Swissquote Group Holding SA (SQN) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning. To the press conference of Swissquote Group Holding for the first half results, I would like to welcome you. The press conference itself will last about 30 minutes. We'll go through the presentation. If you can't see the presentation on your screen, then certainly, you have a chance to download it from our website. [Operator Instructions] With me on the table this morning is Yvan Cardenas, who is our CFO, and he also will be available for questions at the end of the presentation. So let's start and let's dig into the agenda of our first half results. We will obviously give you some information about our figures for the first half. We will dig into the business update, as we call it. So we have a little bit more information on our different reporting segments. We will discuss about the guidance 2021. We'll have a look at the balance sheet. And then at the end, we also have a slide about our joint venture partnership with PostFinance; with our neobank application, Yuh, that has been very successful in its launch and is growing according to plan. But let's go to the first half figures 2021 and with some very good news for us because that's the one factor that we can control the most, which is the account openings and the account opening requests. You see here in the first half of 2021, we had a massive increase in account opening requests, up to 117,795 requests that created some issues at certain moment in our organizations because we were not ready actually to handle so many requests and especially, specifically the questions. All those people had legitimate questions about our systems, and then our call center in Zurich was a little bit overwhelmed. But this is now solved. We have hired enough people so that we can again give the service our clients deserve when they open an account at Swissquote. So this has pushed the number of clients to 459,800, which is obviously a record number from Swissquote. And you can see the distribution here on the slides between trading account, which is by far the largest type of accounts we have, and then we have eForex accounts and also a little bit of saving accounts, something out of the past. As you know, saving with cash at the moment is kind of difficult since there is no interest rates -- interest paid on almost any currency. So we have -- in the first half, we had almost 50,000 new accounts. And here, what we wanted to show you is 2 things. First, the average deposits per account is now increasing. Again, we've passed the threshold of CHF 100,000. On average, clients hold more about CHF 109,000. So it's a little bit compliant with our business model. We are targeting the mass affluent clients and offer them a very good service with a very broad service. At Swissquote, you can trade all type of securities, all type of currencies and this at a good price. So this is very important to note where our business model and -- business model is. We're not a deep discount broker. We have a nice segment that we cherish with higher deposits than what you would expect at other online brokers in Europe. Another very good news is that the clients we are acquiring are very active. Here, in the first half of 2021, we did 9% of total revenue with clients we acquired in 2021. So you can see that this is good news for us because now these clients are with us. They have been acquired and obviously, they will also contribute to the revenue in the second half of 2021. And if we go back a little bit, the clients we acquired over the last 5 years, from 2016 to 2020, represent 61% of our revenues in the first half. But still, also the -- all the clients, the one that we acquired back in 2000 to 2005, are still with us and still contributing a decent amount of revenue to the company. You see here the number 7%, then 12% and 11%. What we wanted to show you with this slide here is that once you have an account with Swissquote, normally, you stay there. You develop the business with us. You bring -- as you get older, you bring in new assets. And we have a very loyal client base that are very active, interacting with us and asking us improvement or to add new features to the system. This is a little bit the success story of Swissquote, keeping the clients, listening to them, developing our business, offering new type of services. The charts that is probably the most amazing is the client assets. Here, for the first time ever, we have crossed the CHF 50 billion mark. And with a quite amazing net new money for 6 months, we have CHF 4.9 billion of net new money that came to the -- to our bank. And that, together with the good market performance, pushed the assets over the mark of CHF 50 billion. And you can see here, going back in time, we -- the growth story of Swissquote. I could go back to the inception of the company, back in 2000, and you would see that these assets has grown over time, but never with an organic growth of CHF 4.9 billion in 6 months. And I can well remember when we were a much smaller company, we had targets of net new money of CHF 1 billion for the entire year. And here, we are almost doing these figures in a month. This shows you how strong the brand has become and how attractive we are to many clients with the service we are offering. Obviously, the margin on assets has been really good. We have 1.17% as a margin, 1.17%. So that's revenues divided by the assets under deposits and which is much higher than the bandwidth we have set in the past around 80 to 90. This obviously is linked to the variable markets we had in the first half, very volatile markets on crypto specifically, and this obviously pushed the revenues in the first half. And here, again, the net new money of CHF 4.9 billion in the first half. I would like to mention that this is purely organic. We had a similar growth in the past, notably in H1 2019 at CHF 3.4 billion. But there, part of that money was nonorganic. It was linked to an acquisition we did. But here, in the first half, the 5 -- almost CHF 5 billion is really made simply by the new clients coming to the -- to Swissquote and also the other ones that improved their relation with us and deposited more assets. So that's the -- that's for us the most important figures. We are looking at this together with a number of clients as the growth story of Swissquote and is also the best guarantee for us to further improve our results in the future. Okay. Here -- sorry, a little bit delays on my side. So here, a chart about the origin of the net new money. So it's still a strong Swiss business. We have 57% of this CHF 4.9 billion that is -- has been booked in Switzerland. That's the biggest part of it. And then we have the usual suspects. We have the Europe that accounts for almost CHF 0.5 billion; Middle East, Africa with CHF 280 million; and then the Asian market with CHF 1.4 billion. So this is a similar pattern that you could see also in our previous reporting. Now just one mention maybe for Switzerland, this is the headquarter. So also, when we have institutional plans that would book and open an account, then obviously, this would be booked in Switzerland even though the clients are not domiciled or the companies or the B2B clients are not domiciled in Switzerland. But this is the place where it's booked. Net revenues of CHF 264.4 million, that's the record number. But you can see also here that going back in time, the growth pattern we had. Usually, the second half is a little bit slower than the first half. This is due to some seasonality with summer where clients traditionally are a little bit less active. But here, what is spectacular around this chart is the business with crypto. You can see the very strong growth here from the second half 2020 to the first half 2021. But also, if you deduct the crypto business, then all the rest had a very nice growth. Fee and commission income did grow. All the segments in the first half also without the crypto impact had a nice -- a very nice growth pattern. So net revenues of CHF 264.4 million. Again, little bit delays with the slides here. Sorry. Okay. So also, one slide we wanted to mention, if the slide is coming here, sorry. The -- we have tried to compute the net revenues by what we call Swissquote locations. The Swissquote is -- has many subsidiaries and many rep office in all over the world. We have office in Europe, London, Luxembourg where we have a bank. We are also present in Malta, then in Dubai, Hong Kong, Singapore. We have -- and this -- in some places, we are a booking center. In some places, it's a simple rep office, and then the clients are booked in Switzerland. But here, what we wanted to show you is that the Swiss domestic part of our business represents 65% and then the rest is -- represents 35%. And if you now concentrate on this 35%, you see that here, over time, we had a nice growth. We did grow from about CHF 30 million revenues in the first half 2017 to now more than CHF 80 million. So this is very good news for us. This is also the result of strong investments in the past. This international expansion that we pushed. And because we know that Switzerland is a smaller country, so given our strengths and our service offering, we think that we can be successful also outside of Switzerland. This year is a little bit the results of that investments we did over the last year and the very nice growth in -- with our operations outside of Switzerland. So again, here, where are we located? In Switzerland, we have office in Gland, Zürich; then in the U.K., in London; Luxembourg with our bank; Malta, Dubai; Hong Kong; and Singapore. Also another interesting chart that we would like to comment a little bit is that Swissquote is not only a retail business, it is to 78% a retail business, but we have also many asset managers, money managers. We're doing business with other banks. We have white-label solution we're offering. We are custody bank for investment funds. We're dealing with fund managers, bank brokers. And all this represents 22%. And here, again, if you look back a little bit where we started in 2017, roughly, the B2B business represents CHF 20 million. And here, also, over the last year, we had a very nice development of our business. It's important for us because the B2B part is a little bit less exposed to volatility. And so this stabilizes our top line and ultimately, our bottom line. So we have invested a lot of efforts and money to develop our white-label offerings. And here, again, this is the result of our past investments. We think that the B2B segment is very attractive. It's -- we're one of the few banks and service provider that can offer the full range of services really from simple custody to execution brokerage. And also, if requested by our partners, we also have white-label solutions where we are putting our famous and well-known e-training platform for our business partners. A good example is PostFinance in Switzerland. There, we do everything from custody to brokerage to the technology where PostFinance clients can trade securities using our services. All this together here has a nice -- strong, nice increase in profitability. In the first half, we did CHF 134.6 million. So this is an incredible number when you think that this was our forecast for the entire year. We realized this in only 6 months. And we're paying taxes, obviously. And we have now a net profit for the first time above CHF 100 million in only 6 months. And if you have read our press release, you see that we aim to double these numbers compared to 2020 for the entire year as we are targeting now to have CHF 210 million of our operating profit for the entire year. That would be double as much as the number we had in 2020, which itself was double as much as the number we had in 2019. Why are we so confident that we can achieve this? Simply because we have this amazing growth in number of clients. They are with us now. They are trading actively. And even though the market would be a little bit less volatile in the second half, we are very confident to reach our targets. This company has a track record of always reaching the targets they are announcing. Usually, we are overachieving our targets. At least it was the case for the last years. But certainly, when we announce the targets, we are able to hold it. Again, a little bit delays for the slides. Hopefully, it's coming here again. So we have a slide about the staff, the number of people here, finally. So we aim to say that we are a technology powerhouse. Out of the 904 full-time equivalent, we have 33% that are in the technology sector, that's probably much more than any bank in Switzerland. So we're really a tech company. Of course, we also have some salespeople. We also have infrastructure support compliance risk, which is very important for a bank, and then we have 15% of our staff that is in our remote location. It's a very young company. So the average age of our staff is 34. We have 58 nationalities, but that's probably whenever you do business in Switzerland, you would have this type of mix not because we want to be so international, but simply that's fact. In Switzerland, you have many nationalities and also because it is so difficult to hire IT specialists and software engineers that obviously, we are also obliged to grow outside of Switzerland to hire the specialists we need. We improved much -- very much our gender diversity. These figures was very different, but now we have 1/3 of our staff, which is female. That's really good news. And also, we managed to reduce the turnover to 10%. That's -- as you know, for tech companies now with the international competition on talents, this is something we have a close look at. It's good to have a little bit of turnover because this keeps your average age young and dynamic. But obviously, more than 10% would also represent a challenge for the company. I can very well remember in the past when we had turnover in the magnitude of 20% to 25%, that means that you have to rehire the company every 5 years. This has improved a lot and also stabilizes a little bit our operations. But 904 people, that's a lot. Also here to mention that now part of the -- of our staff is working part time. This gives a little bit of flexibility in our organization and helps us growing the business immediately because the part-time staff we're hiring are usually high skilled specialists, and they help us pushing the developments when we need it. We are investing money into our brand, into our marketing. That's the game when you're an online company active in the entire world. We're very famous in Switzerland. And if you look here, we've just conducted a brand awareness on using Ipsos as a company to see a little bit where the Swissquote brand and how strong the Swissquote brand is. And here, you see that top of mind when it comes to online trading, we have -- we are -- almost 25% of the people do know Swissquote. And then the -- if you push a little bit and thus to Swissquote, you see that the brand awareness now is almost 40%, 45%. That's as good as the bigger guys in Switzerland. And this shows a little bit the results of our constant investments in our brand with the various initiatives we took. But Swissquote is now -- is part of Switzerland. We have been the very first online bank. We have been the very first financial website in Switzerland. So it's a story actually that goes back to 1996 when we launched everything. This also is the reason why we are celebrating on 25th anniversary since the launch of -- or not the bank, but the platform Swissquote.ch already 25 years ago. One of the important numbers we're looking at is the equity. So the equity did now pass the threshold of CHF 0.5 billion. It is an amazing growth. And it is mandatory to develop our equity. We have a lot of business with B2B partners. We have a high number of assets under custody. So we need to have a strong equity and a strong Tier 1 ratio to be able to fuel our growth in the future. We have a strong capital ratio here, 24.3%. It did grow over time. Sometimes we pay an acquisition and then it has a small impact because we're paying our acquisition out of our excess cash, but the growth is so strong that we -- that it always goes back to levels above 20%. CHF 544 million of equity that gives us good opportunities to grow the business in the future to finance our organic growth. And there is probably also a little bit of space for M&A activities in the future, but more to that a little bit later. So the first half year in a nutshell. CHF 264 million of revenues, CHF 134.6 million of pretax, CHF 116.4 million of net profit. After taxes, we had this amazing net new moneys of CHF 4.9 billion; total client assets, above CHF 50 billion; core capital ratio of 24.3%. And then the growth figures of the company, these are -- these account opening requests we experienced in the first half and then the number of accounts, 50,000, we opened. Now you're going say what happens to the others? They still -- some of them are in the process of being opened now. Sometimes we have a little bit of delay, sometimes the account is a little bit more complicated. But we are also picky with the clients we onboard. We are a Swiss bank. We have lots of obligation when it comes to be compliant. So we're very careful with the type of clients we are onboarding as a Swiss bank. Okay. Now we have a few slides about the -- our various revenue segments. And here, there's a lot to say and a lot to read about these slides. Sorry about that. It's a little bit charged with information. I would try to guide you through it. So first of all, you see the revenue. If we divide our clients in 2 segments, the trading business on one side and the ForEx business on the other side, you see here that the trading business is the biggest part of our revenue. This represents CHF 200 million of revenues in the first half and also the number of trading accounts of more than 400,000. Now what are these guys trading? They're trading all type of financial instruments. And this is the bottom right chart, you see that they do trade shares to 25%. They do cash and foreign exchange also to 20%, 26%. And then a big part of that is also crypto revenue up to 30%. And then the usual type of financial instruments. We have structured products, derivatives. We do fixed income. We have ETFs and investment funds. And this year represents not the number of trades, but the revenue generated in each of these segments. But we -- again, as we already mentioned, we're not -- we also have a lot of B2B clients. And if we now look at the distribution of assets, this is about half-half, 51% are assets from retail clients, group B2C; and then 49%, these are assets deposited with -- from institutional clients. Now this does not reflect in the 50%-50% on the revenue side because, obviously, on the assets from our institutional clients, we have a lower margin. But what we wanted to show you here is that the -- there is a well and nice balance between our B2B and B2C business. Another numbers that I would like to comment is the revenues by nature. Sometimes we have the feeling that Swissquote is just about volatility. When the market is good, the revenue is good. This is obviously true, but it's not the full story. We now also have a bigger part of our business or a big part of our business that is asset-based up to 20%. Asset-based means custody fees, means swap revenues, interest revenues. Even though it's becoming tiny small, but that all-in represents 20% of our revenue in this segment. Speaking about crypto, this is something we strongly developed in the past, and we are continuing developing it. We believe in cryptos. We think that it has now become a natural part of our -- of the business. We don't think at all that crypto trading or the crypto business will disappear. Here, a few numbers. When you're at Swissquote, you can trade 24 different cryptos. You can -- there's even one that we have launched together with our partner, PostFinance, it's called Swissqoin. This is our own token. But you can only trade it when you have a new account. And then the other 23 are the classic cryptocurrencies that you would expect at a bank like Swissquote. Obviously, the biggest one are Bitcoin and Ethereum and there is where we have most of the trades. But there are newcomers like the Dogecoin that has been pushed by famous personalities. And also, the latest add to our family, it's called Polkadot. And in order to be successful and to offer and to please our clients, you have to develop this business. And it's very rewarding since we now have already CHF 1.9 billion of crypto assets under custody. This number -- you can expect these numbers to be quite volatile together with the volatility on the underlying cryptocurrencies. But that's a little bit the rule of the games. You need to offer excellent execution. Also, you need to offer custody services so that the clients that will trade with you as a bank has a safe haven to deposit their cryptocurrency. A little bit about the number of clients. We had more than 60,000 customers that traded cryptos in the first half, but only a part of those clients, namely 10%, do exclusively trade cryptos. I've heard in the past that the growth in -- is just about crypto. That's not the case. We also have traditional clients in brackets that would also trade crypto. This is even the bigger part. 90% of the 60,000 clients do trade other securities at Swissquote, and then they diversify part of their holdings with crypto assets, which is probably a good strategy. Don't bet 100% on crypto, but spice up your holdings with crypto assets. And then also, we have a little bit of information about customer -- clients' profile. Surprisingly, you will see that 65% of our clients trading crypto are in the age of 40 to 60. So it's not just something for millennials. It's -- everyone is trading crypto. And then we even have a number of 9% that are older than 60 years. I think our oldest crypto trader is above 90. So you see this is really becoming an asset class fancy for everyone. And also -- and the last information here on the slides, we're not only offering B2C services, but we also -- 68% of the revenue that now we starts to diversify. We are becoming an execution partners for other banks, other institutional clients. And they are using our brokerage services and our custody services. And this already represents -- or did represent in the first half 32% of our revenue. And of course, there, this also stabilizes a little bit the top line. I think it's important as a service provider that you have a good diversification of our client typology. And again, here, our bank status and the fact that we have been an early adopter of crypto technology, we have a very credible offer in Switzerland and abroad with our serious approach to crypto trading. We have a lot of additions to -- a lot of additional services that will come in the future. We are investing a lot in this sector because we believe in cryptos, and we think that it will stay there for the longer term despite the bad news you get here and there, but it has become an asset class that is now accepted and acceptable by the entire world. Okay. About the -- about Swissquote. So we have a very competitive offering in Switzerland. So it's -- usually people don't realize, but we have 0 account maintenance fee. So if you have an account and you have a few thousand Swiss francs on it, then it would cost you 0. And also, the custody fees are capped. It's capped to CHF 50 per quarter, so that's a max of CHF 200 per year. And for these CHF 200, you can deposit millions and millions and millions. We will not charge you more. This is also a token of our success. If you look, the -- also one of the reasons why we could onboard so much assets, CHF 4.9 billion in the first half, this is also because we are absolutely not greedy on custody. Basically, with custody, we would like to cover our costs because we know that ultimately, we will make our money with transaction. We are very aggressive on options and futures. There, you can trade us of CHF 1.50. We have our lowest fee for funds and structured products starts at -- is at CHF 9 flat. And then we have -- you can buy packages of trade, and then you would pay a flat fee of CHF 19 per trade. So this number is obviously a little bit higher than our competitors that are offering discount brokerage. But when you consider the full service we're offering, the broadness of our financial instruments that you can trade, the fact that the custody is capped at CHF 200, then all-in, it's a very competitive offer, and this explains our growth and our successful business model. We have thematic offering. These are so-called AMCs. And you see here also that it has -- we have had a nice growth in the past. Now this all represents -- so the managed represents already CHF 440.6 million. We have still an objective to reach about CHF 1 billion. This will probably reach over the next 1.5 year, and now it's growing strongly. And we have realized that this is a very nice way of mixing our technology together with our financial skills. We have tens of different certificates, very successful. And it's a good product for starters that would open an account, but don't know exactly what type of products they should buy. However, they may have an idea. They may say Switzerland is a good place to invest. So I'll buy a swiss tracker. And then obviously, they can go into the trackers, see what type of companies they're investing. And this gives him investment ideas, how to trade and where to trade. Very successful business model, and we'll push this hard in the future. Here, again, so we have the same type of charts for our other segments. The eForex business. Here also, you see that we have a nice growth here. In the first half of 2021, we did more than CHF 60 million of revenues. We had volumes of CHF 746 billion in the first half. And here also, there's a good mix between the retail business, B2C represents 64%. But we also are a liquidity provider to many partners, and that represents 36%. What can you trade when you do ForEx? You can trade ForEx, obviously, FX. That's the biggest part, 49%. But we now are improving our CFD offering, that represents 32%. And then we have a bunch of precious metal. Here also, a part of the business is volume-driven, that's really linked with trade. But then we have also parts that is simple asset-based. I mentioned swap revenues in the past, and that represents 18%. Now traditionally, Swissquote has been a little bit weak when it comes to CFDs. And if the slides would like to pop up. Here it comes. So we are improving our offering on single-stock CFDs. It was not a request in the past because we had such a broad range of direct equity investments. So why would you buy a CFD if you can buy the stock? But we realize that CFDs has a lot of advantages. We can invest smaller amounts and have the same effect. And slowly but surely, we're starting to increase our offering. We just added a 100 new single-stock CFDs. And there will be many, many more that we will add to the -- to our system in the very, very near future. And we have an aggressive account fee structure where you could trade from -- if you have a prime account, too, you would only pay 0.09% of commission. And also, the standard trading account is very aggressive on prices. There's no surprise here. It's an international, very strongly competitive markets. And there, we just have to be in the market to be able to gain clients. So you would see this type of fee structure almost the same all over the world. But again, there, we have -- our big advantage is that we are a bank. So when you open an account and trade ForEx with us, you have the security of Swiss banks and not trading with obviously a ForEx broker. We have a serious service offering, and this is appreciated by our clients. Okay. Let's go to the guidance 2021. So here, it has been announced in our press release, we aim to do CHF 465 million of net revenues, that's a 47% plus compared to 2020 where we had CHF 317.3 million. And then the operating -- the pretax profit will almost double, plus 99% to CHF 210 million from CHF 105.6 million in the past. And just look what happens over the last 3 years. This is a strong growth stories. We almost doubled -- now the second time in a row, we doubled the pretax profit. What will happen in 2022? Well, the growth story will continue. Now we have all the clients we have acquired in the last 2 years. And also because of the development of our services, because of the development of our companies abroad, we will also grow the top and bottom line in 2022. It's a little bit early to make a forecast. But I think as long as I can remember, this company has always experienced growth, and 2022 will not be different than the years in the past. But still, for the moment, we do appreciate our incredible growth numbers. 100% growth for the second year in a row is quite a performance. And because we are already in August, we can give a little bit a first taste of July. July, you see here that the pretax profit is at CHF 14.1 million. Now July is traditionally the weakest month in the year because it's summertime. This year, we had the impact of the euro that was -- that -- so usually, people are trading a little bit less. But still, CHF 14.1 million in the weakest months of the year is a very good numbers. And you can see also here that the growth is continuing. We had more than 5,500 new accounts in the same period. And also one thing that is quite amazing, we had CHF 700 million of net new money for the month of July. And at the end of the month, we increased the assets under custody, again, from over CHF 50 billion now to CHF 51.5 billion. Well, obviously, the market helped a bit. But certainly, the CHF 700 million of net new moneys was the biggest part of that asset growth. Okay. Now a look to our balance sheet, and then we'll almost come to the end of this short presentation. So here, we have total assets of CHF 8.6 billion. There also, that's the highest number ever. And I already mentioned the total equity of CHF 544 million, amazing growth compared to 2020. Now where does the money come from? That's in big part due to customer. Here, we see that CHF 3.2 billion, then you have -- we have USD 2.1 billion and EUR 1.3 billion. And what are we doing with the cash? Well, unfortunately, not a lot. A big part of this is deposited with central banks. And because we have a trend or a tendency actually to be careful with our clients deposits, we don't want to take any type of interest rate risk. We still believe that interest rates will go up now that inflation is coming back a little bit. So we would not want to be trapped in long-term investments at the very low investment rate. So we know that it has a cost currently, but it's the philosophy of the company. We for now are a little bit careful with our balance sheet. And we hope to capture then a better interest rates in the future when interest rates will go up. So a very sound and solid balance sheet without any risks. We have loans. Obviously, here, you see that the Lombard and the leasing increased from CHF 551 million to CHF 744 million. But that's low-risk business, Lombard, because it's covered by securities deposited with us. And leasing is related to the deal we're having with Tesla, which is growing nicely and also generates a nice return. Okay. Now last but not least, I have one slide I would like to mention. Well, first of all, the number of accounts since the launch, that's now more than 20,000. It's growing on a daily rate. We're already the second largest provider in Switzerland. And I think we'll soon become the largest provider of neobank services in Switzerland together with our partnership with PostFinance. And also to mention that the 20,000 clients or 20,000 accounts you have here are not counted with our other accounts that we mentioned earlier in the press release. So that's 20,000 on top. We didn't -- we do not account them even though they are -- we're offering banking and custody services to our joint venture partner, Yuh, but it's a different type of accounts. Here, the average deposit is high. For a neobank, it's CHF 2,170 precisely. It had a very good start. It's a super attractive business. It's -- we have a very good offering. And maybe you are already a Yuh clients, and then you can experience the attractiveness of our offering. And then also if you are trading, you get Swissqoins. And Swissqoins, this is the token we have created together with PostFinance. It's a very interesting system. It's -- it creates loyalty. And ultimately, because we are paying back into the treasury account of Swissquote, ultimately people will make money with the coins they get when they open an account and when they trade. Okay. So I think this comes to the -- coming -- slowly coming to the end of our presentation. We have a very active Investor Relations program for the next months. We are in Investora in September in Zurich, then we also are in Munich at the small -- the Baader Small-Cap Day. In November, we have a roadshow with a tech company at the Swiss Equity Forum. And then we are -- you can meet us at the Credit Suisse Equity Forum on November 16. And next time we have our yearly figures, that will be in March 2022 when we will present our yearly figures and then also give forecast for then 2022 and an outlook what will happen 3 years later in 2025. Okay. So this concludes my presentation. Thank you to the -- to your participation today. We have 77 participants that joined us for the press conference this morning. So again, we'll go into some Q&A. [Operator Instructions]

Okay. Let's try this. So who has a question?

Can you hear me? Andreas Brun from Credit Suisse.

Yes, I can.

Okay. I would like to start with three questions. First, in eForex, I saw that the number of clients decreased by 24%, but traded volumes actually are on an all-time high. Could you give us some color there? That's the first one. And then on growth abroad, some investors are worried sometimes about, especially flat tax, with the strategy trying to grab some market share in Switzerland. But you guys, as the market leaders in Switzerland, how do you react? Do you think your pricing is competitive enough? And then the last question on growth abroad. On Slide 10, we see -- you showed us that strong increase from growth of international revenues. I saw that the share of Swiss domestic decreased versus 2020, which shows that growth of non-Swiss customers. But at the same time, the share of Middle East and Europe decreased as well, like from 5% last year to 4%. Could you like -- or how do you see that growth outside of Switzerland in that context?

Okay. Thank you very much. Three very interesting questions. So first of all, the easiest one, this is eForex. Yes, we do a little bit of cleanup. Sometimes the eForex business is really different from the equity business. We do not count small accounts, the -- or inactive accounts. And what is happening with eForex is that you are active over a certain period of time and then you are less active and then you may become active again. So that's the nature of that business. And this is why I wouldn't concentrate too much on those accounts. It is -- we are also charging in activity fees on those accounts because keeping these accounts open has a cost contrary to a trading account where we keep the clients for life. When it comes to eForex, there, we expect the clients to trade because otherwise, it has a cost -- a strong cost impact on the organization. And there, from time to time, we are suspending or closing the accounts when there is only a few Swiss francs on it. So this is the reason why you would see this fluctuation in number of clients. But as you mentioned it, the most important number there is the generated volume with the active clients. So to answer precisely to your question, we only do account for active clients. Then yes, of course, it's a highly competitive market. In Europe, as you know, with many different type of service offering, we do not want to compete in the lower segment. You mentioned flat tax there, and there are others in the same range. Let's say, in the -- with Swiss, there's very low transaction fees, but it's a choice. We have made the choice of offering a very broad service. This is probably also a little bit of Swiss heritage in a way. When we started the company many years ago, in the beginning, we only offered the Swiss exchange. So 6 in the beginning and a few hundred securities. And then it didn't last 2 days before the clients say, "Well, that's great, but I would like to trade U.S. stocks. I would like to deposit my funds with you. I have a fixed income product somewhere that we would like to consolidate with your bank." So that's a little bit the nature of our Swiss origin. And we decided that this is our business model: to have a broad range of service, a quality customer support and also a custody bank that is able to deal with all those different securities. Now this is not the case for our competitors. In the low segment, in the deep discount, there, you -- by nature, you have to concentrate on a smaller number of security. And also probably if you divide the number of assets by the number of clients, you would see that these are much smaller accounts, not the one we have where we have deposits on average of over CHF 100,000. So this is -- it's -- actually, it's a choice of business model. Now we also have an offering for the -- let's say, the more aggressive pricing model, but that's -- we think there, the market is going towards 100% mobile. This is the neobank offering. Therefore, now we have a limited range of securities. But the idea there is to increase that a lot to offer very cheap costs on execution. So to be able to compete against the neobanks and the flat tax and the like. Then you had questions on Slide #10. Well, yes, it is only percentage. So that's -- and especially when there was such a high number, it's difficult to compare percentage with percentage. Obviously, the business in the Middle East did not grow in the same magnitude than our business in Switzerland did. This is why percentage-wise, it's a little bit slower. But in absolute numbers, we have growth all over the place. So it's just this amazing business we had in Switzerland that is pushing percentage-wise the other locations a little bit there.

Okay. Perfect.

Yes. Yes. And then it's good that you mentioned it. So we are -- Yvan and myself, we are available for any questions you may have. You can also call us later directly. We are here for you. Okay. So next question, please? Yvan, can you? That's Mr. -- so that's Mr. Nicola...

[ Nicola Buqui ] from [ Mirago ].

Congratulations for your success. That's really beautiful. So you're in the very enviable position of having exponential clients, exponential revenues. So my a bit broad question is, how do you strategically do to, at the same time, have quality support to your clients continue to be the same or improve while at the same time, containing costs to avoid having exponential costs? Because as you said it, some costs are highly correlated to the number of accounts or clients. Some are more variables. But I guess you want to have in the years to come some margin in order not to have a negative -- too negative operating leverage in case clients are less active or even withdraw assets. So how do you solve this equation strategically?

Yes. Well, that's a tough question, and it is difficult, I have to admit. And you -- and also, we didn't -- we don't always succeed. In the first half, we're making -- we have made headlines because people were complaining that they have to wait sometimes weeks before the account opening is actually processed. And then when you have to wait weeks, then what you do, you take your phone and you give us a call. And then you realize that you're in the waiting of the telephone and then you have to wait for 30 minutes before getting an answer. It was a very tough moment for us. We worked really hard to clean and clear the backlog. And it's exactly what you said. You have to be -- the type of business in which we are is about having the costs under control. But at the same time, we want to offer a super good service. So this is the fine-tuning of the management of the company. We have hired a lot of people. We are now 904. But the growth was even stronger than that. But we have to do it carefully, manage the cost at the same time when growth is there, but not overdoing it because volatility may come down a little bit, and we don't want to be stuck in fixed costs and then have a negative impact on our profitability. So it's a fine-tuned management of the company. That's what we are doing. And then also technology is helping a lot. Now the -- we realized that more and more people are not calling any longer. They are consuming the service on mobile phones. So they are dealing with us on the -- with different tools. They are going into chat modes. They are sending requests online. So it's easier to handle this type of flow than just having a call center agent on the telephone. So there's also a shift in the way actually you are using our customer care services, and we can serve these at a cheaper price. We also have installed robots. Now when you ask questions on the chat system, you may well be served by a robot and then only pass over to a human being once the question becomes a little bit more complicated. So we're trying to deal with that. But as you said, it's not an easy task. Next question is from René Locher.

So I would like to start with -- on Slide 8. Marc, you mentioned in the presentation that this is a little bit the same picture as we see it every year. So I do not fully agree because I mean the growth we have seen in net new money in Asia is quite outstanding. I mean I've just checked with full year '20, full year '20 was CHF 747 million and now we are up at CHF 1.4 billion in H1. So I do believe it's very good news to see a shift out of Switzerland into new regions like Asia Pacific. Also Europe is up and Middle East seems to be quite tough. But nevertheless, I mean do I read it right here on Slide 8? Then on Slide 26, but I mean it's not fair. I mean you have increased your guidance from CHF 130 million to CHF 210 million. But now if I do a rough calculation, you have CHF 134 million H1 plus CHF 40 million in July. You want to achieve CHF 210 million. So if I divide the remaining CHF 61 million by 5 months, that's roughly CHF 12 million per month. So I mean it's not very ambitious at all. I know it's not fair, but nevertheless, it's not fair enough. And then in this context, perhaps any word on the 2024 guidance or even next year, give a 2025 guidance? Then the next one, just a confirmation on Slide 18. Because I used to be with a number of trades per client per year, now I did a rough calculation. Is it right that you've seen like 16 trades per client per year in H1 '21 versus 14 in H2 '20, which should go hand-in-hand that your new clients are active traders just here, 16 versus 14? And now the last question on Slide 4. I don't know if there's an English word, but I call it conversion rate from opening requests to opening accounts, right? So interestingly, in H1, this conversion rate was like 42%. And if I'm looking at July, on Slide 26, here, the conversion rate was 67%. So I'm wondering, is there kind of a time lag in the year between opening requests and opening accounts?

Thank you, René. That's all good questions. I knew that you would multiply the pretax profit. I'm not surprised. I -- once I had a -- I was a very young entrepreneur. And I had a meeting in London with a portfolio manager. And he told me, "Marc, you should only give numbers that you're sure you can match and overachieve." And I learned that lesson very, very strongly. So true, we are a little bit conservative in our numbers. And especially when we say it was the weakest month in the year, then obviously, there was a problem. But we like to be conservative in our figures. We think that doubling the pretax profit is already a nice guidance. It's -- markets are unpredictable. So we may have a slowdown, but it's difficult to forecast. So that's truly, we have been a little bit conservative for the second half in our forecast, well-spotted. Then about the number, yes, it's the -- we have been overwhelmed with account openings. We had difficulties in handling all those numbers because suddenly, it's like you open a gate and it's coming like crazy. I think the crypto hype also helped a lot. So we -- but at the same time, we had to refuse a certain number of clients simply because they did not match our requirements for our Swiss banking accounts. But we have a backlog. And the reason why suddenly you see 5,500 account openings with 8,200 opening requests is because we opened also accounts where the request was made in May and June. So we still have a backlog and we still are struggling with opening the accounts because we have to document the accounts. Now we can't -- we're not in a position where we can open an account into ours. That's not possible. So we have to deal with the fact that we are a Swiss bank, and this -- and there is a little bit of cost to that. And sometimes, we're losing our clients because we can't open the account fast enough, but that's okay. We can live with that. Then let's go back to those prior slides you mentioned. Conversion rates, we -- I think we've touched that, right?

Yes.

Then Slide 8, yes, there was -- that one is true. And maybe the -- Yvan is just sitting next to me. So maybe he has some good explanation as always.

René, perhaps just more comment on the question that Marc just answered. I think you know that there is a backlog, but it's not necessary on Swissquote side. We have an application process, but sometimes the profiles of customers is a bit more complex. Now do you see, they're more wealthy. So sometimes there is a back-end post process. If the customer is the CFO of a listed company somewhere, we may have two more questions. And it may take on his side a few weeks to come back to us. So some accounts are in progress not because there is none -- not necessarily a backlog at Swissquote, but we're getting more and more sophisticated customers than they have in other banks. It may take a bit longer. We always know that high profiles are a bit more complex to happen. So this is why I think the conversion rate is in line with historical metrics, but the files could be sometimes a bit more sophisticated. This is good news, but then there is some time to wait. On Slide 8, yes -- no, I think we had this target to have 50% of net money is coming from Switzerland, 50% coming from customers domiciled outside Switzerland. So we're moving in that direction. Last year, I have to say as well COVID-19 impacted a little bit the development of our international activities and Switzerland overperformed in a certain way. So this is why now we're returning back to what was the objective of management. But yes, I think in the future, the growth should come of net new moneys back with a good mix, 50% Switzerland, 50% international operations.

All right. In that case...

And then was there another slide? A last one that's -- one we forgot?

Just this number of trades, which you used to report in good old days, but now you are just giving the total number. So is it 16 versus 14?

Yes. Yes, that's true. So it is -- it was an amazing time. And -- but this is all mixed. It's also including crypto. And you trade crypto in a very different way than you create -- you trade securities. You go in and out in the same day. So that pushed the number obviously.

Yes. Yes. So I will not bother you with the '24 outlook and wish you all...

Okay. Thank you very much, René, and you could always call the rest a little bit later on the phone.

Okay. Mr. [ Thomas Paul ].

Yes. I was just wondering if you could explain me a little bit the trading income, why it has boosted so much? What is in there? Is this your own holdings? Do you -- how it may be in crypto, you said? And the second question would be a bit about Yuh. And you mentioned you were already the second largest neobank. Who is the largest? And which -- what number of clients will you be -- will you make a profit with you? Do you have some business plan there?

Yes. I'd take the last one and then Yvan will take the first question. So well, it's maybe I exaggerated a little bit. And we're the third largest because we have Credit Suisse in between. So I think the market leader today in Switzerland is Neon. And then you have Credit Suisse CSX, according to their own numbers. So we can't control that, but we have to trust them. And then comes Yuh. However, if you see the dynamic of the -- the dynamic of CSX started months ago and they claim to have 40,000 clients. And we -- in a few weeks, we are 20,000 clients and it continues. So I think we will soon become the market leader. And we only count active accounts. That's also maybe something that we don't know about our competitors, but we do only account for active clients. We have high ambitions for the end of the year. We want to more than double this number. We would like to be around 50,000 clients as a target and then profitability will not be far away when we have reached this type of clients. Now the thing is that this is an investment case. So the -- it's -- the application is quite nice today, but there are many, many more things that we want to develop together with our partner. Now it is the beginning of a longer story. For now, we did the obvious, which is credit cards, let's say, saving, investments, but there's many, many more things we can do and we have a lot of good ideas. But we -- what is important to say here is that we are in the lucky position where we are investing in the company, but at the same time, we are offering services to the company. So from a P&L perspective, in 2021, this will have no impact on -- so the costs of the investments is compensated by the revenue of the service we're rendering to the joint venture. And for the first question, Yvan?

So Yvan Cardenas speaking. So the -- it's true that trading income increased compared to, for example, second half year last year by 77%. This is -- as you specifically called, this is because there was an increased trading activity across all asset classes. So when the Swiss customer with Swiss franc does the transaction, it could be that the asset acquired this business in another currency. So it does generate on top of the brokerage commission an FX margin for the bank. Same on the crypto asset class, no fixed income. So it's really when customers know they acquired the trade, they buy or sell, the security that is not designated in the same currency than their deposits. So we have here an interesting margin that comes on top of the brokerage commission.

Okay. Then the next question is...

swissinfo.

Swiss what?

swissinfo.

swissinfo. Okay. Yes. swissinfo, yes.

Yes. Matthew Allen from swissinfo. I've got a quick question relating to your crypto business. In one of the slides, you say you're going to get into the lending, staking and exchange side of that business. I wonder if you could put any more meat on the bone there as to when and how you're planning to do that. And particularly, with the exchange, does this mean you're going to be applying for the new DLT trading license, which is being introduced by FINMA beginning of this month?

Okay. Well, to your -- the last point, no, we don't need because we are a bank, so we have all the licenses we already have. So for now, we are basically a broker in -- when dealing with crypto, meaning that we have exchanges on the other side, and we are interlinking the trade of our clients and then we see execution on the exchange. But that's the -- that was the initial phase of our development. Now we have -- first of all, we have many clients. So we can hedge them internally as a start. And then also, we can cumulate the liquidity from various places, so -- to offer a better execution service to our clients. In that sense, we will then become an exchange. And this is big developments we are doing. We are almost ready to -- for that. And the other deals will come in 2021. So we have an entire team dedicated to this. So...

And then Mr. [ Manuel Pedro ].

Yes. Can you hear me?

Very good.

Perfect. And also congratulation to the very good result. I have only one question regarding risk. What is the average leverage your cost owners have with you? And probably also, what is the maximum leverage you offer to clients in FX and crypto trading?

Okay. So no leverage with crypto trading. And the -- because we don't think we should do it. And then in -- when it comes to ForEx, the demand is a little bit to where the client is booked. If the client is booked in Europe, then obviously, we follow the ESMA rules, which is where the leverage is capped at 30. And in Switzerland, there is no capped -- regulatory cap on the leverage. But however, we have an internal limit at 100. And then we have a question from Kepler Cheuvreux.

Can you hear me?

Yes.

Yes.

I have a question. Well, you say that you were aiming for growth in 2022, top line and bottom line. There's something I don't get. I mean when I see you, you -- I mean your guidance, I understand that you're conservative for H2, but that means that your guidance suggests that you will make something like CHF 75 million, right? if I'm not mistaken, CHF 75 million pretax profit in H2. I don't know, just if I extrapolate this CHF 75 million the next 2 half of 2022, I get to CHF 150 million. So it would be below 2021. I don't know if I'm wrong thinking like this, but do you have anything?

Yes. Okay. So well, there's 2 answers to your question. The first one is the second half has always been historically lower in our history. I don't know why. This is probably there is the summer and then there is the holiday season at year-end that is lowering a little bit the revenue in the second half. So you shouldn't take the second half as the forecast for the entire 2022. As we mentioned earlier, we are a little bit conservative in our approach anyway. But the -- we also invested a lot. We have our operations in Luxembourg that is now getting some more steam. We have -- as you know, we have acquired this bank and we have transformed the business model. And we are pushing on the growth side, and you have a little bit the same story in Singapore in our different locations. So we are -- we know that year after year, we are increasing our business, and we -- this also will happen in 2022. Simple out of growth from all the clients we will acquire in 2021, and there, we'll be sitting on our revenue line in 2022. [ Also ]?

Ms. [ Stephanie ]...

[ Stephanie Beans ], yes.

Congratulations on your results. I just had a quick -- while I had a few questions. Just relating to the EU partnership with PostFinance, you were saying that the cost of investment in this is mainly sort of compensated by the revenue you get from the partnership. And I was just wondering, do you have any estimates? I know it's still probably early days of the effect that this could have on the business and any other partnerships that you sort of have in mind going forward? Following from that, I think globally, we've seen quite a dramatic increase in the first quarter of 2020 in trading for retail investors generally. What kind of gives you the impression that this market acceleration on trading platforms will continue organically at the same sort of growth rate? And then lastly, sort of as you said in your presentation, you kind of pride yourself on being a tech powerhouse. And this is purely out of curiosity. Do you think that there's any relationship between users using your platform, say, in a trial account and then converting into trading? Or is it mainly users who come with already some trading background and who'd like to just use the services that they're familiar with?

Okay. So -- yes. For the last question, we see a little bit of shift in financial knowledge between the clients we had a few years ago and the one we have now. It's also one of the reasons why we struggled a little bit with our customer care because on average, we're spending more time with them because they have have different questions about financial products. So there is truly a new generation of clients coming to us and learning financial products. So it's -- I think it's -- I'm not sure whether it is because they are using demo accounts and then transforming it simply because it has become popular. And it's -- you can hardly open newspapers without speaking about cryptos, about financial products. And it has become part of your early adult life to deal with financial products. There is -- there really is a shift. And also the one reason why we developed this partnership with PostFinance is that to have a good introductory product for neo customers using neobanks. And now obviously, when the clients get a little bit more sophisticated, they want to have a broader service range and then they can use the classic e-trading service from both partners. Then I can't remember the 2 other questions. The first one was I think it was about Yuh. What was it? Please, can you -- was it about some forecast about the impact on our business, right?

Yes. Yes. Particularly for sort of neobank interested users sort of relating to the crypto trends. And also, do you have any sort of future partnerships around this space in mind?

Yvan Cardenas speaking. So I think for you, what -- we have a mobile app that has been launched to the market. So this app was developed by Cisco. So in order -- the cost or the vast majority of the costs are behind us. They were basically included in our 2020 figures. And then we made this partnership with PostFinance to launch in the Swiss market. We think that we need to be successful in Switzerland in a domestic market before contemplating to export. This way, we'll have some more hands. So I think, yes, first, we need to observe how it would have developed in the market here. Mr. Bürki has mentioned an objective for the end of this year. And then I think if we are successful and we are convinced we can be successful, then we may contemplate other services. For this year, we don't expect the partnership to cost something despite we're really launching the product in the new markets. So a new product, new market. So there is some costs in terms of marketing and so on. But later on, this should contribute nicely to the profitability of Swissquote Group.

Okay. So we have three more questions. Andreas Brun from Credit -- sorry, no. What -- was that Leudeville? Is that...

[Foreign Language] I'll ask my question in English. Do you intend to review and upgrade your long-term guidance for 2024 considering that the pretax profit you were aiming initially is expected to be reached as of this year? Is it something that you plan to do to review the guidance, the profit guidance in the next 6 months, I would say?

Yes. Absolutely. So we announced at the beginning of the year that we will have CHF 0.5 billion revenues in 2024 and then a profit margin to lead us to a pretax of CHF 200 million. Now we did it earlier with the help of good markets, but also -- and it is also explains why the margin is a little bit higher because by 2024, we will have a higher cost base. So we probably will not be able to sustain the same profit margin. Yes, sure, we have reached the -- in 2021, we have reached our forecast for 2024. So by the end of the year, we will have the presentation of the yearly results. Of course, we will give our 3 years' outlook for, in this case, 2025. And then we have Andreas Brun from Credit Suisse.

Just a quick follow-up on -- like talking about the profit margin, looking at your H2 guidance, one can calculate the pretax profit margin of 37%. Do you think that's a sustainable level for the like short, medium term? Then secondly, also looking at H2 '21 guidance of CHF 200 million of revenues, where do you actually expect the difference to come from versus H1? Is it coming mainly from crypto revenues or mainly seasonality? And around that topic, I would like to understand how sustainable your crypto revenues are. How much is kind of the average revenue contribution, for example, in July from crypto trading? Or put like differently, what do you expect in a normalized half year from cryptos?

Well, that's a tough question. And this is really the reason why we have been a little bit careful for the second half because it's difficult to predict actually what the crypto markets will give us in a way. It's -- if you take the July figures, then out of the 14 -- out of the posted revenues, CHF 3 million is coming from crypto in July. So -- but that's a very low number. And it happens in a market where crypto was going sideways. Now if there is a little hiccup in crypto, then you would see this number explode and this going straight to bottom line. So that's probably a little bit the reason of our, let's say, more careful forecast for the second half is because we don't exactly know what -- how much cryptos will be traded and when it will be happening. It could well be possible that we do the exact same numbers in crypto revenue than the first half so that we would simply need to have more volatility coming back to this business segment, which you can absolutely not exclude. We may see the Bitcoin going back to CHF 50,000, CHF 60,000 within a few days, and then we are back there. So our forecast has been made taking into account that crypto trading will be very, let's say, boring for the second half. That's the explanation of our, let's say, more careful forecast on the -- more careful outlook for the second half. What makes us also more positive, however, is that the number of clients trading crypto is increasing. The number of clients depositing cryptos from wallets to the bank is increasing as well. So the fundamentals of the business are increasing. And we believe -- we do believe in that market. So it's -- in the medium term, and we're speaking about 2022, it will again be a substantial part of our revenue. But in the medium term, let's say, next 2, 3, 4 months, it's difficult to say exactly at what level we will be. And then there was a question about the margin of 37%.

Yes. So on that, Yvan speaking. So the -- so in the first half, we had quite a very positive pretax margin of 50%. Our objective in the initial guidance was 35% with an objective for 2024 to be at 40%. So it's true that we had 3 months ago an objective of 35%. So the second half year looks more in line. So we probably have made some accelerated progress here in the pretax margin, but it's certainly not the case that we could sustain 50% medium term. We had back in March an objective of 40% medium term. And this is probably a more appropriate target medium term. We could be sooner at this pretax margin of 40%. Second half year is an example, 35.5%, it's again above initial targets. But yes, this is what I can say. Probably it's somewhere between 35% and 40%.

Okay. So with this, I think we've reached the time limit of our presentation this morning. So again, thank you very much for joining us. Thank you very much for your interesting questions, and this is highly appreciated. And yes, we -- Yvan and myself, we're here. In case you have questions, don't hesitate to call us. And with that, I wish you a wonderful day and a great weekend and see you next time. Bye.