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

Ladies and gentlemen, welcome to the Half Year Results 2026 Conference Call and Live Webcast. My name is Yusof, the Chorus Call operator. [Operator Instructions] This conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or for broadcast. At this time, it's my pleasure to hand over to Mr. Holger Laubenthal, CEO. Please go ahead.

Thank you, Yusof, and good morning, everyone. Great to be here for the presentation of our first half 2026 results. I'm here with our CFO, Christoph Glaser; CRO, Volker Gloe, and we look forward to walk you through the slides and then to your questions. Key messages we have for you this morning for the first half. So first, given continued strategy execution, we achieved a solid 6% growth in net income, it's primarily due to further efficiencies from our transformation program. Second, we're pleased with receivables growth of 2% from across business units, including personal loans. Net revenues remained stable despite lower maximum interest rates. Strong improvement in cost/income ratio by over 4 points to 43.5%, and loss performance continued solid and aligned with the guidance that we've given. Overall, this delivered a strong capital position of 17.7%. And with that, we're also pleased to confirm our full year guidance we have provided based on the core performance excluding this next point. Now, we're really excited to announce our acquisition of Santander's auto financing business in Switzerland. We look at it as a strike one opportunity for us. Transaction is well aligned with our strategy, further strengthens and expands our presence in Switzerland. We'll have more on this later, but we expect this transaction to be EPS accretive next year with resulting ROE improvement from 2028 onwards. And again, Christoph, with more details on this later. So a few key highlights here on the first half. Net income came in at CHF 92.3 million, up 6%. As I said, we're pleased with financing receivables growth. And as I mentioned, flat revenues against the backdrop of lower interest rates. Strong continued progress with our operational excellence program leads to reduction of cost/income ratio to 43.5%, losses in line with guidance, ROE increase of 30 bps and overall delivering strong Tier 1 capital ratio. Just zooming in quickly here on the specific segments in our market. Personal loans, we see nice rebound here given focused growth initiatives with that slightly ahead of the market. Auto is up as well in receivables, continued positive momentum, again, leveraging our new platform and further increasing automation in these processes. Good results in cards in terms of receivables growth, and buy now pay later continued focus on profitability, invoices up 12%, volume down based on mix and portfolio management. So next page, just a few words on our continued benefits from strategy delivery. It illustrates continued focus and execution across programs. We're increasing penetration in our app. We've got more products live simpler, more automated interaction for increasing customer value. With the auto platform, we're pleased with further automation here and particularly straight-through processing significantly increase, which makes us faster, more efficient and again, significant value for our partners and customers. We've also introduced a number of add-on products in our app that makes them more intuitive, more relevant offerings, and we're seeing strong conversion increase on those products. Last not least, driving accelerated AI adoption, both in customer interaction as well as related analytics for faster and more efficient servicing going forward. So with that, let me hand over to Christoph to -- for a closer look at the financials.

Thank you, Holger, and welcome, everyone. It's a privilege to join you on this call following my arrival in spring. As Holger already mentioned, we have delivered CHF 92.3 million of net income and CHF 3.15 of EPS, which represents a 6% year-over-year growth. Our net revenues are stable despite lower maximum interest rates and a softened macro environment. Our provisions for losses are back to normal levels, and Volker will provide more details on that in a moment. The substantial decrease of our operating expense shows once again our continued commitment to manage the company efficiently. NIM is stable at 5.4%. Our cost/income ratio substantially improved to 43.5%. Our ROE improved to 14.1% and our ROA to 2.4%. Now with that, let's take a quick look at net financing receivables and yields, which shape our interest income. Firstly, and as Holger has already mentioned, it is important to note that we have grown net financing receivables across all product lines. We have managed to reinitiate growth of our P loan receivables base following moderate declines in the past. We have also managed to contain the impact of reduced maximum rate levels and yields, keeping them broadly stable or at mildly lower levels like for instance, in the case of P loans. Now that said, we would like to reiterate that we are focused on the management of our NIM and the related guidance, which takes me to the next page. Our NIM has been kept stable at 5.4%. We had to digest CHF 5.7 million of negative pricing impact related to lower maximum interest rates, and CHF 0.8 million of lower income from cash and cash equivalents. And we've managed to compensate this challenge entirely by reducing cost of funds, taking both price and mix actions. We intend to keep NIM at 5.4% as we go through the year. With that, I would like to ask Volker to cover the next topic, provisions for losses.

Yes. Thanks, Christoph. For the first half of '26, the loss provisions came in at CHF 36.2 million or translated into a loss rate at 1.1%. This is slightly higher than in the same period last year when we reported 0.9%. I want to remind us that in the last year's number, we had this effect of the previously described synchronization of collections and write-off procedures that impacted the loss rate. So if one would normalize for this temporary effect, the comparison year-over-year would rather show stability at an around 1% level. We also see now the expected stabilization of delinquency and NPL numbers. These metrics were also affected by the mentioned synchronization, and now the level of stability is reached. Both the 30-plus delinquencies and the NPLs have actually slightly improved when looking into a year-over-year comparison and comparing to last year's numbers. So they came in at 3.3% for 30-plus delinquencies and 1.7% for NPLs, respectively. We show on the upper right on the page, the adjusted NPL number as well. This enables the comparison over the longer term and is excluding these synchronization effects. And you again can see that the underlying asset quality has actually not materially moved. Our calibration of this triangle of risk price and volume to optimize profitability has continued. We allowed in the first half of '26, slightly more credit risk on the book. Therefore, the credit grade distribution shows also a lower portion of CR1 and CR2 volumes compared to the previous period. Nonetheless, we feel comfortable with the risk that we have been taking here as we do it in a prudent way as always, and the underlying performance remains solid. And it has been, and we have been seeing that on the previous pages, rewarded by asset growth and also a constant NIM. As we continue to stay diligent in our risk taking, we would also not change the outlook for the full year. We still expect a loss rate around 1%. Though I have to add that this is the pre-transaction expectation. The transaction itself increases the auto financing receivables and auto leasing assets have an attractive risk profile. But there is a certain one-off effect related to loss accounting under U.S. GAAP. Consequently, including the transaction and hence, also including the one-off effect, we would foresee a loss performance for 2026. That is slightly above our midterm target of around 1%. And with that, I hand it back to Christoph.

Thank you, Volker. Now disciplined risk management and prudent loss income trade-offs are part of our DNA as much as disciplined cost and prudent cost/income trade-offs. In the first half of '26, our OpEx amounted to CHF 116 million, i.e., CHF 11 million less than in the first half of '25, reducing our cost/income ratio from 47.6% to 43.5%. We managed to reduce OpEx across almost all categories of spend. Our FTE number has dropped from 805 to 744 as of June '26. Now let's take a bit of a longer-term look at our OpEx performance on the next slide. Firstly, and as Holger already mentioned at the beginning of the presentation, there are benefits from the transformation we started a couple of years ago, and we continue to drive that transformation as we go through 2026. The number of group employees has dropped from 877 in mid-'24 to 805 in mid-'25 and to 744 over time. Our operating expenses have dropped from a level of CHF 265 million in '24 to CHF 245 million in '25. And now looking at 2026, we expect to spend no more than CHF 228 million to CHF 230 million. We does expect inherently a cost reduction of CHF 15 million or more in 2026 and the cost/income ratio run rate in the second half of 2026 below 40%. Now let's turn to the balance sheet before we cover funding and capital. With regard to the asset side, there are really 2 key points to be made. As Holger already mentioned, the net financing receivables have grown 2% from CHF 6.584 billion to CHF 6.690 billion. And secondly, with the 2% growth in P loans, we have managed to outgrow the market in the first half of '26. With regard to the liability side on the next page, there are really 4 key messages to be covered: funding profile, cost of funds, the funding mix and then, of course, liquidity and funding ratios. Our funding profile remained well diversified in the first half of '26 with deposits representing 57% of total funding and non-deposit funding 43%. Total funding was broadly stable at CHF 6.3 billion. Now importantly, our end-of-period funding cost declined further to a level of 1.17%, while the remaining term increased slightly to 2.3 years. On the wholesale side, we continue to strengthen the covered bond pillar now with 3 outstanding issuances, while the ABS matured in May '26. Our liquidity and stable funding ratios remained very strong with an LCR of 446% and an NSFR of 112%. With that, let's stay on the right side of the balance sheet and talk about capital. With a Tier 1 capital ratio of 17.7% and a CET1 ratio of 15.3% as of June '26, our position remains strong. RWAs logically increased in line with our net financing receivables growth. And our dividend policy, and that's important, remains unchanged. The company intends to pay a dividend of at least CHF 4.60 for 2026 and growing thereafter. Now with that, I'd like to hand over back to Holger, who will provide more detail regarding the acquisition of the majority of Santander's Swiss auto business.

Great. Thanks, Christoph. So look, as mentioned, we're very excited about the acquisition of Santander's Swiss auto financing business in Switzerland. Really, we look at this as a strike zone opportunity for us, right? You know our clear approach to M&A, and this deal is very compelling strategically and with attractive financial returns. A couple of points I'd mention here. First, it really strengthens our position in one of our core pillars, right? We like the auto business. It is in our DNA. It is a secured business. We have great market coverage, and this is a strong addition. Second, we have communicated at the beginning of the cycle that we want to invest and drive scale in auto, and we're doing just that. This opportunity adds significant scale to our new platform, providing meaningful leverage. Third, it expands our partnership network. We're adding existing partnerships with importers and dealers across the country. Fourth, and this is important. We're entering an exclusive commercial corporation agreement with Santander that allows us to participate in pan-European partnerships going forward as it essentially makes us their Swiss partner for such opportunities. So really a strong pillar for our auto business and for future growth. Christoph will talk later about the financing. We have a well-balanced and diversified solution here and expect closing of the transaction in November this year. EPS will be accretive from next year on with ROE increases of around 25 bps from 2028. Capital target and dividend policy remain unchanged. Just a few points on this next slide on the strategic rationale, a few illustrations to add some color to this, right? So we're strengthening our auto business to both scale and diversification. We're adding roughly 25% of receivables, which gives us a 4-point lift in market share and delivers diversification, both in terms of new car mix as well as distribution relationships. So overall, great opportunity, straightforward asset deal where benefits come from the book acquisition as well as relationships with one of Europe's leading auto financing players, number of importers as well as dealers across the country. So back over to Christoph for a bit more detail on this transaction.

No. Thanks, Holger, for laying out the strategic rationale. In terms of financial implications, there are really 3 topics to be covered. Firstly, as to the P&L impact, the acquisition is going to be EPS dilutive in 2026. That's driven by day 1 expected credit loss recordings and some integration costs. Now starting 2027, the acquisition is going to be EPS accretive, adding 25 basis points of ROE by 2028 and then going forward. Secondly, the purchase price of CHF 820 million covers CHF 755 million of net financing receivables, CHF 46 million of PP&E, which is linked to operating lease positions and CHF 19 million of intangibles. No goodwill will be recorded. The financing will be comprised of CHF 120 million of equity and CHF 680 million of debt. As to the capital management, we will use deployable excess capital and our Tier 1 capital ratio will be impacted by 70 to 80 basis points, and it is expected to be around 17% at year-end '26. In addition to that, it's important to note that the credit risk profile of the bank will improve with secured assets increasing to north of 50% and incremental capacity to issue covered bonds and to take in more retail deposits. All of that explains the 3 topics that are important to note with regard to financial implications. And with that, back to Holger to wrap it up with a few outlook-related comments.

Very good. Thank you, Christoph. So a couple of words on outlook, what to expect for this year. So we'll continue our prudent focus on profitable growth, balancing risk, volume, price, as you know from us. In operational excellence, we're progressing with automation and personal loans as well. We want to continue, as we have simplifying our application landscape and decommissioning. Leverage the momentum we have in personal loans and clearly continue to scale the auto platform. As we said, we look to close this transaction in November for a focused integration going forward. We also want to embed our simplified leaner organization across the business for continued simplification of the company. And on the outlook, and this is now adjusted for the transaction. We do continue to expect organic net revenues to grow in line with GDP. Loss performance, as Volker already said, slightly above midterm guidance, given the accounting impact. Cost/income ratio at 43%. Importantly, H2, excluding transaction, below 40%, the ROE around 14%, strong capital, unchanged dividend policy. And then we look forward to giving you an update on our next strategic cycle in December this year. Now before we wrap, I want to take this opportunity to thank Volker for his leadership and partnership over the many years in this company. We are, of course, here in a good position given the joint transition work between Volker and Christoph. We talk about risk management as part of our DNA, and Volker has really played a key role in embedding these capabilities in our organization. So Volker, a big thank you again. And with that, let's turn over to questions.

[Operator Instructions] Our first question comes from Nemes Mate, UBS.

I have 3 questions, please. The first one would be on H1 financials and the delta from here. I'm specifically interested in the moving parts to net interest margin. You were at 5.4% in H1. You are expecting 5.4% stable for the rest of the year. Could you comment on what do you expect in terms of asset yields, I suspect primarily on personal loans? And where do you see financing costs move from the end of period at 1.17% here? Any color on that would be appreciated. And the other two questions are on the acquisition. Firstly, Holger, you mentioned that part of the deal is an exclusive partnership on a pan-European level with Santander. Can you help me understand what does this mean in practice? And the other question is on the financials of the acquisition. It's clear that transaction helps you gain scale, helps you deploy your excess capital into productive use. But I was just wondering, would you be able to comment on the ROI, the return on investment on the acquisition? That would be very helpful.

Yes. Thank you, Mate. Let me start with a bit of context on the acquisition and then hand over to Christoph for the financials and also the NIM question in general. So Mate, again, as we said, right, strikes an opportunity for us. It's also a straightforward transaction as an asset deal during the discussion with Santander, at some point, we had contemplated other constellation, which might have led us into a holding structure as a favorable advantageous structure. But of course, this is a straightforward simple outcome to execute. And as we said, it helps the scale, leverage our platform, expands our partnership universe. Now specifically to your question, Mate, many importers when they go through deciding who to partner with on financing in a region, in Europe, in this case, right? I mean, you have 2 options. You either go country-by-country that makes it complicated, right, because you have many, many partners to deal with or you choose one partner that can cover the entire continent in this case. And that is the typical approach that importers would take. And so that gives us an opportunity now to be Santander's essentially partner in Switzerland for such pan-European opportunities for these importers. Hopefully, that clarifies it. Otherwise, let me know and we can dive a bit deeper.

It does.

Excellent. So that's really something we're excited about and a real addition in terms of the tools that we have at our disposal for growth. So Christoph, let me hand over to you for the financial and the acquisition and the NIM.

The NIM question, alright. Look, first of all, I like the transaction for the reasons you've mentioned. And on top of that also for the fact that we are enhancing distribution capabilities, get an operating lease capability with it and most importantly, a secured book expansion, which then has positive impacts on covered bond capacity and retail deposit capacity. Now that said, the transaction is going to be already accretive given the fact that it is a secured book with relatively lower price or return profile. It will be accretive, but to probably a slightly lesser degree than you would expect from a P loan book, for instance. Now because we do have a day 1 upfront, loan loss provisions to be booked and because we have some integration costs upfront, 2/3 of which sit in '26 and 1/3 in '27, the deal will be initially dilutive, but then, as we mentioned before, at 25 basis points of ROE, which is quite nice to see. Back to your investment -- sorry, interest margin-related question. Look, as you could see from the page presented earlier, generally speaking, we are managing yields at a quite a stable level. There is, of course, linked to the KKG, maximum interest decrease, an impact on the P loan book. Now -- and as higher-priced vintages mature, portfolio yields are gradually normalizing by lower funding costs partly offset yield pressure, and I've talked about that earlier today. So now we are in the business of actively managing that interest income through the cycle. And we do expect the yields compression to moderate with yields progressively stabilizing over time. That's pretty much it.

Our next question comes from Venditti Andreas, Vontobel.