Q2 2026 Grenke AG Earnings Call

August 13, 2026

Speaker #1: Welcome, ladies and gentlemen. Good morning from Baden-Baden, to our today's earnings call regarding the half-year financial report 2026. My name is Franziska Randt, I'm head of the IR department, and I have the extreme pleasure that today here with me is both CEO Dr. Sebastian Hirsch and CFO Dr. Martin Paal.

Speaker #1: Welcome. We will start with the presentations, and right after we will enter into our Q&A session. Before we get started, let me remind you that this presentation contains forward-looking statements based on current assumptions and expectations, which are subject to significant risks and uncertainties.

Speaker #1: The key assumptions and influencing factors are explained during the presentation, and in the disclaimer at the end of this material. Please take these into account when assessing the information provided.

Speaker #1: With that, I will now hand over the call to our CEO, Sebastian. Please go ahead.

Speaker #2: Thank you, Franziska. And a warm welcome also from my side. Ladies and gentlemen, when we last spoke, we discussed an environment characterized by uncertainty.

Speaker #2: Geopolitical tensions, weak economic growth, and persistently high insolvencies. And this environment has not fundamentally changed. Nevertheless, we have increased our profit by nearly 25%, and our return on equity by 80 basis points, in the first half.

Speaker #2: We are in line with our plan. So I could simply hand over to Martin right here, and let him take you through the details and figures.

Speaker #2: But that would be too easy. Because the situation deserves a closer look, and more importantly, some perspective. There are two sides of our first half performance: on the one hand, the risk environment remains challenging, on the other hand, our operating business is getting stronger.

Speaker #2: But before we put this into perspective, let me start with what matters most to me: we are on track. Four facts explain why, and they also capture the two sides of our first half performance.

Speaker #2: First, investment activity remains weakly globally. Despite this environment, we generated new business of around 1.6 billion euro. Second, we are winning market share. Particularly in Germany, France, and Italy, but also in North America.

Speaker #2: We are seeing momentum. So even in a weak investment environment, Grenke continues to expand. Third, insolvencies remain high. Our loss rate of around 2% reflects this.

Speaker #2: We take this seriously, and we will come back to how we are addressing it later on. And fourth, and this is particularly important to us, our operating leverage is clearly visible.

Speaker #1: Right.

Speaker #2: Our loss rate of around 2% reflects this. We take this seriously and calculate it later on. Fourth, and this is very important to us: our operating leverage is clearly visible.

Sebastian Hirsch: Our loss rate of around 2% reflects this. We take this seriously, and we will come back to how we are addressing it later on. Fourth, this is particularly important to us, our operating leverage is clearly visible. Our income is growing faster than our cost, and our cost-income ratio has improved significantly. Yes, the environment remains challenging, but our business is getting stronger. That is why I say we are on track. These are the four facts of the H1 2026. That is why the earnings are increasing compared to last year. We do not want to downplay the challenging environment, quite the opposite, like in our daily business. But we also need to put what we see today into perspective.

Speaker #2: Our income is growing faster than our costs, and our cost-income ratio has improved significantly. So yes, the environment remains challenging, but our business is getting stronger.

Speaker #2: Our income is growing faster than our costs, and our cost-income ratio has improved significantly. So, yes, the environment remains challenging, but our business is getting stronger.

Speaker #2: And that is why I say we are on track. So these are the four facts of the first half 2026. That's why the earnings are increasing compared to last year.

Speaker #2: And that's why I say we are on track. These are the four factors of the first half of 2026. That's why the earnings are increasing compared to last year.

Speaker #2: We don't want to downplay the challenging environment quite the opposite. Like in our daily business. But we also need to put what we see today into perspective.

Speaker #2: We don't want to downplay the challenging environment—quite the opposite. Like in our daily business, we all need to put what we see today into perspective.

Speaker #2: And to do that, I would like to take a step back and look at how our business has developed over the last past 6 years, because one quarter alone does not tell the whole story.

Speaker #2: And to do that, I would like to take a step back and look at how our business has developed over the past six years, because one quarter alone does not tell the whole story.

Speaker #2: Let's start with the foundation of our business volume. After the decline during the pandemic, you know that we returned to growth. New business has increased significantly, and with the usual time lag, this has translated into growing asset base.

Sebastian Hirsch: To do that, I would like to take a step back and look at how our business has developed over the last six years, because one quarter alone does not tell the whole story. Let us start with the foundation of our business volume. After the decline during the pandemic, you know that we returned to growth. New business has increased significantly, and with the use of time lag, this has translated into growing asset base. Our total assets have grown to EUR 9.2 billion. This matters because today's asset base is a foundation for tomorrow's income. This is exactly what we see in the next step. Our asset base grows, our income follows. Operating income has increased to EUR 182 million, roughly 50% since the low point in 2022. The growth we generated in previous years is increasingly translating into income today.

Speaker #2: Let's start with the foundation of our business volume. After the decline during the pandemic, you know that we returned to growth. New business has increased significantly and, with a slight time lag, this has translated into a growing asset base.

Speaker #2: Our total assets have grown to 9.2 billion euro. And this matters because today's asset base is the foundation for tomorrow's income. And this is exactly what we've seen in the next step.

Speaker #2: Our total assets have grown to $9.2 billion. And this matters because today's asset base is the foundation for tomorrow's income. And this is exactly what we've seen in the next step: our asset base grows, our income follows.

Speaker #2: Our asset base grows; our income follows. Operating income has increased to 182 million euro, roughly 50% since the low point in 2022. The growth we generated in previous years is increasingly translating into income today.

Speaker #2: Operating income has increased to $182 million, up roughly 50% since the low point in 2022. The growth we generated in previous years is increasingly translating into income today.

Speaker #2: Before we add the next dimension, let me take one crucial point. This happens because of a robust portfolio. The fact that it generates this level of income is not only strong evidence of its underlying quality, it's evidence of its power.

Speaker #2: Before we get to the next dimension, let me make one crucial point: this happens because of a robust portfolio. The fact that it generates this level of income is not only strong evidence of its underlying quality, it's evidence of its power.

Sebastian Hirsch: Before we add the next dimension, let me take one crucial point. This happens because of a robust portfolio. The fact that it generates this level of income is not only strong evidence of its underlying quality, it is evidence of its power. Of course, we are seeing elevated losses, and I will come to that in a moment, but there is no doubt about the fundamental strength of our portfolio. That distinction matters. Now let us add risk. Here we should not sugarcoat what we see. The risk environment has deteriorated, and the loss rate is too high. But when we look at the absolute risk expense over time, this also reflects the significant growth of our portfolio. More volume naturally means more absolute risk. But that is only one part of the picture. What is putting pressure on us today is the elevated loss rate.

Speaker #2: Of course, we are seeing elevated losses, and I will come to that in a moment, but there's no doubt about the fundamental strength of our portfolio.

Speaker #2: And that distinction matters. Now let's add risk. And here we should not sugarcoat what we see. The risk environment has deteriorated, and the loss rate is too high.

Speaker #2: And that distinction matters. Now let's add risk. And here, we should not sugarcoat what we see. The risk environment has deteriorated, and the loss rate is too high.

Speaker #2: But when we look at the absolute risk expense over time, this also reflects the significant growth of our portfolio. More volume, naturally, means more absolute risk.

Speaker #2: But that's only one part of the picture. What is putting pressure on us today is the elevated loss rate. And that is driven by the macroeconomic environment.

Speaker #2: But that's only one part of the picture. What is putting pressure on us today is the elevated loss rate, and that is driven by the macroeconomic environment.

Speaker #2: We take both into account when we're steering our business, the current macro data, and our volume development. Finally, let's add costs. And now look at what happens when we bring income and costs together.

Speaker #2: We take both into account when we're steering our business: the current macro data and our volume development. Finally, let's add costs. And now, look at what happens when we bring income and costs together.

Sebastian Hirsch: That is driven by the macroeconomic environment. We take both into account when we are steering our business, the current macro data and our volume development. Finally, let us add costs. Now look at what happens when we bring income and costs together. The gap is widening. That is operating leverage. Following years of investments and consolidation, costs have broadly stabilized while income continues to grow. This widening gap is where our operating leverage becomes visible. Now let us zoom in on the last two and a half years. There is a reason why I am showing you the period. Around three years ago, you may remember, we started to systematically strengthen our operating performance. Over the last six quarters, that work has become increasingly visible in a clear trend emerging. Income has grown significantly, while costs have remained broadly stable.

Speaker #2: The gap is widening. That is operating leverage. Following years of investments and consolidation, costs have broadly stabilized, while income continues to grow. And this widening gap is where our operating leverage becomes visible.

Speaker #2: The gap is widening. That is operating leverage. Following years of investments and consolidation, costs have broadly stabilized, while income continues to grow. This widening gap is where our operating leverage becomes visible.

Speaker #2: And now let's zoom in on the last two and a half years. And there's a reason why I'm showing you the period. Around 3 years ago, may you remember, we started to systematically strengthen our operating performance.

Speaker #2: And now let's zoom in on the last two and a half years. And there's a reason why I'm showing you this period: around three years ago, as you may remember, we started to systematically strengthen our operating performance.

Speaker #2: And over the last 6 quarters, that work has become increasingly visible in a clear trend emerging. Income has grown significantly, while costs have remained broadly stable.

Speaker #2: And over the last six quarters, that work has become increasingly visible, with a clear trend emerging. Income has grown significantly, while costs have remained broadly stable.

Speaker #2: This is operating leverage. We have been worked towards. And you can see the impact on our cost-income ratio. It has improved steadily. From 64.4% at the end of 2024 to 50.6% today.

Speaker #2: This is operating leverage we have been working towards, and you can see the impact on our cost-income ratio. It has improved steadily, from 64.4% at the end of 2024 to 50.6% today.

Speaker #2: And this is not a quarterly effect. It is a result of disciplined work and fundamental improvement that are increasingly taking effect. And this creates flexibility, we need to navigate, even in a challenging environment.

Sebastian Hirsch: This is operating leverage we have been worked towards. You can see the impact on our cost-income ratio. It has improved steadily, from 64.4% at the end of 2024 to 50.6% today. This is not a quarterly effect. It is a result of disciplined work and fundamental improvement that are increasingly taking effect. This creates flexibility we need to navigate even in a challenging environment, at the same time gives us confidence that we are on the right track to increase our return on equity. So what does that mean for the full year's guidance 2026? First, we confirm our earnings guidance of EUR 74 to EUR 86 million. For new business, given the continued weakness in investment activity, we currently expect to come in at the lower end of our guidance of 3.4 to 3.6 billion range.

Speaker #2: This is not a quarterly effect; it is a result of disciplined work and fundamental improvement that are increasingly taking effect. This creates the flexibility we need to navigate even in a challenging environment.

Speaker #2: And at the same time, gives us confidence that we are on the right track to increase our return on equity. So what does that mean for the full year's guidance 2026?

Speaker #2: And at the same time, it gives us confidence that we are on the right track to increase our return on equity. So, what does that mean for the four-year guidance for 2026?

Speaker #2: First, we confirm our earnings guidance of 74 to 86 million euro. For new business, given the continued weakness in investment activity, we currently expect to come in at the lower end of our guidance of 3.4 to 3.6 billion range.

Speaker #2: First, we confirm our earnings guidance of $74 to $86 million. For new business, given the continued weakness in investment activity, we currently expect to come in at the lower end of our guidance of $3.4 to $3.6 billion range.

Speaker #2: There are, however, two important underlying parameters I would like to point out, where our expectations have changed and would just important for our earnings.

Speaker #2: There are, however, two important underlying parameters I would like to point out where our expectations have changed, and which are important for our earnings.

Speaker #2: On risk, the macroeconomic environment has proven more challenging than we expected at the beginning of the year. We therefore expect the loss rate to remain elevated, also portfolio growth should help bring the full year's ratio below 2%.

Speaker #2: On risk, the macroeconomic environment has proved more challenging than we expected at the beginning of the year. We therefore expect the loss rate to remain elevated, although portfolio growth should help bring the four-year ratio below 2%.

Sebastian Hirsch: There are, however, two important underlying parameters I would like to point out where our expectations have changed and which is important for our earnings. On risk, the macroeconomic environment has proven more challenging than we expected at the beginning of the year. We therefore expect the loss rate to remain elevated, although portfolio growth should help bring the full year's ratio below 2%. On cost efficiency, it is the opposite. Our operating leverage is developing faster and better than expected, and now we expect our cost-income ratio to come in below our previous assumptions. In other words, higher risk is being offset by stronger operating income and stronger operating performance. That is why we remain on track for our earnings guidance 2026. Martin will later give you some insight on contribution margin too, and equity ratio for 2026. Ladies and gentlemen, 2026 is not our destination.

Speaker #2: On cost efficiency, it is the opposite. Our operating leverage is developing faster and better than expected, and now we expect our cost-income ratio to come in below our previous assumptions.

Speaker #2: In other words, higher risk is being offset by stronger operating income. And stronger operating performance. And that is why we remain on track for our earnings guidance 2026.

Speaker #2: In other words, higher risk is being offset by stronger operating income and stronger operating performance. That is why we remain on track with our earnings guidance for 2026.

Speaker #2: Martin will later give you some insights on contribution margin 2 and equity ratio for 2026. But ladies and gentlemen, 2026 is not our destination.

Speaker #2: Martin will give you some insights on contribution margin 2 and the equity ratio for 2026. But, ladies and gentlemen, 2026 is not our destination—it is one step on a longer path.

Speaker #2: It is one step on a longer path. Our ambition remains unchanged, 10% return on equity by 2030. And what I've shown you today is also how we intend to get there.

Speaker #2: Our ambition remains unchanged: a 10% return on equity by 2030. And what I've shown you today is also how we can get there. First, income: we continue to grow our portfolio.

Speaker #2: First, income. We continue to grow our portfolio. Selectively, and translate that growth into sustainable income. Second, risk. We will manage risk with discipline, based on data and clear decisions.

Sebastian Hirsch: It is one step on a longer path. Our ambition remains unchanged, 10% return on equity by 2030. What I've shown you today is also how we intend to get there. First, income. We continue to grow our portfolio selectively and translate that growth into sustainable income. Second, risk. We will manage risk with discipline based on data and clear decisions. Third, cost efficiency. We will continue to expand our operating leverage through digitalization and standardization. Income, risk, cost. These are the three levers on our path to create value and achieve 10% return on equity. The environment remains challenging. We do not ignore that. Our business is getting stronger, and our measures are working. This gives us flexibility to absorb the elevated risk burden and steer our business with composure and discipline.

Speaker #2: Selectively, and translate that growth into sustainable income. Second, risk: We will manage risk with discipline, based on data and clear decisions. And third, cost efficiency: We will continue to expand our operating leverage through digitalization and standardization.

Speaker #2: And third, cost efficiency. We will continue to expand our operating leverage through digitalization and standardization. Income, risk, cost. These are the three levers on our path to create value and achieve 10% return on equity.

Speaker #2: Income, risk, cost—these are the three levers on our path to create value and achieve a 10% return on equity. The environment remains challenging. We do not ignore that.

Speaker #2: The environment remains challenging. We do not ignore that. But our business is getting stronger, and our measures are working. This gives us flexibility to absorb the elevated risk burden and steer our business with composure and discipline.

Speaker #2: But our business is getting stronger, and our measures are working. This gives us flexibility to absorb the elevated risk burden and steer our business with composure and discipline.

Speaker #2: We remain on track for 2026 and on our path towards 10% return on equity. Thank you, and with that, I hand over to Martin now.

Speaker #2: We remain on track for 2026 and on our path towards a 10% return on equity. Thank you, and with that, I hand over to Martin Lau.

Speaker #1: Thank you, Sebastian, and also a very warm welcome from my side. Now let's take a closer look at our financial figures regarding the first half year of 2026.

Speaker #1: Thank you, Sebastian, and also a very warm welcome from my side. Now, let's take a closer look at our financial figures regarding the first half-year of 2026.

Sebastian Hirsch: We remain on track for 2026 and on our path towards 10% return on equity. Thank you. With that, I hand over to Martin Paal.

Speaker #1: Following our strategic value levers, I would like to start with our operating income side. The foundation for our operating income creation is our leasing new business, not only of the past quarter, but the overall running lease portfolio, as Sebastian just showed you a second ago.

Martin Paal: Thank you, Sebastian, and also a very warm welcome from my side. Now, let's take a closer look at our financial figures regarding the H1 2026. Following our strategic value levers, I would like to start with our operating income side. The foundation for our operating income creation is our leasing new business, not only of the past quarter, but the overall running lease portfolio, as Sebastian just showed you a second ago. In the H1 2026, we achieved an increase in leasing new business by 1.4% to EUR 1.6 billion, despite the continuous challenging environment. With that, we are quite pleased. Leasing new business growth was mainly attributable to our core markets, with a strong performance in Germany, followed by France and Italy.

Speaker #1: In the first half of 2026, we achieved an increase in leasing new business by 1.4% to 1.6 billion despite a continuous challenging environment. And with that, we are quite pleased.

Speaker #1: In the first half of 2026, we achieved an increase in leasing new business by 1.4% to €1.6 billion, despite the continuously challenging environment. And with that, we are quite pleased.

Speaker #1: Leasing new business growth was mainly attributable to our core markets with a strong performance in Germany, followed by France and Italy. And as you can see on this slide, new business in our DACH region rose by 7.5% up to 405 million euro, while Western Europe increased by 3% to 429 million.

Speaker #1: Leasing new business growth was mainly attributable to our core markets, with strong performance in Germany, followed by France and Italy. And as you can see on this slide, new business in our DACH region rose by 7.5% to $405 million, while Western Europe increased by 3% to $429 million.

Speaker #1: And Southern Europe recorded a 3.1% growth to 422 million. In our Northern Eastern region, however, we saw a decline in new business by around 11% compared to the first 6 months of last year to 220 273 million euro.

Speaker #1: And Southern Europe recorded a 3.1% growth to $422 million. In our Northern and Eastern region, however, we saw a decline in new business by around 11.5% compared to the first six months of last year, to $2,273 million.

Martin Paal: As you can see on this slide, new business in our DACH region rose by 7.5%, up to EUR 405 million, while Western Europe increased by 3% to EUR 429 million, and Southern Europe recorded a 3.1% growth to EUR 422 million. In our Northern & Eastern Europe region, however, we saw a decline in new business by around 11% compared to the first six months of last year to EUR 273 million. Alongside a strong H1 2025 in this region, this primarily stemmed from the end of subsidies for e-bikes in Finland in the H2 of last year, as well as a greater steering towards higher local overall profitability in other countries, such as, for example, Denmark or Sweden. Our other regions, which include our future core markets like the US, Canada and Australia, however, maintained their growth with 3.3% to EUR 116 million.

Speaker #1: And alongside a strong first half-year in 2025 in this region, this primarily stemmed from the end of subsidies for e-bikes in Finland in the second half of last year, as well as a greater steering towards higher local overall profitability in other countries, such as, for example, Denmark or Sweden.

Speaker #1: And alongside a strong first half year in 2025 in this region, this primarily stemmed from the end of subsidies for e-bikes in Finland, in the second half of last year, as well as a greater steering towards higher local overall profitability in other countries such as, for example, Denmark or Sweden.

Speaker #1: Our other regions, which include our future core markets like the U.S., Canada, and Australia, however, maintained their growth with 3.3%, to €116 million.

Speaker #1: Our other regions which include our future core markets, like the US, Canada, and Australia, however, maintained their growth with 3.3% to 116 million euro.

Speaker #1: And especially here, our U.S. business, which doubled in size—as well as Canada, with around 10% growth—drove the performance in this region over the past six months.

Speaker #1: And especially here, our US business, which doubled in size, as well as Canada, with around 10% growth, drove the performance in this region over the past 6 months.

Speaker #1: And this development underlines the growing relevance of these markets for us. So, overall, we achieved growth across our markets, despite, in some cases, a significant decline in overall investment activity. This allowed us to increase our market shares in many countries.

Speaker #1: And this development underlines the growing relevance of these markets for us. So overall, we achieved growth across our markets, despite in some cases a significant decline in overall investment activity, allowing us to increase our market shares in many countries.

Martin Paal: Especially here, our US business, which doubled in size, as well as Canada with around 10% growth, drove the performance in this region over the past six months. This development underlines the growing relevance of these markets for us. Overall, we achieved growth across our markets, despite in some cases a significant decline in overall investment activity, allowing us to increase our market shares in many countries. This performance enabled us to maintain our leasing new business at a solid level. We use our CM2 margin as a key metric to steer quality or, in essence, profitability of our leasing new business during the period. At 15.9% for the H1 2026 and 15.6% in Q2, our CM2 margin accounts especially for two facts. The interest rate environment, reflecting the newest increase in ECB interest rate, which we saw at the end of the Q2.

Speaker #1: This performance enabled us to maintain our leasing new business at a solid level. We use our CM2 margin as a key metric to steer the quality or, in essence, the profitability of our leasing new business during the period.

Speaker #1: This performance enabled us to maintain our leasing new business at a solid level. We use our CM2 margin as a key metric to steer quality or, in essence, profitability of our leasing new business during the period.

Speaker #1: At 15.9% for the first half of 2026 and 15.6% in Q2, our CM2 margin accounts especially for two factors: the interest rate environment, reflecting the newest increase in the ECB interest rate, which we saw at the end of the second quarter.

Speaker #1: At 15.9% for the first half of 2026 and 15.6% in Q2, our CM2 margin accounts especially for two facts. The interest rate environment, reflecting the newest increase in ECB interest rate, which we saw at the end of the second quarter.

Speaker #1: In the previous year's first half, we still profited from some tailwind of a lowered interest rate. And second, our CM2 margin also reflects the currently elevated level of risk provisions.

Speaker #1: In the previous year's first half, we still profited from some tailwind of lowered interest rate. And second, our CM2 margin also reflects the currently elevated level of risk provisions.

Speaker #1: Since Germany continues to achieve strong performance in new business, its share in the overall new business portfolio also increases. And with traditionally lower CM2 margins there, this slightly affected our group CM2 margin as well.

Speaker #1: Since Germany continues to achieve a strong performance in new business, its share in the overall new business portfolio also increases. And with traditionally lower CM2 margins there, this slightly affected our group CM2 margin as well.

Martin Paal: In the previous year's H1, we still profited from some tailwind of lowered interest rate. Second, our CM2 margin also reflects the currently elevated level of risk provisions. Since Germany continues to achieve a strong performance in new business, its share in the overall new business portfolio also increases. With traditionally lower CM2 margins there, this slightly affected our group CM2 margin as well. Most important for our steering of our CM2 margin is that our measures for risk-adequate pricing and proactive management of our portfolio are taking effect. With roughly 16% CM2 margin for the H1 2026, we feel comfortable given the macroeconomic environment we face today. Reflecting this, we expect our CM2 margin to reach around 16% for the remaining year. Let's move on to our P&L.

Speaker #1: Most important for our steering of our CM2 margin is that our measures for risk-adequate pricing and proactive management of our portfolio are taking effect.

Speaker #1: Most important, for our steering of our CM2 margin, is that our measures for risk adequate pricing and proactive management of our portfolio are taking effect.

Speaker #1: And with roughly 16% CM2 margin for the first half of 2026, we feel comfortable given the macroeconomic environment we face today. Reflecting this, we expect our CM2 margin to reach around 16% for the remainder of the year.

Speaker #1: And with roughly 16% CM2 margin for the first half of 2026, we feel comfortable given the macroeconomic environment we face today. And reflecting this, we expect our CM2 margin to reach around 16% for the remaining year.

Speaker #1: Let's move on to our P&L. In the first six months of this year, we saw strong growth in our operating income by 11%, to $353 million.

Speaker #1: Let's move on to our P&L. In the first 6 months of this year, we saw strong growth in our operating income by 11% to 353 million euro, driven by both our growing net interest income of 215 million euro as well as a strong profit from new and service business of 138 million euro.

Speaker #1: Driven by both our growing net interest income of $215 million, as well as strong profit from new and service business of $138 million.

Speaker #1: Including gains from disposals. At the same time, we managed to keep our cost development at a slow level. With costs of $182 million, increasing only by 1.5% compared to the first half of 2025, our continuous efforts in cost discipline as well as efficiency measures showed satisfying effects.

Martin Paal: In the first 6 months of this year, we saw strong growth in our operating income by 11% to EUR 353 million, driven by both our growing net interest income of EUR 250 million, as well as a strong profit from new and service business of EUR 138 million, including gains from disposals. At the same time, we managed to keep our cost development on a slow level, with cost of EUR 182 million increasing only by 1.5% compared to the H1 2025. Our continuous efforts in cost discipline as well as efficiency measures showed satisfactory effects. This led us to a significant improvement of our operating result before settlement of claims and risk provision by roughly 23% to EUR 171 million. Our cost-income ratio improved from 56.4% to 51.6% accordingly. Throughout 2026, we will continue on this path, strengthening our operational efficiency towards higher profitability.

Speaker #1: Including gains from disposals. At the same time, we managed to keep our cost development on a slow level. With cost of 182 million euro, increasing only by 1.5% compared to the first half of 2025, our continuous efforts in cost discipline as well as efficiency measures showed satisfactory effects.

Speaker #1: And this led us to a significant improvement of our operating result before settlement of claims and risk provision by roughly 23% to $171 million.

Speaker #1: And this led us to a significant improvement of our operating result before settlement of claims and risk provision by roughly 23% to 171 million euro.

Speaker #1: And our cost-income ratio improved from 56.4% to 51.6% accordingly. So, throughout 2026, we will continue on this path, strengthening our operational efficiency towards higher profitability.

Speaker #1: And our cost income ratio improved from 56.4 to 51.6% accordingly. So throughout 2026, we will continue on this path, strengthening our operational efficiency towards higher profitability.

Speaker #1: After operating income and operating cost, I'm now heading over to our third strategic key lever: risk. So let me also be frank: the first half of 2026 was characterized by continued uncertainty in the economic environment, also impacting our customers and their payment behavior.

Speaker #1: After operating income and operating cost, I'm now heading over to our third strategic key lever, risk. So let me also be frank, the first half of 2026 was characterized by continued uncertainty in the economic environment, also impacting our customers and their payment behavior.

Speaker #1: In consequence, we observed persistently high insolvencies and a still elevated level of defaults. Therefore, the settlement of claims and risk provisions rose from €95 million to €119 million, resulting in a loss rate of 2%.

Martin Paal: After operating income and operating cost, I am now heading over to our third strategic key lever, risk. Let me also be frank, the H1 2026 was characterized by continued uncertainty in the economic environment, also impacting our customers and their payment behavior. In consequence, we observed persistently high insolvencies and a still elevated level of defaults. Therefore, the settlement of claims and risk provisions rose from 95 to EUR 119 million, resulting in a loss rate of 2%. Even though our loss rate remains notably elevated above our long-term average of 1.5%, our operating leverage largely compensates for this increase. As mentioned some slides before, we have already accounted for higher loss rates in our newly settled leasing contracts while continuing our efforts in debt collection for defaulted contracts such as AI solutions with call agents.

Speaker #1: In consequence, we observed persistently high insolvencies and a still elevated level of defaults. Therefore, the settlement of claims and risk provisions rose from 95 to 119 million euro resulting in a loss rate of 2%.

Speaker #1: Even though our loss rate remains notably elevated above our long-term average of 1.5%, our operating leverage largely compensates for this increase. And as mentioned some slides before, we have already accounted for higher loss rates in our newly settled leasing contracts, while continuing our efforts in debt collection for defaulted contracts, such as AI solutions with call agents.

Speaker #1: Even though our loss rate remains notably elevated above our long-term average of 1.5%, our operating leverage largely compensates for this increase. And as mentioned some slides before, we have already accounted for higher loss rates in our newly settled leasing contracts while continuing our efforts in debt collection for defaulted contracts such as AI solutions with call agents.

Speaker #1: Ladies and gentlemen, our goal remains clear: to sustainably increase our return on equity to 10% by 2030. Throughout the first half of 2026, we have already registered notable progress.

Speaker #1: Ladies and gentlemen, our goal remains clear. To sustainably increase our return on equity to 10% by 2030. Throughout the first half of 2026, we already registered a notable progress.

Speaker #1: Our group earnings came in at €32.6 million, compared to €26.2 million in the previous first half year. Worth mentioning in that context is a slightly higher tax rate of 26.4%, which was influenced by a one-off effect in Q2, but also resulted from current shifts favoring our core markets of Germany, France, and Italy.

Speaker #1: Our group earnings came in at 32.6 million euro, compared to 26.2 million in the previous first half year. Worth mentioning in that context is a slightly higher tax rate with 26.4%, which was influenced by a one-off effect in Q2, but also resulting from current shifts favoring our core markets of Germany, France, and Italy.

Martin Paal: Ladies and gentlemen, our goal remains clear, to sustainably increase our return on equity to 10% by 2030. Throughout the H1 2026, we already registered a notable progress. Our group earnings came in at EUR 32.6 million compared to EUR 26.2 million in the previous H1. Worth mentioning in that context is a slightly higher tax rate with 26.4%, which was influenced by a one-off effect in Q2, but also resulting from current shifts favoring our core markets of Germany, France, and Italy. At the end, our group earnings led us to a return on equity after taxes annualized of 4.6%, or as Sebastian just mentioned, a plus of 80 basis points. As you know, return on equity can fluctuate since it is an annualized figure, but what genuinely matters is the profitability curve over time. We are on the right track since we have advanced consistently.

Speaker #1: At the end, our group earnings led us to a return on equity after taxes, annualized, of 4.6%, or, as Sebastian just mentioned, an increase of 80 basis points.

Speaker #1: At the end, our group earnings led us to a return on equity after taxes annualized of 4.6% or, as Sebastian just mentioned, a plus of 80 basis points.

Speaker #1: As you know, return on equity can fluctuate since it is an annualized figure, but what generally matters is the profitability curve over time. And we are on the right track since we have advanced consistently.

Speaker #1: As you know, return on equity can fluctuate since it is an annualized figure, but what genially matters is the profitability curve over time. And we are on the right track since we have advanced consistently.

Speaker #1: Primarily, we improved our cost-income ratio significantly. The combination of strong revenue growth with strict and disciplined cost management is crucial for our path towards higher profitability, no matter the macroeconomic environment.

Speaker #1: Primarily, we improved our cost income ratio significantly. The combination of a strong revenue growth with strict and disciplined cost management are crucial for our path towards higher profitability, no matter the macroeconomic environment.

Speaker #1: And in light of this development, we maintain ongoing confidence that our return on equity will continue to improve throughout the second half of the year.

Speaker #1: And in the light of this development, we maintain ongoing confidence that our return on equity will continue to improve throughout the second half of the year.

Martin Paal: Primarily, we improved our cost-income ratio significantly. The combination of a strong revenue growth with strict and disciplined cost management are crucial for our path towards higher profitability, no matter the macroeconomic environment. In the light of this development, we maintain ongoing confidence that our return on equity will continue to improve throughout the H2 of the year. Before we enter into our Q&A session, I will now turn a short look to our funding mix, which provides the financial foundation for our leasing growth. As you are aware, our funding mix relies on four debt pillars. After our debt debut issuance with the first local bond in Australian dollar in last year's Q3, we achieved a successful placement of our first Canadian dollar bond in May this year.

Speaker #1: Before we enter into our Q&A session, I'll now take a short look at our funding mix, which provides the financial foundation for our leasing growth.

Speaker #1: Before we enter into our Q&A session, I'll now turn a short look to our funding mix, which provides the financial foundation for our leasing growth.

Speaker #1: As you are aware, our funding mix relies on four debt pillars. After our debt debut issuance with the first local bond in Australian dollars in last year's Q3, we achieved a successful placement of our first Canadian dollar bond in May this year.

Speaker #1: As you are aware, our funding mix relies on four debt pillars. After our debt debut issuance, with the first local bond in Australian dollar in last year's Q3, we achieved a successful placement of our first Canadian dollar bond in May this year.

Speaker #1: The new bond issued with a volume of 100 Canadian dollars provides dedicated refinancing for our local leasing activities in Canada, underlying the relevance as one of our future core markets next to Australia and the US.

Speaker #1: The new bond issued with a volume of 100 Canadian dollar provides dedicated refinancing for our local leasing activities in Canada underlying the relevance as one of our future core markets next to Australia and the US.

Speaker #1: So at the end, our senior unsecured pillar now stands at €3.5 billion, accounting for 47% of our funding mix. To move on with our pillars, deposit business accounted for €2.3 billion, while our asset-backed pillar totaled almost €1 billion.

Speaker #1: So at the end, our senior unsecured pillar now stands at 3.5 billion euro, accounting for 47% of our funding mix. To move on with our pillars, deposit business accounted for 2.3 billion, while our asset-backed pillar totaled almost 1 billion.

Martin Paal: The new bond issued with a volume of CAD 100 provides dedicated refinancing for our local leasing activities in Canada, underlying the relevance as one of our future core markets next to Australia and the US. Our senior unsecured pillar now stands at EUR 3.5 billion, accounting for 47% of our funding mix. To move on with our pillars, deposit business accounted for EUR 2.3 billion, while our asset-backed pillar totaled almost EUR 1 billion. Completing our funding mix, external bank funding amounted to nearly EUR 600 million. This pillar also includes revolving credit facilities we have in place, for example, with our partner Intesa Sanpaolo in Italy. Ladies and gentlemen, in the current volatile market environment, we place particular importance on maintaining a funding base that offers sufficient liquidity and reliable execution capacity.

Speaker #1: And completing our funding mix, external bank funding amounted to nearly $600 million. This pillar also includes revolving credit facilities we have in place—for example, with our partner Intesa Sanpaolo in Italy.

Speaker #1: And completing our funding mix, external bank funding amounted to nearly 600 million euro. This pillar also includes revolving credit facilities we have in place for example with our partner Intesa Sanpaolo in Italy.

Speaker #1: Ladies and gentlemen, in the current volatile market environment, we place particular importance on maintaining a funding base that offers sufficient liquidity and reliable execution capacity.

Speaker #1: Our funding mix gives us a solid refinancing foundation to support our future growth ambitions in leasing new business. And with an expected equity ratio of around 15% by the end of that year, we are well equipped to support further growth.

Speaker #1: And with that, we are now looking forward to your questions. Thank you very much for your attention. Now, back to you, Franziska.

Speaker #2: Thank you very much, Sebastian. Thank you, Martin, for your presentations. Ladies and gentlemen, we will now enter into our Q&A session. Now, depending on which link you joined us through today, you can ask a written or an oral question.

Speaker #1: And with that, we are now looking forward to your questions. Thank you very much for your attention. Now back to you, Franziska.

Martin Paal: Our funding mix gives us a solid refinancing foundation to support our future growth ambitions in leasing new business. With an expected equity ratio of around 15% by the end of that year, we are well equipped to support further growth.

Speaker #2: Thank you very much, Sebastian. Thank you, Martin, for your presentation. Ladies and gentlemen, we will now enter into our Q&A session. Now, depending through which link you joined us today, you can ask a written and oral question.

Speaker #2: If you see a little hand symbol at the top of your screen, you're welcome to raise your hand in case you have questions or would like to ask an oral question.

Speaker #2: If you see a little hand symbol at the top of your screen, you're welcome to raise your hand in case of questions to ask an oral question.

Sebastian Hirsch: With that, we are now looking forward to your questions. Thank you very much for your attention. Now back to you, Franziska.

Martin Paal: With that, we are now looking forward to your questions. Thank you very much for your attention. Now back to you, Franziska.

Speaker #2: Please note, at this stage, that our lines are muted. I will call up your name; your line is being unmuted. Then, don't forget, please, to also unmute your device.

Franziska Randt: Thank you very much, Sebastian. Thank you, Martin, for your presentations. Ladies and gentlemen, we will now enter into our Q&A session. Depending through which link you joined us today, you can ask a written or oral question. If you see a little hand symbol at the top of your screen, you are welcome to raise your hand in case of questions to ask an oral question. Please note at this stage that all lines are muted. I will call up your name, your line is being unmuted, and then don't forget, please, to also unmute your device. You are also welcome to use the chat function for the Q&A you might have. We have a first question coming from Marius Fuhrberg from Berenberg. Your line is unmuted. You can go ahead now, Marius.

Speaker #2: Please note at this stage that our lines are muted. I will call up your name, your line is being unmuted, and then don't forget please to also unmute your device.

Speaker #2: But you're also welcome to use the chat function for the Q&As. You might have. So, we have a first question coming from Marius Wolberg from Berenberg.

Speaker #2: But you're also welcome to use the chat function for the Q&As. You might have. So we have a first question coming from Marius Fuhrberg from Berenberg.

Speaker #2: Your line is unmuted. You can go ahead now, Marius.

Speaker #3: Yeah. Hope you can hear me.

Speaker #2: Yes.

Speaker #3: Great, thanks for taking my questions. I have a few of them for May. The first one is on the cost-income ratio, which developed quite well in Q2.

Speaker #2: Your line is unmuted. You can go ahead now, Marius.

Speaker #3: Yeah. Hope you can hear me.

Speaker #2: Yes.

Speaker #3: Would you consider this sustainable, or are you putting extraordinary effort on costs in order to protect profitability in the quarter? Which means there could be a cost development catch-up once the loss ratio is coming down.

Speaker #3: Great. Thanks for taking my questions. A few of them for May. The first one on the cost income ratio, which developed quite well in Q2.

Speaker #3: Would you consider this sustainable or did you put extraordinary effort on costs in order to protect profitability in the quarter? Which means could the cost development catch up once loss ratio is coming down?

Speaker #3: Second question, on new business: Apart from the finance basis effect, do you generally see low demand from the broad customer base against the backdrop of the overall economy?

Marius Fuhrberg: Yeah. Hope you can hear me.

Franziska Randt: Yes.

Marius Fuhrberg: Great. Thanks for taking my questions. I have a few of them for Marius Fuhrberg. The first one on the cost-income ratio, which developed quite well in Q2, which considered it is sustainable or did you put extraordinary effort on cost in order to protect profitability in the quarter, which means it could be cost development catch up once loss ratio is coming down. Second question on new business. Apart from the Finland basis effect, do you generally see low demand from broad customer base against the backdrop of the overall economy? The third question here to, once again, with a bit more color, please, on Sweden and Denmark. You mentioned active steering in those countries, but have those countries showed significantly lower profitability in the past?

Speaker #3: Second question, on new business, apart from the Finland basis effect, do you generally see low demand from broad customer base against the backdrop of the overall economy?

Speaker #3: And the third question here, once again, with a bit more color, please, on Sweden and Denmark. You mentioned active steering in those countries, but have those countries shown significantly lower profitability in the past?

Speaker #3: And the third question here, do once again, with a bit more color, please on Sweden and Denmark, you mentioned active steering in those countries, but have those countries showed significantly lower profitability in the past because looking at the two margin in Northern Europe, it appeared fairly high and also with your chart just recently shown with the risk development, it appeared that Northern Europe have remained fairly stable in with regards to risk costs and therefore please give us a little bit more color why you have steered down new business against this setup.

Speaker #3: Because looking at the two margins in Northern Europe, it appeared fairly high, and also with your chart just recently shown with the risk development, it appeared that Northern Europe has remained fairly stable with regard to risk costs. Therefore, please give us a little bit more color as to why you have steered down new business against this setup.

Marius Fuhrberg: Because looking at the CM2 margin in Northern Europe, it appeared fairly high, and also with your chart just recently shown with the risk development, it appeared that Northern Europe have remained fairly stable in regards to risk costs. Therefore, please give us a little bit more color why you have steered down new business against this setup. The last one on the disposal side, which were on a record high in Q2. Whereas you mentioned on previous calls that they will sooner or later come down. Any feeling when we should expect respective development, or when or how long we should expect those to remain that high?

Speaker #3: And the last one on the disposal side, which were at a record high in Q2, whereas you mentioned in previous calls that they will sooner or later come down.

Speaker #3: And the last one on the disposal side, which were on a record high in Q2, whereas you mentioned in previous calls that they will sooner or later come down.

Speaker #3: Any feeling when we should expect respective development, and/or how long we should expect those to remain that high?

Speaker #3: Any feeling when we should expect respective development and or when how long we should expect those to remain that high?

Speaker #4: Yes, thanks for the first question. I will take the first two, and then Martin will add their answers. First, cost-income ratio. From the trend perspective, we believe that it is sustainable quarter by quarter.

Speaker #1: Yes, thanks for the first question. I will take the first two and then Martin will add their answers. First, cost income ratio. From the trend perspective, we guess that it is sustainable quarter by quarter.

Speaker #4: There will be maybe a bit of migration because of different income development and maybe some cost impacts in a single quarter. So it's important to put it more in a long-term perspective, as we did at the beginning of my presentation.

Speaker #1: They will be maybe a bit migration because of different income development and maybe some cost impacts in a single quarter. So it's important to putting it more in a long-term or mid-term perspective as we did at the beginning of my presentation.

Sebastian Hirsch: Yeah. Thanks for the first question. I will take the first two, and then Martin Paal will add the answers. First, cost-income ratio. From the trend perspective, we guess that it is sustainable quarter by quarter. There will be maybe a bit migration because of different income development, and maybe some cost impacts in a single quarter. So it's important to putting it more in a long-term or midterm perspective as we did at the beginning of my presentation. But that ratio and that operating leverage should be sustainable. There's no link between cost and the performance in risk. So I don't see there any link that when risk come down, then costs are going up or something like that. That may not be the case.

Speaker #4: But that ratio and that operating leverage should be sustainable. And there's no link between cost and the performance in risk. So I don't see any link that when risk comes down, costs are going up or something like that.

Speaker #1: But that ratio and that operating leverage should be sustainable. And there's no link between cost and the performance in risk. So I don't see there any link that when risk come down then costs are going up or something like that.

Speaker #4: That will not be the case. To be honest, when new business is growing faster, or when we are expanding new business, we may also see some special costs for sales that are more linked to that.

Speaker #1: That will not be the case. To be honest, when new business is growing faster when we expanding new business and we may see also some special costs for sales that is more linked to that.

Speaker #4: But there's no link between risk and cost, so the cost-income ratio is more or less free from the risk development. For Finland, it's, on the one hand, a lower demand because of the macroeconomic environment.

Speaker #1: But there's no link between risk and cost. So the cost income ratio is more or less free from the risk development. For Finland, it's on the one hand a lower demand because of the macroeconomic environment.

Sebastian Hirsch: To be honest, when new business is growing faster, when we expanding new business, then we may see also some special costs for sales, that is more linked to that, but there is no link between risk and cost. The cost-income ratio is more or less free from the risk development. For Finland, it is on one hand, a lower demand because of the macroeconomic environment, and the down in the leasing for bikes, for e-bikes is also sustainable because it was stopped in the middle of last year if I am right. We also see the base impact is now running off. In the H2 of the year, especially in Q4 that year and then next year, we will not have that base impact on the e-bike business. That is sustainable.

Speaker #4: And the downturn in the leasing for bikes, for e-bikes, is also sustainable because it was stopped in the middle of last year, if I'm right.

Speaker #1: And the down in the leasing for bikes, for e-bikes is also sustainable because it was stopped in the middle of last year if I'm right.

Speaker #4: So we also see the base impact is now running off. In the second half of the year, especially in the fourth quarter of that year and then next year, we will not have that base impact from the e-bike business.

Speaker #1: So we also see the base impact is now running off. So in the second half of the year especially in the fourth quarter of that year and then next year we will not have that base impact from the e-bike business.

Speaker #4: So, that is sustainable in terms of the overall demand. Finland is more or less in line with all the Nordic countries. Martin will give some color on Sweden and Denmark.

Speaker #1: So that is sustainable in terms of the overall demand Finland is more or less in line with all the Nordic countries Martin will give some color to Sweden and Denmark.

Speaker #4: And also to the deposit, just one comment from my side. In a long-term perspective, you should always see the profit or losses of disposals together with the interest income.

Speaker #1: And also to the deposit just one comment from my side. In a long-term perspective, you should always see the profit or losses of disposals together with the interest income.

Speaker #4: Because at the end of the day, it's a gamble between the expected residual value at the beginning for the interest calculation of the leasing receivables, and only the difference between the expected residual value at the beginning and the realized residual value at the end is then in that profit line.

Sebastian Hirsch: In terms of the overall demand, Finland is more or less in line with all the Nordic countries. Maybe Martin will give some color to Sweden and Denmark and also to the deposit, just one comment from my side. In a long-term perspective, you should always see the profit or losses of disposals together with the interest income, because at the end of the day, it is a gambling between the expected residual value at the beginning for the interest calculation of the leasing receivables, and only the difference between the expected residual value at the beginning and the realized residual value at the end is done in that profit line. When there is a difference, we always adjust our expectation. Interest income or interest earnings and that line on a long-term perspective, you should put together when you analyze it.

Speaker #1: Because at the end of the day, it's a gambling between the expected residual value at the beginning for the interest calculation of the leasing receivables and only the difference between the expected residual value at the beginning and the realized residual value at the end is then in that profit line and when there's a difference we always adjust our expectation so interest income or interest earnings and that line on a long-term perspective you should put together when you analyze it.

Speaker #4: And when there's a difference, we always adjust our expectation. So, interest income or interest earnings—and that line, on a long-term perspective—you should put together when you analyze it.

Speaker #1: Yeah. Morning, Mr. Wolberg. Happy to answer the third question regarding Sweden and Denmark. Well, I could have pointed out maybe also other countries in the Northern, Eastern region because this region is, in general, not performing well.

Speaker #4: Yeah. Morning Mr. Fuhrberg. Happy to answer the third question regarding Sweden and Denmark. Well, I could have pointed out maybe also other countries in Northern Eastern region because this region is in general not performing well.

Speaker #1: You have seen it in the new business figures. But especially, pointing to Denmark and Sweden means that we steer a country specifically if we see a difference between, maybe, the macroeconomic challenges that affect a country—or affect all countries—or whether we see, in the specific countries, kind of, as you mentioned, low profitability, for example.

Speaker #4: You have seen it in the new business figures. But especially pointing to Denmark and Sweden means that we steer a country specifically if we see a difference between maybe the macroeconomic challenges that affects a country or affect all countries or whether we see in the specific countries kind of as you mentioned low profitability for example where we then even more go in and are more selective in our reseller network where we are more active in taking them out of our reseller portfolio and that in a first instance always has an effect on our leasing new business because it directly has an impact on this leasing new business production.

Martin Paal: Morning, Mr. Fuhrberg. Happy to answer the third question regarding Sweden and Denmark. Well, I could have pointed out maybe also other countries in Northern & Eastern Europe region because this region is in general not performing well. You have seen it in the new business figures. But especially pointing to Denmark and Sweden means that we steer a country, specifically if we see a difference between maybe the macroeconomic challenges that affects a country or affect all countries, or whether we see in the specific countries kind of, as you mentioned, low profitability, for example, where we then even more go in and are more selective in our reseller network, where we are more active in taking them out of our reseller portfolio. That, in the first instance, always has an effect on our leasing new business because it directly has an impact on this leasing new business production.

Speaker #1: Where we then even more go in and are more selective in our reseller network, where we are more active in taking them out of our reseller portfolio.

Speaker #1: And that, in a first instance, always has an effect on our leasing new business because it directly has an impact on this leasing new business production.

Speaker #1: And then onboarding new resellers, where we build up trust with them, takes some time. And that's why I pointed out Sweden and Denmark specifically.

Speaker #4: And then boarding on new resellers where we build up trust with them take some while and that's why I pointed out here Sweden and Denmark specifically.

Speaker #1: Maybe just one addition to the disposal, again, which Sebastian just explained. A factor is also that we see that our customers are going on to lease.

Speaker #4: Maybe just one addition to the disposal. Again which Sebastian just explained. A factor is also that we see that our customers are going on to lease for longer period of time.

Speaker #1: For a longer period of time, their contracts may be because they think the objects are still working. Why change them? Maybe there are, in the delivery chain, some issues that we do not get the objects.

Martin Paal: Boarding on new resellers where we build up trust with them takes some while, and that is why I pointed out here Sweden and Denmark specifically. Maybe just one addition to the disposal gains, which Sebastian just explained. A factor is also that we see that our customers are going on to lease for a longer period of time their contracts, maybe because they think the objects are still working. Why changing them? Maybe there are, in the delivery change, some issues that we do not get the objects. This has all to do at the end with the customer behavior, how long they continue to use the objects, and the longer they use it, the higher is the disposal income. We are evaluating this. Clearly, this is not a one-off effect in this quarter.

Speaker #4: Their contracts maybe because they think the objects are still working. Why changing them? Maybe there are in the delivery change some issues that we do not get the objects.

Speaker #1: This has all to do, at the end, with customer behavior—how long they continue to use their objects. And the longer they use them, the higher is the disposal income.

Speaker #4: This has all to do at the end with the customer behavior. How long they continue to use their objects and the longer they use it the higher is the disposal income.

Speaker #1: We are evaluating this clearly. This is not a one-off effect in this quarter. We have seen that over the last five to six quarters.

Speaker #1: That we have that elevated disposal income. And also, as Sebastian just mentioned, it is always the situation that it is either in the interest income side, or in the disposal income at the end, depending on the residual values we are estimating at the beginning of a contract.

Speaker #4: We are evaluating this clearly. This is not a one-off effect in this quarter. We have seen that over the last five to six quarter.

Speaker #4: That we have that elevated disposal income and also as Sebastian just mentioned it is always the situation that it is either in the on the interest income side or in the disposal income at the end depending on the residual values we are estimating at the beginning of a contract.

Speaker #2: Thank you very much for answering the questions. We have another question coming from the audio line from Roland Pfender from Odoo. Your line is being unmuted.

Martin Paal: We have seen that over the last five to six quarters that we have that elevated disposal income. As Sebastian just mentioned, it is always the situation that it is either on the interest income side or in the disposal income at the end, depending on the residual values we are estimating at the beginning of a contract.

Speaker #2: Thank you very much for answering the questions. We have another question coming from the audio line from Roland Pfänder from Odoo. Your line is being unmuted.

Speaker #2: You can go ahead now, Mr. Pfender.

Speaker #3: Yes, good morning. I have some questions from my side, please. First of all, could you comment on the loss rate according to the major countries you operate in?

Speaker #2: You can go ahead now Mr. Pfänder.

Speaker #3: Yes, good morning. Some questions from my side please. First of all, could you comment on the loss rate according to your major countries you operate in?

Speaker #3: So, where were the biggest deviations from your expectations that you had, let's say, at the beginning of the year? That's the first question. Now, coming back to cost development...

Franziska Randt: Thank you very much for answering the questions. We have another question coming from the audio line from Roland Pfänder from ODDO BHF. Your line is being unmuted. You can go ahead now, Mr. Pfänder.

Speaker #3: So where the biggest deviations to your expectations you had in let's say in the beginning of the year. It's the first question. Now coming back to cost development.

Speaker #3: Yes, you had some improvements there. But do you see it even differently now, as your leasing business or leasing volume looks like it will grow less than maybe expected earlier?

Speaker #3: Yes, you had some improvements there. But do you see it even differently now as you're leasing business or leasing volume looks like to grow less than maybe expected earlier?

Roland Pfänder: Yes, good morning. Some questions from my side, please. First of all, could you comment on the loss rate according to your major countries you operate in? So where are the biggest deviations to your expectations you had in, let's say, in the beginning of the year? That is the first question. Now coming back to cost development. Yes, you had some improvements there, but do you see it even differently now as your leasing business or leasing volume looks like to grow less than maybe expected earlier? So will you do more on cost development? Could you even see costs really declining year over year going forward in this scenario? What is your stance here? The last question on tax rate. You have a new business mix. What is the underlying tax rate to this business mix? Thank you.

Speaker #3: So, will you do more on cost development? Could you even see costs really declining year over year going forward in this scenario? What's your stance here?

Speaker #3: So will you do more on cost development? Could you even see costs really declining year over year going forward? In this scenario what's your stance here?

Speaker #3: And the last question on tax rate. Do you have a new business mix? What is the underlying reason? Thank you.

Speaker #3: And the last question on tax rate. Do you have a new business mix? What is the underlying tax rate to this business mix? Thank you.

Speaker #4: Thanks for the second round. I will start again and take the first one—the loss. Martin mentioned it in the presentation. I guess it is page 17.

Speaker #1: Thanks for the second round. I will start again. And take the first one. The loss rate been Martin mentioned it in the presentation. I guess it is page 17.

Speaker #4: There you see the settlement of claims and risk provisioning by regions. And there you can also point out that the region behind the DACH region is Germany, which is the biggest country.

Speaker #1: There you see the settlement of claims and risk provisioning by regions and there you can also point out the region behind the DACH region is Germany is the biggest country.

Speaker #4: Western Europe is France, and Southern Europe is Spain and Italy. And to make a long story short, those are the main drivers because of volume.

Martin Paal: Thanks for the second round. I will start again and take the first one. The loss rate, Martin mentioned it in the presentation. I guess it is page 17. There you see the settlement of claims and risk provisioning by regions. There you can also point out the region behind the DACH region is Germany is the biggest country. Western Europe is France, and Southern Europe, it is Spain and Italy. To make a long story short, that are the main drivers because of volume. Martin mentioned it as well. Across regions, we have a deviation in our expectation from the beginning of the year because of the macroeconomic environment. Then it is clear that the most important regions and countries of volume are also the driver in terms of deviation.

Sebastian Hirsch: Thanks for the second round. I will start again and take the first one. The loss rate, Martin mentioned it in the presentation. I guess it is page 17. There you see the settlement of claims and risk provisioning by regions. There you can also point out the region behind the DACH region is Germany is the biggest country. Western Europe is France, and Southern Europe, it is Spain and Italy. To make a long story short, that are the main drivers because of volume. Martin mentioned it as well. Across regions, we have a deviation in our expectation from the beginning of the year because of the macroeconomic environment. Then it is clear that the most important regions and countries of volume are also the driver in terms of deviation.

Speaker #1: Western Europe is France and Southern Europe it's Spain and Italy. And to make a long story short that are the main drivers because of volume.

Speaker #4: Martin mentioned it as well. Across regions, we have a deviation in our expectation from the beginning of the year because of the macroeconomic environment.

Speaker #4: And then it's clear that the most important reasons and countries for volume are. Also, the driver in terms of deviation. And maybe one comment on the loss rate.

Speaker #1: Martin mentioned it as well. Across regions we have a deviation in our expectation from the beginning of the year because of the macroeconomic environment.

Speaker #1: And then it's for clear that the most important reasons and countries of volume are also the driver in terms of deviation. Maybe one comment to the loss rate.

Speaker #4: The lower new business, as maybe expected at the beginning of the year, and you're also saying now that we will reach the lower end of our guidance range, has a small volume impact and also has an impact on the loss ratio, because the ratio—we divide the settlement of claims and risk provisioning.

Speaker #1: The lower new business as maybe expected at the beginning of the year and you're also saying now that we will reach the lower end of our guidance range has a small volume impact and has also an impact on the loss ratio because the ratio we divide the settlement of claims and risk provisioning through the volume and the volume is a bit lower and that drives a bit.

Speaker #4: So, the volume is a bit lower and that drives it. It's not the main driver, but when it will continue over the year, we're talking about 10 basis points.

Sebastian Hirsch: And maybe one comment to the loss rate is a lower new business as may be expected at the beginning of the year. We are also saying now that we will reach the lower end of our guidance range. It has a small volume impact and has also an impact on the loss ratio because the ratio we divide the settlement of claims and risk provision through the volume. The volume is a bit lower and that drives a bit. It is not the main driver, but when it will continue over the year, we are talking about 10 basis points loss ratio because of lower losses. That maybe is a link to the next question. Martin can answer some things about the cost development improvement.

Speaker #4: The loss ratio is lower because of lower risk, lower losses. And that maybe is a link to the next question. Martin can answer some things about the cost development improvement.

Speaker #1: It's not the main driver but when it will continue over the year we're talking about 10 basis points. The loss ratio because of lower risk.

Speaker #1: Lower losses. And that maybe is a link to the next question. Martin can answer some things about the cost development improvement. We are taking care on volume and quality and that overall should bring us to growth of the total assets and growth of the relevant volume for the income.

Speaker #4: We are taking care of volume and quality, and that overall should bring us to growth of the total assets and growth of the relevant volume for the income.

Speaker #4: And for sure, the growth pace at the moment in new business is not that high. It was a very slow growth rate for the first half of the year.

Speaker #4: But steered by quality. Selective by countries. You see that Germany, or the DACH region, moves at a different pace compared to Southern and Northern Europe. It depends a bit on the demand perspective, but also on our steering.

Speaker #1: And for sure the growth pace at the moment in new business is not that high. It was a very slow growth rate for the first half of the year.

Martin Paal: We are taking care on volume and quality, and that overall should bring us to growth of the total asset and growth of the relevant volume for the income. For sure, the growth pace at the moment in new business is not that high. It was a very slow growth rate for the H1 of the year. Still by quality selective by countries, you see that Germany or the DACH region with different pace than Southern Europe and Northern & Eastern Europe region. It depends a bit on the demand perspective, but also on our steering. We would like to growing our portfolio, growing our overall substance for the income. That is the most important thing. Mixing that, the right volume with the right risk appetite, so to say, will bring us to more volume, more substance, and at the end of the day, to a growing income.

Sebastian Hirsch: We are taking care on volume and quality, and that overall should bring us to growth of the total asset and growth of the relevant volume for the income. For sure, the growth pace at the moment in new business is not that high. It was a very slow growth rate for the H1 of the year. Still by quality selective by countries, you see that Germany or the DACH region with different pace than Southern Europe and Northern & Eastern Europe region. It depends a bit on the demand perspective, but also on our steering. We would like to growing our portfolio, growing our overall substance for the income. That is the most important thing. Mixing that, the right volume with the right risk appetite, so to say, will bring us to more volume, more substance, and at the end of the day, to a growing income.

Speaker #1: But steered by quality selective by countries you see that Germany or the DACH region was different pace. Then Southern Europe and Northern Europe it depends a bit on the demand perspective but also on our steering.

Speaker #4: And we would like to grow our portfolio, growing our overall substance for the income. That is the most important thing. And mixing the right volume with the right risk appetite, so to say, will bring us to more volume, more substance, and, at the end of the day, to a growing income.

Speaker #1: And we would like to growing our portfolio growing our overall substance for the income that is the most important thing and mixing that the right volume with the right risk appetite so to say will bring us to more volume more substance and at the end of the day to a growing income.

Speaker #1: Yeah. Morning, Mr. Pfender. Happy to add something to the second one on cost development. When I remember, in the last years and quarters, we were talking or we were coming from cost increases of almost...

Speaker #2: Yeah.

Speaker #4: Morning Mr. Pfänder. Happy to add something to the second one on cost development. When I remember in the last years and quarters we were talking or we were coming from cost increases of almost double digit or even higher.

Speaker #4: Then we took it down to only single digit expectations of cost growth. Now we are seeing 1.5% on a half year basis comparison. I think we have really done a lot of efforts there.

Martin Paal: Yeah. Morning, Mr. Pfänder. Happy to add something to the second one on cost development. When I remember in the last years and quarters, we were coming from cost increases of almost it down to only single-digit expectations of cost growth. Now we are seeing 1.5% on a half-year basis comparison. I think we have really done a lot of efforts there. I do not see currently that a nominal decline of cost compared to the last year. We are happy with this development. If we end up there at the end of the year, somewhere in the low digit cost growth, then the cost-income ratio will reflect also this, what we currently see, namely a cost-income ratio below 55%. Regarding the tax rate of our business mix, our three largest countries which have a high contribution currently, especially Germany, Italy and France, have high tax rates, especially Italy.

Speaker #4: I do not see currently that nominal decline of cost compared to the last year. We are happy with this development. If we end up there at the end of the year somewhere in the low digit cost growth then the cost income ratio will reflect also this was what we currently see namely a cost income ratio below 55%.

Speaker #1: We have now brought it down to only single-digit expectations for cost growth. Currently, we are seeing 1.5% on a half-year basis, compared to the previous period.

Speaker #1: We've really put in a lot of effort here. I do not currently see a nominal decline in costs compared to last year. We are happy with this.

Speaker #4: Regarding the tax rate of our business mix our three largest countries which have high contribution currently especially Germany Italy and France have high tax rates especially Italy we are talking about something around 30%.

Speaker #1: Development. If we end up there at the end of the year, somewhere in the low single-digit cost growth, then the cost-income ratio will also reflect this.

Speaker #1: What we currently see is, namely, a cost-income ratio below 55%. Regarding the tax rate of our business mix, our three largest countries, which have a high contribution currently—especially Germany, Italy, and France—have high tax rates, particularly Italy.

Speaker #4: Germany and France in Germany and France in the higher 20s and if they have a large contribution then the tax rate increases. However we had in this quarter especially a one-off effect in our tax rate regarding there was a tax audit in France which resulted in expenses that were not tax deductible contributing also to this higher tax rate in that quarter.

Speaker #1: We are talking about something around 30%. Germany and France—Germany and France are in the higher 20s. And if they have a large contribution, then the tax rate increases.

Martin Paal: We are talking about something around 30%. Germany and France in the higher 20s. If they have a large contribution, then the tax rate increases. However, we had in this quarter, especially a one-off effect in our tax rate regarding, there was a tax audit in France which resulted in expenses that were not tax deductible, contributing also to this higher tax rate in that quarter.

Speaker #1: However, we had in this quarter especially a one-off effect in our tax rate. There was a tax audit in France, which resulted in expenses that were not tax deductible, contributing also to this higher tax rate in that quarter.

Speaker #2: Thank you. We have.

Speaker #3: Maybe just.

Speaker #2: Sorry. Mr. Pfänder.

Speaker #3: Just one follow up. I was actually asking regarding the loss rate. Do you see one single country behaving worse than others in comparison? Or is it yeah the movement across the border like you mentioned before?

Speaker #2: Thank you.

Speaker #3: Maybe just, just one follow-up. I was actually asking regarding the loss rate. Do you see one single country behaving worse than others in comparison?

Franziska Randt: Thank you.

Roland Pfänder: Maybe just

Speaker #1: It's more across the border the smaller countries are different because they have the portfolios different and the portfolio is maybe not showing the overall macroeconomic environment but in the bigger countries where we are having less is more or less across the landscape of industries.

Franziska Randt: Sorry. Mr. Pollnau?

Roland Pfänder: Just one follow-up. I was actually asking regarding the loss rate, do you see one single country behaving worse than others in comparison? Or is it the movement across the border like you mentioned before?

Speaker #3: Or is it, yeah, the movement across the border, like you mentioned before?

Speaker #4: It's more across the border. The smaller countries are different because their portfolios are different. And the portfolios may not show the overall macroeconomic environment, but in the bigger countries, where we are having less—

Speaker #1: It's more or less the same and it's from a statistical point of view also when you have a lower expected loss you're today's unexpected loss so to say or your realized loss deviation is absolutely lower than when you're absolute risk at the beginning was higher.

Martin Paal: It is more across the border. The smaller countries are different because there the portfolio is different, there the portfolio is maybe not showing the overall macroeconomic environment. But in the bigger countries where we are having less is more or less across the landscape of industries, it is more or less the same. From a statistical point of view also, when you have a lower expected loss, your today's unexpected loss, so to say, your realized loss deviation is absolutely lower than when your absolute risk at the beginning was higher. In EUR it means in Germany, the realized deviation is lower in EUR than in France or in Spain, for example, because we are talking about 3.5% in previous year. Our expected loss estimation at the beginning in Germany, in France it was around 6% and in Spain it was about 7.5%.

Sebastian Hirsch: It is more across the border. The smaller countries are different because there the portfolio is different, there the portfolio is maybe not showing the overall macroeconomic environment. But in the bigger countries where we are having less is more or less across the landscape of industries, it is more or less the same. From a statistical point of view also, when you have a lower expected loss, your today's unexpected loss, so to say, your realized loss deviation is absolutely lower than when your absolute risk at the beginning was higher. In EUR it means in Germany, the realized deviation is lower in EUR than in France or in Spain, for example, because we are talking about 3.5% in previous year. Our expected loss estimation at the beginning in Germany, in France it was around 6% and in Spain it was about 7.5%.

Speaker #4: More or less across the landscape of industries, it's more or less the same. And from a statistical point of view, also, when you have a lower expected loss, your unexpected loss today—so to say, your realized loss deviation—is absolutely lower than when your absolute risk at the beginning was higher.

Speaker #1: So in euro it means in Germany the realized deviation is lower in euro than in France or in Spain for example. Because we're talking about 3.5% in previous year our expected loss estimation at the beginning in Germany in France it was around 6% and in Spain it was about 7 7.5% and so the euro deviation is of course because of that higher starting level.

Speaker #4: So, in euro, it means in Germany the realized deviation is lower, in euro, than in France or in Spain, for example. Because we're talking about 3.5% in the previous year, our expected loss estimation at the beginning in Germany. In France, that was around 6%.

Speaker #1: Also higher but when you take it into account countries measuring industries is more or less the same in the bigger countries.

Speaker #4: And in Spain, it was about 7–7.5%. And so the euro deviation is, of course, because of that higher starting level, also higher. But when you take it into account, countries and measuring industries, it's more or less the same.

Speaker #3: Thank you.

Speaker #2: Okay. So we have a next question coming from Mr. Lukesch from Kepler Schiffrö. Your line is being unmuted. Just one second. Yes. You can go ahead now.

Martin Paal: The EUR deviation is, of course, because of that higher starting level, also higher. When you take it into account, countries measuring industries is more or less the same in the bigger countries.

Sebastian Hirsch: The EUR deviation is, of course, because of that higher starting level, also higher. When you take it into account, countries measuring industries is more or less the same in the bigger countries.

Speaker #4: In the bigger countries.

Speaker #3: Thank you.

Speaker #2: Okay, so, next question coming from Mr. Lukasz from Kepler Schiffrö. Your line is being unmuted—just one second. Yes, you can go ahead now.

Speaker #5: Good morning. Yeah. Thank you very much. First question would be on the loss rate and the decrease you kind of expect or imply with your guidance for H2.

Roland Pfänder: Thank you.

Franziska Randt: Okay, we have a next question coming from Mr. Lukas from Kepler Cheuvreux. Your line is being unmuted. Just one second. Yes, you can go ahead now.

Speaker #5: Good morning. Yeah, thank you very much. My first question would be on the loss rate and the decrease you kind of expect or imply with your guidance for H2.

Speaker #5: Why is that given the negative trend that we're seeing over the last quarters and what loss rate exactly have you now factored into your CM2 margin calculation?

[Analyst] (Kepler Cheuvreux): Good morning. Thank you very much. First question would be on the loss rate and the decrease you expect or imply with your guidance for H2. Why is that given the negative trend that we are seeing over the last quarters? What loss rate exactly have you now factored into your CM2 margin calculation?

Speaker #5: Why is that, given the negative trend that we're seeing over the last quarters? And what loss rate exactly have you now factored into your CM2 margin calculation?

Speaker #1: Oh. Okay. That's same question. Single answer. Thanks for that. Mr. Lukesch. We expect the loss rate below 2% on the one hand volume will increase because of the portfolio impact and of the ongoing new business and the estimated growth.

Speaker #4: Oh, okay. That's the same question—single answer. Thanks for that, Mr. Lukasz. We expect the loss rate to be below 2%. On the one hand, volume will increase because of the portfolio impact.

Martin Paal: Okay. That is a single question, single answer. Thanks for that, Mr. Lukas. We expect a loss rate below 2%. On the one hand, the volume will increase because of the portfolio impact and of the ongoing new business and the estimated growth. On the other hand, we are more selective with the current data. We are adjusting as often as it is sensible from our perspective with the current data, with our current measurements. So the quality of the portfolio is more fitting to the today's macroeconomic environment. The leasing portfolio we settled two years ago was not fitting maybe perfectly to the today's environment because we are not aware of the situation two years. We can estimate that, and that is why the loss rates would come down. On the one hand, volume will increase.

Sebastian Hirsch: Okay. That is a single question, single answer. Thanks for that, Mr. Lukas. We expect a loss rate below 2%. On the one hand, the volume will increase because of the portfolio impact and of the ongoing new business and the estimated growth. On the other hand, we are more selective with the current data. We are adjusting as often as it is sensible from our perspective with the current data, with our current measurements. So the quality of the portfolio is more fitting to the today's macroeconomic environment. The leasing portfolio we settled two years ago was not fitting maybe perfectly to the today's environment because we are not aware of the situation two years. We can estimate that, and that is why the loss rates would come down. On the one hand, volume will increase.

Speaker #1: On the other hand we are more selective with the current data. We are adjusting as often as it is sensible from our perspective with the current data with our current measurements.

Speaker #4: And of the ongoing new business, and the estimated growth. On the other hand, we are more selective with the current data. We are adjusting as often as it is sensible from our perspective with the current data, with our current measurements.

Speaker #1: So the quality of the portfolio is more fitting to the today's macroeconomic environment. The leasing portfolio we settled two years ago was not fitting maybe perfectly to the today's environment because we are not aware of the situation two years.

Speaker #4: So, the quality of the portfolio is more fitting to today's macroeconomic environment. The leasing portfolio we settled two years ago was not maybe perfectly fitting to today's environment, because we were not aware of the situation two years ago.

Speaker #1: We can estimate that and that is why the loss rates would came down on the one hand. Volume will increase the settlement and risk provisioning should be more or less in euro on the same level.

Speaker #4: We can estimate that, and that is why the loss rates came down. On the one hand, volume will increase. The settlement and risk provisioning should be more or less on the same level in euro.

Speaker #1: And that gives us on the one hand confidence on the one other hand it's the estimation. For a decreasing loss rate below 2%.

Speaker #4: And that gives us, on the one hand, confidence; on the other hand, it's the estimation for a decreasing loss rate below 2%.

Speaker #5: Thank you. So it's fair to assume that it's up from kind of 1.6 to 1.7 towards let's say 1.9 in your model. If you say below 2% that this is reflected or is it just really a little increase to 1.7 or 1.8.

Martin Paal: The settlement of claims and risk provision should be more or less in EUR on the same level. That gives us, on the one hand, confidence. On the other hand, it is the estimation for a decreasing loss rate below 2%.

Sebastian Hirsch: The settlement of claims and risk provision should be more or less in EUR on the same level. That gives us, on the one hand, confidence. On the other hand, it is the estimation for a decreasing loss rate below 2%.

Speaker #5: Thank you. So it's fair to assume that it's up from kind of 1.6 to 1.7, towards, let's say, 1.9 in your model. If you say below 2%, is that reflected, or is it just really a little increase to 1.7 or 1.8?

Speaker #1: It depends on your on the on the volume expectation. At the end of the day and but it's fair to say 1.8 1.9 it depends on the volume.

[Analyst] (Kepler Cheuvreux): Thank you. So it is fair to assume that it is up from 1.6% to 1.7% towards, let us say, 1.9% in your model, if you say below 2%, that this is reflected, or is that just really a little increase to 1.7% or 1.8%?

Speaker #4: It depends on the volume expectation. At the end of the day, it's fair to say 1.8, 1.9—it depends on the volume.

Speaker #1: I guess the fairest assumption is to say okay let's assume that the absolute expenses for settlement of claims and risk provisioning will be on the same level as it was on the first half of the year.

Speaker #4: I guess the fair assumption is to say, okay, let's assume that the absolute expenses for settlement of claims and risk provisioning will be on the same level as they were in the first half of the year.

Martin Paal: It depends on the volume expectation at the end of the day. But it is fair to say 1.8, 1.9. It depends on the volume. I guess the fairest assumption is to say, okay, let us assume that the absolute expenses for settlement of claims and risk provisioning will be on the same level as it was in the H1 of the year.

Speaker #5: Thank you. Second question would be on again on the gains from disposables. Usually we do see an uptick throughout the year you mentioned that this is a kind of mechanism to be read together with the NAI.

Speaker #5: Thank you. Second question would be, again, on the gains from disposals. Usually, we do see an uptick throughout the year. You mentioned that this is a kind of mechanism to be read together with the NAI.

Speaker #5: I was just wondering if you see that uptick trend to continue throughout the year with now the 10 million jump or hike we have seen.

[Analyst] (Kepler Cheuvreux): Thank you. Second question would be on, again, on the gains from disposals. Usually we do see an uptick throughout the year. You mentioned that this is a kind of mechanism to be read together with the NII. I was just wondering if you see that uptick trend to continue throughout the year with now the EUR 10 million jump or hike we have seen, or to EUR 10 million. I would be interested in what kind of volumes you disposed in order to make that gain, and if these volumes were very different to earlier quarters. Also if you do have some decreasing about the timing of the disposals.

Speaker #5: I was just wondering if you see that uptick trend continuing throughout the year, with now the 10 million jump, or hike, we have seen.

Speaker #5: Or to 10 million. And I would be interested in what kind of volumes you disposed in order to make that gain and if these volumes were very different to earlier quarters.

Speaker #5: Or to €10 million. I would be interested in what kind of volumes you disposed of in order to make that gain, and if these volumes were very different compared to earlier quarters.

Speaker #5: And also if you do have some decrease in about the timing of the disposals.

Speaker #5: And also, if you do have some decrease in the timing of the disposals.

Speaker #4: Let me start with the volumes that are now part or form part of this disposal income. You can have a look approximately four years back into our new business portfolios of 2021, 2022 because these contracts that are running out that were settled then are running out today or in these days in these quarters.

Speaker #1: Let me start with the volumes that are now part of, or form part of, this disposable income. You can have a look approximately four years back into our new business portfolios of 2021 and 2022.

Martin Paal: Let me start with the volumes that are now part or form part of this disposal income. You can have a look approximately four years back into our new business portfolios of 2021, 2022, because these contracts that are running out that were settled then are running out today or in these days, in these quarters. At that time, we had new business portfolios that were significantly lower as opposed to portfolios today. So lower, relatively, volumes as opposed to other years are now coming into this or entering into this disposal income. This has, because of this portfolio effect, already a positive effect on gains of disposal because, Sebastian just mentioned it, we assume a residual value for the whole portfolio.

Speaker #1: Because these contracts that are running out—that were settled then—are running out today, or in these days, in these quarters. And at that time, we had new business portfolios that were significantly lower, as opposed to portfolios today.

Speaker #4: And at that time we had new business portfolios that were significantly lower as opposed to portfolios today. So lower relatively volumes as opposed to other years are now coming into this or entering into this disposal income.

Speaker #1: So, lower relative volumes—as opposed to other years—are now coming into this or entering into this disposal income. And this has, because of this portfolio effect, already a positive effect on gains of disposal, because Sebastian just mentioned it.

Speaker #4: And this has because of this portfolio effect already a positive effect on gains of disposal because Sebastian just mentioned it. We assume a residual value for the whole portfolio.

Speaker #4: And if then a relatively lower part of the portfolio comes back coupled with relatively more contracts that go into subsequent lease this triggers at the end the higher disposal gains at this in this period.

Speaker #1: We assume a residual value for the whole portfolio. And if a relatively lower part of the portfolio comes back, coupled with relatively more contracts that go into subsequent lease, this triggers, at the end, higher disposal gains in this period.

Speaker #4: And as I said this is not a one-off effect in this quarter we have seen positive disposal income over the last five to six quarters.

Martin Paal: If then a relatively lower part of the portfolio comes back coupled with relatively more contracts that go into subsequent lease, this triggers at the end the higher disposal gains in this period. As I said, this is not a one-off effect in this quarter. We have seen positive disposal income over the last five to six quarters. We expect that we see a positive one over the next quarters as well. But what is also the truth, that this will go down over the next years, because then new business portfolios with higher business volume, namely 2022, 2023 especially, will run out and then the direction will be the other way around.

Speaker #1: And as I said, this is not a one-off effect in this quarter. We have seen positive disposable income over the last five to six quarters.

Speaker #4: We expect that we see positive one over the next quarters as well but what is also the truth that this will go down over the next years because then new business portfolios with higher business volume namely 22, 23 especially will run out and then the direction will be the other way around.

Speaker #1: We expect that we will see positive one over the next quarters as well. But what is also true is that this will go down over the next years because then new business portfolios with higher business volume, namely '22, '23 especially, will run out.

Speaker #1: And then the direction will be the other way around.

Speaker #1: Yes.

Speaker #5: Understood. Thank you.

Speaker #1: Maybe some flavor to the portion of the business. We are seeing now at least volume so the initial running contracts with the net acquisition cost of roughly 12 billion if I'm right.

Speaker #4: Yes.

Speaker #5: Understood. Thank you.

Speaker #4: Maybe add some flavor to that portion of the business. We are seeing now at least volume. So, the initial running contracts with a net acquisition cost of roughly €1.2 billion, if I'm right.

Speaker #1: And roughly 5% of that is a leasing contract and disposal. It's very stable over the periods of years. There are some times a bit more some times a bit less.

[Analyst] (Kepler Cheuvreux): Understood. Thank you.

Speaker #4: And roughly 5% of that is a leasing contract and disposal. It's very stable over the years. Sometimes it's a bit more, sometimes a bit less.

Sebastian Hirsch: May some flavor to the portion of the business we are seeing now a lease volume, so the initial running contracts with a net acquisition cost of roughly EUR 12 billion, if I am right, and roughly 5% of that is a leasing contract in disposal. It is very stable over the periods of years. There are sometimes a bit more, sometimes a bit less. It depends on the macroeconomic environment. Martin mentioned that before, as your colleague asked the question to the earnings of disposal. There is one thing important. In times like this, when you are an entrepreneur and you say, "Okay, my leasing contract is running to an end for my," whatever, "IT infrastructure for machinery or something like that. It is working. Now I can make a decision.

Speaker #1: It depends on the macroeconomic environment and Martin mentioned that before as your colleague asked the question to the earnings of disposal there's one thing important.

Speaker #4: It depends on the macroeconomic environment. And Martin mentioned that before, as your colleague asked the question regarding the earnings from disposals. There’s one important thing.

Speaker #1: In times like this when you are an entrepreneur and you say okay my leasing contract is running to an end for my whatever IT infrastructure for a machinery or something like that it is working.

Speaker #4: In times like this, when you are an entrepreneur and you say, okay, my leasing contract is running to an end for my, whatever, IT infrastructure or machinery or something like that.

Speaker #1: And now I can make a decision okay I can go for new investment or I can say okay a running system the situation is not clear what will happen tomorrow uncertainty environment may I will stay with that I know what I should pay and I go forward and make a retention for a half year or four year.

Speaker #4: It is working. And now I can make a decision: Okay, I can go for new investment, or I can say, okay, a running system—the situation is not clear.

Speaker #4: What will happen tomorrow? It's an uncertain environment. Maybe I will stay with that. I know what I should pay, and I go forward. And make a retention for half a year or for a year.

Speaker #1: And to expect that that is a sustainable behavior and to price in that in today's or tomorrow's leasing contract in the expected residual value is not that easy.

Sebastian Hirsch: Okay, I can go for a new investment, or I can say, 'Okay, a running system, the situation is not clear what will happen tomorrow. Uncertain environment. May I will stay with it, I know what I should pay, and I go forward and make a retention for a half year or for a year.'" To expect that that is a sustainable behavior and to price them that in today's or tomorrow's leasing contract in the expected residual value is not that easy. We had said some years ago after the pandemic, may you remember, there was a bit the same impact. We saw a lot of secondary lease because of the bottlenecks in the supply chain at that time. It is a bit the same in some cases that, and to find there the right level.

Speaker #4: And to expect that this is a sustainable behavior, and to price that into today's or tomorrow's leasing contract in the expected residual value, is not that easy.

Speaker #1: We had said some years ago after the pandemic may you remember there was a bit the same impact we saw a lot of secondary rentals because of the bottlenecks in the supply chain.

Speaker #4: We had some years ago, after the pandemic—maybe you remember—there was a bit the same impact. We saw a lot of secondary rentals because of the bottlenecks in the supply chain.

Speaker #1: At that time and it's a bit the same in some cases that and to find there's a right level okay what are we taking as a sustainable trend as sustainable taking it into the new contracts for the interest yield calculation and some things like what I described as maybe more or less a trend we see today and it's too early to say if it is a sustainable way you try before the value driver sorry for the residual value.

Speaker #4: At that time, and it’s a bit the same in some cases, that to find there’s a right level, okay, what are we taking as a sustainable trend—are sustainable, taking it into the new contracts for the interest yield calculation—and something like what I described as maybe more or less a trend we see today.

Speaker #4: And it's too early to say if it is a sustainable way. You try before the value driver—sorry, for the residual value.

Sebastian Hirsch: Okay, what are we taking as a sustainable trend, as sustainable, taking it into the new contracts for the interest year calculation and some things like what I described as maybe more or less a trend we see today, and it is too early to say if it is a sustainable value driver for the residual value.

Speaker #2: Maybe last question Mr. Lukesch.

Speaker #2: Maybe last question, Mr. Lukasz.

Speaker #5: Yeah. Last one would be on the other comprehensive income line. Shareholder profit was reduced by 2 million due to hedging. This quarter I was just wondering you know it's like how this could play out for the next quarters to come if you do have any visibility here.

Speaker #5: Yeah. The last one would be on the other comprehensive income line. Shareholder profit was reduced by €2 million due to hedging this quarter. I was just wondering, you know, how this could play out for the next quarters to come, if you do have any visibility here.

Speaker #5: And maybe a very last one to follow up on the tax rate you mentioned the impact could you maybe quantify the impact due to the one-off in France.

Speaker #5: And maybe a very last one to follow up on the tax rate. You mentioned the impact. Could you maybe quantify the impact due to the one-off in France?

Franziska Randt: Maybe last question, Mr. Lukas.

[Analyst] (Kepler Cheuvreux): Yeah. Last one would be on the other comprehensive income line. Shareholder profit was reduced by EUR 2 million due to hedging this quarter. I was just wondering, how this could play out for the next quarters to come, if you do have any visibility here. And maybe a very last one to follow up on the tax rate. You mentioned the impact. Could you maybe quantify the impact due to the one-off in France? Thank you.

Speaker #5: Thank you.

Speaker #4: The one-off in France makes up a low single digit number in the tax rate one two percentage points in the tax rate. The effect in the other comprehensive income relates to our hedging in an economic sense we see effects in the P&L in other operating income namely other operating expense so to speak because there are the value changes in the derivatives in the FX derivatives that we use for hedging of FX currency risks and the other part is shown in the equity under other comprehensive income namely that that results from FX translation if we go from single audits from single accounts of our entities to the group account when you translate this at the end of the quarter this is economically not an issue but we sometimes see some differences in the quarterly accounting or recognition within P&L and within other comprehensive income directly in equity.

Speaker #5: Thank you.

Speaker #1: The one-off in France makes up a low single-digit number in the tax rate—one or two percentage points in the tax rate. The effect in the other comprehensive income relates to our hedging in an economic sense.

Speaker #1: We see effects in P&L, in other operating income—namely, other operating expense, so to speak—because there are the value changes in the derivatives, in the FX derivatives that we use for hedging of FX currency risks.

Martin Paal: The one-off in France makes up a low single-digit number in the tax rate, 1% to 2% in the tax rate. The effect in the other comprehensive income relates to our hedging in an economic sense. We see effects in the P&L in other operating income, namely other operating expense, so to speak, because there are value changes in the derivatives, in the FX derivatives that we use for hedging of FX currency risks. And the other part is shown in the equity under other comprehensive income, namely that results from FX translation. If we go from single audits, from single accounts of our entities to the group account, when you translate this at the end of the quarter, this is economically not an issue, but we sometimes see some differences in the quarterly accounting or recognition within P&L and within other comprehensive income directly in equity.

Speaker #1: And the other part is shown in equity under other comprehensive income, namely that which results from FX translation. If we go from single audits, from single accounts of our entities, to the group account, when you translate this at the end of the quarter, this is economically not an issue, but we sometimes see some differences in the quarterly accounting or recognition within P&L and within other comprehensive income directly in equity.

Speaker #5: I leave you for H2.

Speaker #5: Thank you for H2.

Speaker #4: Sorry.

Speaker #1: Sorry?

Speaker #5: Any view for H2 how this will develop over the next quarters to come supportive or rather a drag?

Speaker #5: Any view for H2—how this will develop over the next quarters to come? Supportive, or rather a drag?

Speaker #4: In the total period at the end this levels out between P&L in fact and OCI effect from quarter to quarter the fluctuation is a result of the FX changes in the currencies.

Speaker #1: In the total period at the end, this levels out between P&L. In fact, any OCI effect from quarter to quarter—the fluctuation is a result of the FX changes in the currencies.

Franziska Randt: Thank you.

Franziska Randt: Any view for H2?

[Analyst] (Kepler Cheuvreux): Any view for H2?

Martin Paal: Sorry?

Speaker #4: Where we are operating in.

Speaker #1: Where we are operating in.

Franziska Randt: Any view for H2, how this will develop over the next quarters to come? Supportive or rather a drag?

[Analyst] (Kepler Cheuvreux): Any view for H2, how this will develop over the next quarters to come? Supportive or rather a drag?

Speaker #2: So we have some next question coming from Dr. Häßler. From DZ Bank. Your line is being unmuted at this second. Yes please don't forget to unmute your own device as well.

Speaker #2: So we have the next question coming from Dr. Hessler from DZ Bank. Your line is being unmuted at this second. Yes, please don't forget to unmute your own device as well.

Martin Paal: In the total period at the end, this levels out between P&L effect and OCI effect. From quarter to quarter, the fluctuation is a result of the FX changes in the currencies where we are operating in.

Speaker #3: Yes good morning. Thank you for taking my questions. Philip Häßler from DZ Bank. Two short quick questions. On the disposal gains again sorry. You said that this is linked to NII.

Speaker #3: Yes, good morning. Thank you for taking my questions. Philip Hessler from DZ Bank. Two short, quick questions. On the disposal gains again, sorry. You said that this is linked to NII.

Franziska Randt: Thank you.

Philipp Häßler: Yes. Good morning. Thank you for taking my questions. Philipp Häßler from DZ Bank. Two short, quick questions. On the disposal gains, again, sorry. You said that this is linked to NII. Do I interpret it correctly that because you have somewhat lower new business and therefore lower NII because your customers do not renew or do not sign up for a new contract, but continue the old contract? Is this the right way to see it? Because you said it is linked to NII.

Philipp Hässler: Yes. Good morning. Thank you for taking my questions. Philipp Häßler from DZ Bank. Two short, quick questions. On the disposal gains, again, sorry. You said that this is linked to NII. Do I interpret it correctly that because you have somewhat lower new business and therefore lower NII because your customers do not renew or do not sign up for a new contract, but continue the old contract? Is this the right way to see it? Because you said it is linked to NII.

Speaker #3: Do I interpret it correctly that because you have somewhat lower new business and therefore lower NII because your customers really ally don't renew or don't sign up for a new contract but continue the old contract.

Speaker #3: Do I interpret it correctly that, because you have somewhat lower new business and therefore lower NII, your customers really don't renew or sign up for a new contract, but continue with the old contract?

Speaker #3: Is this the right way to see it because you said it's linked to NII?

Speaker #3: Is this the right way to see it? Because you said it's linked to NII?

Speaker #1: Okay I will start directly because I opened that box. Earlier it's linked to NI but you are saying is very interesting because it's more linked to the new business performance and so each contract which is in retention is a potential new contract for tomorrow.

Speaker #4: Okay, I will start directly because I opened that box earlier. It’s linked to NII. What you are saying is very interesting because it’s more linked to new business performance, and so each contract that is in retention is a potential new contract for tomorrow.

Speaker #1: That's right but it's more a tactical question in terms of sales what I mentioned is NII the NII is a interest income in leasing is calculated by the in average four years leasing installments and then we estimate a residual value based on our statistical data.

Speaker #4: That's right, but it's more a tactical question in terms of sales. What I— is NII. The NII is the interest income in leasing, and it is calculated by the average of four years' leasing installments.

Sebastian Hirsch: Okay. I will start directly because I opened that box earlier. What you are saying is very interesting because it is more linked to the new business performance. Each contract which is in retention is the potential new contract for tomorrow. That is right. But it is more a technical question in terms of sales. What I mentioned is NII. The NII is the interest income in leasing is calculated by an average 4 years leasing installments, and then we estimate a residual value based on our statistical datas. That cash flows, the leasing installments plus, at the end, the expected residual value. You are looking for the discount rate to the net investment, and that is the initial cost we have. So the net acquisition value, we pay for the assets, and that is why the estimated residual value drives the interest.

Speaker #4: And then we estimate a residual value based on our statistical data. And those cash flows—the leasing installments plus, at the end, the expected residual value—you look for the discount rate to the net investment.

Speaker #1: And that cash flows the leasing installments plus at the end the expected residual value the you looking for the discount rate to the net investment and that is the initial cost we have so the net acquisition value we pay for the assets and that's why the estimated residual value drives the interest and with that interest we are calculating the interest income each quarter each month so to say because you split the leasing installment in an interest part and a amortization part like in a loan you know.

Speaker #4: And that is the initial cost we have, so the net acquisition value we pay for the assets. And that's why the estimated residual value drives the interest, and with that interest, we are calculating the interest income.

Speaker #4: Each quarter, each month, so to say, because you split the leasing installment into an interest part and an amortization part, like in a loan, you know.

Speaker #1: But you have to take an account in line with IFRS estimated residual value. And the deviation between your estimation at the beginning and the realization at the end so after four years you estimated 500 as residual value and you can earn 600 you have a deviation of 100 and that's a profit of 100 because 500 residual value is on your account on your asset you get 600 from disposals from whatever as cash in and the difference 100 that is your profit when you get 400 you have a loss of 100 and for all the contracts which are running into the end of the lease term we are doing that from an accounting perspective and each in minimum each year we check okay is our residual value estimation fair is it right or is there an adjustment needed based on country lease term and object category because it's different copy machine and notebook or a dentist chair is there's a different estimation of that residual value.

Speaker #4: But you have to take into account, in line with IFRS, the estimated residual value. And the deviation between your estimation at the beginning and the realization at the end—so after four years you estimated 500 as the residual value, and you can earn 600.

Sebastian Hirsch: With that interest, we are calculating the interest income each quarter, each month, so to say, because we split the leasing installment in an interest part and amortization part like in a loan. But you have to take into account, in line with IFRS estimated residual value. The deviation between your estimation at the beginning and the realization at the end, so after 4 years, you estimated 500 as residual value and you can earn 600. You have a deviation of 100, and that is a profit of 100, because 500 residual value is on your account, on your asset. You get 600 from disposals, from whatever as cash in, and the difference, 100, that is your profit. When you get 400, you have a loss of 100.

Speaker #4: You have a deviation of 100, and that's a profit of 100 because a 500 residual value is on your account, on your asset. You get 600 from disposals, from whatever, as cash in, and the difference—100—that is your profit. When you get 400, you have a loss.

Speaker #4: Of 100, and for all the contracts which are running into the end of the lease term, we are doing that from an accounting perspective.

Speaker #4: And, at minimum, each year we check: okay, is our residual value estimation fair? Is it right, or is there an adjustment needed based on country, lease term, and object category?

Sebastian Hirsch: For all the contracts which are running into the end of the lease term, we are doing that from an accounting perspective. In minimum each year we check, okay, is our residual value estimation fair? Is it right or is there an adjustment needed based on country lease term and object category? Because it is different, a copy machine and a notebook or a dentist chair, there is a different estimation of that residual value.

Speaker #4: Because it's a different copy machine and notebook, or a dentist chair, there's a different estimation of that residual value.

Speaker #3: Okay thank you. Thank you for that. Second question would be I mean I know that you only give normally the development of risk costs by on a country basis but could you maybe comment a little bit on how risk costs develop by object type or whether you see any objects where risk costs are particularly high or is it also relatively even spread?

Speaker #3: Okay, thank you. Thank you for that. Second question would be—I mean, I know that you normally only give the development of risk costs on a country basis, but could you maybe comment a little bit on how risk costs develop by object type, or whether you see any objects where risk costs are particularly high, or is it also relatively evenly spread?

Philipp Häßler: Okay. Thank you. Thank you for that. A second question would be, I know that you only give normally the development of risk costs on a country basis, but could you maybe comment a little bit on how risk costs develop by object type or whether you see any objects where risk costs are particularly high or is it also relatively even spread?

Philipp Hässler: Okay. Thank you. Thank you for that. A second question would be, I know that you only give normally the development of risk costs on a country basis, but could you maybe comment a little bit on how risk costs develop by object type or whether you see any objects where risk costs are particularly high or is it also relatively even spread?

Speaker #1: Object type is maybe not the main driver what we see or if we saw it was the last couple of quarters is that bigger tickets are so to say from a today's perspective more risky than the smaller tickets.

Speaker #4: Object type is maybe not the main driver. What we see, or what we saw over the last couple of quarters, is that bigger tickets are, so to say from today's perspective, more risky than the smaller tickets.

Speaker #1: Could also be the link to okay when you have to pay more monthly it's more in burden to bring the cash and to pay that in the today's situation for the small medium enterprise so it's more but it depends also a bit on the region and it depends also on the industry on and on the country and overall and that is why we are focusing on small tickets is that the diversification and the small ticket area is pretty high and that's the best shield against risk.

Speaker #4: Could also be. The link to, okay, when you have to pay more monthly, it’s more of a burden to bring the cash and to pay that in today’s situation for the small and medium enterprise.

Sebastian Hirsch: Object type is maybe not the main driver. What we see or what we saw over the last couple of quarters is that bigger tickets are, so to say, from a risk perspective, more risky than the smaller tickets. Could also be the link to, okay, when you have to pay more monthly, it is more a burden to bring the cash and to pay that in today's situation for the small, medium enterprise. So it is more that bigger tickets are risky. But it depends also a bit on the region and it depends also on the industry and on the country and overall. That is why we are focusing on small tickets, is that the diversification in the small ticket area is pretty high and that is the best shield against risk. Again, it is not an object type, it is more linked to a bigger ticket.

Speaker #4: So, it's more that bigger tickets are risky, but it depends also a bit on the region, and it depends also on the industry, and on the country.

Speaker #4: And overall, that is why we are focusing on small tickets: the diversification in the small ticket area is pretty— we find that to be the best shield against risk.

Speaker #1: So So again it's not an object type it's more linked to a bigger ticket as bigger the tickets are as more you will get let's say a higher absolute risk realized in your P&L at the end of the day.

Speaker #4: So again, it's not an object type. It's more linked to a bigger ticket—as the tickets get bigger, the more you will get. Let's say a higher absolute risk is realized in your P&L at the end of the day.

Speaker #1: So one fail and the bigger ticket is more absolute deviations and one fail in the small ticket environment.

Speaker #4: So one fail on a bigger ticket means more absolute deviations than one fail in the small ticket environment.

Speaker #3: Perfect. Thank you very much.

Speaker #2: Thank you for your questions. Now we have another question from the audio line again from Mr. Roland Pfänder. Your line is online now. You can go ahead.

Speaker #2: Thank you for your questions. Now we have another question from the audio line again, from Mr. Roland Pfender. Your line is now open. You can go ahead.

Sebastian Hirsch: As bigger the tickets are, as more you will get, let us say, a higher absolute risk realized in your P&L at the end of the day. So one fail in a bigger ticket is more absolute deviation than one fail in the small ticket environment.

Speaker #3: Yes thanks just a follow up. You mentioned you're gaining market share in your leasing business. I'm wondering is this also due to pricing and if yes why would you undercut for example market pricing.

Speaker #3: Yes, thanks. Just to follow up, you mentioned you're gaining market share in your leasing business. I'm wondering, is this also due to pricing? And if yes, why would you undercut, for example, market pricing?

Philipp Häßler: Perfect. Thank you very much.

Philipp Hässler: Perfect. Thank you very much.

Franziska Randt: Thank you for your questions. Now we have another question from the order line again from Mr. Roland Pfänder. Your line is online now. You can go ahead.

Speaker #3: I would actually expect that the market would need to push for higher pricing looking at the volatility in the market also coming from macro shocks loss volatility why is not the market pricing in general higher also looking at your returns not covering cost of capital and I guess for the industry should not be very different.

Speaker #3: I would actually expect that the market would need to push for higher pricing, looking at the volatility in the market. Also, coming from macro shocks, loss volatility—why is the market not, in general, pricing higher?

Roland Pfänder: Yes, thanks. Just a follow-up. You mentioned you are gaining market share in your leasing business. I am wondering, is this also due to pricing? If yes, why would you undercut, for example, market pricing? I would actually expect that the market would need to push for higher pricing looking at the volatility in the market, also coming from micro shocks, loss volatility. Why is not the market pricing in general higher? Also looking at your returns not covering cost of capital, I guess for the industry it should not be very different. Thank you.

Speaker #3: Also, looking at your returns not covering cost of capital—and I guess for the industry, it should not be very different. Thank you.

Speaker #3: Thank you.

Speaker #4: Yes, good questions, thanks. First, when we look at that, we have to split the CM1 and CM2. CM1 is pretty stable. I guess CM1 was a bit higher than Q4 last year.

Speaker #1: Yes good questions. Thanks. First when we look to that we have to split the CM2 and CM1 and CM2. CM1 is pretty stable I guess CM1 was a bit higher than Q4 last year and that reflects more or less the market price for the lesser what is the leasing installment I has to pay what is our funding cost on the other hand and if I'm right CM1 is nearly 11% and it's pretty good for that environment because interest rates rising and that's always pressure on CM1 normally.

Speaker #4: And that reflects more or less the market. The price was less. What is the leasing installment I have to pay? What is our funding cost, on the other hand?

Speaker #4: And if I'm right, CM1 is nearly 11%, and that's pretty good for that environment because interest rates are rising, and that's always pressure on CM1.

Sebastian Hirsch: That is a good question. Thanks. First, when we look to that, we have to split CM2 and CM1 and CM2. CM1 is pretty stable. I guess CM1 was a bit higher than Q4 last year, that reflects more or less the market price for the leasing. What is the leasing installment I have to pay? What is our funding cost on the other hand? If I am right, CM1 is nearly 11% and it is pretty good for that environment because interest rates rising and that is always pressure on CM1 normally. When I look to the market price, I would like to say, okay, the market price is a bit higher than in previous quarters. In CM2, we adjust the expected credit loss from our today's notice, from today's performance in the portfolio.

Speaker #4: So, when I look at the market price, I would like to say, okay, the market price is a bit higher than in previous quarters.

Speaker #1: So when I look to the market price I would like to say okay the market price is a bit higher than in previous quarters.

Speaker #4: In CM2, we adjust the expected credit loss from today's notice, from today's performance, and from the portfolio. And so, the expected credit loss in CM2 is higher than in previous quarters and previous years.

Speaker #1: In CM2 we adjust the expected credit loss from our today's notice from the today's performance and the portfolio and so the expected credit loss in CM2 is higher than in previous quarters and previous years and that is pressure on the CM2 margin at the end of the day.

Speaker #4: And that is pressure on the CM2 margin at the end of the day. And in the markets there, you have two groups of clients demanding leasing.

Speaker #1: And in the markets there you have two groups of clients demanding for leasing the healthy clients and the not healthy client and at the beginning it's always the same you don't know that but a client who is healthy today is strong have a good performance maybe also in that environment and there are some small medium enterprise in that environment they are performing well they are not willing to pay much for funding or for leasing because they know they are strong.

Speaker #4: The healthy clients and the not healthy clients. And at the beginning, it's always the same—you don't know that. But a client who is healthy today, is strong, has good performance, maybe also in that environment.

Sebastian Hirsch: The expected credit loss in CM2 is higher than in previous quarters and previous years. That is pressure on the CM2 margin at the end of the day. In the markets, there you have two groups of clients demanding for leasing, the healthy client and the not healthy client. At the beginning, it is always the same, you do not know that.

Speaker #4: And there are some small and medium enterprises in that environment. They are performing well. They are not willing to pay much for funding or for leasing because they know they are strong.

Speaker #4: On the other hand, you have the weaker, maybe, industries, the weaker clients, and they are able to pay a higher market price, as you mentioned, and in our business, it's a bit the mixture.

Speaker #1: On the other hand you have the weaker maybe industries the weaker clients and they are able to pay a higher market price as you mentioned and in our business a bit the mixture of that.

Sebastian Hirsch: A client who is healthy today, is strong, have a good performance, maybe also in that environment, and there are some small and medium enterprises in that environment that are performing well, they are not willing to pay much for funding or for leasing because they know they are strong. On the other hand, you have the weaker, maybe industries, the weaker clients, and they are able to pay a higher market price, as you mentioned. In our business, a bit the mixture of that. We are not willing to winning market shares in that environment via pricing. It is more winning market shares to being present, to being there for a fair price, a good balance between risk and income for us. Winning market shares means two things in our business.

Speaker #4: Of that. So we are not willing to win market share in that environment where pricing is more about winning market share by being present, by being there for a fair price, a good balance between risk and income for us. And winning market share means two things in our business.

Speaker #1: So we are not willing to winning market shares in that environment via pricing it's more winning market shares to being present to being there for a fair price a good balance between risk and income for us and winning market shares means two things in our business.

Speaker #4: On the one hand, when we look to the lessee, to the end customer, and on the other hand also look to the dealer, to making a business for the reseller or dealer in times like this, it's also about a sustainable relationship to dealers and resellers, and that is trust. And that trust is building the future, and that future is a base for new business of tomorrow, when hopefully the macro environment is more stable—maybe better, but more stable would also be better than it is today.

Speaker #1: On the one hand when we're looking to the lesser to the end customer and on the other hand also looking to the dealer. To making a business with a reseller dealer in times like this it's also sustainable relationship to dealers and resellers and that is trust and that trust is building future and that future is a base for new business of tomorrow when hopefully the macro environment is more stable maybe better but more stable would be also better than it is today.

Martin Paal: On the one hand, when we are looking to the lessee, to the end customer, and on the other hand, also looking to the dealer. Making a business with a reseller dealer in times like this, it is also sustainable relationship to dealers and resellers. That is trust, and that trust is building future, and that future is a base for new business of tomorrow when hopefully the macro environment is more stable, maybe better, but more stable would be also better than it is today. Winning market shares has always two sides. The end customer on the one hand, but also the long-term relationship to resellers and dealers. We know that from the pandemic, we know that from the financial crisis and several things, that that strong relationship we are covering today is the base for future.

Speaker #4: So, winning market share always has two sides: the end customer on the one hand, but also the long-term relationship to resellers and dealers. And we know that from the pandemic—we know that from the financial crisis and several other things—that the strong relationships we are covering today are the basis for the future.

Speaker #1: So winning market shares has always two sides the end customer on the one hand but also the long-term relationship to resellers and dealers and we know that from the pandemic we know that from the financial crisis in several things that that strong relationship we are covering today is the base for future.

Speaker #2: So we're moving to some written questions from our chat, which are: Regarding our balance sheet, someone asked why the cash balance was reduced and what our plans are for the second half of this year regarding any bond issuance.

Speaker #2: So we're moving to some written questions from our chat which are regarding our balance sheet and there the person ask why the cash balance was reduced and what our plans for the second half of this year regarding any bond issuances.

Speaker #4: Yeah. When we have a look at our cash balance, this is always a to-date effect or to-date issue, because we make the cut at the 30th of June and then we see what is on our cash balance.

Speaker #1: Yeah. When we have a look at our cash balance this is always a two-date effect or two-date issue because we make the cut at the 30th of June and then we see what is on our cash balance.

Franziska Randt: We are-

Martin Paal: Thank you.

Roland Pfänder: Thank you.

Franziska Randt: moving to some written questions from our chat, which are regarding our balance sheet. The person asks why the cash balance was reduced, and what our plans are for the H2 of this year regarding any bond issuances.

Speaker #4: We deliberately spread it over the year depending on when we make, for example, larger capital market transactions. It is, on the one hand, important to have some cash buffer if we need it for our new business when we expect higher growth and to fund that.

Speaker #1: We deliberately steer it over the year depending on when we make for example larger capital market transactions it is on the one hand important to have some cash buffer if we need it for our new business when we expect higher growth and to fund that on the other hand having too much cash on our balance sheet on the one hand ways on some ratios and on the other hand we want to deploy it in more earning in higher return earning leasing contracts.

Martin Paal: Well, when we have a look at our cash balance, this is always a to-date effect or to-date issue because we make the cut at 30 June, and then we see what is on our cash balance. We deliberately steer it over the year depending on when we make, for example, larger capital market transactions. It is, on the one hand, important to have some cash buffer if we need it for our new business when we expect higher growth. To fund that, on the other hand, having too much cash on our balance sheet, on the one hand, weighs on some ratios, and on the other hand, we want to deploy it in more earning and higher return earning leasing contracts. Having too much cash on the balance is not helpful at the end as well.

Speaker #4: On the other hand having too much cash on our balance sheet on the one hand weighs on some ratios and on the other hand we want to deploy it in more earning in higher return earning leasing contracts.

Speaker #4: So, having too much cash on the balance is not helpful at the end, as well. So, at the end, it is a balance and a trade-off between a cash buffer and the return side.

Speaker #1: So having too much cash on the balance is not helpful at the end as well. So at the end it is a balance and between a trade-off between cash buffer and the return side but this is deliberately steered by us.

Speaker #4: But this is deliberately steered by us.

Speaker #2: When we speak to ratios, the question is about the regulatory CET1 ratio and if we already know how high that is.

Speaker #4: Yeah. We have a CET1 ratio currently, which is above 14%. We have a total capital ratio, which is above 17%. There is quite some buffer above what is required from a regulatory perspective.

Speaker #2: When we stick to ratios the questions about the regulatory CET1 ratio and if we already know how high that is.

Martin Paal: At the end, it is a balance and a trade-off between cash buffer and the return side. This is deliberately steered by us.

Speaker #1: Yeah. We have a CET1 ratio currently which is above 14%. We have a total capital ratio which is above 17%. There is quite some buffer above what is required from a regulatory perspective.

Speaker #4: Which we feel comfortable with.

Speaker #2: Thank you. And there was a follow-up question regarding the steering of Sweden and Denmark and the decisions and the steering we took there. Was it more, it seemed, business, cost of risk driven? What were really the factors why we needed that active steering?

Franziska Randt: When we stick to ratios, the question is about the regulatory CET1 ratio, and if we already know how high that is.

Speaker #1: Which we feel comfortable with.

Speaker #2: Thank you. And there was a follow up question regarding the steering of Sweden and Denmark and the decisions and the steering we took there was it more seemed to near business cost of risk driven what were really the factors why we needed that active steering.

Martin Paal: Yeah. We have a CET1 ratio currently, which is above 14%. We have a total capital ratio, which is above 17%. There is quite some buffer above what is required from a regulatory perspective, which we feel comfortable with.

Speaker #4: In the end, this is always a mixture of everything. If you imagine a scenario where we have significantly higher risks realized at the end than we expected at the beginning of a contract.

Speaker #1: At the end this is always a mixture of everything. If you imagine a scenario where we have extensively higher risks at the end realized than we expected at the beginning of a contract then it comes back on the one hand to the customer but also to the reseller who brought us this business and then we take measures to at the end get rid of that reseller as I mentioned and go for new ones and to having this relationship established means at the first time shrinking new business instantaneously and with a build up of this new relationship with new resellers this takes quite a while to have this build up then also in new business.

Franziska Randt: Thank you. There was a follow-up question regarding the steering of Sweden and Denmark and the decisions and the steering we took there. Was it more themed to new business, cost of risk driven? What were really the factors why we needed that active steering?

Speaker #4: Then it comes back, on the one hand, to the customer but also to the reseller who brought us this business. And then we take measures to, at the end, get rid of that reseller, as I mentioned, and go for new ones. Having this relationship established means, at first, shrinking new business instantaneously, and with the build-up of this new relationship with new resellers, it takes quite a while to have this build-up then also in new business.

Martin Paal: At the end, this is always a mixture of everything. If you imagine a scenario where we have extensively higher risks at the end realized than we expected at the beginning of a contract, then it comes back, on the one hand, to the customer, but also to the reseller who brought us this business. Then we take measures to, at the end, get rid of that reseller, as I mentioned, and go for new ones. To having this relationship established means at the first time shrinking new business instantaneously. With the buildup of this new relationship with new resellers, this takes quite a while to have this built up then also in new business.

Speaker #2: So, thank you. I don't see any questions from the audio line or in the chat function. I will just give it some seconds. So, it seems there are no further questions.

Speaker #2: So thank you. I don't see any questions from the audio line or in the chat function. I will just give it some seconds. So seems to be there are no further questions.

Speaker #2: Thank you very much for joining us today. Thank you, Sebastian. Thank you, Martin, for your presentations and for answering all those questions. Please do not hesitate to get in touch if there are further questions that spring to mind.

Speaker #2: Thank you very much for joining us today thank you Sebastian thank you Martin for your presentations and answering all those questions. Please do not hesitate to get in touch if there are further questions that spring to your minds.

Speaker #2: We're always happy to help. Just drop us an email at investor@grenkq.de. In the upcoming weeks, we will be quite busy traveling to different conferences in Frankfurt, Munich, and Hamburg.

Franziska Randt: Thank you. I don't see any questions from the audio line or in the chat function. I will just give it some seconds. Seems to be there are no further questions. Thank you very much for joining us today. Thank you, Sebastian. Thank you, Martin, for your presentations and answering all those questions. Please do not hesitate to get in touch if there are further questions that spring to your mind. We're always happy to help. Just drop us an email at investor@grenke.de. In the upcoming weeks, we will be quite busy traveling to different conferences in Frankfurt, Munich, and Hamburg. I kindly invite you to check out our corporate calendar. On 12 November, we will issue our Q3 report. You're also welcome to stay tuned. As Sebastian mentioned, we're on track, so stay tuned. This concludes the conference for today.

Speaker #2: We're always happy to help just drop us an email and investor@granke.de. So in the upcoming weeks we will be quite busy traveling to different conferences in Frankfurt, Munich and Hamburg.

Speaker #2: So I kindly invite you to check out our corporate calendar. On November 12th, we will issue our Q3 report. So you're also welcome to stay tuned, and as Sebastian mentioned, we're on track.

Speaker #2: So I kindly invite you to check out our corporate calendar. On November 12th we will issue our Q3 report. So you're also welcome to stay tuned and as Sebastian mentioned we're on track.

Speaker #2: So stay tuned. This concludes the conference for today. You may disconnect now. Take care, and goodbye.

Speaker #2: So stay tuned. And this concludes the conference for today. You may disconnect now. Take care and goodbye.

Franziska Randt: You may disconnect now. Take care and goodbye.

Martin Paal: Thank you very much.

Sebastian Hirsch: Thank you very much.

Franziska Randt: Bye-bye.

Martin Paal: Bye-bye.

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