flatexDEGIRO SE (FTK) Earnings Call Transcript & Summary

Hello, and welcome to the flatexDEGIRO Preliminary Results Half Year 2023 Analyst Call. Please note, this call is being recorded. [Operator Instructions] I will now hand you over to CEO, Frank Niehage, to begin today's conference. Please go ahead, sir.

Yes. Good morning, everyone. This is Frank Niehage. A warm welcome to our half year preliminary results 2023. A warm welcome here from Tegernsee, where we celebrate the 10th anniversary with [indiscernible]. The team is here in the [ trainings ] camp. Present are my colleagues out of the Management Board, which is Dr. Benon Janos, Stephan Simmang, Muhamad Chahrour and myself and obviously, our Head of IR, Achim Schreck. Warm, warm welcome from Tegernsee. We are happy to talk today about very robust numbers, and before we go into details, a personal note. We also had to announce today that, unfortunately, Muhamad Chahrour has decided on his own to leave the firm by end of this year. As we are professionals, we like to focus on the firm's result first, and then, Muh will give you a bit more details at the end of this call about his personal motivation, which I regret on one hand side, but I have to respect and you will see on the personal side, why there is reasons that he will and has to leave us. However, let's please start with the firm first. Let's start with our highlights. I will always start as usual and then hand over to Muh, and he will shift gears and drill down into commercial and financial aspects more in detail. I'm happy to confirm our guidance in a very challenging environment. Needless to say, the geopolitical situation in Europe, the interest rate hikes, the high inflation will have and do have an impact on our business. However, we confirm guidance, and we also have a very positive outlook for the second half due to the measures taken, and we will go into more detail very soon. I will also start with the regulatory environment, and let me spend a short moment on what's going on with respect to our German BaFin regulator, and then I will talk thereafter about the UP level, PFOF, which will have a severe impact on our industry as well. Let me start with the well-known aspect of BaFin. We are very positive that we have fully automated the process and developed and implemented with respect to the credit risk mitigation techniques and that was hard work, but we were very close with BaFin and our special auditor, and we have handed over all the relevant information. So from our side, the work is done, which is a very good news, and the process runs and is implemented. Now it's up to the commissioner to take his samples and review everything and report it back to BaFin. We are very positive in respect that by end of September, we will get a feedback on this and hope then after that, be able and allowed to apply the credit risk mitigation again, as we temporarily were not allowed. Obviously, we continue to aim on other findings and work on this. What's relevant with respect to hiring new people and implement new processes and to run that project has been done. So it's up and running. And allow me to mention after an audit, it's normal course of business and over 12 months to 24 months to work on those findings that improve, and that's what we are doing. You're already aware of the positive news with respect to the SREP. Our capital requirement was lower by 75 basis points. Again, the first step in the right direction. In general, we will continue to improve wherever possible this overall situation. So that's the positive news on our German situation. Let me move over to the EU level. Again, from my point of view, positive news, why is that? The PFOF ban to me is ranging the single market deal. The single market requires fair rules for all of us, which in the past and up till now, it's not the case in some countries like the Netherlands, the U.K., you are not allowed to receive a payment for order flow, and in others, you are. So in my opinion, the EU moves into the right direction and will have same rules for all of us. Like always, there is a transition period from January 2024 until 2026, where member states have the possibility to have a different situation. However, this has no impact to us and for us because over 99% of our revenues, as we always said, are independent of any payment for order flow. So this is a good news for our industry, in my opinion. In general, it's a good news for us, and it's a good news for our clients. Why is that? As that has no impact, we will not have to increase prices, for instance, on the 4,500 ETF and saving plans like it is discussed here in the media. And we will continue, especially in Germany for over 20 years with our price model at flatex [ EUR 5.90 ] per trade. We never touch that, and we will not touch that. And therefore, again, news into the right direction. Obviously, the retail investment strategy, we will continue to watch and report when there is any changes or impact on our industry. So this goes to the regulatory environment. Now I'd like to repeat and mention again governance. As we always said, we will improve and develop our governance and at the Annual General Meeting, as you are fully aware of, Britta Lehfeldt was appointed. So now it's 5 Supervisory Board members, and we are happy that we are even more diverse than before, and we are all looking forward to work together with Britta Lehfeldt successfully, as we already started in the bank. And as now the general assembly at the Annual General Meeting was positively voted for. So again, we develop us, as always said, into the right direction with respect to governance. Obviously, let me also highlight the few business aspects. Obviously, we improved our relationship with the ETP partners, and are very happy and proud that JPMorgan is our new platinum partner. The work is great, and we are happy for that partnership and everything is on track and works well. A long, long time ago, we mentioned that we work on digital wealth product, and we are happy now that our partnership with Whitebox, who we knew from the B2B side for many, many years, is now live on the B2C side as well and flatex wealth has started and taken off this month. We are targeting here [ potential ] new clients, who do not decide themselves, but rather want to go for a managed strategy. And we hope that the government clients, who are not trading at all for a long, long time, instead of doing nothing, might rather have an alternative when they look at the potential offering of that wealth management product. So we wish good luck for this. And I move ahead with adjustments. We did at DEGIRO especially. We increased the rate on our loan product. And obviously, over the last months, interest rates were increased, so we adjusted here as well with respect to our credit product and improved. And we did a bit on the commissions with respect to U.S. trades and local trades. This all in all will have a big impact in the second half, and we are looking forward to that. Again, in Spain, we were awarded Best Stockbroker with Rankia for the seventh consecutive time. So again, a great tradition we try to continue with. And again, positive highlights so far, and we will promise to work on it more hard and bring up more of this in the future. So in general, this is, yes, at the beginning, now we will shift gears, and I will hand over to [ Muh ] like always. Muh, the floor is yours, please.

Good morning, everyone. Thank you for joining today's call. And as Frank said, let me first please run you through the financial details of the first half year, and then, I'm asking for 5 minutes to give a little private note on the announcement of this morning. If we jump into the commercial performance of the company, we have to admit that under the given circumstances and under the given environment, we have continued to manage our customer growth very, very well. We have increased the number of customer accounts in the first half by 186,000 clients with an annualized retention rate of 98.1%, which equals a churn rate of 2%. The net growth was 162,000 accounts. As you remember, we have forecasted this year 1.5 growth, a customer account growth of 1.5x to 2x our European peers. Actually, the account growth in the first half was 2.1x the relative growth of our peer average. The relative share of customer account growth per month is the following seasonal patterns. We are showing on Slide 11 what the seasonal pattern looked like in the years 2016 until 2019 to just actually adjust for the COVID years and the new stock years. And what we see is literally that we are very much in line with what we have seen historically with respect to seasonality, strong customer growth in the first quarter, which usually drops in the second quarter, and then in the third and fourth quarter, it usually picks up again. So absolutely in line with respect to seasonality on -- also in terms of absolute number in line with our forecasted numbers. The second important point or actually not the second important point for us with respect to customer growth, the most important point is the development of the assets under custody. We are looking back to 3 years, 4 years, where customer growth, the absolute number of customers was usually the most important thing. We actually see here the importance to highlight what the assets under custody development looks like. As of June the 30th, we have reached an all-time record of EUR 47.8 billion in assets under custody, which are split in EUR 44.2 billion securities and EUR 3.5 billion in cash. So what we see is actually 2 things. The first thing that we see is that our net cash inflows are still positive now with EUR 2.9 billion in the first half. We had, in total, roughly EUR 6 billion of cash inflow, EUR 3 billion of cash outflow. So the delta of it, the EUR 2.9 billion is the net cash inflow. Quite interesting to see, we are again and again highlighting, we are not a savings bank, we are a transactional bank. We are an online broker. And the evidence for that is that 91% of the net cash inflows of EUR 3 billion, where we -- were invested into securities by the clients. So the actual growth in cash was only EUR 0.3 billion out of total EUR 3 billion net cash inflow. The trading -- coming to the trading activity, the trading activity dropped compared to Q1, I just mentioned it. It has also to do with seasonality effect. Q2, as I already mentioned in our first quarter call is expected to show lower transaction activity, first, given because of, in general, less trading days, but second, also because Q2 historically has been the weakest quarter in terms of transaction activity. We are absolutely in line with the trading activity of our, let me call it most admired peers Nordnet and Avanza. Now also there, you can see the drops between Q1 and Q2. So the patterns follow, flatexDEGIRO pattern follows absolutely a market pattern and with no respect idiosyncratic or because -- and I'm highlighting this point because, as you remember, very often, we've been challenged with respect to the quality of growth. And if the quality was worse than our peers' quality, we would have to see literally stronger drops in activity, but since it's absolutely in line, it confirms at least that the quality is as good as with our peers. I'll just touch on this point, activity follows seasonal patterns. So in the history -- if we look back, usually, 26% of all transactions happened in the first quarter, 23% of all transactions of the year happened in the second quarter. This is exactly what I mentioned. It is historically the weakest quarter. Our first quarter was slightly stronger than in the past. The second quarter is absolutely in line with historical seasonal patterns. So we feel pretty good with respect to the residual 6 months of this year, and our forecast and guidance that we will come to in a moment. If we come to the commercial aspects, I mean, most of you have read them obviously, and see then the adjusted revenues grew by 8% quarter -- so year-on-year -- sorry, quarter-on-quarter. They dropped by 8%, mainly due to the fact that Q1 versus Q2, we are missing 3 million transactions that were done in the first quarter but did not happen in the second quarter and 3 million transactions with EUR 4 of revenue per trade or actually a little bit more than EUR 4, but to use it for the mathematical calculation. We're talking about actually EUR 12 million of revenue drop. The drop is not as heavy as the EUR 12 million, it's only EUR 7 million. And the reason for that is, obviously, the improved -- significantly improved monetization on the one hand side, on the other hand side, also and to a much bigger effect also the increasing interest rates for the deposits in the second quarter compared to the first quarter. The commission income is much more in line with what I just discussed or what I just mentioned, a drop of roughly EUR 12 million, EUR 13 million. This is what explains the drop from Q1 to Q2. The similar drop is also between Q2 to Q2 because also in Q2, 2022, we are -- we were at 16.2 million transactions, so also a delta of [ 3 million ]. The interest income is record high, obviously driven by 2 mechanisms. The first one, as I said, is the deposit -- the deposit facilities that are enjoying month-by-month more and more interest gearing, so to speak. And on the other hand side, Frank mentioned it at the 1st of July, it's not reflected, obviously, in Q2. But as of the 1st of July, we have increased the margin loan interest rates with DEGIRO that will also have a significant impact on the second half interest income. The commission for trade is still relatively flat in this range of roughly EUR 4 with a little bit of uptick towards EUR 4.17 in Q1, 2023. The drop from Q1 to Q2 is mainly explained by the drop in transactions. 3 million less in transactions equals also a significant drop in high-revenue transactions. That's point number one. And point number 2 is that there are some -- some account fees that are charged in the first quarter that also fall out in the second quarter. But if we look in the second quarter and take more a monthly perspective, June, which was the first full month with the newly implemented fees on the DEGIRO side, did a revenue -- sorry, did a commission per transaction of north of EUR 4.20. So we are now absolutely in line with what we expect going forward for the second half. And obviously, also the April month, which was a super weak month, had a dilutive effect also on the Q2 commission per trade. So as of now, Q3 will be sort of [ split the ] the quarter to confirm the price increases on both ends, interest income, as well as commission income. And as I said, June has already provided us some transparency with respect to commission per trade and interest income. We had last year -- sorry, not on the last call, not last year, we had a discussion about the elasticity after price increases. And I know that some of the covering sell-side analysts have questioned and have challenged the elasticity that results from price increases with DEGIRO and let's say, at least, build a correlation between price increases and transaction activity. And to clean up this myth, we are providing this slide that shows literally the index trading of U.S. stocks at flatex and DEGIRO beginning in the first calendar week of 2022. So what we are showing is literally that we index for the brand flatex and for the brand DEGIRO, the number of transactions in the first calendar week of 2022 and have sketched, so to speak, both graphs until the most recent week and the development of the trade in U.S. stocks. Why U.S. stocks because we mainly changed our pricing at DEGIRO with respect to U.S. stocks. And the evidence that we wanted to bring to you is that the changes in fees with DEGIRO did not affect the transaction activity on the DEGIRO side. Since we didn't do anything on the flatex side, it's the perfect benchmark for the activity development. And as you can literally see both graphs are developing literally at exactly the same magnitude. Actually, over the recent weeks, the DEGIRO graph is above the flatex graph, which means that actually activity -- the index activity at DEGIRO is higher than at flatex. What we did is over the recent 18 months, first, we increased the FX fee from 0.1% to 0.25% at DEGIRO with no changes at flatex. In December '22, we increased at DEGIRO the handling fee from EUR 0.50 to EUR 1 with no changes at flatex. And in mid-May 2023, we changed the U.S. commission from EUR 0 to EUR 1 with no fee change at flatex, and what we see is actually a parallel development of our trading activity. So again, the drop in activity is not an idiosyncratic result, it's literally market-driven and defined by the environment in which we -- which all mature online brokers have to operate. Actually, on the loan side, it's a little bit different and actually positively surprising us. We did the same thing also for margin loan changes. The blue line is again DEGIRO, the orange line is the flatex. What we did with DEGIRO, as you know, already last year, so at the beginning of this year and on the 1st of Jan, we increased the margin loan rates for DEGIRO clients, and we did so on the 1st of July, again, and we indexed, as well the usage of margin loans at flatex and DEGIRO. And what we see is even before -- or let me put it the other way around that finally, since we increased the margin rates for DEGIRO, the volumes have picked up. And also here again, the volumes with DEGIRO have increased or back literally to a level, where we were in 2022. And with flatex, we are still 10 percentage points down in terms of volume. Long probably short, I want to show you here is that there is no significant -- statistical significant elasticity on the volumes of DEGIRO loan amount and given that we have changed the rate at DEGIRO and did not change the rate at flatex. Coming to the OpEx side. I think it's important to highlight the key OpEx driver, which is obviously marketing expenses. We have promised that we will reduce the marketing expenses throughout the year. Actually, there is a significant reduction in marketing from Q1 to Q2 by roughly EUR 9 million. So in Q1, we were at EUR 17.2 million. In Q2, we were at EUR 8.3 million. For the residual year -- for the residual 6 months, we budget roughly EUR 11 million, which totals then roughly EUR 36 million. That would equal to a drop in marketing spend compared to last year by EUR 30 million or 25%. We expect a further significant decrease in 2024. Since in 2023, we still have the sponsoring of Sevilla, which went perfectly fine with winning the European League, obviously, but also had an impact on the one-off costs because we had as usual in these contracts, a bonus clause for winning the European League, which kick in, to the surprise of many, many people, which will drop out next year. So we expect also for next year even lower marketing cost than EUR 36 million, which we expect for this year. I mentioned it, the sponsorship of Sevilla FC came to an end at a superbly high note, winning the European League, a great success, especially also not from a sportive perspective, but also from a brand awareness perspective for our brand DEGIRO and for the flatexDEGIRO Group. We have here shown a little bit the amount of DEGIRO web searches during the final game on normal Wednesday versus the final Wednesday, which shows a significant pickup. All in all, a very, very successful sponsoring agreement, sponsoring engagement that comes to an end. Thanks to Sevilla FC to the whole team, to the whole people at Sevilla for having as a sponsor and for the great hospitality that we enjoyed and the great support on all media channels whether social media, TV and finally, obviously, winning the European League. Last but not least, on some numbers with respect to OpEx, I think it's important to highlight that we had some non-recurring effects, onetime effects on our OpEx side. We mentioned it in the first quarter. We paid to all our employees, EUR 3.3 million of a onetime tax incentivized inflation compensation. This was a tax incentive provided by the German government, where we were able to pay, so to speak, a net amount, as a gross amount to our clients, so without any taxes and without any social payments that we have to take, and we made use of this. And this was capped to, if I'm not mistaken, EUR 3,000 per employee, and we have made -- made use of this scheme. On top, as I just mentioned, marketing, we had an additional expense due to the European League winning of Sevilla FC in the second quarter that is absolutely a non0recurring item. Last but not least, we mentioned the EUR 1.1 million fine in Q1 by BaFin. And another legal disputes in which we are currently is with the -- with the legal Italian competition authority, where we had a EUR 4 million fine prepayment in Italy. That is based on a competitor's claim. And this claim did not come from a client, did not come from any regulatory body. It came literally from a competitor in Italy and not only against us, but again, also some other competitors in the market. We are following this -- obviously, this legal dispute with very, very high diligence and are supported, obviously, by a worldwide known legal firm. We have appealed this decision. As both we, but also our legal support is very high probability to win the appeal and also an information that was interesting to find out that only 14% of the, so to speak, spoken penalties and fined by the competition authority only 14%, 14% came into effect after decisions were appealed in front of the court. So we absolutely see here no base for this fine. All our arguments were not heard, and this is something that we will now bring in front of the or actually, we did already bring it in front of the court in Italy to be decided at a -- on a court level. So despite all these one-off effects, the adjusted EBITDA provided in the second quarter was quite positive with EUR 34 million, which is a quarter-on-quarter growth of [ 13% ] year-on-year growth, quarter-by-quarter of 24%. But despite much, much lower transactions, which I think proves the cost discipline that we have started this year, and that will obviously become much more visible in the coming next 2 quarters. The accounted EBITDA is also with EUR 29 million in Q2, relatively stable. So what you see is actually that we build EUR 5 million of -- so we released EUR 5 million of SARs provisions. And that -- sorry, we built EUR 5 million of SARs provisions between -- or in during Q2, which reduces the adjusted EBITDA from EUR 34 million to EUR 29 million. Coming a little bit to the full year perspective. Frank mentioned it, we are absolutely confirming our guidance in the end, which was EUR 380 million of revenues, 40% of EBITDA margin, 30% of EBT margin. The assumptions have been mostly stable. The customer account growth of 1.5x to 2x ahead of peers is continuing. The number of settled transactions has been adjusted in the assumption base. We started the year with the assumption of 65 million. The assumption for this year is now 58 million transactions. The lower assumption in number of [ plays ] is balanced out by the higher commission per transaction of EUR 4.15 for the full year. The average interest rate on margin loan is adjusted to 5% as an assumption. The average interest rate on the remaining cash under custody has been adjusted to 3.5%. The costs will most likely benefit from the mix, given the fact that we do less equity trade than expected, the settlement cost will also come down. So we will [indiscernible] see an effect on the cost on the one hand side. And on the other hand side, obviously, since the interest income has a higher share in total revenues, we will see also a positive effect on the relative cost. The OpEx were explained and marketing has been explained. So if we look into both P&L, the actual P&L for H1 and the implied P&L for H2, we see roughly the same commission income for the second half, 10%, 10%, 12% increase in interest income. The other income will be most probably stable, a little bit coming down given also contracts that we have discontinued. We definitely expect to reduce further the OpEx, as we mentioned and are aiming for a high [ 40%s ] EBITDA margin -- adjusted EBITDA margin and the high [ 30%s ], EBT, adjusted EBT margin for the second half. And if you combine these 2 P&Ls for the full year, you will see that this is more or less what we have guided for the full year. That's it. With respect to the preliminary, with respect to facts and figures, thanks. Thank you. Warm -- thank you to our colleagues from the whole Board for this successful first half year despite the environment that we are operating in. Before opening up the Q&A session, allow me to take 2, 3 moments to describe and tell you a couple of things about my decision that we announced this morning. As you all have read, I prepared to bid farewell to this exceptional organization that has been my professional home since 2015, and it was obviously also for me, literally a home, where I spent more time with than actually with my own family over the recent 8 years, 9 years. From its humble beginnings as a German small online broker, we have witnessed the remarkable transformation of this company into the European market leader, and it has been for me personally an incredible journey filled with countless challenges, we had [ big dreams ]. We had a lot of lessons learned that shaped me as a person and actually as a leader. And I'm instilled with a profound sense of gratitude and pride when I reflect upon this time. And I have to admit it has been a privilege to serve, to develop and to lead that company. And I'm very thankful and grateful for the trust and that the Supervisory Board that Frank in very, very early days that I was given [Technical Difficulty] in this game very early in 2015 and leaving a position that I've cherished for so long first as a CFO; then, as a Digital CEO, then as a Deputy CEO and COO of the Group is undoubtedly bittersweet. And rest assured, it was a very difficult decision for me, a decision that I took the diligence and the necessary time for to decide upon. And I know that I'm surprising a lot and maybe even disappoint some people with this decision, but I'm convinced that the change is an integral aspect of growth and something that I've always preached to colleagues, to employees. [indiscernible] I'm served with a deep sense of excitement and optimism, what my new professional chapter will look like after my remaining time with flatexDEGIRO. And the break -- a personal break, where I will take care of my private matters of my family. It was also personally a tough year with the losses that we had in our family over the last 12 months, leaving father-in-law and losing my own father. So taking the time to reflect on a couple of things and to fill up [indiscernible] to literally hopefully follow the next professional destiny. Now, I want to express my deepest appreciation to all of you, colleagues, employees, the Supervisory Board, investors, clients, analysts, stakeholders, regulators, business partners, family and friends. Your support during this [indiscernible] years was and has been always a driving force behind our accomplishments, but also personally my accomplishments. And we've developed great relationships delivered exceptional results and created I'm very sure a very lasting impact in the online brokerage industry. We have developed together the European market leader. And although, I will continue to support specific internal topics and projects, this is my last IR call for flatexDEGIRO. I think it's very, very important. This is also something I absolutely believe in to have a [ very low ] and consequent transition, especially of the capital market communication. Guess, I am happy to hand over the responsibility for Investor Relations to our CFO, Benon Janos. And I'm very sure that Benon, Achim and obviously, Frank, will continue to answer all your questions at least as good as Achim and I try to do. The last personal note, Frank, I'm immensely grateful for the mentorship, guidance and knowledge that you have generously shared with me. Your support definitely has shaping me into a better person and leader. And I know that it's a disappointing step, but I've absolutely no doubt that this company will continue to drive and deliver. We have an excellent management board that is now back to 3 people that will hopefully increase at the end of the year after the approval by the regulator to 4 people again by having Christiane, as the CHRO in the Group. And I have no doubt that this company will continue to thrive and to deliver. I'm absolutely excited to follow the development, as a shareholder from the sideline, so to speak. Yes. That's it. Thank you very much, everyone, for the great journey we had, and we've shared over so many years. And again, a personal thank you also to all the long lasting and early time investors for the last 8 years, we have spent so many times discussions and points together, and thank you also for the support that made flatexDEGIRO what it is today. Goodbye.

Thank you, Muh very much. Before we open up for Q&A, let me make a short comment. Obviously, I regret a lot that you're going to leave us was, was a successful journey we had together. Unfortunately, we share the same experience. You lost her father this year, I lost my father this year. Without going too much into private details, I have a great deal of understanding on the private side that you will take care of more of your family and take [ as a vertical ] to digest those things and that I respect. And I hope everyone else will expect that -- should respect that. With respect to the company, we've run this business in the Group management board level, long, long time and many years alone, the 2 of us. Now we are 4. I'm rest assured that Benon, [ Stephan ] and I will continue to run it successfully. And as you said, subject to BaFin's approval, which is expected by end of the year, Christiane will join with respect and the effect of 1st of January. So then we are back to 4%. I'm also happy that you continue as a shareholder and will support us. And I also appreciated your comment that you will not continue to work for any competitor and having worked with the market leader and grow this business to European market leadership, I appreciate that a lot. And I wish you for your personal belongings and for your personal life, all the luck you've deserved and whatever you expect. And I trust when you go back into the professional environment, you will continue to be very successful. And I wish you all the best for that as well.

Thank you very much, Frank.

So thank you for all the great years. And now we open up for questions.

[Operator Instructions] Our first question today comes from Ian White from Autonomous Research.

Thanks for taking the call and for taking my questions. Just to start, I'd like to say a quick congratulations to Muh on a very successful tenure and thanks for your help during my time at [indiscernible] flatex. Just a few questions then, please, if I can. First up on this issue regarding the Italian Competition Authority. Can you just say a bit more about that, please? What exactly is it that you are alleged to have done that's [ countermand ] guidelines or whatever the Competition Authority has in place. Why have you chosen to prepay this fine if you kind of think ultimately you'll be successful in your challenge against it? And is EUR 4 million the upper bound of potential liability here? Or could that go further? Just wondering, if you provide a bit more detail around that issue, please? Secondly, just on this question around the retail investment strategy, I appreciate that you don't -- basically don't [ add ] PFOF in your business. But I understand that you do receive sort of significant payments from the ETP providers and the commission's proposal is that third-party payments will be banned, as far as I understand it. So can you say a little bit please about sort of how you see the risks there to your revenue stream from the ETP providers. Is that at risk basically if the commission's proposals continue, as they were drafted earlier this year? And just finally, I wondered, if you could share with us what was the total CapEx in 1H, '23, please?

Yes. Let me start in general with Italy. It's the antitrust authority, which has imposed a final fine of EUR 4 million. That's the final sum can't be higher. Second, it's Italian law that you have to pay the fine in advance regardless of whether justified or not. Obviously, the Italian has a [indiscernible] business model invented here because they always impose fines, they receive the money. And then only if the parties, who are involved go to court and fight that decision, they have to give the money back. And we have reviewed all the public available information on that and there were over 20 cases, where the result is that no more than 14% of the total sum imposed had to be paid and were legally justified. So obviously, we have appealed in court, and we trust that we will get either the total or at least a great sum of that fine back because we believe, in general, that we behaved and complied with what market standards are in Italy, but I don't want to [ prejudice ] the legal court here, and we leave it to the judges finally to decide over that. Yes, this is, in general, a comment and maybe Muh, you want to mention a bit more about the details if necessary. With respect to the PFOF situation, I think, technically, you have to distinguish between commissions paid by investment banks to brokers and other parties with respect to ETP products. To my understanding, that is not part of PFOF, that's a different ball game. Yes. And maybe Muh, you want to comment on the other aspects or give a bit more detailed information, if necessary.

Yes. Ian, I think first, thank you for your warm words and to cover up. So the [ telling ] point was absolutely, as Frank said. So it is what it is. You have to prepay fine. It's different in, I think, mostly and not even all European jurisdictions, you pay when you have the final decision. In Italy, you have to prepay fines and then you have -- you can still appeal that. With respect also to the ETP topic, I think we have started [indiscernible] we've started already 2 years ago to change the structure also of the ETP settlement into a more OTC situation between us and the product partners. And on top of that, there is 1, 2 strategies that we have in our drawer, so to speak, what to do if for whatever reason there might be an ETP ban, which does not -- which is as of today, not given. But in the Netherlands, for example, you have seen some players that then use white label solutions to provide ETPs to the market, so we could do as well, if necessary. With respect to the -- your question, I think, was the last one with respect to CapEx, allow me to say that we will provide all the balance sheet details and cash flow details and P&L details in the report that is going to be published mid of August.

Maybe can I just come back on the first one, just briefly, -- sorry if I've missed this somewhere, but what is the -- what's the actual accusation against the company, please? What is the alleged wrongdoing for which this sort of preliminary fine has been imposed. Can you just provide a bit of detail there, please?

Yes, absolutely. Absolutely. Sorry, Ian. So it is actually the vast majority of the fine is with respect to an absurd topic from our perspective, but also from the industry perspective, we discussed it with different regulatory bodies, Ian, and all of them cannot understand it either. So the topic is the [ Auto FX ]. So when clients have viewers on their account, and they buy an Apple share at NASDAQ, we have to convert the money, obviously. We cannot settle against more instantly the prime broker in Europe. We need dollars to buy Apple. And the default setting, which is actually the default setting globally is to do it automatically. The client, however, has also the option to open with us the U.S. dollar account, but then he has to open up a second account, which is a second reference cash account, where he can then pass U.S. dollars. And they say that we are providing, so to speak, a disadvantage to clients by having the [ Auto FX ] standard product. Now we have obviously analyzed the whole European market, and there is literally half of the market does not even offer U.S. dollar account, so clients are forced into automatic FX conversion. And those that offer FX accounts, all of them have as a standard default to have automatic FX conversion. Now in Italy, as we said, there is a competitor that opened up all this discussion with us and not only with us, but with also 1, 2 other players, and the funny thing is that this competitor himself has as a default, the Auto FX for its clients, so -- which is an absurd discussion, and this is the [indiscernible] this explains the vast majority of the fine.

Next question, please.

And we move on to Christoph Greulich from Berenberg.

Yes. 3 from my side, please. Firstly, on the U.K. business. So it seems like you have stopped onboarding new customers there a few months ago. Yes, just maybe if you could tell us what is the reason for that? And then given that the U.K. has been classified as one of your growth markets, yes, if you could quantify roughly the impact that had on the Group's customer growth in Q2? Then secondly, just on the future transition on the management team, are you planning to find a successor for the COO role? Or is the plan to distribute most responsibilities among the existing members of the management team? And then, just on the PFOF evolution, the recent news flow, what is your expectations for how this might shape or change the competitive landscape?

Yes. Let me briefly start with U.K. and then maybe Muh can go a bit more in detail if necessary. We have temporarily stopped onboarding U.K. clients because we are in discussion with the U.K. regulator about the new license situation, and I'm convinced that we will come back soon on that and change that, as I said, is temporary. And I think the impact was not that big to my understanding, but maybe Muh want to comment on a little bit more in detail. With respect to the position of COO, as I mentioned earlier in my personal note, Muh and I have run the Group management board, just the 2 of us for almost 8 years, and it was very successful. Now we have 4 members here. Company has grown. Temporarily, we will be 3 soon. We will be 4. So we will continue to take over and divide the responsibilities Muh's had among ourselves here, and we trust that we do that well. Anything else, we will comment on as soon as Supervisory Board has reached a different view. If not, we will continue like that, which, for the time being, is a situation. Muh is available until the end of the year anyway. And latest with effect of January 1st, we will have Christiane Strubel joining. And then we, again, [ 4 head ], I think that should be enough and will work well. But I'm happy to hand over to Muh.

Yes. Let me -- Hi, Chris, let me just on the U.K. business, I think [ that is ] to give also here the reasoning. So it's literally a temporary point. As you know, we have stopped actually marketing the U.K. already 2 years ago. since actually the temporary regime. And if you look into the number of clients, I mean, last year, we did 7,000 gross new clients in the U.K. So it was not a big effect. We still consider it as a strong growth market. But we are waiting for the final licensing, which will happen, hopefully, over the next weeks, latest in Q3, and then we will open up again the onboarding. The reason is mainly that we want to avoid the transitionary to this new entity that we have implemented during onboarding phase. So this is why we also stopped it. But also in the discussions with the regulators, we came to a point that it makes sense to stop it and make the transition. And as soon as we have the new licensing, we will be able to open up then the onboarding again. To your last question, Frank, the PFOF discussion advantages -- potential advantages...

Yes. I mean, as I said, we believe in a single market with fair rules for everyone. So I hope this will be more transparent and fair in the future, as we do not depend on PFOF revenues. It has no negative impact to us, yes, other than with neo-brokers, who have based their business model on PFOF. And obviously, this will have an impact on the industry, where I strongly believe that we're going to benefit from it. And as you always know, we have taken time to strengthen our organization, to do our homework. We work hard on the learnings from the audit. So I think we will head into a bright future, and we will look into organic and unorganic growth. And obviously, the competitors, some of them, especially the neo-brokers have to reinvent their business model when they cannot receive any more payments from the stock exchanges. And in Germany, there is the Federal court rule, as you're all aware of, which does not allow market participants to increase fees via general terms and conditions with 2 months notice, and then it's going to implement it thereafter as it used to be 20 years, 30 years ago, which was the common practice that has no longer -- is no longer valid. You need consent in writing from the clients before you can change that. And obviously, clients do not like that if they were solicited with the aspect that they don't have to pay anything. So that's going to be a challenge. And maybe that's also the reason why the commission is giving 2 years transition period to give enough time to talk to the clients. We don't have to do that. So especially in Germany, we always, for 20 years, kept our [ EUR 5.90 ] that has not changed and will not changed with respect to equity trades and our ETF savings plans products, I think, amount to [ 4,500 ]. We don't have a reason to change anything. So our clients will not be affected by this. But I think it's going to have an impact on the industry.

And our next question comes from Andrew Lowe of Citi.

Just a few from me. I thought Page 18 and 19 were interesting showing increased charges at DEGIRO. I'm interested in any thoughts that you may have on future pricing at flatex, where you've been more stable with your fee structures? And then secondly, just in terms of the fact that you've got a number of inactive customers on your platform. I'm just curious what the regulatory challenges of this includes, say, for example, how do you ensure that your KYC is up to date. And the reason we're asking is that one of your Nordic peers recently said that they have a regulatory obligation to keep KYC up to date, which is why they're closing [ active ] accounts. So just curious on your thoughts there? And then finally, just a clarification. Did I understand correctly that you said that your June commissions per trade was in line with your expectations in the second half of the year with which your guidance implies EUR 4.25?

So I had some difficulties due to reception to really understand all the questions. The only thing I really understood was why commission decreased per trade. And Muh is going to happy to comment on that. Muh, why don't you take over, please?

Yes. I had my ear very close to the phone. So I'll try to get it. So the first, I think point was Slide 18, 19 DEGIRO and flatex, if I -- if I'm not mistaken, your question was like whether there are price changes with flatex or strategies around flatex price changes. Am I right?

Hi, sorry. I've changed away from the headset. Hopefully, you can hear me better now. Yes, that's right.