to the steady financial performance of our company. Thank you for listening. And now I would like to hand over to Holger for his observations and outlook.

Excellent. Thanks, Pascal. So look, I'd like to share a few personal observations here and thoughts that I've had since starting at Cembra. So you get a bit of sense for who's sitting at the end of the line here. So firstly, we have incredibly strong substance in this business. We spoke about the loss performance as an example. And there's great depth across the functions. The average tenure of our risk underwriters is over 15 years. Our auto sales force has almost 2 decades on average. And I could go on -- and the expertise this brings is really the backbone of this business. Secondly, you may know, I worked in this business between 2003 and 2006, and it's just great to see some former colleagues again and meet all the new colleagues. And I want to share a brief story. The likes of many, as I've encountered many when I started here. One of my first days here, a colleague of mine, I met in the hallway. She had the same broad smile that she had 15 years ago when I was here. And I asked her what has kept her here all the time since then. And look, her answer was simple. We have great people, and this is where I belong. And I hear these things over and over. Everybody wants to win, there's passion, we care for each other and there's good commitment to deliver. I'm also very pleased in terms of the Board and Management Board dynamics. We have a supportive Board of Directors, and I'm pleased to see robust dialogue, discussion on topics that matter and gives me good confidence in terms of collaboration going forward. We really understand this business and the market and consumer finance. I've spoken with customers and partners, and they all tell me they like us because we solve problems. We're available. We understand how they operate, and we understand how we can best serve them and we're responsive to their needs. And we have been doing this for decades. The business model is a well-oiled machine. We know the businesses, they operate well, and this really has allowed to develop this track record of profitable growth and resilience. And we continue to deliver attractive ROEs on the back of a solid capital position. We're committed to the dividend. Sustainability, close to my heart. I'm really glad this is getting more attention across the board. And for us as well as we're building deep roots in the bank and in the culture and listen to the regulator, all stakeholders involved. Finally, on a personal side, again, it feels a bit like coming home. It's good memories from the early 2000s, and so I'm excited about the journey ahead. So on the next page. What does that imply in our focus areas going forward? I already mentioned briefly, we're conducting a strategic review of the business, and I'm actually really excited to craft our vision and strategy together with the team here. So let me just give you a view of the trends in the market as I see them and the implications for us. The first point is the fundamentals in this market remain attractive in terms of consumer credit needs. And for all the reasons that I've just explained, we have a strong position to capitalize on this. That said, there are also some changes. Look, I've had the opportunity to run consumer finance business, banks, retailers, technology business in B2B and B2C across the world. And it's no surprise that as anywhere, digitization, data analytics, technology, fragmentation of value chains all come to play in Switzerland as well, consumer finance operating models and ways to create and deliver values to customers are evolving and changing. And so as one result, a leadership position in technology is a critical ingredient to sustainable success in this space. Lastly, and we've alluded to this as well, yield pressure is here. And if anything, it's intensifying. It's not going to go away. And I think the way to succeed in this market and to continue to succeed is to make sure you put the customer first and to ensure efficiency and business model scalability. So what does that mean for us as we conduct the strategic review? One, I think it's really important for us to clearly define our ambition as a playmaker in this market. We are a leader in the markets we operate in, and we need to actively build our future. Today, we're serving over 1 million customers, which I think is fantastic. And the feedback is really positive. That said, I think it's important for us to look at how we even better leverage our customers understand to build real intimacy going forward, not just today, not just what we've learned in the past, but really what we see happening in the next 2, 3, 5 and more years and how consumers and partners will need our services, how they consume them, where we find them and ensure that we build simple and intuitive solutions around that. We spoke about the cost income challenge before. And, look, one way to address this, of course, is simplifying our operating model and technology landscape and ensuring alignment a simple model which is both efficient and scalable and delivers for our customers. And finally, and it's obvious, but it's really important and something that matters deeply to me, is our culture, right? And making sure the culture and the capabilities evolve to keep track with all these challenges that I just explained. And so we're looking at how to strengthen the skills it takes and the way we work together to make all this happen. Now all of this is in the context of who we are in our DNA. And at the core, that's the Swiss consumer lender, deep expertise in functions such as risk management, collections and many others. So this is what's going into our review. I'm quite excited about it, and we'll look forward to updating you on this in December with more details to follow. So then just before we wrap here and get ready for questions, a few words on the outlook for the second half. And our focus will be on accelerating the recovery and continued strong focus on cost discipline. In terms of the outlook, we're currently anticipating a stable economic and regulatory environment pending the evolution of the pandemic. But we do expect a rebound in card fee income in the second half following the forecasted economic recovery and the gradual continued easing of travel restrictions and continued strong loss performance. Beyond that, we reaffirm our medium-term targets. So now we look forward to answering your questions.

[Operator Instructions] The first question comes from Andreas Venditti from Vontobel.

You mentioned the task force in terms of private loans and the, let's say, reacceleration of growth there. Can you maybe tell us a bit what we can expect in terms of business recovery? And also in terms of yields, the yields came down again. Of course, you just mentioned in your closing remarks, obviously, that the yield pressure is there, but so maybe also in terms of outlook on the yield would be very helpful. In terms of your initial remarks, in terms of strategic review, you mentioned something about the SME activities. Maybe you can -- I'm not quite sure I got it correctly. So maybe you could clarify what you meant. And maybe finally on the card side, maybe you could add a bit of color in terms of the card innovations you're talking about. And also, I remarked, the growth in the number of cards has been gradually coming down, I mean, still increasing, but the growth rates are coming -- has been coming down. Maybe you could tell us a bit there what you expect also from your new partnership with IKEA. And also in terms of cards, how this looks like?

Great. Thank you so much for the questions. Let me start this and then on personal loans, and then Pascal can add a few words on the yields, and I will also talk about SME and cards and innovation there. So look, as we articulated, right, the challenge in personal loans is -- there are multiple items, right? One is the challenges from the pandemic that continue and that we've already seen last year, we also, as you recall, had some dissynergies last year, which reduced the asset base going into this year dissynergies from the cashgate acquisition. And then the cautious underwriting, which has some upside to it as well. Now the task force. When I came in, this was one of my and our joint first priorities. And so I really wanted to make sure that we have a dedicated effort on getting this business back in growth mode. And what I would say is, Pascal has alluded to this too, we have seen a stabilization in the asset base in the last few months. And again, pending continued recovery of the markets, we also expect a recovery in that book going forward. Pascal, why don't you add a few words on the yields, and then I'll take the rest of the questions?

Yes. On the yield, yes, for H2, so we expect a similar level of yield compared to what we have seen as of H1 as a loan at 7.1%. Holger mentioned before, the continued price pressure and competition in personal loan. On the other side, we also need to see that the yield is always only part of the story as what -- where we need to look at is the overall margin as well. And the margin is the sum of the pricing, losses and efficiencies. So at the end, looked at also the return on assets, which is, I think, is appropriate. But indeed, as all of the pressure remain and for second half of the year, you would expect basically stable compared to what we have seen in H1.

Very good. Thank you, Pascal. Then let me take some of the other questions. On SME. Look, you may recall, we launched the SME lending business a couple of years ago, 1.5 years ago, roughly, I think. And obviously, this was before we came into the pandemic. And with the situation where we are today and the model that we had built, and given the very strong across-the-board government support for that sector, this is just not a viable proposition. And to me, strategy is as much about what you want to do as it is about what you're not going to be able to do and what you're not going to focus on. So this was really, from my perspective, something for us to drive increased focus on the things that really matter, such as the personal loan situation that we just addressed. I hope that answers the question, but we can elaborate more otherwise. On cards innovation. Look, there's a few things that we're working on with this project. The first is we want to really essentially digitize the processes and provided a digital virtual card, if you want. Secondly, we want to increase self-service options for our customers, including digital onboarding and others and to really make the process simpler and more intuitive for customers. Third, as we build the solution, we're making sure that this is transferable across our products, right? Because we believe that these seamless, simple customer journeys matter across the board. And then lastly, we also believe, and we're getting some feedback there from our existing retail partners, that this is a great tool to strengthen the collaboration with them and jointly increase the value for the customers. So that's really on the card innovation product. In terms of your question regarding growth and the IKEA relationship. Look, we've had, as Pascal alluded to, we've had about twice as much time in lockdown this year -- year-to-date as last year-to-date. And so that also had a bit of an impact on footfall in stores and stores being partially closed and other things. That said, we do see revenues coming back. We've seen transactions coming back. We're pleased with our end market performance, and we're also excited about the science that the international fees come back. The IKEA relationship, again, we're very excited about that partnership and having launched this in -- still during pandemic and with some of their store closures in place. But we do expect this to be a great program for us. They are the largest loyalty program in the market with 1.7 million customers, and we're excited about it. And so this should be a key contributor to growth going forward in the number of cards.

The next question comes from Mate Nemes from UBS.

I have 3 questions, please. Firstly, on credit cards. The foreign spend in May and June in particular. I'm just wondering if you could give us a sense of where this is skewed in June compared to normal pre-COVID levels, also perhaps compared to the same period last year. I certainly hear you that you're seeing an uptick, but if you could give us some comfort that this is indeed heading in the right direction. And in the second half, we should be expecting a markedly better results on that front. Secondly, the personal loan book underperformed versus the sector in terms of volumes. Obviously, this could be the result of perhaps a bit more cautious appetite in terms of risk. I'm just wondering if you could talk a little bit about the drivers here. And lastly, on costs. You're now seeing basically nice step down in terms of professional service fees, in terms of marketing fees and the number of cost lines are heading in the right direction. And I'm just wondering if you could give us a sense how IT expenditures, especially in the context of card innovation and other digital investments. So how IT expenditure should be developing in the second half and perhaps in the years coming?

Great. Thank you for the questions. Let me just say a couple of quick things, and then I'll hand over to Pascal for the bulk of this. The -- look, clearly, as we've alluded to, we've seen the uptick. And it's the right question to ask, and our hypothesis always has been, right, that these lines will come back as the markets continue to open. And we're pleased to see that. But Pascal, why don't you provide some more details on the cards as well as in the cost situation? And then we can circle back on personal loan underperformance.

So specific to your question, Mate, compared to pre-COVID-19 time as of the month of June, was close to the level as we have seen in June of '19.

Yes. Very good. Do you want to take the cost point as well, and then we'll get back to the personal loan situation.

Yes. So look, on the cost income -- on the cost side, there are a lot of things we like in the way the cost has developed on the cost side, but obviously, the pressure remain on the revenue side, which means the cost income is disappointing. Specific to your question on IT. Look, as Holger mentioned a couple of times the technology leadership, and it's all about technology as in the future in this market. So honestly, although this is not the line, although IT is not really the line where I would expect the fundamental reductions in the short term. I would expect it really to remain broadly flat, depending on the future investments. I think in total, it's important to look at our cost income ratio and our cost and cost income ratio in the context of long-term aspirations, which is unchanged. We refer to the 44% of the aspirations we have. And yes, we might have some IT investments required, which need to be offset with further efficiencies.

Thanks, Pascal. Then let me just comment on the personal loan situation. Look, I would say there's multiple factors that play into this, right? Firstly, we've seen some pressure on the book last year already, and that was partially driven by the cashgate synergies, but also by reduced activity in the market in terms of consumer spending, consumer sentiment and resulting all of them in consumer loan appetite. Now the other point is -- and Volker elaborated on this, was our deliberately cautious underwriting where we've dialed back quite a bit. We're now pleased to see that as the markets come back, we can release some of that. So that should give us some tailwind. And as I said, we've alluded to that. And then lastly, look, there is competition in the market, too, right? And that's both from some of the bigger players, as you know, but there are also some smaller players that are getting quite active. I think that's good for the market, keeps everyone on their toes, including ourselves. And we've put this task force in place to really get us back on growth track. And I'm confident that we will be able to do that.

The next question comes from Andreas Brun from Credit Suisse.

Two questions left on credit cards. Do you actually see pressure from the Mastercard debit card launch in Switzerland, which happened by the end of last year? And secondly, do you have pressure on fees on the cards or other commissions from card despite of the lower usage of the card outside of Switzerland? Is there like a market pressure on credit card fees in general?

Yes. Thank you, Andreas, for the questions. So let me start with the first one, and then I'll hand over to Pascal on fees. Look, the launch, as you alluded to -- look, most banks have started to replace the Mastercards, right, with the new Mastercard and Visa debit cards and will complete this process over time. But I think it's also fair to say that these cards are meeting some resistance from Swiss retailers, right? The fees are significantly higher by a multiple than those in the Mastercard. And there's been some complaints. Some of the supervisory and competition bodies have gotten involved. So that kind of remains to be seen, right? There's a healthy dose of skepticism, I would say, certainly from the retailer side. And then, of course, as you may also know, these cards cannot be used in all industries and purchasing process in the same way, right? Such as a bit of a challenge for rent a car companies, hotels and the likes given the uncertainty about the ultimate fees on this. But look, I think these cards ultimately are going to be used in a very similar way as the previous Mastercards. And that's where we see the trend going, I would say. Let me hand over to Pascal on the second part of your question.

Look, on the fee side though this is, I would say, a dynamic agreement, the one we mentioned several times that long term, the pressure will remain. I think the beauty on the credit card side is ultimately the volumes are going up are going up significantly. There are the key trends in terms of usage of cards, in terms of cashless payment. And our job is always to ultimately offset or potentially lower margin with higher volumes. And this is what we have to do as of short term. So obviously, we did have change in interchanges, and both the national and international. And as I said, ultimately, as pressure will remain, but critical will be as the continued growth in this business.

Maybe one add-on there. We touched on the growth of the number of cards, which was only 4% year-on-year. Like going forward, with stores being open again, do you expect an acceleration of growth of the number of cards going forward without any further lockdowns?

Look, so first, I think it's important to realize that 4%, although in the COVID situation, is a good number. The year-on-year growth, 4% people who do know -- cannot in the stores. This is part of our value proposition is ultimately acquisitions in the stores. So in that sense, though, I'm pleased with the plus 4% of the increase year-on-year in cards. Going forward, it's -- on the total, as we said, that growth is important with credit cards. And of course, we would expect some further applications supported as well by partners like IKEA as an example.

The next question comes from Benjamin Goy from Deutsche Bank.

Two questions from my side. One on capital, one on IKEA. On capital, just wondering with cost income, you have a lot of initiatives there to improve it, but to improve your returns, also the denominator could help. So would you also review going into the Strategy Day your capital targets? And then secondly, relating to the IKEA launch, were there any meaningful project costs you would call out that might fall away in H2? Or, yes, you would call it business as usual and nothing extraordinary to report?

Yes. Pascal, why don't you take those questions?

Yes. So obviously, look, on the capital side, as we have as our capital policies in place, dividend and capital policies. And we always refer to -- ultimately to the 17% to 19% Tier 1 as the target. And for now, these are the rules which apply. I think, in the situation of COVID is good to have a bit of excess capital. 18.3% is a good number, slightly above our target of 17%. But obviously, as more it's growing, the more questions on what do we do on the equity side. On the -- on to your question, I wouldn't expect extra movements in terms of investments for the second half of the year. You want to further comment, Holger?

I think that's good.

The next question comes from Daniel Regli from Octavian.

A lot of questions have already been asked, but a couple of follow ups. Maybe quickly on competition in personal loans. Can you maybe elaborate quick -- a little bit more on where exactly you see the fiercest competition? Is it from established players coming in with lower prices? Or is it from new entrants into the market? Then secondly, on the tax rate, just saw the tax rate dropped a bit from the normal, let's say, 21% to 19% in H1. Should we expect this to normalize in H2? Or was this driven by the sale you saw on provisions? Or was this more sustainable drop in tax rates? And then maybe lastly, on credit cards. Can you maybe establish a bit on changing client behavior? Have you already noticed that, for example, people are using their credit cards more now also driven by the pandemic, which could deliver, let's say, a more or a higher base level of fees, should the revenues from FX transactions coming back. And also there, maybe quickly back on your comment about the June months, you said that June was almost on June '19 levels? Are you talking about volumes or revenues?

Thanks for the question. Let me start with the competition and say a few word on cards, and then I'll hand over to Pascal for the tax rate and the particular item on revenue for the FX side. Look, competition on personal loans, I think you get a bit of both. The big players like ourselves, they've been active, the Bank-now and Migros Bank, of course. But we also have seen recently, and this is sort of what I was alluding to with similar trends in other places. There are a lot of smaller, more technology-driven players that come into the market. crowd lenders, bob Finance and others that sort of take a piece out of the value chain, do that really well, partner with other players in the market and all that. Now I think -- first of all, I think that's great. That gives -- again, it gives a good dynamic into the market. It gives choice to customers. And at the end of the day, it's our job to make sure that we have the products and the service and deliver them in a way that the customer is willing to buy them from us. That's what we got to do, right? I think the other thing I would say is, as I mentioned, I was in this business for 3.5 years in the early 2000s, and I've seen this at that time already. You will always have a few people trying to rapidly grow into this space because it is quite attractive. But we've also seen a lot of people fail because perhaps they don't have all the depth and expertise that it takes to sustainably succeed. We've been doing this for decades, and we're in this for the long game, right? And so that's, I think, one of our -- what we bring to the table with our expertise and with our experience. But that said, I do want us to watch this carefully, always good to look a bit over your shoulder when you're a market leader, and then really actively define how we continue to grow the business here. That's what I'd say on competition. Cards. In terms of client behavior, I think, look, you're on the right track with the question. And in this industry, as many others, the pandemic really has accelerated trends that were already visible before, right? And so penetration of card usage versus cash is growing. Mobile payment is growing versus cash, et cetera, et cetera. So I would say that, that global trend that you're seeing will continue. I think that does, by and large, provide some tailwind. And look, overall, still north of 30% of transactions in Switzerland are cash. If you go to the Nordics, it's well below 10%, right? So there is room to grow in this space, and we're excited to continue to build our capabilities. So let me hand over to Pascal on the tax rate question and also just on the FX side on the cards.

Maybe just to finish, so first on the card side as well the -- I mentioned before the reference of June -- the month of June 2021 compared to 2019. It was referred to the volumes, and it was referred to the international volumes of the cards business, where I said it's close to the 2019 level. Hope it clarifies. On the tax side, though, clearly, there was some bit of one-offs, although we moved to the 19.2% tax rate. We indicated for 2022, although basically as 20%. So the reductions compared to last year and the 20% is basically the change in cantonal or communal taxations in Switzerland. So H1 was in that sense extraordinarily low.

Great. And maybe just one quick follow-up. Did I get you right that you're planning for an Investor Day in December? Or will we hear your strategic review conclusion with full year results?

Yes. We'll give you the details on this shortly, but we do want to make sure we can update where we are with the strategy development in December and the details will follow shortly.

[Operator Instructions]

Good. Great. Look, unless there are any other questions, we -- let me just thank you again for dialing in. Thank you for the range of questions. Look, we're pleased to see a gradual recovery here with some remaining uncertainty, of course, in the markets, but we're gearing up to accelerate our way out of this. Strong loss performance, and look forward to the balance of the year, and thanks again for dialing in.

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.