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

Ladies and gentlemen, welcome to the Full Year 2023 Results Conference Call and Live Webcast. I am Alice, the conference call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] At this time, it's my pleasure to hand over to Mr. Holger Laubenthal, CEO. Please go ahead, sir.

Yes. Thank you, operator. And, Good morning, everyone. Welcome to the call, the presentation for full year results 2023. I'm here with our CFO, Pascal Perritaz, our CRO, Volker Gloe. And, as usual, we'll be walking through the presentation here and then look forward to your questions. So the first page, look, we're 2 years into the strategy that we communicated to you and shared with you in December '21, and we wanted to give you an update in terms of where we stand. So a few key messages here for you. Firstly, solid results in '24 with net income at CHF 158 million, down versus last year, but a good pickup in the second half. We're quite pleased with the 3% net receivables growth, continued strong loss performance, stable cost/income ratio. And we're also reconfirming that we're on track for the 2026 targets. Secondly, and including in volatile markets, we're very pleased that the Cembra DNA continues to deliver. You could see that in the decisive pricing action we've taken, the impact that's starting to have, cost management, risk management discipline and the stronger gross funding mix. Third, in terms of our businesses, auto and personal loans, we've continued to show profitable growth and focus on profitable growth. The cards migration program, more on that later, is now effectively concluded. Buy now pay later integration has been a success, and we have a scalable payments platform to grow on going forward. Fourth, we're simplifying organization, creating 2 business lines, Lending and Payments, which we're very excited about, will give us more focus, better customer base leverage and efficiencies across the organization. As we discussed previously, '23 and '24 are challenging due to a couple of factors. Firstly, the lag in impact of repricing measures where we're now seeing great momentum though, the expected normalization of the loss performance and some partial delays we discussed in implementing our core banking platform. Sixth, we're on track to deliver against the cost/income target by 2026 with the key building blocks to execute on this in place, and benefits will be coming in as of this year. And last but not least, with all that, we're confirming our midterm targets as well, of course, as our dividend policy and outlook. So with that, let me move directly to Page 4, in terms of the year. So I've already mentioned a few points here. Net income at CHF 158 million, good pick up there in the second half. It's great to see our pricing actions coming through and the NIM improvements in the second half and more on that later as well. We're quite pleased with the growth in net financing receivables overall, and the team executed really well to deliver on our cost/income guidance. Also, again, strong loss performance. And in the back of these results, we're proposing an increase of the dividend to CHF 4. Let me, on the next page, just briefly comment on how we delivered across our product lines in our markets. So personal loans showed strong market leadership here in terms of decisive pricing actions that we've taken. And look, we continuously manage here the price risk volume equation for profitable growth. That means we're quite selective in where we grow, and that's also reflected, of course, in the continued health of our loss metrics. In auto, we had a very strong year. Here too, good rigor in pricing. We're excited that we launched the leasing platform. Good feedback, from part of the dealer base using it so far. Cards migration program. Look, for all intents and purposes, this is now completed. We've converted over 2/3 of the cards. We made some commitments a couple of years ago around where we were going to be, and we're pleased to say that we are, in terms of the financing receivables, on the same levels that we were in 2019. And it's all about growth going forward from here. We also grew our co-branding cards portfolio meaningfully. And then with the buy now pay later acquisition, which is now concluded and integrated, a great platform, for growth going forward, strong fee and volume growth in the year, mostly, of course, through the acquisition with some organic components as well. So that's the overview of the products and markets. Let me hand over to Pascal for a closer look at the financial results.

Thank you, Holger, and Good morning, everyone. Today, we report solid results for 2023 in a challenging environment with rising interest rates and uncertain economic outlook. With the decisive pricing measures, the net interest margin stabilized and even slightly increased from H1 to H2. We continued our disciplined risk selections and diligently managed our costs. This translates into the robust loss performance and an improved cost/income ratio from H1 to H2. And we grew our net financing receivables faster than GDP. Let me further explain. We'll first focus on the P&L and then in few minutes on the balance sheet. The net income amounted to CHF 158 million. This is a decrease of 7%. And this is due to the temporary reductions of the net interest margin, the normalizations of the provisions for losses and the continued strategic investments, particularly in our strategic program operational excellence. Net revenue increased by 1%, with the commission and fees income more than offsetting lower net interest income. The net interest income declined by 3% and as the interest expense increased to CHF 75 million dollars, reflecting the increase of the funding cost, and it was partially offset by the repricing measures. The commission and fees income were up 10%, mainly driven by the growth in buy now pay later, both organic and inorganic. The loss performance remain robust, A, at 0.8%, and Volker will comment very soon. Finally, as you heard from Holger, return on equity, 12.5%, Tier 1 ratio stood at 17.2%. On the next page, the net revenue increased by 1%, with increase of interest expense more than offset by additional revenues, namely as of the interest income and the commission fees. In the second half of the year, the gap between the interest -- between the increase of the interest expense and the interest income declined compared to H1. So the gap was CHF 6 million at H1, you see here, CHF 18 million minus CHF 12 million, and at H2 as though the gap was CHF 2 million. Q4 was a turning point with the additional interest income more than offsetting the increase of interest expense. Since June 2022, we successfully increased the monthly pricing for new business in all businesses. The net interest margin stood at 5.2%. It stabilized compared to the first 6 months and the year or even as a slightly improved since June or July last year. And we expect the net interest margin to rebound to around 5.5% in the midterm. On the net financing receivable in the year that we are pleased with this 3% growth in net financing receivables. We aim for profitable quality growth. We grew our secured auto business by 6% and selectively increase our personal loan business in challenging market environment. By taking decisive pricing actions, we deliberately focused on more profitable market and less price sensitive customer segments. This is our Cembra DNA to proactively manage our portfolio, tradeoffs, pricing, risk and volume depending on market and segment situations, and optimize use of capital and returns. Of course, our strategic and commercial ambitions remain to keep market at least stable compared to 2021. Since H1 2023, the yield improve across all products, driven by the pricing adaptions in response to the changing interest rates environment, as you can see. Credit cards. Our migrations program from Cumulus to our proprietary Certo! card is concluded. More than 2/3 of the transitions portfolio was migrated. We move now to business as usual. We are pleased with our stable cards assets and our revenue very close to the pre-COVID level. We have now a well-diversified cards portfolio with 58% B2C and 42% B2B2C. As you can see on the right side, we retain our highest valued customer groomed -- customer segments. Shown on the upper right chart, we segmented our migrations program by customer segments, targeted CRM activities and achieved high migrations for prioritized customer segments. As a result, we estimate the retained profitability on the migrations portfolio to around 85%. Regarding operating expense, the operating expense increase by 2%, and this is also driven by the acquisitions and the integrations of Byjuno and strategic investments and partially offset by diligence cost and hiring management. The lower numbers of FTEs was driven by BNPL integrations and diligent hiring management during the second half of the year. This results into a stable cost/income ratio of 50.9%. From now on, we expect the cost/income ratio to gradually decline in line with our strategic plan by 2026. Now, I hand over to Volker for an update on the provisions for losses.

Thank you, Pascal. For the full year '23, we reported loss provision of CHF 56.9 million translating into a loss rate of 0.8%. This is an increase versus the prior year, but at the same time, in line with what we have been expecting and communicating. The loss performance is gradually normalizing as certain precautionary measures that were implemented during the COVID pandemic were lifted and credit risk policies reversed to pre-COVID levels. If one would try to illustrate the main drivers behind the development from '22 to '23, and again, it's the expected normalization, one would need to consider that the '22 number had some specific effects still relating to the COVID pandemic. Excluding these underlying core losses for '22 would rather have been around 0.7%. Then in a walk to the '23 number, there are several factors that deserve mentioning, such as the full year consideration of losses stemming from the Byjuno acquisition, higher upfront allowances due to the implementation of the CECL standard under U.S. GAAP, but also the general impact of increased cost of living and its effect on debt servicing capacity in certain customer segments. As this temporarily slightly more adverse macroenvironment is currently still pervasive, we continue to actively manage credit losses and related mitigation measures to ensure the financial soundness in all customer segments. This picture is also reflected in asset quality, where we see a small uptick on 30 plus delinquencies and NPLs. And generally asset quality numbers are on a continued sound level. The same goes for the level of allowances for losses, where there might have been some movements in or between individual product lines in the course of '23, but the overall level has been very stable. Looking forward, so while in other European countries, there might be some more visible impact of macro trends on credit quality. We would, in the current Swiss environment, rather expect that the loss performance remains solid with a lost rate in line with long-term trends and in line with our midterm target of less or equal than 1%. And with that, I hand -- turn back to Pascal.

Thank you, Volker. Regarding balance sheet, the total assets grew by 6%, and this is mainly from the increase of the net financing receivables as well as the cash and equivalents following our continued disciplined funding management. The funding increased by 8%, and I will comment though very soon. And finally, the shareholder equity decrease by 2%, including an impact of CHF 54 million from the adoptions of the current expected credit loss in U.S. GAAP at the beginning of the reporting period, as already communicated in the past. Regarding funding. So the funding balance increased by CHF 470 million. This is plus 8%, and this is driven by the strong business growth and higher liquidity buffers. H2 was marked by the turning point in interest rates expectations. And here we observed that institutional investors and lenders expanded their investment horizon. In January, May and September, we took advantage of favorable capital markets with the issuance of 3 longer dated insecure bonds with a net growth of CHF 210 million. We increased the ABS segment by CHF 275 million. Retail fundings also increased by CHF 220 million with many new clients buying our attractive cash bonds. The remaining terms of the portfolio increased to 2.4 years and the end-of-period funding cost increased to 1.47%. Our average cost of fund was 1.18%. Our net average cost, meaning the net of income from our cash and repo facilities -- investment facilities was 1% as expected. In 2024, we expect to continue to grow the retail funding further with new digital retail fundings products already launched. We are placed with our funding profile and liquidity positions. On the capital. Our capital ratio is reported for the first time on U.S. GAAP basis, including the buy now pay later legal entities. We remain very well-capitalized with a strong Tier 1 ratio of 17.2%. The risk rated asset increase by 3%, and this is in line with the increase of the net financing receivables. And given as of the solid financial performance, the Board of Directors will propose a dividend of CHF 4 at the next General Meeting on the 24 April, 2024. And this represent an increase of CHF 0.05 compared to previous year. With that, I hand over to Holger for the update on the strategy executions.

Very good, thank you Pascal. So we go to Page 17 directly. Look, as mentioned, right, 2 years in, we wanted to give you an update where we stand, right? So this is the page that we shared with you December 21. Clear ambition to continue to lead in consumer finance in Switzerland based on a strong set of core capabilities. We launched 4 programs, which we're now executing on, and a clear set of finance targets with one adjustment on the timing of the ROE in terms of getting back to 50% or more. So all of this from a programmatic perspective still in place. So let's take a look on the next page how we're doing so far. So DNA continues to deliver. Right? We're close to our partners. We're close to our customers, deeply embedded in the markets that we operate in, and you can rely on us for cost risk discipline and decisive pricing actions. We're also progressing on our strategic initiatives. Operation excellence, the leasing platform is out. We like what we see so far in terms of efficiency improvements and the partner reactions we're getting. And we've done a lot of foundational work in terms of infrastructure consolidation, cloud readiness to move forward across the business with these platforms. We're continuing to build our app, and we launched our digital savings product suites, early this year. Excited about the prospects there. Business acceleration, we talked about the successful cards migration, further growth in our co-branding, partnership portfolio. We're also excited that we came back to organic growth with a strong profitability focus across product lines. On new growth, the Byjuno acquisition is completed. The TWINT partnership is live, and we're expanding on that. We more than doubled commission fee income this year with the acquisition and organic growth. Cultural side. Again, good, good progress here. We significantly strengthened our commercial organization and repositioned ourselves as an attractive employer with the refresh branding. So on the right, you see the metrics that we track. I think they reflect this performance. We're quite pleased with the receivables growth, obviously, the ROE we talked about, and the trend going forward there in terms of getting back to the targets we committed. Cost/income on track in spite of the investments that we're making in reliably strong loss performance. So let's focus on the going forward on the next page. And we talked to you about 2 years ago, we discussed the market trends. And so I'll just be brief here. Because in a nutshell, this continues to be an attractive market, right? It's a resilient economy driven by a strong consumer, low unemployment and the long-term fundamentals are healthy and quite conducive for our consumer finance. Digitization, obviously, continues to play a big role, data analytics, AI and others and we're seeing first use cases on that. But by and large, in a nutshell, attractive market that we like to operate in. If you look at the Lending and Payments a bit more closely. In lending, we continue to see very strong long-term fundamentals. And with the positive interest rates, I'd say a return to a healthier environment, right? We're focused on business model resilience comes back in the picture. And that certainly plays to our strengths. In payments, we continue to observe cashless, convenience continuing to gain relevance and clearly also product proximity around different cards products, invoice payments, buy now pay later. And in addition, it's good to see the underlying need for credit that continues to be intact. So the next page, as you look at this, right, the business characteristics from Lending and Payments are indeed a bit different, but quite consistent within themselves. So Lending is more stable, more predictable, the use cases are much more distinct. Whereas, on the Payment side, it's bit more dynamic. There's higher frequency, typically more transactional, and it's more capitalized. So, look, we want to fully capitalize on these trends, and really drive growth in these 2 -- in these 2 areas going forward. And therefore, we're organizing ourselves into these 2 business lines to really drive synergies, across the organization. We have, the Lending business line led by Peter Schnellmann, who has several decades of deep experience in these markets, built great leadership team. And we're equally pleased to have Christian Stolz lead the Payment side of the business who joined us, of course, as the founder and CEO of Byjuno, with previously multiple years leading the Mastercard operations of Switzerland in the country. So 2 very strong leaders, great prospects for the business going forward, supported by the functions here on the right. What this gives us is a stronger focus on cards and buy now pay later customer base leverage now that we successfully concluded the migration. And you've heard me say this before, it's important for me to have firepower at the front end, and we're clearly establishing that here as well. The more intense focus on customers and partners, a simpler operating model and an opportunity to continue to be lean on the enabling function. So to reflect this, we'll also introduce segment reporting on this level. So let's take a look, next few pages, on the priorities in these 2 areas. So this is Lending and so personal loan and auto businesses, right? Strong and leading positions that continue to deliver well. We talked about the triangle between pricing, risk and volume that we manage quite deliberately. And you should expect the same going forward with a clear focus on profitable growth. In addition, we're excited about the continuing rollout -- the full rollout this year on the motor solutions platform and leveraging the respective capabilities with our entire distribution universe, the 3,700 dealers, platforms and distributors, which will give us significant simplification value add for partners and customers in efficiencies per our strategic plan. Next, we'll be initiating the same for personal loans with expected similar benefits aligned with our strategy. So on Payments. So post-Certo! migration, we're combining 2 strong business lines into one. And let me tell you why we are so excited about this business and its prospects. So I just hit a few items here in terms of the trends. Some of them we talked about in the past, right? Offering convergence clearly is a major trend that we're seeing and as a player with the product breadth that we have, we believe we're uniquely positioned to benefit from that. The important of the merchant interface and one-stop shopping we talked in the past a lot about embedded finance and flexibly combining payment financing options at that point of sale, at that interface is critical. And again, we believe we're well-positioned here. Data and customer insights are getting more important, capabilities to work with that data getting more and more important. And look, we have well over 2 million customers and we're quite excited about leveraging these connections. So overall, I think we're well-positioned to play in this space and to continue to win. So let's go to the next page, we'll talk a bit about the game plan for the Payments business line. So again, combining cards and buy now pay later and invoice payments, look, I think, we have an excellent foundation, right? Well over 2 million customers, but if you think about it, the majority of them in the buy now pay later side so far we've mostly dealt with transactionally, right? What this combination gives us is an opportunity to significantly enhance interactions, to significantly enhance propositions and to really cross-sell from one into the other channel for a much deeper and meaningful customer relationship with values, both for customers and also our P&L. We've been a leader in the B2B2C business for decades. And here too with the addition of buy now pay later, there's well over a 1,000 retail relationships that we're adding. And the same that goes for the consumer, also goes for the retailer, right? We have an opportunity given our product set, given our capabilities to significantly broaden our product offering to that retailer group, strengthen relationships. And again, I think we're uniquely positioned given that, that product set. And look, we're thrilled about this combined new organization. It's great to see how this is coming together on a single leadership. So look to deliver on this 3 targeted programs. One is increasing product density. I mentioned the significant cross-sell potential that we see by combining these businesses for the well over 2 million customers. We know these customers on the buy now pay later side of credit affinity, and we believe we have a unique channel for access to these customers here that we'll be using quite intensively going forward. We wanted to on that basis accelerate customer engagement. We've talked about our app, we're adding functionality to this. We want to make this increasingly a tool to communicate in one-to-one fashion with customers in a way that's more meaningful for them. And then also I mentioned the opportunity with the retailers. So we will revamp our partner proposition here under one leadership, extend the embedded finance solutions, not just for a finite number of co-brand partners, but for overall retail partnerships. And with that we're looking to achieve a 5% to 10% top line growth per year and are quite excited about the prospects for this business. Let me conclude on the next page here with a word on the cost/income ratio, which is of course a key driver for the 20% to 30% EPS growth we discussed through to 2026. And the composition here, you can see there's, obviously, the first elements is growth, right, which is based on everything we just talked about for the 2 business lines. And I think we're poised to deliver on that given how we set ourselves up. And then secondly, of course, there's operational excellence. We talked about motor solutions, we talked a lot about automation, digitization, much more efficient service delivery and strengthening our base infrastructure -- IT infrastructure. In that respect, as we discussed, we will see benefits coming in as of this year. Headcount management. Look, we've been diligent in this in the past. We've gone from about 950, as you may recall, mid-year '23 to about 900 by end of year '23. And we're planning for a further reduction FTE, aligned with our strategic programs and delivering against the cost/income roadmap to around 830 by year end and we're expecting about CHF 3 million to CHF 5 million associated one-off costs with that. So with that, let me move to the outlook. So 2024, I think some clear priorities for Lending in terms of profitable growth. I talked about the 3 programs for Payments and accelerating growth in that business line. Operational excellence, deliverables are clear in terms of the rollout of the motor solutions platform and increasing benefit realization focus really here. For the year '24, you can expect continued resilient business performance. We expect net revenues to moderately outpace GDP. Clearly, continued loss discipline. Cost/income below 49% with benefits from transformation coming in. ROE, we're looking at 13% to 14%. And from an H1 versus H2 perspective, a bit of a similar trend to what we've seen last year with a better second half. With that, the targets through '26, so you can see on the right, remain in place with one adjustment on the ROE, but overall a clear outlook for 2026. So summary, solid '23, groundwork and operational excellence is progressing well. Initial benefits will come this year. Our DNA continues to deliver in terms of cost and loss performance, pleased with our position in the markets, strong pricing, NIM recovery and great opportunities in Payments with the new organization. So with that happy to take your questions.

[Operator Instructions] Our first question comes from the line of Andreas Venditti from Vontobel.

Maybe firstly on the new guidance for 2024 on the return on equity, not totally surprising. Already with half year you mentioned that this target would be challenging. Now, this is stated at 13% to 14%. Maybe you can remind us of the main drivers of this? And especially also, you keep your at or above 15% target for 2025 and '26, which is going to be quite a nice jump from the 13% to 14% level, so maybe you can also give a bit of color where you see this coming from. Then maybe on the guidance for the net interest margin, 5.5%, I guess, based on repricing measures ongoing you said midterm. Is that correct that by midterm you mean 2026? And then also on the cards, you have reached the 2020 -- '19 level, as was the target in terms of receivables. On revenues, you're slightly below. Maybe you could add a bit of color there, what the main reasons were. Yes, I'll stop here and maybe I'll ask a few more questions later on.

Yes. Good morning and thanks very much for the questions. Let me start with the ROE guidance, and then we'll have Pascal talk about the NIM. And then we get back to the cards question as well. So look, the ROE guidance, you're right, 13% to 14% is what we're now guiding on. And it's really a bit a continuation of some of the temporary trends that we explained. Right? One temporarily, the pressure that we're seeing on the NIM, given the delayed impact of the pricing actions that we've taken, and that continues to feed a bit into the year. But again, I think the good news is, we are seeing the NIM coming back up. So from that perspective, that also gives us confidence in terms of -- the second part of your ROE question, in terms of the guidance going forward. The second one is, as we expected, continued normalization of the loss performance that Volker talked about. And then we had mentioned this during the year, some partial delays in the core banking platform transformation, right. There, too, we're making good progress now, and we have some good line of sight in terms of what's coming this year and the efficiencies associated with that. And so, I think with that and with also then some of the growth programs that we've explained and the repositioning of the business lines, that gives us, in combination, good comfort in terms of where we're heading going forward and also the improvements in the ROE coming through, both again through the commercial actions and the cost actions that we're taking. Pascal, do you want to take the NIM question?

Yes, on the NIM question as well, so from a timeline standpoint, when do we refer to midterms? Yes, usually we refer to up to the end of the strategic cycle, 2020-2026 for the NIM improvements and the rebound, I would say, latest 2026.

Yes, and look on the card side, indeed, right? Net financing receivables on the levels of revenue is 2% below. I would say this, right? When we first discussed this challenge well over 2 years ago, we put this out as an ambition. And clearly, we had some perspective on what we were going to do, but we still had to build all the programs, right? We had to build the products, we had to build the communication campaigns, we had to build the CRM measures, et cetera. And we had to get smart in terms of the data analytics. And so, I would say we're quite pleased with the way that, that migration went. Again, given -- versus the ambition, I think indeed slightly off one metric, but spot on the other. And now it's for us to shift to growth in this business, right? And I think we've done the groundwork, we've got the organization in place to do that.

Our next question comes from the line of Mate Nemes, UBS.

I have a couple of questions. The first one would be on the net interest margin, the 5.5% guidance. Could you clarify, please if you are factoring in any improvement in the funding costs, perhaps down the line in '25 or '26 given the expected rate cuts in Switzerland in the next couple of quarters? That's the first question. Second question still on funding costs. I see that the exit funding cost run rate is close to 1.5%. Is that a good guide to use for 2024, or you would expect perhaps somewhat of an up drift still from current levels? And the third question would be on the auto business. I was wondering if you could give us a bit of color, what you're seeing in that market at the moment, given perhaps some softening in used vehicle prices. How does that affect you? What do you see in terms of competitive dynamics? Clearly, the market is still expanding nicely. Your receivables also grew in line at 6%. So I'm just wondering what do you see in terms of activity now perhaps towards the end of the year, early this year? What do you see in terms of pricing and so on?

Pascal, you want take the NIM and the funding and then I'll come back on the order side?

Yes, definitely, Holger. For the net interest margin as around the guidance of the 5.5%. So first, although obviously, as the net interest margin are several elements which are to take into consideration. So, obviously, one side, the overall pricing of the book, the commissions level, obviously at the same time. We earn money as again, on our cash, cash equivalents and investments portfolio. And finally, as the funding cost. So, clearly, as though it'll be a dynamic. We are managing the net interest margin as a key KPI for us. And depending on how all these elements develop, also as a capacity as to implement pricing actions, as an example, but also development of interest rates, SMB as a policies we have to take some more or less actions. So once again, the net interest margin, though is very important KPIs. And on the funding side back, though, to your second questions. Look, the end of period the funding costs are 1.47%. If you have the SMB policy, at 1.75%, so basically, yes, we would expect the funding costs to continue to slightly increase. Over time, certainly, as the speed of increase of what we have seen as between '22 and 2023 will be lower. But once again, we are managing more, the overhaul net interest margin with the funding cost, though, being only one part of the equation.

Thanks Pascal. So on the other side, Mate look, I think, obviously, this market has been I would say quite volatile over the last few years, right, through COVID and then coming out of COVID. I think here too, we're seeing a bit of a normalization as everywhere else, right? We continue to benefit from what we saw in the market last year, right? As you know, we continue to focus predominantly on -- to a larger part on the used car market and have been able to grow quite nicely in spite of the price increases that we pushed through. We also, I'd say, Mate, we haven't seen a significant change in dynamics in terms of the market. There's always a bit of cyclicality, right, one way or another. But I think the strength that we bring to bear is, sort of leading to your second point as well, right? We are really deeply embedded with our partners out there, the 3,700 dealers and increasingly also with other distribution platforms and others. So look, I think as I've said more generally, right, it is an attractive market that makes it attractive for others as well. I think we have a strong position, we continue to build that. But we don't really see a significant change in terms of what we've observed sort of at the end of the year and going to this year.

[Operator Instructions] Our next question comes from Daniel Regli, ZKB.

Congratulations for the good result. I have a couple of questions. And first, my first question is on the reporting. Obviously, you said, you will kind of consolidate your divisions into 2 main divisions, but will you kind of continue to report revenue separately for credit cards and buy now pay later, as well as personal loans and auto leases and loans, or would just merge everything together in just one line for both segments or divisions? Then the second question is also a bit on net interest margins, and obviously, we have seen a nice pickup in yields, particularly in auto, but also personal loans in H2. Can you give me some sense about exit yields in these business lines and kind of your expectations where these yields could go in 2024, given the current price increases we have seen? And maybe also on the net interest margins, what do you expect in terms of maximum rates for 2025 given current expectations are that Central Bank will cut the rates to 1.5%? It could be that the SARON drops back to below 1.5%, which should naturally lead to kind of a reduction of the maximum rates to 11% to 13% again in 2025. Have you kind of baked this into your guidance or your expectations, or what is your thinking about this going forward? And then my third question would be on costs. Can you give me a sense about the non-recurring part of costs in 2023 and kind of the outlook for investments into operational excellence for 2024? And then last but not least on your guidance, you're saying you expect revenues for 2024 to only grow modestly above Swiss GDP, which is expected at 1.1% given your receivables have increased 3%, and we should see some kind of net interest margin expansion during 2024. Yes, what is kind of the gap between, let's say modestly above 1.1% and let's say a receivables increase of at least 3%, which could lead to 4% to 5% if we add onto it then net interest margin expansion, can you maybe help me on this bridge here?

Let me start with the last one, and then I hand over to Pascal on the other one. Look, I think sometime in the past we said to slightly outgrow, right? And we choose the wording deliberately, moderately, it's a bit more than slightly right, in that sense, right? And so, you'll appreciate, we don't guide on a specific number. But if you're expecting GDP to grow at about 1%, then moderately certainly would be more than 1.2% or 1.3%, right? And then, hopefully it gives you a bit of sense, right? So it's slightly more bullish than just the outlook of slightly outgrowing. Hopefully that helps a bit. But let me hand over to Pascal on the other questions on reporting NIM and cost.

Thank you first for the questions on the segment reporting. So you may have seen in the presentations, investor presentations we added in the appendix as a pro forma segment reporting as just to give a bit of color, also the lending versus to payments. Generally, you can assume that the overall presentations of our financial results though will not fundamentally change. So in the sense, what we have disclosed today in 2024, we will continue to disclose. We'll certainly add as a one page with the segment reporting, the Lending and the Payments. So no big changes that we expected in this area. The second one regarding the yield and the pricing then, yes, first we are pleased with the repricing actions we have taken. We are also pleased to demonstrate that the yield has further develop. This is a very dynamic market environment, so both on the interest rates the timing of potentially low rate cuts as well as from the SMB, but also in terms of competitions. So this is why we are more guiding also basically at the overall net interest margin with management taking appropriate actions depending on how the market developed both as of a macro and competition as a standpoint. But generally as though certainly on the auto business, we are moving a bit more to the top of the market, of the pricing cycle. And certainly as OP loan, on the card side with the change of interest rates cap which was implemented January 1, then does gives some upside. Look back to your questions now around more 2025. We don't know. In a sense it's really highly depending on the SMB as a policy decisions, the timing on potential decisions from the government on the change of interest rates cap. So basically depending on the decisions made, then we will adapt. Finally, your questions on the cost/income, what was recurring in 2023 versus 2024. So certainly as in 2023 we had basically as the integrations cost related to buy now play later, we give indication CHF 3 million to CHF 4 million between 2022, 2023 in the context of the integrations of buy now pay later. So certainly here -- so we are in this guidance probably around CHF 2 million to CHF 3 million that we spend in 2023 for the integrations of this business. So, obviously, these are cost which will not recur in 2024. For 2024, we also indicated as well as part of the roadmap how to come to the 39% cost/income ratio that we might have some one-off personnel cost related to the reductions of workforce. So in that sense that the CHF 3 million to CHF 5 million we mentioned, that could be a recurring cost in the context of 2024.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Holger Laubenthal for any closing remarks.

Very good, thank you operator, and thanks everyone for the questions and your time this morning. Look, quick summary, right, I think a solid '23. We're pleased with the groundwork that's now in place and operational excellence with benefits coming into this year as we speak. Strong DNA, continue to deliver price loss cost. We're pleased with the market positions we're having. We talked about the NIM recovery given the strong pricing actions we've taken and a good set of opportunities ahead of us, the business lines, particularly also in Payments within new organization. So with that, thanks again and wishing you a great day and we'll talk soon.

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