Grenke AG (0R97.IL) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I'm Anke Linnartz, Head of Investor Relations at GRENKE and it is my pleasure to welcome you today to our Capital Markets Update. Thank you very much indeed for taking the time to come here and join us in Frankfurt. At the same time, I would like to say a big welcome to those participants who are following us online. Today marks the first Capital Markets update of GRENKE, and this is because we are looking ahead. We are returning to our strength. In the next few hours, you will get a granular view on how our company and our ambition will work. We'll describe our midterm outlook in detail, and we'll elaborate on how we will deliver on our goals. We will kick off the CMU with a presentation by our CEO, Michael Bucker; and our CFO, Dr. Sebastian Hirsch. After that, at around noon Frankfurt time, we will take a short break. After that, you will have the opportunity to ask questions to both of them, either in person or remotely via the chat function. I would also like to encourage you to check out our CMU website where you have access to the agenda, today's presentation and all other materials. I would also like you to take notice of the disclaimer regarding forward-looking statements on Page 2 of the presentation. That said, without further ado, I would like to hand over to Mr. Bucker. Mr. Bucker, the floor is yours.

Yes, ladies and gentlemen, a warm welcome also from my side, especially to all of you that joined us here in Frankfurt. Today is a very special day for all of us, for GRENKE and as well for my colleague, Sebastian Hirsch and me because this is our first capital markets update. So again, thank you for joining us. At the annual press conference, I announced that GRENKE would double both sales and earnings in 2024. And it is precisely this path back to growth and continued profitability that we will explain to you right now. And I will start with a brief review of our starting position. Building on this, I would like to explain the key pillars of our Fast. Forward. growth strategy for the coming years. And finally, we'll briefly discuss what you can expect from us in short term. But first, let's take a look into what GRENKE stands for. [Presentation]

Yes, the video gave you a first impression that is underlined by a look on GRENKE's history of more than 2 decades of being a listed company. GRENKE is a successful company with a long tradition, with strong roots and with its origin as a family-run company. And after the IPO in the millennium year 2000, GRENKE continued its growth curve. And I'm going so far back in history because some of you may not know GRENKE. Others, however, have been with us since 2000 and remember the most important stages of our prosperous development. For example, the acquisition of our own bank, now GRENKE Bank in 2009. Or in 2012, the establishment of our first branch outside Europe in Brazil or even our entry into the U.S. market just 2 years ago. Like many other companies, the corona pandemic put a strain on GRENKE. Added to this was a report of a short seller, and 2020 and '21 were therefore extremely challenging years for us, perhaps the most difficult years since the foundation in 1978. But ladies and gentlemen, we are convinced that we have passed the bottom. Corona will certainly keep us busy for a long time to come, but now kept at a manageable level. The short attack and correlating special audits are behind us, and GRENKE is back to normality. And normality at GRENKE means one thing above all, profitable growth. And based on what we know today, no serious negative effects on GRENKE's business development are foreseeable, even as a result of Russia's war of aggression against Ukraine. And according to estimates, our business will grow sustainably. And you can see what growth at GRENKE means in numbers, over 10% more new business volume every day since every year -- not day, every year since our IPO in 2000, almost 11% more new contracts per year. Profit growth has been close to 9% year after year despite the adverse developments of the last few years. Currently, about 1,800 people in 33 countries work for GRENKE. And last but not least, our most important asset include our global network of around 30,000 specialist resellers. So what unique strength have made GRENKE's success story possible? Above all, we are there when companies need financial freedom. And we are there when entrepreneurs want or need to preserve their liquidity, especially in difficult economic times. Liquidity is critical and key. And we provide liquidity to SMEs around the globe and several aspects make our offer unique. As global market leader in small ticket leasing segment, we are a strong and attractive partner. Our industry, product and partner expertise is unsurpassed. Straightforward and rapid financing of assets for the self-employed freelancers and small and medium-sized enterprises, that is the customer experience with which we inspire. It only takes a few minutes for application to release of funds. Starting from our home market, Germany, our ambitions were strongly directed beyond national borders from day 1. Our footprint in Europe is now extensive. And this is something that none of our competitors who tend to be located in single countries can achieve. However, let me emphasize once again that we have no exposure either to the Ukraine or to Russia. And we will remain strong here. And we will become stronger in markets in which we have only recently established a presence, which promised great potential like Canada, Australia and above all, in the U.S. In a competitive environment, our position is unique. No one can identify and address new topics as good as we do across the markets. We have a reseller network with 30,000 qualified partners worldwide. And at the same time, we are independent of banks or other financial institutions as well as manufacturers. And we finance almost everything our customers need for their daily business from laptops to telephone systems from medical equipment to e-bikes, here is one, even objects that seem unusual at first glance, such as a forklift truck or a new dentist chair. Our business model is based on the philosophy of an open competitive architecture. And this means that we do not expect any exclusivity from our sales partners because we are very competitive and we are convincing with our performance. Then we invented small ticket leasing. And we remain true to this very successful business. It's what we do best. By our partner network and our direct sales, we serve more than 700,000 customers worldwide. And in doing so, we have convincing advantages, having local competence and the field for trends and new markets, focus on added value on our customers and great resilience even in times of crisis. We have more than impressively demonstrated successful performance in the last 2 years. Furthermore, a stable refinancing foundation. Yes, and last but not least, being a pioneer in designing digital processes. The strong foundation of our object portfolio is IT. Small ticket IT leasing is in our DNA. IT objects are making up almost 70% of all leased assets in 2020 -- 2021. However, we can proudly say our leasing solutions can finance almost everything our customers need for their daily business. And you can see a significant diversification of our portfolio in the past years. Besides machinery and equipment, medical technologies and green -- and first green assets like e-bikes were added to our portfolio. Thus, for the future development of our portfolio, megatrends require substantial investments of SME to transform their businesses. And that we will expect our asset portfolio to change. Our customer portfolio is broad and strong. We address a wide range of industries, starting with commercial dealers, manufacturers and research over to engineering and services. Our customer sectors represents the whole variety of SME businesses in our markets. We finance the backbone of these economies. Yes, ladies and gentlemen, what is our market? We are financing small tickets. And this small ticket leasing was an invention of our founder, Wolfgang Grenke, 40 years ago. Small means that a single contract covers the volume of up to EUR 25,000. On average, at GRENKE, a single contract covers about EUR 8,000. Of course, this is a niche market. But based on our experience over decades, our niche accounts for about 5% of the total leasing market. In total, therefore, our addressable market internationally has a volume of many billions of euros. After America, Europe, GRENKE's home market is in the second place and Australia in fourth. In other words, these are the largest leasing markets in the world for SMEs, small ticket leasing as well. And GRENKE has already made its entry there. And in this niche, we have only a few competitors. There is not a single one with a comparable global offer for SME, and this makes us the global #1 in small ticket leasing. And for the global leasing market as a whole, a volume of around EUR 2.1 trillion was recently forecast for 2026. Based on '21, this corresponds to an annual growth averaging almost 12%. Considering the effects of the war against Ukraine, the growth in big ticket like perhaps aircraft leasing may be judged under other aspects. But this is not our market. But the leasing market is not only growing, it's also undergoing a dynamic process of change. We are currently experiencing a phase of disruption and uncertainty everywhere. However, liquidity is particularly important for small companies, especially in difficult times. It is not at least this growing need for a solution to secure liquidity that is driving growth in leasing. Traditional banking services are becoming less important, especially for small- and medium-sized enterprises. Flexibility and the integration of services is becoming more essential for companies to make quick and efficient use of their asset investments and leasing fills this gap in demand. There's a clear trend towards usage and service-oriented financial models. In other words, service and use instead of ownership. The growth drivers and leasing from which GRENKE benefits also include technical, social and political megatrends. Potential financial markets for GRENKE are emerging from these trends and most importantly, climate change requires a comprehensive transformation. The investments required in this century are reaching an immeasurable dimensions. They will have to be financed and leasing make a significant and probably growing contribution to this. Aging societies and medical progress require increasing investments in technology and infrastructure. Automation of processes is further accelerating by artificial intelligence and robotic technologies. From e-bikes to charging stations, we are only at the beginning of a high-growth market. At the beginning of 2021, there were around 7.1 million electric bikes in households, 20% more than just 1 year earlier. The Internet of Things enables further possibilities for smart asset usage and pay per use financing products. And advancing digitization also requires small- and medium-sized enterprises to adopt their business models and technical equipment. And we are in the middle of this because all of this has to be financed in a way that preserves liquidity as far as possible. Yes, ladies and gentlemen, you have seen GRENKE's strong position from which we are starting into the next dimension of growth. Now I would like to explain to you the growth strategy we have defined for the coming years, how we intend to achieve our ambitious goals. In detail, we have set ambition targets -- ambitious targets for 2024, and you can see them on the right-hand side. First of all, there is EUR 3.4 billion in leasing new business. We're also moving into new dimensions in terms of planned profit after taxes with an announced EUR 140 million. In the left-hand column, you can see the 3 strategic approaches to achieve these goals. First, expanding and diversifying our global presence. What does that mean? It means that the more than 30 countries in which we are already active, we will take a differentiated approach depending on the situation. Our second strategic approach to achieving our growth targets is to expand our asset portfolios. As we have done in the past, we will continue to grow in line with the needs and wishes of our customers. And we are subject to nearly no restrictions in terms of objects we can lease. And at the same time, we will increase our efforts to proactively develop new product fields. And thirdly and finally, strict cost discipline, made possible, above all, by the consistent use of digital opportunities is one of the core tasks, one of our most important ongoing task. Ladies and gentlemen, as announced, I will outline the content elements that will lead us to the goals I have just described. My colleague, Sebastian Hirsch will explain our key financial figures afterwards. Since the topic of ESG, I will play a major -- will play a major role both in terms of the, yes, new market potential for us and for our own footprint, and would then like to provide you with some more details here as well. Let's go on with the overview of our global growth strategy. We have promised to double our new business in leasing. And this is what we aim to deliver by 2024. This puts us back on track against the best year of our history before we had experienced the corona pandemic and the short seller attack. Let me now zoom in on our program and how we will deliver these results. But first, I need some water. Yes, as I indicated in the beginning, the addressable SME small ticket leasing market for GRENKE is approximately 5% of the total leasing market. And this chart of the estimated number of SME in 2024 clearly shows the regional concentration of our core target group. Now when it is easy to see how great our opportunities are in the European and North American market. In our established markets, especially in Europe, we will continue to grow strongly with the market and expand into our new segments in these markets. And we will continue to focus our structures and processes on efficiency and customer experience. There, the focus is clearly on profitable growth. In countries where we have only recently become active, for example, U.S., Australia, we will make targeted investments. Here, our focus is primarily on accelerating the development of the markets and rapidly increasing market share. And we have, furthermore, identified another cluster. Markets where we earn good money, but where we already have the position that grants a sustainable profitability. Brazil would be a good example. But Sebastian, why don't you continue to detail the country analysis.

Yes. Thank you, Michael, and also a warm welcome from my side. And we appreciate that you take the time to join us today, especially here in Frankfurt. Michael has just talked about our addressable markets of SMEs in the world. Let me show how well GRENKE is already positioned at the moment. Because GRENKE is so unique, it is not easy to precisely define the market for our niche, the small-scale investment segment. But we can approach a relative view and use public data as well as our experience. And the best public data available is the Global Leasing Report. This is based on the world's leasing market statistics. These data includes, of course, [ CAGRs ], private clients and big tickets. So when we start using overall data, of course, we will need to bear that in mind. Let me call this like a statistical error. But the good thing about this statistical error is it is persistent since decades. So whenever we draw conclusions from this data to our small ticket SME business, the error is comparable for each data set. For this reason, we can use the overall data for the global leasing market as a steady reference. So let me show you the world's top 20 countries in terms of leasing. The figures are based on 2020 statistics and are calculated on the new business volume in EUR 1 billion. As you can see, GRENKE is already present in 15 of the 20 largest leasing markets in the world. Today, we don't want to talk about the 5 countries in which we are not yet represented, especially as we rule out a future expansion into Russia and China. So let's focus on the enormous potential in the 15 markets where we are in today. America, Canada and Australia are our future core markets, as Michael mentioned. Those 3 markets are among the world's top 10 leasing markets. And for us, America, Canada and Australia having a huge potential as we started operations in the recent past, which I would like to explain you in more detail. So let's move to a more technical chart. First, I would like to explain the axis of these metrics. The vertical, the overall leasing volume in billion per market. It's based exactly on the data on our previous slide. And the horizontal, the GRENKE new leasing business, also 2020, in million euro. And you think that both axis have no linear scaling. It's algorithmic one, so we can show different market sizes in the same metrics. And the first part here is our home market, Germany, with a leasing new business of nearly EUR 480 million in 2020 by GRENKE on the horizontal. And the total leasing market was in the area of EUR 65 billion on the vertical in 2020. And so we should expect data showing up for the GRENKE countries over all the world in a scatter plot and distribution cloud. And it is a cloud with a more or less stable correlation between the total leasing market size and GRENKE's new business. Some smaller markets are missing because they don't appear in the global leasing statistic. And the bubble size is a reference to the global leasing market size by country. And the biggest one, our newest market, the U.S., show up next to the distribution cloud on the top left. Because we've started our U.S. business in Phoenix only 2 years ago, so it's more than fair to expect a move from the top left to the top right over the next few years. As Michael presented earlier, clustering data is quite helpful also in that chart. So we cluster our markets according to size. There, we arrive at 3 large blocks, our established core markets, our future core markets. And thirdly, our hidden stars. America is standing out the crowd with the greatest potential. Accordingly, our strategic priority last year. Our long-term focus is further Australia and Canada with the obvious potential to move forward on the right-hand side of our graph. Our takeaway is GRENKE, the next dimension, the best is yet to come. And right in the middle of that cloud, you can find Belgium. So why I'm talking about Belgium? Because Belgium is one of our hidden stars. The business started in 2006 and delivered with roughly EUR 50 million in new business in 2019, a good portion to our new business. Belgium was and is successful. Let's turn to the figures. The start in Belgium was typically, typically first 10 years for a new GRENKE country with the first branch. This is shown here with a step-by-step rising new business volume on the left hand. Over the time of 10 years, our dynamic grows despite macroeconomic impacts. In that period, for example, the financial crisis 2008, 2009. And on the right-hand side, we see the development of contribution margin 2 and cost with a clear opening pair of the [ axis ]. Belgium is like a role model. It has role model status. It serves a good benchmark for several new countries, especially within the first 5 to 10 years. Regardless of overall size of the leasing market, this is a driver for scalability and growth potential during a currently second stage. So this development of a start is representative for the past, for today and for the future. And Belgium is as well a comparable example for our start in America because a number of SMEs with a bit more than 600,000 is equal to Arizona. That said, the potential for GRENKE in America is clear because the U.S. market in terms of SMEs is the [ fifty foot ] of Arizona or the [ fifty foot ] of Belgium. But as always, because it's part of our DNA, we move forward gradually. There is potential for growth in each region in our core and established markets as well as in our smaller hidden well-performing markets. So to double our business of '21 within the next 3 years will be driven by our established markets. But at the same time, we are preparing the dimension after the next to be ready for further growth. That's why the regional distribution of our new business will not substantially change from year-to-year. We expect a healthy evolution to a more diverse portfolio country-wise. And the importance and the share of the U.S. will increase the future development in North America to a double-digit number. And this will only come true if we keep pushing the market, exploring investment trends and growing faster than the global leasing market. And not only do we have a unique position in terms of our global footprint, but also in the competitive environment in our ecosystem. As already mentioned, our reseller partner network with 30,000 qualified partners worldwide gives us a head start. We finance almost everything that our customers need for their daily business. Further, our business model is based on the philosophy of an open competitive architecture, as Michael mentioned. So we are able to cover in trends and having the right solutions for small investments for SMEs worldwide. With our initiatives, we will leverage our business based on partners and our customers with digitalization, awareness and presence to our reseller network, as well as solutions, convenience and experience for SMEs to solving customer value. And those leverages will widen the range of the addressable market for our leasing in each country. Our position is unique because we combine object know-how and competence of finance for our customers and partners. I'm handing the floor back to Michael, who will explain our growth strategy based on the differentiated market characteristics. Michael, please?

Yes, thank you. To sum up our differentiated market approach. First, we want to benefit from outstanding growth in our core markets. Second, we invest into new growth markets like the U.S. And third, we want to maintain our profitable position in those markets that display strong profit contribution, but have softer growth expectations. And across all markets, new megatrends will support our growth, for example, health and ecological enhancing assets. And also, our customers are expecting the next wave of GRENKE efficient digital process. And both is a must to support our growth, but also gives us a unique basis for development most of our peers cannot match. As you have seen, our core markets make up for approximately 75% of our new business. We will benefit significantly from the growth of the markets that, however, also demand new products and asset types as well as the next wave, digital solutions. And we will introduce our program Fast. Forward. digital that will develop these new convenient customer journeys, also, aid us to improve our efficiency in delivering our products. And continuously improve our product and innovate our object portfolio, a new hub and branch concept in the established core markets will target a concentration of competence and know-how. And Sebastian will show you the details on how these strategic initiatives will help our P&L in a minute. The GRENKE way of developing markets always implied leveraging our core skills into the development -- into developed core markets into the future ones. This is the approach that made us so successful and enabled the fast profitable growth. And we intend to continue to replicate the success and invest in our future core markets, namely in the U.S., Canada and Australia. And we will extend our reseller relationships in these markets. And as part of our GRENKE way, we will, of course, leverage the best of digital processes and customer experience in these markets as well. And we laid out already that our hidden markets are an important profit contributor to our bottom line. Hence, we will clearly want to maintain our position in these markets. And that said, we will also aim to further improve our cost to delivery. And we will improve customer experience by a careful concentration of support process. However, as you remember, we are dealing with local SME leasing customers, and we will keep our personal customer experience in the market. We see a big opportunity to be at the forefront of next-generation asset leasing, namely those businesses that foster ecological health, for instance, green and circular economy. Amongst these, we see big opportunities in clean tech, in e-mobility or a loading station, just to name a few. Additionally, we include new opportunities in social, health, medical assets. And GRENKE was the first, not only to develop SME small ticket leasing, but also provide for these services in an automated digital way. And therefore, we have launched our Fast. Forward. digital program that will touch all key processes that are customer-related and systematically improve customer experience, like an immediate decision-making or easy-touch booking. And clearly -- and this is corresponding benefit also for us. This will allow us to reduce cost to deliver and, accordingly, a big lever to achieve our profitability improvements. In total, our projected growth path towards '24 will be between 15% to 20% per annum. And again, very much in line with our best year before the pandemic and the short seller attack. But the sheer dominance of our current core markets, DACH, Western and Southern Europe, this growth rate we'll see in these regions as well. Conversely, in our future core markets in the Americas and Australia coming from a smaller base, we will scale much faster. Yes, ladies and gentlemen, as you see, GRENKE is perfectly located to reestablish our growth path. We are the market leader in a fast-growing, distinct market niche for SME small ticket leasing. And we have the capability and determination to expand into the very sizable opportunities outside of Europe, namely U.S., Canada and Australia. Plus, only we can develop skills and capabilities at scale in these new asset categories that likely are to foster growth in our core markets, leasing of assets that support the green revolution and medical treatment. Thus, supporting ecological and societal health. So this is why we state our growth and profitability targets to double our new business to EUR 3.4 billion in the next 2.5 years, keep our CM2 margin stable at 17%. Thus, then double our profit to around EUR 140 million. And all this was a solid equity ratio by 16%. Sebastian, over to you for value creation and financials.

Yes, thank you. So let's start with a very important chapter. It's about value creation and financials. Following what we've just heard on our Fast. Forward. growth strategy, it is my pleasure to walk you through our financial structure and planning. Within the next minutes, I want to share some insights into how we think about the business and its profitability. In doing so, we want to further contribute a high level of transparency and explanatory value. As Michael has pointed out, we have set ambitious goals for GRENKE. As we are emerging into a post-pandemic world, we will maintain our momentum and continue to support our customers and significantly grow our new business in leasing. In doing so, our strategic covers 3 quantitative and thus, financial dimensions: profitability, resilience and long-term value. So let me deep dive into each of these dimensions. First things first. So we start with profitability. I would like to share a brief video with you. In this video, we outlined the economics of our leasing business and the cornerstones how we are accounting for it. You will see, based on our predictable business model, visibility on our future profitability is very high. So here we go. [Presentation]

As you have seen, because of the periodic nature of lease payments, each lease contract has a lagged P&L impact. But each lease contract positively contributes our P&L during the entire time of a lease. So let me focus on what we've seen in the video and transform it into an indicative template for several new business portfolio. So we can see that on that slide, and we start on the left hand with the new business, new business 100, as a reference for a single contract or maybe a portfolio. And that new business will bring us 17% or, here, 17% contribution margin 2. It's in line with our expectation and with our long-term guidance to achieve a contribution margin 2 of 17%. And as shown in the video, set -- so CM2 is corresponding directly with our operating income. And here, the accumulated operating income is 18.1% -- by 18.1% because the CM2 is a net present value and the accumulated operating income is without any discounting. So the reference of 17% CM2 is 18.1% operating income. And shown on the other side of the graph is the P&L impact over 6 years. And 6 years are quite important for our portfolio because the average lease term is 48 months, means nearly 4 years. But we have also contracts running 5 or 6 years. So looking to our overall portfolio and new business portfolio, we have to take in account 6 years for an indicative projection. And in the table under the chart, you can find for each line of our operating income, the impact to our IFRS P&L. And you see it's quite different. The second year is the most important here from a value base because the leasing receivable is at peak. Why? The first year, you see a calculated quarter, quarter-quarter means [ 25 ], in average, for each quarter. So that's a new business portfolio for years building up. And that's why the interest income, the net interest income this year at peak. Same in the expected credit loss. Here, you see the peak as a negative impact on the P&L in the first year because of the expected credit loss calculation under IFRS. We have to take in account that expected credit loss. And the third line is the result of service business, quite stable with a number of running contracts, maybe you are aware of that, in our portfolio. And the last, the others, that are 2 components. At first, the new business results, we have the earnings from new business that's in the first period because of the industry direct costs. And the rest, year 2 to year 6 here is the impact on aftersales. And we see here also there is a lag impact in the P&L. At first, it becomes negative. At the end, the accumulated impact when we met our estimated residual value, the overall impact is zero. And in this, we would like to have a look to our existing portfolio. Maybe you are surprised by what you see, but that's exactly what we aim for. I would like to invite you to change perspective. And it's not a U turn, it's just 90 degrees. And it looks like a Christmas tree right from the Black Forest in front of our headquarters in Baden-Baden, healthy and well symmetrically shaped. What you see on the left-hand side is our existing leasing portfolio represented by the leasing receivables according to IFRS. From the bottom, with beginning in 2022 to the top at 2026. The dark colors close to the trunk of the tree represent a new business recently contracted. And the further we reach out to the branches, the tips of the branches, the older the contracts are. And the right hand is the maturity structure of our funding mix, divided up by the 3 pillars of funding. Here, we will continue our well-diversified strategy, which is a substantial competitive benefit. And besides equity, that 3 financial debt pillars are unsecured funding, retail customer deposits with GRENKE Bank as well as asset-based funding. And the relative importance of each of these pillars could change as we continue to take advantage of temporary pricing differentials between individual pillars to optimize our overall funding costs. Our maturity profile for the next years is well balanced, especially following our recent issuance of a EUR 150 million bond with maturity in '24. And with this issuance, we have proven that investors remain fully engaged in our bonds as we had more than 70 investors in the order book. So the Christmas tree is a result of a matching maturity for the funding, essentially based on the assets, our leasing receivables. And our currently contracted leasing portfolio will deliver EUR 600 million interest income. And building on our matching maturities funding strategy instead of maturity transformation resulting cumulative interest expense amounts to EUR 150 million. And that's resulting in EUR 450 million outstanding net interest income that our current portfolio will deliver until '26, all locked in already today. And this interest income is the main component of our embedded value, which amounts to EUR 1.6 billion per end of 2021, EUR 34.4 per share based only on the existing portfolio. And of course, we want to go beyond that. And the light green bars represent a projection of our new business and its resulting leasing receivables in the future. We want to share with you our ambitions for growth in sales and new business volume. This is a layout you might be more familiar with since we used that before. Same numbers display horizontally, fast forward for the next 5 years. And the dark line divides the bars into existing portfolio below and the new business above that line. This is based exactly on our planning. The first light green boxes above the line represent what we already recorded, the new business volume of Q1 '22, fully in line with our planning. It's locked in. And despite the normal gradually decrease of the existing portfolio, the overall portfolio is building up. The basis of our future earnings which is initially expressed in the CM2. In a nutshell, there is a CM2 of EUR 2.7 billion for the new business of the next 5 years. I'm sure you will agree that this is already a strong number. Now let's look to the relevant KPIs we use to steer our business and which are basically part of our projection. You might remember the slide from our analyst conference for the full year's results 2021. We continue to focus on our contribution margins as the main driver of our future operating income. But let's start with the bars on the bottom of the slide, the average ticket size per leasing contract. We expect to gradually increase the average ticket size compared to 2021. We keep our focus on small tickets across regions, across all industries and SMEs and across investment trends. So we expect an average ticket size below EUR 10,000, which also implies that the half of our investments are EUR 5,000 was smaller, same as today. So the example we saw in the video structurally stands for a representative leasing contract independent from the object type. We also intend to incrementally increase the risk appetite for new business. Of course, it will increase the average expected credit loss that we calculate for each leasing contract. We are aiming for a level of about 5.5%, close to a pre-COVID level. That said, we have full confidence in our instruments to measure risk. The increase in expected credit loss will be mirrored in a corresponding increase in our CM1 margin, which we expect to extend above 12%. From a long-term perspective, the CM1 ratio should be more or less on a stable level as it was in the past. And all of this will directly impact the CM2 margin. Our midterm target continues to be approximately 17%, and taking into account the former figures because it's all connected and will drive our future earnings. To complete the P&L projection, we also need the cost perspective. So we are often talking about new business earnings and contribution margins. In addition to all these important KPIs, costs and operational leverage have always been important for us. Cost discipline, as we call it in Germany, is one driver of our success. We want to keep the leadership in managing small tickets efficiently and we'll manage our cost-income ratio down to a lower level, below 45% on the long run. That's what we aim for, but step by step. First, I would like to show you how to measure the operating leverage and the cost-income ratio for our operating business. To get more transparency regarding the cost-income ratio and the cost structure, we are focusing on the operating costs on the IFRS P&L. So there's no extraordinary impact of other costs, et cetera, included. For the income, we are taking the elements of the operating income in accordance to IFRS 2, but adjusted by the risk provisions and settlement of claims. So the cost-income ratio is free of any risk provisioning and free of other earnings. So let's focus on the figures. At first, the income as a denominator for the cost-income ratio. You see that in the upper ellipses. It's driven by our growth in volume and the CM2 development, as shown before, excluding the risk. You should keep that in mind. And to analyze the group cost-income ratio, 2 types of cost cluster are material: first, staff costs; and second, SG&A costs. And in that type of costs, it's crucial to distinguish local costs and costs on a group level. And local costs here are costs for serving customers and partners typically costs of sales or costs of a branch. And at group level, we are talking about costs for IT and supporting the local entities as well as overheads. At the end, we merged into operating cost-income ratio. And to be honest, this is not 100% matching with the cost-income ratio we published based on the full P&L so far. But we project our business and to prove the scalability of our business, that's the adequate view. In the past, we've managed to operate with a cost-income ratio that was mostly in the lower 40s percentage range. Last year due to ongoing investments, extraordinary expenses and a decreased portfolio, the ratio had increased temporarily. But we expect to return to a cost-income ratio of around 45% by '24. In the longer term, we believe a further reduction below that level is realistic. In line with our commitment to and our responsibility for our staff which we see as a major driver for our continued success, we expect a stable ratio here. Therefore, the bulk of our planned midterm efficiency increases will be attributable to the SG&A component of our expenses. And that view includes all sustainable investments in further digital transformation in sustainable internal control systems and the right sales infrastructure for driving growth, driving growth beyond '24, beyond Europe and well beyond EUR 3 billion new business. With that, let me move to illustrate 2 key sensitivities of our P&L. In recent months, inflation rates and interest rates have already risen sharply worldwide. So pressure on the central bank is high. And given the geopolitical situation, a turnaround is not inside at least not in the short term. What does this perspective mean for GRENKE? Rising interest rates as well as inflation will drive a positive change for our demand, as Michael just described. But let's move through the financial impacts. First, interest rate sensitivity. We see no really lasting impact of interest rate changes on our profitability since we do not engage in maturity transformation, but pursue funding strategy that matches the maturities. Our existing leasing portfolio is effectively and fully hedged against changes in rates. Therefore, our symmetric Christmas tree is like a guarantee. Further interest rate developments could only affect the portfolio to be contracted in the future, so our new business. And however, we anticipate that our leasing rates will fluctuate as rates in the markets evolve, allowing us to effectively pass on potential increase in funding costs to our leasing pricing. Secondly, I would like to cover inflation sensitivity. We expect that our business is largely resilient to any rise in inflation. While, obviously, some of our internal costs will increase in response to higher inflation. But the higher terminal value of leasing object will compensate such internal cost increase. And again, the total portfolio lifetime is relevant for us. So I would like to move to the second element, our resilience. Here, I will cover our cash flow and the way of calculating risk, taking risk and going for risk provisioning. Starting with the cash flow. The strong portfolio we've seen in the embedded value is also settling down in a strong cash flow. As you will see on this chart, we have been consistently cash generating in our ongoing business activities. This holds true even during the COVID-19 pandemic. And also going forward, we will manage our business conservatively and with the objective of continued positive and strong cash flow generation. Funding with matched maturities is at the core of this proceed. It adds to the resilience of our business model even in a challenging market environment. Going forward, we see also in funding the next dimension. Senior unsecured bonds and debt issuance will be a key pillar of our funding strategy. With the expected growth in our leasing portfolio, we are in a position to preparing a benchmark-sized bond of EUR 500 million in an upcoming transaction because our quarterly cash inflow is strong enough to cover a EUR 500 million maturity in the future. Our focus will continue to be on the 3 to 5 years tenure in line with our term match funding strategy. In terms of resilience, I would like to address our credit risk position, credit risk in line with our leasing receivables. Since decades, we have been collecting data and experience linked to payment behavior, bad debt collections and recoveries for nonperforming leasing receivables of SMEs worldwide. On the left-hand side of the chart, you can see that over the past years, the expenses for settlement of claims and risk provisions. And because of the pandemic in 2020, it increased stronger than the volume of leased assets. However, as actual losses turned out to be less than initially expected, the loss ratio has decreased substantially already last year. For this year, we confirm in our guidance that we expect a loss ratio between 1.4% and 1.7%, in line with levels we had seen prior to the pandemic. And we feel comfortable with this level given the exceptionally good payment behavior of our customers and our strong portfolio quality. And during this entire time period, our risk assessment has proven to be highly accurate, as you can see on the right side of the chart. Consistently, the deviation between actual and expected losses was lower than 0.5% of the net acquisition costs of all years since 2017. So the year 2020 might serve us like a good vintage wine. Let me underline that clear message. Our goal is not to meet a loss rate of 1.5% per year or an exact expected loss for the lifetime of 5.5%. We want to calculate the risk for each request and price risk premium in a balanced ratio between risk and contribution margin. And consequently, that means we would like to have a low deviation between our calculation at the beginning and the real expenses at the end of the lifetime for each portfolio. And for our calculations, the total term of a leasing contract or a portfolio is crucial, as shown in our video. The periodical view is a necessary accounting need, but not the best economic perspective to the portfolio. Our equity is a result of our past profitability, and at the same time, key for our resilience. Ultimately, it is expression of value, portfolio value of the past. With more than 19%, our IFRS equity ratio continues to remain comfortable above our target level of 16%. This gives us a range and space for future growth. So if we simply assume that 16% is enough to cover all the requirements we have to fulfill, then we are talking about roughly 3% free equity in minimum. And to stay conservative, let's take a low balance sheet volume of EUR 6 billion. So we are talking about -- 3% of EUR 6 billion, we are talking about an equity of EUR 180 million from a balance sheet perspective. And with that EUR 100 million equity, we can back more than EUR 1 billion leasing receivables staying for the 16% requirement. In other words, we can stretch our balance sheet by EUR 1 billion with our existing equity, ceteris paribus. And it will be supported additionally by future retained earnings. And that strong equity is driving also our embedded value and the economic view to the equity, the existing portfolio value. In closing the value dimension, let me move on to the development of our embedded value. Until 2018, it has been steadily increasing until it remained broadly stable as our portfolio growth stalled. We expect to resume our growth path in the coming years based on the fast-forward growth strategy. As already mentioned when we published our full year figures, our stock has been trading at a discount relative to the embedded value recently. On this chart, we are putting this relationship in a longer-term context. You can see that historically, the market had valued us at premium to embedded value, a testimony to our growth prospects. We are intent on earning back this level of market confidence and trust based on the growth strategy we have outlined to you today. And we want to deliver our figures quarter-by-quarter, consistently and steadily. Let me stress this again. It's our goal -- our clear goal to raise our embedded value stronger than our new business volume. With that, over again to Michael for the ESG chapter.

Yes. Let's turn now to the area of ESG. Leasing can be a catalyst for a sustainable business. This is because leasing offers an incentive to use equipment and machinery of the latest, and thus, most energy-efficient generation. No one knows the ecological footprint of leasing object as well as we do and can factor it into the entire business relationship. For more than 20 years, GRENKE has been forwarding used leasing objects for professional secondary recycling. And this is an essential building block for practice recycling management. And thanks to our object and industry expertise, coupled with our knowledge of the timing of replacement investments, we are able to provide tailored support for the transformation process in small- and medium-sized enterprises. And this is why we want to become the enabler for sustainable SME economy, and we do so in all 3 dimensions: climate and environment; social contribution; responsibility and trust. And we enable the transformation to an environmentally conscious future of offering sustainable financial services and facilitating green investment choices. And we promote equal opportunities and innovation for our customers, partners and employees alike, with that, transparent communication and create a sustainable corporate structure. As pointed out, we are reporting assets and volume development on a country and regional basis. And this stems from the firm belief that our markets are local in nature and that we are optimally positioned to develop these new opportunities for GRENKE. And we see ESG as an important lever of growth. First, we will expand our asset portfolio towards new medical and green economy objects, and moreover, we intend to design clear ESG criteria for our leasing contracts. And therefore, we have launched a cooperation with the KIT, Karlsruhe Institute of Technology and [ thereof, be a ] partner of remarketing of equipment, to explore new possibilities for an optimized leasing journey in the sense of ESG. And regarding our own footprint, GRENKE strives through responsible operations to define a clear pathway which meet regulatory obligations. And we set ourselves a clear path towards carbon neutrality by 2025. Current measures are already taking place to analyze and reduce our corporate footprint for Scope 1 and 2 emissions which, for our biggest country, Germany, is approximately 3,200 tonnes of carbon emissions which is, by the nature of our business, a smaller number. What are we doing especially in terms of social issues? As a financing partner for small- and medium-sized enterprises, we support a segment with limited access to financial services. And this is how we expand our customer base. By creating transparency about green investments and seeking fair cooperation, we strengthen and expand our partner portfolio. We are aware of the crucial importance of compliance for our customers and partners, and we aim to build and expand trust with our stakeholders through maximum transparent communication. And as you can see here, we take our responsibility seriously in all dimensions. With that, I hand over to Sebastian, who will introduce to you an innovative ESG project from GRENKE that we are very proud of, and it's called GSI.

Yes. I would like to guide you through our analytical approach to measure the ESG impact for each leasing contract with our new and unique GSI, GRENKE Sustainability Index. We felt inspired by the Nutri-Score for foods. We take our data and experience to measure the impact for ESG. And therefore, 3 levels are important: at first, the customers, the SME, for example, the industry or maybe individual ESG information; second, the object, the investment of the small/medium enterprise; and of course, the service we provide and the lessee choice. For example, a paperless contract is very important for that. And with that new GSI, we raise a treasurer and a company SMEs and the mandatory ESG transformation. Additionally, we will get important information about our portfolio across countries, sectors and object, which we will implement in our reporting. So we increase transparency for our SMEs, resellers as well as for you, our investors. It raises awareness for sustainability and merge each, environmental, social and governance aspects in a simple index. And we create a starting point for incentives and the decision-relevant information for small-scale investments. We are testing now a prototype and want to have it scientifically certified or validated, an innovation I'm really proud that sets us apart from many other market participants and will certainly support our ambitions for further profitability -- sorry, for further profitable and sustainable new business. So we've shown you a lot of figures and information today, none of which change our financial targets for 2022. As we continue to invest in our digital and compliance capabilities, our goal in 2022 is to generate a net profit of EUR 75 million to EUR 85 million and achieving a new Leasing business in the range between EUR 2 billion and EUR 2.2 billion. And this growth shall continue in the financial years to come. With these targets, we are on our way, well aware that we still have many challenges ahead, but from a strong starting point and based on a strong acceleration of new business in our leasing operations worldwide. The transparency we've shown today will give you flavor to substantiate our ambition. As we shared with you today, the global footprint of GRENKE is driven by many GRENKE subsidiaries outside Germany. So we are sure that the way for future growth and especially for long-term growth is a mix of our growth in our established core, future core and hidden star markets. And based on the assumptions that we will achieve this, we have set ourselves a historical milestone: to double 2021's level of net profit and new business by 2024. As I mentioned before, we want to deliver quarter-by-quarter consistently and steadily. Back to Michael for our concluding remarks.

Yes. Can we do it together or not? Yes. Ladies and gentlemen, before opening up for questions and discussions, I would like to summarize. Come, [ Sebastian. ] Yes, you, yourself, would have felt during our presentation, GRENKE is back. And walking through our halls in Baden-Baden, or in our offices in the different countries, you can definitely feel it. And the numbers show it as well. Our effort to define the growth agenda already pay off. We explained the high growth opportunities for our business and GRENKE as a company. Our business model will be resilient to the risk we all foresee at the horizon. We have a unique and distinctive position in the small ticket leasing business for SME customer. And our business portfolio holds high potential, and we will continue our growth path in our established markets according to megatrend developments. And we address the enormous mid- and long-term growth opportunities in the future core markets like U.S. And last but not least, we showed you how we will continue the value creation in our business model. So given all this, we are very confident GRENKE will, yet again, be a great stock to invest into. Thank you. Ms. Linnartz?

So thank you, Mr. Bucker, Mr. Hirsch, for your detailed explanations and the presentation. I'm sure we all have learned a lot. We will now take a short break. And for those of you with us in Frankfurt, you will find a buffet with snacks and drinks just outside this conference room. I ask you to be back at 12:15, when we meet again for the Q&A session. So thank you again, and see you at 12:15. [Break]

For our Q&A session, as mentioned already, we would like to provide the opportunity to ask questions not only to those of you present here on site, but also, of course, to our remote participants. We will start with present right here in the room. So please, just raise your hand if you have questions. We will then pass the microphone on to you. And would you be so kind as to wait until you have received the microphone so that the other participants, especially our online guests, can hear you. Could you please also state your name and affiliation. Concerning our online participants, please use our chat format. I will read your questions aloud here in the conference room then. Okay. The first question I see here in the room. Would you please be so kind to pass the microphone on?

It's Marius Fuhrberg from Warburg Research. Question. We spoke a lot about macro trends and how big your markets are that you're addressing. But could you give us a bit more insight into how especially you want to address your resellers and how exactly do you identify potential resellers you partner with? And how do you approach those? And also in this context, would it make more -- or would it make sense to -- especially in the beginning of an entry of a new market, would it make sense to rise a little bit the cost temporarily and grant the resellers a larger profit for intermediation of your services in order to grow the market stronger, especially in the first steps into the new market?

Thank you for your question. I would like to start with the second question. For us, and we've shown that on the example in Belgium, consistent and gradual development is quite important, on the one hand, to growing, to building up the volume; on the other hand, also to learning about the market, to collecting data and experience, to measuring our risk, to measuring our contribution margin, to measuring the expected residual value. So that's quite important, especially over the first 2 to 5 years to growing not that fast. Maybe then when there's a development, you are not able to see that before, then it's a big surprise. And that's the main reason why we're going forward step-by-step when we're entering a new country, and then as you're aware of, starting with the sell division. So that's important for us. So from the beginning with the strong growth or a huge volume, from our experience, that makes not really a sense. And to go out and address resellers, it's quite important for us. That's why we're always talking about our sales force, a huge network of branches, maybe in the future with hubs. But the salespeople are quite important to going out to the dealers and enabling the dealers to offering the clients leasing. Pay-per-use is important for each dealer and across objects. We saw in the past, I think 5 years ago, nobody talked about to lease a bike. And today, e-bike leasing in the commercial sector is quite common, and the same we see with other object types in the medical environment and so on. So our goal is to go out to the dealer. We have some good context to manufacturers as well, and while the manufacture channel, you will also meet some new dealers. So it's like a cycle, if you want so. And that we are approaching also for the future.

Yes. And your question is direct to the point. That's important at the moment, especially to the megatrends, to find the right dealers. Who is #1 at the moment for e-bikes? Who is #1 for medical health? Who is #1 for dentist chairs? What else? And the task of our branches worldwide is to find these dealers, the best dealers, the #1 dealers in the markets and to convince them to work with us. And so very important at the moment, especially in times where the things are changing and the transformation in the society is going on. Same with the electric and with the automotive topics and photovoltaic. And -- but we are on the way. So we are in the countries and the task of the branches and the sales is not so to go to the direct customers, to find the right dealers. That's the way we do business.

Okay. Thank you very much. We have another question.

Roland Pfänder with ODDO BHF Bank. I would be interested regarding your new product spectrum. Out of your planned growth until 2024, how much volume would you allocate to these new product spectrum issues? How much would they contribute?

Yes, this is a good question. We have it -- perhaps you can add, Sebastian. There's not a concrete planning on the, perhaps, ESG products. What we have in our mind is to have, after a certain time frame, that we have 30% of our products and of our objects in the ESG area. But this target is not official at the moment. So therefore, we're thinking about that. It's part of our growth strategy, but we haven't defined it exactly how many medical and how many ESG-related. It will be what we will come up with that.

And our experience in terms of medical, for example, is quite good because to -- going out with the goal to say we would like to have 10, 20, 30 whatever percent or that kind of objects was also the case as we entered in the medical environment. As we go for the shares of Europa Leasing, the question was how big will the medical object be in the future? And today, we have roughly 8% to 9% medical objects. But with the medical objects, with the access to that client, our former objects came back, a printer, a copy machine, PCs, telephone, whatever. And that's why the -- in the medical environment, in the medical sector, we're talking about roughly 14% of our new business portfolio. And that is a bit the same. And a new client maybe is going for an e-bike. That client come back and will go for informal object like a printer, like a telephone, like a notebook or whatever. And so it's not that easy to point directly out what is the future portfolio for the megatrends and for the explicit ESG objects. Important for us is, with opening that object categories, we're having access to more clients, to more small/medium enterprises. It's widening the market for us.

[ Merlinka Cwava ] from SEB. You spoke about your ESG strategy, and you mentioned Scope 1 and 2 emissions. However, you missed Scope 3, which is the most emissions you have. So when can we expect a strategy for your emission reduction in Scope 3 emissions? And does it apply only to the EU? Or does it apply as well globally?

Yes, you listened -- compliment. You listened exactly to the presentation, and I just mentioned Scope 1 and 2. And this has -- there's a reason because emissions, according to the greenhouse gas protocol, and that is the Scope 3 emissions, we can measure them but we cannot control them. And that's our own portfolio of our customers. And for the time being, for leasing companies, it's not regulated how it would be -- go on then in the Level 3 assets. So it's a really, really good question. So it's a little bit open for us. So just 2 and 1, we do in Europe, and we like to do it also worldwide. That is our aim. And 3, yes, we like to influence it, yes, in the way that we have lots of ESG-related assets in our portfolio. And we'd like to influence it with our GSI, GRENKE Sustainability Index, what Sebastian said. And perhaps you can add more.

I think that's especially the right way to deal with the Scope 3 because as a leasing company, we are owner of the asset. And it's, from today's regulatory, not 100% clear who is responsible for the Scope 3 in terms of the leased asset, is it the lessee or the lessor. And that's why we are going forward with our GSI. That's an index, then we can measure the portfolio, we can see is it maybe a good distribution in terms of the figures, and it will be like a score from 0 to 10. And then we can maybe develop the portfolio into a better GSI, so that's the best we can do today. And when the regulator is more familiar with who is responsible for the asset at the end of the day, then we can talk about also what's about a neutral strategy for the Scope 3. It's only that part because who is responsible for the leased asset, that's not 100% clear at the moment.

Johannes Thormann, HSBC. 2 questions. First of all, a follow-up on GSI. Is there a minimum score you want to do new business with your clients, e.g., if they have, and if we stay with Nutri-Score D or E rating, they're out and they can't get new business with you? Or is this just something to show and to show a distribution? Secondly, on your capital ratio, which was very strong currently -- it's very strong currently. You said you have at least room for EUR 1 billion balance sheet growth. And then looking at your AT1 currently issued, how much more AT1 can you issue? And at which point do you think you need to issue new shares to foster more growth?

The question for the minimum score, there will be for the time being no minimum score. We will be open for our customers worldwide. And the ESG score is very important for us in the future, but there will be no limited minimum score for the time being in our considerations for the time being.

But the plan is setting incentives.

Yes.

Maybe for a dealer because also a dealer portfolio can be scored with that GSI. And so with anyone, actually, hey we would like to work with the dealer portfolio and the dealer portfolio is not that good in terms of GSI. So there are many topics we see for the GSI, for client, for our portfolio as well as for a dealer portfolio. And so the first thing is now to measure that for the several portfolio perspectives. And in terms of AT1 and equity, from the numbers we presented, we feel comfortable with our equity up to 24. So to reach the volume we had in 2019, to reach our EUR 3.4 billion from a balance sheet perspective and the requirements, we are aware of. That should be okay. And then it's a question of how far we will go forward. Of course, our Tier 1 capital will grow during that time because we are profitable. Then it is another space for maybe AT1 capital, I think, roughly EUR 100 million, I assume. But it's more or less an expectation. But it depends on the market environment, is it sensible to go for an AT1, especially the current interest environment? We don't know. And today, it's too early to talk about raising capital. But in the area of '24, depending on the growth perspectives and our strategies, then that is an issue to talk about and looking forward to that, yes. GSI is more for steer the business. Not to have a minimum requirement, but to steer it in a direction we like to have.

Marius Fuhrberg, Warburg Research again. Two more questions from my side. You spoke about -- a lot about Leasing business, but you also have the Factoring business as well. Which role does this play in your future plans? Is it more a business that you're running alongside but not really prioritize from a strategic point of view? And the second question is, you mentioned that you aim for a CIR of below 45% in the long run. But what would you consider a rough sort of basis for CIR that you need to run the business in the long run? So what would be the absolute minimum of CIR that we could consider?

I'll take number one. So I would answer the question for the Factoring business. In fact, the Factoring business, when you look to our balance sheet, it's under 2% of our balance sheet, what concerning -- regarding the Factoring business. But it is important for us because it could be a really interesting add-on to our product portfolio and also at the point of sale of our leasing customers, very, very interesting add-on from the product line. We are working on it at the moment because it's not so profitable than we like to have it, as you see also in our annual accounts. We had this topic since some years, and we are working on with colleagues from the factoring side to get it profitable. Because in GRENKE, this is also important for every branch, where else for every country, you have to be profitable. And profitability is one of our most important tasks to be, and Factoring at the moment is working on it.

And I will take the second one to cost/income ratio. Looking forward for, let's say, more or less a steady state in the cost/income ratio, I would assume 40% roughly. It depends a bit on the future outlook, if you would like to go for further growth. But when we're growing in the U.S., it's a huge market where the scalability impact could be very high. And so from today's perspective, a steady state is roughly 40%. And then it depends a bit on what is the future investment for further growth or not and then could be below, could be. But I would assume 40% there.

Manfred Piontke, MPPM. 2 questions, please. First, on the risk situation and your scoring model. You are planning a notable increase in new business despite maybe all the questions regarding the circumstance we will have maybe in the second quarter -- in the second half of the year. Does it mean that you are -- based on your scoring model, you are on the risk on level? And secondly, in comparison to -- in relation to this, the risk provisioning or the risk losses in the first quarter was quite -- for me, quite low with 1.4%. Is this a consequence on the risk provision policy you got from the audit and the BaFin that this might be a little bit overdone? And this is maybe an positive effect we are seeing currently? And yes, that's the first 2 questions, please.

Yes, all for you.

I will take the questions. Thank you, Mr. Piontke, for the questions. First, our scoring is well on track for several markets. But to be honest, in the today's time and also over the last 2 years it's, for a risk model, not that easy to calculate the right expected credit loss, especially when you are in the crisis like the pandemic, the model is not knowing how many of the crisis is behind us and how many of the crisis will to become. And so the risk model is always and also our score is maybe looking a bit more conservative into the future. And the second one in talking about risk and scoring, measuring expected credit loss in our business, it is key that we are talking about an investment of a small/medium enterprise. And a small/medium enterprise who is going to invest during a pandemic, during that time we're having today, it's absolutely different to -- and small/medium enterprise who's going to a bank and asking for EUR 10,000 cash, but the risk models are more or less equal. And so we are in a very comfortable situation with our scoring, with our experiences, and we are able to measuring risk, pricing in the risk and scoring performed well. And we thought that also on the slide that the deviation between our expected loss, and that is based on the scoring model, is quite low to the real losses at the end of the day. And the other question, it is a bit an impact of the over-done because we had to sharpening our risk model and especially macroeconomic impacts. Under IFRS, you have to implement in your risk model macroeconomic parameters, and that should be also an official and open macroeconomic parameter. And we did that over the last years. But from the mathematical approach, our risk model doesn't need any macroeconomic parameters. The experience we have, it's a macroeconomic pre-indicator for what will happen in the future. Because we’re having -- the payment behavior of our clients, that's a pre-indicator what were coming over the next years to the GDP or whatever macroeconomic parameter you would like to have. So from the mathematical approach, it's not a need, but it's IFRS, it's accounting standard. And so we go for them. That is an impact. And the other impact is that the volume came down. The volume came down. And then when you go for expected credit loss and the volume is going a bit down, the lessees are paying well. The performance of our lessees is of relevance, and then you have like a profit because you don't need the former expected loss.

And the supplement we got from the BaFin, you asked also, after the BaFin, had -- so it nothing to do with the risk model or something like that. There are topics like compliance, internal audits, organizational things, anti-laundering topics. There are topics that, therefore, we get the supplement of 1.5% of the BaFin, nothing to do with the risk model itself. And I feel very comfortable with it, personally. Coming to GRENKE as a new CEO, first, was look into the portfolio. Perhaps you have ideas about kitchen thinking or something like that when you come new to a company or there was nothing, so nothing. We are really robust. And our gene and coefficient is really great, 40 years of experience is in our scope. In my view, Sebastian, there is no one I know with such an instrument in our score than we have in GRENKE. That's really great. We can really be proud of.

So maybe we take the time and just move on to one question we received in the chat, which comes from Berenberg, Gerhard Orgonas. And the question is about current market shares and the approximate market share within our core markets, meaning Germany, France and Italy.

[Foreign Language] Sorry. Sorry I do it in English, yes? So we are, in Germany, approximately 11%, 12%; same in France, 11%, 12%; and we are top in Italy, Italy is between 30% and 35%. That are our own protections and our own measurements we have. You cannot find anything at the market in official. But we think we are over 10%, up to 12%, Germany; France, 35% and Italy.

Okay. So let's see whether there are further questions in the chat.

Otherwise, I would continue with one. Just as you mentioned Italy.

Please go ahead.

We saw huge growth in Italy in the first quarter. Could you elaborate a little bit on what exactly drove this growth? Was it more -- especially as you already have this huge market share in Italy. Was it more like more investments of SMEs or more, yes, from your dealer side? Or what exactly was it that Italy grew so fast in Q1?

Sebastian?

Yes. The Italian market was pretty down because of the pandemic, the overall market and the investment behavior of clients. And so the rebound impact of the Italian market is, I think, one of the biggest in our markets we have, and that's the main reason for that amazing growth in growth rates. That was down because of the pandemic, and now there are -- it’s an acceleration of small/medium enterprises to go for investments, sometimes also a time lag for investment of the last year or whatever. But the main reason is the rebound from a macroeconomic perspective, not only for our business, also from the macroeconomic perspective.

And we're starting on more our sales offensive. You read perhaps about it in the last quarter of last year. And there was also Italy, for us, a very important market to come back, come back into the market to speak with the resellers. We were a little bit defensive in the pandemic in Italy, that's true. And now we'd like to come back. The economy is growing there, and we see the green shoots coming out. And yes, so GRENKE is also back in Italy, perhaps a little bit more than in other states.

Okay. Thank you for that. So we move on to the chat again and receive the question from Philipp Häßler from Pareto. And it's about our further geographic expansion strategy. And he's interested in Japan and whether Japan would be one market we would be interesting to enter, and also whether there are some details we could provide on other markets we might be looking at. So it's about expansion.

I think we've shown our footprint and also the landscape global-wise and the top 20 countries. And of course, Japan could be interesting, but we have a lot to do and positive things in North America and also in Australia, and that's our focus today. And so we will go forward for that strategy to going -- growing the business there, going to the next states, especially in the U.S. and then it's time to covering other markets and to discussing what could be the right direction, and that could be one.

Yes. So at the moment, no plans about these countries. We mentioned America, we mentioned Canada and Australia, and that's the things we like to go, and we'd like to expand our market share there.

Yes. And there's another question from Pareto, and this is related to profitability. And the question is whether profitability differs between object categories. And of course, then the follow-up would be, what is the most profitable object category?

Yes, I will take the question, Michael. From a portfolio approach, profitability is quite equal. Of course, there are some objects with a different term, a lifetime and when an object is running 4, 5 or 6 years, then, of course, the residual value is different to an object that's running only 24 years. And also not only the object is important; also the manufacturer, the brand of an object could be important. You know that maybe from cars, and this is the same in our business. It depends on the manufacturer and on the brand if a 24 or 36 months old notebook is more or less where you’re able and would anybody like to use that object when it is 3 years old. That are more drivers for our residual value, and that could affect profitability, of course. But overall, the 17% contribution margin too, and especially the overall profitability taking in account the cost/income ratio is equal. And one thing more, talking about e-bikes. The e-bike business is a business that we are talking about small/medium enterprises, also some mid enterprises going for e-bikes for their employees. And of course, it's not 1 contract for an e-bike. Then you talk about 10, 50, 30, whatever contract. So it's more or less a scalable business, and there, the contribution margin, one, is lower than in a business when you go into 1 SME going for a dentist chair or going for a copy machine. But it's quite efficient then in the cost/income ratio at the end of the day because in the e-bike business, we are not talking about 45% cost/income ratio, we're talking about 25% or whatever from the long-term run because it's a running business. It's a flowing business at the end of the day. So overall profitability is equal and it depends a bit on object type and maybe the brand at the end of the day.

So back into the room, do we have further questions? Yes.

Can you hear me? Okay. Yes. This is Mengxian Sun from Deutsche Bank. So we probably understand that you want to achieve your growth expansion plan through products expansion and geographic expansion. Probably, let's go back to the start. And can you provide us some details what is your procedure actually to establish a dealer market when you enter a new market? And how do you convince actually the reseller and also the end consumer to use GRENKE Finance? This is the first question. And the second one is on your funding plan in the midterms, especially on the benchmarks and senior unsecured bond. So we saw that the last bond yield is around about 4%. Do you feel it's the comfortable level that to issue the benchmark bond?

So I will take question number one. So the geographical thing is one point. The other thing is to have new objects, all the things about the megatrends, the e-bikes, what else, photovoltaic, et cetera, et cetera. And the third thing is new digital processes, to bring up interfaces, the APE interfaces, to launch web shops like that. So there will be not only geographical expansion, it's also next wave of digital products. And the third thing is that new objects following the trends in the society and the megatrends. Yes, and to speak with the resellers and in the countries, to be there, to have good people there, experienced people there, good salespeople there with a lot of knowledge, knowledge in the sectors we are in and convince the resellers to work with us. Again, there's no one who are in a worldwide international operation than GRENKE is. And this will bring really big advantages for us. We can bring in our experience of 33 countries into the contract, into the relationship to the resellers.

And it's always the same since decades in our business. The first step is to going out visiting the dealers, it's quite important in our business. And then the dealer needs its first experience with GRENKE because a dealer is key to our business. And therefore, as Michael mentioned, digital solution is important today. In fact, it has to be a fast process because the client or the SME is not waking up in the morning and saying, "Hey, today, I go to GRENKE and would like to go for a leasing contract." The client is going to the dealer for invest, for the business. And then the dealer is able to provide them a leasing contract, and then it should be fast, fast, fast. So not really noticeable for the SME and for the dealer in that we are able to making a fast credit decision, and we're paying out the dealer at the same day. And that is across regions, a huge advantage. And to going for a fast digital KYC process too, because that's important from the governance perspective, that is important for the future, that must be -- or it has to be a fast process for sales, for the dealer. And the funding you asked for, what the funding plan is. It’s 4.1% roughly. That's a market price at the end of the day. And so when we would like to go for senior unsecured bond benchmark size, then maybe it could be a bit cheaper because there's always a premium for a sub benchmark bond. And we would like to deliver over the next quarters good results. And at the end of the day, I also don't know what will happen in the interest market in the future. But from that perspective, it could be maybe a bit less, but it is a market price within sub benchmark premiums, that's for sure, because bonds are not that liquid. They have not that much liquidity for trading. And so it could be a bit less. But at the end of the day, it's a question of the market.

So Mr. [ Fianken ]? Right.

Another question to the international expansion, mainly U.S., the Canadian and the Australian markets. Huge markets. Huge possibilities. How would you like to speed up here? And what have we expect? Normally, knowing from the past, it takes a country unit to be profitable by 3, 4, 5 years. And it's really depending -- looking at the strategy, GRENKE normally is doing founding a branch, the branch is going profitable, then split it and make another branch. Is this the same strategy you want to follow in these countries? Or what would you like to speed up because the potential is as high? And what is your budget for these 3 countries? How will the burden in the P&L this year, next year? And when is to be expected that they will be profitable?

Yes, I will take the question. When we talk about the future core markets, you have to take into account Australia and Canada are minimum 5 years at the market. Australia, roughly 5 years; and Canada, I think, 6 to 7 years. And we are located there in Australia in 2 branches, and in Canada, in 3 branches. So it's not at the very beginning and we are in the accelerating, looking to the chart of Belgium. And both countries, from an overall perspective, are profitable. So there, the next step is scaling the business and going for sale divisions and going for sale division in the right way of today because is it a physical branch or maybe a digital branch, but we would like to widening our business. And Michael mentioned the hub. That could also be a solution. But there, the next question is to scaling as a business and they're profitable. And in the U.S. market, we are on the very beginning there. We need to having more dealers, and that's an exercise for the sales guys in the U.S., to going for more dealers, onboarding more dealers, making business with more dealers, to having on the one hand, a diverse dealer portfolio; and on the other hand, the base for future growth. And there's no extra budget or something like that. But if you would like to, can assume a low single-digit million budget for accelerating new business in the U.S., and we can also assume that's actually right, that over the next 3 years, so in some 5 years, the U.S. market, it will be profitable.

And to your question, we will go our GRENKE way like the last years. So the growth we see up to 2024, this is done or should be done then by the European markets, our core markets. We can't step to the new markets in U.S., Canada and Australia to bring this. That's beyond. Then we will plan it beyond. And this will come beyond 2024.

Okay. Thank you. We have another question in the chat, and then I move on to you. From Berenberg again. And it's about our main competitors, especially in our core markets and how they act for the time being. And if there are any changes right now that we monitor or whether the situation is stable.

Is it smart to speak about our competitors here? Yes, I'll do it. Yes, and I would say, yes, it's different. In Germany, we have ABC Leasing, we have MERCATO, we have [ Alvis ]. In France, it's [ Locum, LeaseCom, Friend Finance ]. In Italy, it's BCC, [ Lease, BenzIFS ]. So we have different competitors in each country. So there is no one who is really international in the SME business, instead of -- also BNP. It's also in the core markets. We see BNP also in small business leasing and [ Delagalanden ]. But [ Delagalanden ] is more in a bigger scale at the moment. And we recognize more or less nothing what they -- in change of business. So I heard nothing out of the market about our competitors, if they are struggling or expanding. So -- and we are concentrating on GRENKE at the moment, and we bring out our growth strategy.

Okay. Thank you. So now Mr. Pfänder, please, I think I saw that you raised your hand.

I would like to come back to your personal management risk appetite. I mean, you are planning for substantial growth. You're introducing new products. And I think we're all aware that the macroeconomic environment out there is every day more challenging. So how would you judge this also with -- in the light of your scoring model and how you plan the business going forward?

So regarding the economical consequences, let me say that we plan not with a doomsday scenario, and we really do not plan with a severe decline of the economies in the Western countries. So therefore, we see, for our products and for our clients and our markets, really good opportunities to do business because all our products we have are liquidity-saving. And you see, everyone we are handling with is thinking about his future. We are not a bank which are finance losses or what else with companies which are struggling. I was long enough banker in my life. Every customer we have think about the future, and he likes to invest into his future. And he's speaking with our resellers about things he like to do. And that is a situation out of the business model from GRENKE, which makes us strong because our customers are investing into their future, no loss financing or what else. And this is one of the best arguments for our business model. So I'm really not afraid what is happening. Our products and the way we are going into the market and the way we handle it, the type of financing, pay per use, is in the middle of the societal trend at the moment. And we will have just customers who are investing and this makes us strong.

And In terms of scoring, as I mentioned before, we know that our model is robust. We’re having a lot of data and experiences. And of course, looking forward, that's part of our data and of our scoring decision, and we're raising the risk appetite but step-by-step and not that huge. And I pointed out in my speech that we are leveling at 5.5%. That's more or less the goal. And we are taking in account several industries, several object types, and that's very important for us as always. And another thing, despite the investment case of each SME is that we are talking about very short terms, so 48 months on average, 2 years duration. It's not a 10-years debt or something like that. So also, if there is something not in the right way in the calculation maybe, then you can fulfil that quite new with an adjustment in your scoring, with the adjustment of the new experience and going forward, quite new. And we're adjusting our scoring monthly. We are looking to the expected credit loss figure. So we are quite fast in adjusting whenever we see some trends, some parameters, which are not in the right direction.

So we have another question in the chat. And with regard to the time, I try not to overrun by more than 5 minutes, but I think this is another good question we received from [ Barram Asadola Fadi ] from [ Richver Capital ]. Can you please expand on how you intend to also increase lending to SME now that capital is becoming more scarce? And next question, is that already included in your estimate for 2024? Or may it be additional?

[Foreign Language] Sorry, sorry. Concern -- regarding our equity ratio and the equity, we have to do more business, if I understand it right. You see, we got a supplement from the BaFin. Yes? Out of Pillar I, you have 8% and the supplement we got in the Pillar II is 2.5%. We had before 1, so additional 1.5, so we have 10.5% is our SREP factor we have. And you see our equity ratio. Equity ratio is above 19%. Core Tier 1 is above 16%. You see it before in our balance sheet. So we have a lot of headroom to grow, and you see what we tend to earn in the future, what we'd like to tend to earn in the future. We can also have retained earnings outstanding, which we can add to the existing equity ratio. So therefore, we have no concerns in growing. So we have enough headroom for our growth in terms of equity.

And that's also the case for GRENKE Bank because also GRENKE Bank has to fulfill the capital ratios and so on. And so there's also space to widening maybe an SME lending business. But that's not the top focus of us. Things we talked about today is Leasing business. So the lending business of GRENKE Bank is not part of our leasing guidance of the EUR 3.4 billion Michael mentioned, and any lending business, maybe rising of lending business is on the top to that EUR 3.4 billion, the same as factoring. But we decided today focusing on leasing because there are huge opportunities and maybe banking business could add that in the future.

Yes. We have another question in the room. Please?

[ Dieter Bloemker ], HSBC. One question, if I may. Talking a lot about the international expansion today, I would like to know how you progress on the acquisition of the former franchise entities. Thank you.

So we are well in progress, and it was and is also quite important for us. And sometimes it's not that easy to match dates and appointments, but we feel comfortable that we can announce over the next days there the first results because we are focusing on that. And it was a clear message, with the beginning I said here, that we would like to take over all the franchisees and that we would like to take over all the franchisees that year. And as I mentioned before, there were huge steps over the last weeks. And so we will come back to you as soon as possible to announce what happened. And the first focus was on 2 markets, too, pointing out that, on the U.S. market and also Singapore, that will be the first markets, the first franchisees we would like to take over. And then we will come, let's say, in the flow to doing the rest.

Okay. So we have time for just another question here right in the room and another one from the chat. We received more questions than we have time to answer, but we will follow up on that. So please keep asking and chatting with us. But first of all, we'd like to move on to somebody in the room. I think there was another hand raised. So am I wrong? So maybe I got it wrong. Then we have another question, and maybe it's the last one from [ Richver Capital ], again, from Mr. [ Asadola Fadi ], regarding online commerce. It's continually moving he says. Could you please elaborate on how you are positioning GRENKE in the digital channels of your current and future, I guess, reseller network?

Yes, most important for us to dealing with this topic. So yes, Fast.Forward.Digital program, I mentioned in my speech. We are working on it. We are on the way. We have APE interfaces also in the -- already in the e-bike business and we would like to expand that. And we like to build up also all the online shops. This is this topic. And first, it's absolutely important to think about the future and to think how will be the communication to our customers in future. And we cannot predict the future, but you have to think what could be technically possible and what would be the way to communicate with the resellers and with the customers. And we like to go this way and would like to invest into, and we make a lot of thoughts about that. And we have already these API interfaces. But we are not there where we like to be, and we are working on it.

Okay. So thank you very much for your answers. And ladies and gentlemen, today's Capital Market Update is coming to an end. And for us, it's time to thank you very much for joining us. It was a pleasure having you, and we are looking forward to talking to you anytime soon. If further questions spring to your mind, please do not hesitate to drop us a line or give us a call. You know how to reach us. And we would like to invite our on-site participants to join us now for a quick bite to eat. And before we close the session, I'd like to thank the IR team, my team, for setting up this event. I think they did a great job, and thank you very much. So this is it for today. Thank you all for joining us, and please mind that our Q2 new business figures will be out on July 3. Thank you very much, and goodbye.