Hypoport SE (HYQ) Earnings Call Transcript & Summary

Yes. as I said, it would be our preferred options if predicable. And during Q2, we couldn't do any buyback. Because of ongoing nondisclosed let's say, projects.

Right. So the next one is coming in. Switching back to Euro Pac. How is [indiscernible] initiative? I have going with the regional banks.

Yes. Okay.

question was EUROPACE 1 exactly.

Yes. So Europe is one is our subscription model to get enhanced typically AI-based features in EUROPACE, a bundle of features along the value chain. And we introduced this roughly a year ago to the broker segment of the market and are in the mid-hundreds of subscription here by now. And -- but to answer this question, even if not was asked by now, let's say, see some potential, see still a lot of potential in speeding up this process of gaining her subscription. So we are not fully happy with the progress we have here in the broker segment. So at the end of the second quarter, we introduced this as well to our banking partners, so in their branch networks, which is a slightly different pricing model, so there's transaction based, not subscription based. And we -- so it's -- we sell it there for a higher transaction fee. Yes. And let's say, the sales process started roughly 2 months ago. And we got the first signature by now. It's still too early to judge on the success with the regional banks here specifically.

Yes. Great. Thanks. I hope this answers the question. However, if not, please follow up. Did you the next one is, could you comment on the individual loss-making business units for the remainder of the year?

Yes. Let's start with value in real estate and mortgage business. We expect positive contribution on EBIT level for the second half of this year, so effectively breakeven for [indiscernible] and with a successful first half of the year, we are confident that we will reach this. Next is Dr. [ Klein Movida ] with [indiscernible] ERP solution for the housing associations. Here, we are still in an investment phase, and we'll have as well still a significant loss in the second half of this year. Let's say, roughly EUR 1 million per half of the year is our run rate there right now. And we expect their breakeven in 2027. And the last is qualify as well with the declining loss level, but let's say, getting closer to neutral in the second half of this year is still with a slightly lower confidence level because of the, let's say, the stage of this business model. We are there as well on a low level of investment. I think you are aware of this, let's say, early stage product and a pretty long sales cycle and -- but let's say, we see that we get closer to the point that we are as well building to increase our investments again when the client base improved.

Very clear. Thanks. There are two questions regarding mortgages. I will group this a little bit here. The first one is specific on Deutsche, Deutsche Bank. You have described in further calls that the decision of Deutsche Bank to give up market share was temporary. But it seems now that it's a little bit more permanent development a little bit stickier. What are the implications for EUROPACE and [indiscernible] and is it right that ING seems to be benefiting all of this.

Let's say, I expect this decision to, let's say, reduce the new mortgage volume to the current level is a tactical decision and it's something that is constantly reconsidered as well within Deutsche Bank. And it's linked to capital allocation within Deutsche Bank and the question of the attractiveness of the German mortgage business relative to other operations the bank has. So I'm certain that we see that the Deutsche Bank will return when this, let's call it, balance shift in the favor of German mortgage business again. And I'm certain that this is something that we will all see still. So it's nothing that will take decades for Deutsche Bank. I got to know Deutsche Bank as a very agile organization when it comes to this kind of capital allocation decisions who profited from the withdrawal. Yes. I would say Deutsche Bank was serving especially complex mortgage products and had a strong position there. And I would say the let's say, most part of the gains went to regional banks, not to ING. While ING was pretty successful in the last 18 months and in the competition, but with a very standardized product. And there took market share from others, especially as well for regional banks because of their lack of digitalization of their mortgage operation where ING was simply stronger. Now we lost Jan. Maybe because of the same issue. So why when you just look on the numbers, you could say that ING improved, increased their market share in Deutsche Bank lost market share. the real flow was Deutsche Bank lost to regional banks and regional banks lost to out of two different -- let's say, in two different -- slightly different areas of the market.

Thanks. And sorry for this. Yes, it was some issue with the camera. So the next one is still with mortgages. But let's stay with the private bank. So any process of acquiring any new customers in this segment to the Private Bank segment?

Yes. So unfortunately, the private bank segment in Germany is small. This -- we saw in the first half of the year a new announced market entrants. This is [ Targo bank ] backed by French banking group, as you know. And Targo decided to use EUROPACE for their operation here. And we wish Targo all the best and hope that they achieve their goals in the market in the upcoming years. Our technology is what's the right choice for this. So besides this, nothing we are able to disclose for now. We would be happy to see more European banks entering the German market because it's attractive as ING shows that when you have a very digital approach, a good funding, then you are -- you have -- you can easily build a strong position in the German mortgage market. There's a lot of space left here.

Okay. Very clear. Thanks. And there is -- and thank you from the U.K. investors regarding your answer to the Deutsche Bank. Just to be this to direct this to you as well. So the next question is on mortgage market, a little bit more overall. Are we expecting still a wave of higher refinancing activities in '27, '28?

Yes. Yes, we do. So we expect to see a vital refinancing market starting in 2027 because the current level of refinancing is unsustainable when you look on the portfolio volume of German mortgages outstanding. They need to be refined. There is no other way.

Exactly. Right. Okay. I don't see any questions regarding mortgages or EUROPACE. So let's jump to the next topic, which is a little bit more high level. I assume because the question is pretty short. Why is EBIT growth Q4 weighted? So this is the question. Yes. I'm also -- I'm not sure this is just what I can read you my interpretation is why we are expecting a strong Q4 because if not -- if we are right, please correct us, but maybe this is a good start.

Now let's say, we saw this in the last years that Q4 always delivered a certain level of outperformance. In some business model, it's pretty obvious. So everything what is linked to subsidized loans and other tax credits and similar things regarding the [ Middlestand ] business of Ram Capital. So financing platform. This is -- it's heavily linked to year-end, the closing of the subsidizing entity and as well from this planning process and, let's say, a project planning process of German Middlestand. A major part of this business is done in the fourth quarter. we saw as some cyclical moves in housing associations. And let's say, often in the last quarter as well in the overall mortgage market business, we see some, let's say, certain developments of shifts in volume with impacts as well the let's say, the certainty of, let's say, high commission events which influence in the last quarter profitability allocated there because then it gets certain that certain trigger events for certain commissions are reached in the end.

Okay. I hope we got this question right. If not, however, please come back to us. The next one is regarding mortgages and interest rates. So it is given the level of interest rates, do you foresee banks offering concessions for refinancing?

Let's say, it's a difficult concept for financing normally, banks try to refinance their the mortgages, which are already on their balance sheet with a higher margin. So typically, it's because of the stickiness of this product, banks try to earn higher margins out of a refinancing. And the job of especially mortgage brokers or other banks using EUROPACE to convince the client that shifting to another bank, saves so much money in the work and the has to do this. So in this context, the world concession doesn't fit really. So I could just guess if it's about when we see higher mortgage rates, then the original. The loan to be refinanced had if banks could be willing to lower the mortgage rate to reduced the burden on the consumer level. I don't see this actually as a relevant issue in Germany. Let's say, the rates and included with repayment part for mortgages in -- which we are underwritten in the low interest rate environment of 2016 under 2022 secured that even with higher mortgage rate, and this is what we see right now, something around 1%. It's not -- there's no issue for the borrower to handle this increase in interest rates. So I don't see any default risk for banks or any need for concessions regarding the mortgage rate for banks here in Germany in 2027 and onward.

Okay. Thanks. I hope we got this question right. If not, please come back. The next one is a little bit more specific to financing platforms and Q2, so not H1, but in Q2, it's special. What was the reason of the 12% jump in operating expenses in financing platform in Q2.

Yes. We had this question in the German call. So this is -- let's say, it's a short period. Let's say, we had a user conference of Hypoport, which was the largest ever and the most expensive one ever, and we do this once a year. this triggers a couple of hundred thousand euro extra costs onetime in up to the next user conference. And some other, let's say, a small extraordinary payments. So nothing recurring. It's not a trend to increase cost in the segment significant. This is it's linked to a very short period. And in the end, our smaller segment as well you are looking at.

Thanks for this.

Normal -- I would call it, normal volatility on the cost side. In general, we are very strict in our cost management.

Correct. I think then in a moment, I don't see any additional questions or not in my math. Once again, as a reminder, please type your questions in the chat, I can highlight this or share this via email with me. And just browsing if I missed the question, it don't seems so.

Let's say, you are willing to answer questions [indiscernible].

I'm pretty sure, yes. Investor Relations sometimes do. All the day. seems that there are no additional questions. So we wish all the best to you and have a great summer, the rest of the summer. And thanks for this call. We hopefully see in conferences and autumn next days. So thanks for this Q&A, Ronald and thanks, everyone, for joining. So have a good rest of the day.

Yes. See you in 3 months year. Bye.