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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, welcome to the Cembra Half Year 2022 Results Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.
At this time, it's my pleasure to hand over to Mr. Holger Laubenthal, CEO; Mr. Pascal Perritaz, CFO; and Mr. Volker Gloe, CRO of Cembra Money Bank. Please go ahead, gentlemen.
Thank you, Sandra. So good morning, everyone. Great to be here for our half year results discussion. I'm here with Pascal Perritaz and with Volker Gloe. As usual we'll briefly walk you through the highlights of the presentation and then we look forward to taking your questions. So before I dive into the details here, just a couple of overarching comments on the first half. I'm pleased to report a strong result for the semester. Good performance really across business lines with profitable growth and have also again achieved excellent loss performance.
We're delivering on our strategy. We launched the credit card app on time. We launched our proprietary card proposition with the Certo! credit card family and also the migration program on the Migros portfolio.
In addition, we're pleased to have strengthened existing partnerships with Conforama and FNAC and also some new partnerships with Zurich and cards with SPAR. Our sustainability efforts have led to an upgrade of the ratings to AAA by MSCI. And last not least, we added some new faces with deep expertise to our management team also adding a bit to diversity, which I'm quite excited about.
So with that, let me -- before I hand over to Pascal and Volker for more details, let me just give you the highlights of the first half performance. So net income came at CHF 90.6 million up 15% year-over-year. Financing receivables also grown 4% with growth from all business lines.
Net revenues were up 6%, with a strong rebound in fees and cost income has consequently come down noticeably with a loss rate at 0.5%. Overall, that delivers 15.3% ROE for the first half and strong Tier 1 capital at 18.8%. And as mentioned, we're progressing on executing our strategy.
On the next page, there's layout talking about the products and markets that we operate in. Personal loan is up 2% in a strong market. Here, we continue to balance growth with making sure we retain strong margins.
We've outperformed the market in auto on back of a strong used car market and the dynamics in that market. Cards, we've seen a strong rebound as anticipated, and we've been able to capitalize on this. And then Swissbilling off to a very strong start to the year with significant double-digit growth rate.
So overall, I think we're pleased with the performance year-to-date, and let me just hit a few operational highlights on the next page. So I said, overall performance further improved both in terms of profitable growth as well as risk management. Given the interest rate environment, we've put pricing actions in place on new originations to protect margins.
Strategy execution is progressing well across the work streams that we presented in December at the Strategy Day. Operational excellence, we launched the credit card app per end of June, we had 160,000 live on the app. We're also progressing with our platform upgrade for the leasing business, looking to start implementation here towards the end of this early next year.
And on the business and growth side, we successfully launched the Certo! credit card family and entered new partnerships. As I mentioned, Swissbilling is delivering well on the growth plans as well as on planned product releases. Culture transformation is well underway with the new organization, new leaders in place and increased commercial focus, which is starting to bear fruit. So look overall strong first half.
Now let me hand over to Pascal and then later Volker for some more detail on the financials and the loss performance.
Thank you very much, Holger, and good morning, everyone. In the first half of the year, we delivered a very strong business performance. We grew profitably in all our businesses. We benefited not only from the rebound effect after the lifting of economic COVID restrictions, but also from our commercial efforts, as you heard from Holger. We also made a significant progress in implementing our strategy and reach out the important milestone with the launch of our credit card Certo!. Let's now dig deeper into the numbers, starting with the P&L. Total revenues increased by 6% to CHF 250 million. The interest income slightly declined by 1% as a result of lower opening receivables and decreasing yields in the personal loan business. I will further comment on this in one of my next page. The interest expense was 7% lower, the commission and fees increased by 27%, with the credit card fees increasing by 42% year-on-year due largely to the lifting of the COVID restrictions.
The Swissbilling, which you can see on the line that we over grew significantly in buy now pay later with an increasing of billing volume to CHF 191 million, and fee income of CHF 6.5 million, plus 35%. The ratio commission fees to the net revenue increased from 25% to 29%.
We once again recorded an excellent loss performance. The provisions for losses benefited from the prudent and cautious credit risk policies applied during pandemic. This translates into a loss ratio of 0.5%, and Volker will further comment soon. The operating expense decreased by 2% and the reductions of the cost/income ratio from 52.6% to 48.8% is largely due to the increase of net revenues. I will also explain later on the development of the operating expense.
Finally, the very strong net income of CHF 90.6 million is driven by both revenue growth and margin improvement. Let's now talk about [indiscernible] improvement. Once again, with the strategic cycle, we introduced this new alternative metrics, which is called a return on financing receivables. And I want to repeat why we introduced these new metrics. In the past, we mainly as I commented on the yield development as an indication for margin development.
But as we know, the margin is the sum of many components, including pricing, yield, acquisitions, costs, interest expense, provisions for losses, operating expense and tax. And with this disclosure, we decompose our profit by [indiscernible] to better explain the movement of our margin.
P Loan, auto, car businesses all contributed to this margin improvement. And in total, the group margin improved from 2.5% to 2.8%, which is obviously also driven by the increase in the commission and fees line. You can also see on this page that the net income margin reduced slightly from 5.6% to 5.5%.
So now with the next page, let's now discuss the net interest income and the net financing receivable by business. So in total, interest income reduced by CHF 2 million from CHF 191 million to CHF 189 million and the assets grew by 4%.
Let me explain. In the P loan, the 2% increase was driven by a strong volume performance in 2022, increase -- and an increase in market demand. As a result of lower asset base compared to the first half of last year and the continued competitive environment. Interest income in the personal loan business decreased by 6% with a yield of 6.8%.
The P loan business mix towards increased towards low-yield businesses also due to higher demand for online and agent channel. We maintain our risk discipline in higher-risk customers and high pricing. These reductions of the portfolio pricing was, however, more than offset by gain in loss performance.
The auto assets increased by 4%, driven by strong volume in 2022 and the normal seasonal peak in H1. Interest income was stable with a yield at 4.5%. And in the credit card business, the net financing receivable rose by 8%, driven by higher transaction volume. Interest income was up 6%, yield 8.1%.
So let's talk about the cards. The transactions volume rose by 18% and the cards revenue by 22% with both commission and fees and interest income increasing. On the right side, you see the month by month for the comparison against the pre-COVID level. The transactions volume were 22% above 2021 and the card revenue plus 5%. You can see that volume and revenues were impacted in January by the omicron variant and the corresponding introductions of economic restrictions, which was then lifted starting February, mid of February.
Operating expense. So the operating expense decreased by 2%. Let's first talk about the absolute OpEx development and then about the ratio. Compensation and benefits expense were down 2%, which is mainly reflecting [ as of to ] the lower number of employees.
Professional services increased by 11%, driven by higher temporary resources related to the launch of our strategic initiative, operational excellence. The marketing expense increased by 57%, which is really mainly driven by our new proprietary as a credit card propositions in the first half of 2022. The cost for postage and statutory increased by 29%, and this is, again, largely due to the launch of our new card propositions, chamber applications, QR bills.
In over the decrease is largely driven by lower pension costs due to the U.S. GAAP valuations effect on Cembra pension fund. As a result of the 2% reduction in OpEx and the 6% increase in net revenue, the cost income ratio reduced from 52.6% in the previous reporting period to 48.8%.
Our full year 2021 -- I repeat 2021, cost income ratio was 50.6%, and we guided the market for a stable cost/income ratio in 2022. I want to reconfirm our guidance on a stable cost income ratio for the full year 2022, which mean that we anticipate some increase of operating expense for the second half of the year, largely due to the launch of our card propositions and the ramp-up of investments related to our strategic initiatives.
On the balance sheet, we already said net financing receivables at the end of the period amounted to CHF 6.4 billion, which is an increase of 4%. And the diversified funding portfolio increased by 3% to CHF 5.9 billion, largely in line with the increase of the financing receivables.
And the shareholder equity has decreased by 2% after Cembra paid out a dividend of CHF 113 million for the financial year 2021 in April 2022 and which was partially offset by the net income contributions of CHF 90.6 million.
So some details on the funding. The funding mix was 56% deposits and 44% non-deposits. The deposit base increased by 6% to CHF 3.4 billion, and the non-deposit debt remained stable at CHF 2.5 billion, at June 30. In March 2022, we paid back CHF 250 million auto lease assets, asset-backed securities, and we issue an unsecured bond of CHF 250 million for the same amount of the ABS in May 2022.
The weighted average durations decreased slightly from 2.5 to 2.3 years. And the pricing and funding cost amounted to 46 basis point compared to 44 basis point in December 2021. As you can see, we have strong liquidity metrics, and we maintained CHF 400 million of undrawn committed facilities.
Interest rate sensitivities. As we all know, the capital market has been very volatile since beginning of the year and interest rates increased sharply. For the full year 2022, we expect interest expense of CHF 28 million to CHF 30 million compared to CHF 26 million in 2021.
For the year after, and as disclosed to our investor presentations in December 2021, the net interest margin is expected to decline slightly mainly due to the shift of business mix and ongoing competition. Our ambitions is to offset the increase of interest expense by asset repricing.
And as you can see on the left side of this chart, the slightly negative duration gap. Repricing gap should support the projections of the net interest margin over time. And we also introduced timely some repricing following the SNB policy rate change announced in June 2022.
I would like to hand over to Volker to comment on our excellent loss performance.
Thank you, Pascal. Good morning, everyone. Yes, loss provisions for the first half came in at CHF 15 million, corresponding to a loss rate of 0.5%, which is the same level as last year, but last year contained a one-off. So that's also the reason why we kind of deemed the loss performance for the first half of '22 to be really strong. Same is valid for the credit quality indicators, such as 30-plus delinquencies and NPL ratios, they remain very robust. 30-plus delinquencies at 1.6%, NPLs at 0.6%, so slightly better than actually in prior reporting periods.
Let me provide some more explanation for the strong loss performance. In the beginning of the COVID pandemic, the bank tightened its credit risk appetite, which led to onboarding in average better quality customers. As these customers have a lower default probability, we now see the benefit as lower losses in the segment.
And although these measures are reverted back in the meantime, we can still temporarily benefit from this effect. And there are also a few exceptional items that influenced the loss result in H1.
One example for that is the environmental reserve. We booked that back in H1 2020 in the beginning of COVID to be prepared for the expected worsening macro environment. The need for the reserve has actually never materialized because payment behavior remained very strong in the portfolio. And therefore, we could now release in H1 this environmental reserve, which contributed to around CHF 2 million lower losses.
Another factor, also cautious write-off procedures that we applied during the pandemic. When we took a rather conservative look on the collectibility of some especially individual and larger exposures, now in the first half, we were able to benefit from that as we could recognize strong recovery performance on these written off exposures.
And that's probably especially in the area of auto financing, where also the relatively high car prices helped in addition. So it's a bit of a bundling of favorable items in the first half. But if one would need to give an estimate for a normalization of this H1 number, it might be rather closer to 0.7% actually in the core, but these exceptional items then brought it down to 0.5%.
One more comment on losses. Despite the strong loss performance as loss provisions, we maintained our level of allowances for losses in the balance sheet. So relative to the receivables, the ratio of allowances, the coverage is stable at 1.4%, so at the same level as last year.
Allowances will first materially change when the expected loss concept is -- so-called CECL will be implemented under U.S. GAAP in the beginning of next year. The latest estimates confirm the ones that we have been communicating earlier in -- with a day 1 impact in a range of between CHF 50 million and CHF 70 million, which impacts the opening reserve balance of 2023 under US GAAP.
When it comes to the outlook, I think it's fair to say that the macro outlook for 2022 and probably even next year, especially when it comes to unemployment remains quite strong, but there might be a heightened level of uncertainty around these forecasts. Consequently, we remain cautious with our outlook for the loss performance.
We stick to the midterm target level of less or equal than 1% loss rate. We would expect that the loss performance will normalize over the next periods, but not kind of instantly but as a gradual move. So it would be a surprise if the loss rate for the full year 2022 immediately jumps to a level of 1%, but it will not stay on 0.5% either for the full year, so we can probably expect somewhere to be somewhere in between.
And with that, I hand it back to Pascal to guide us through the capital position.
Thank you, Volker. So on the capital position, we remain very well capitalized with a strong Tier 1 capital ratio of 18.8%. The risk-weighted assets grew in line with the development of our financing receivables. And as you just heard from Volker with the implementation of CECL as of January '23 we expect total one-off impact, which was -- also impacted Tier 1 ratio between 0.6 to 0.9 points as previously as communicated during the investor presentation in December.
So thank you very much. And I would like to hand over to Holger for the 2022 priorities for the second half of the year and the outlook.
Thanks, Pascal. So I'll just make a few comments quickly on the cards business line here on this next page. I think the key messages here are the programs that we had presented to you and that we've been working on are on track. And we have multiple actions and growth avenues that -- at our disposal that we continue to deliver on.
Priorities remain as presented at our Investor Day, focus on a strong value proposition, operational and service excellence, strong customer focus and of course, effective migration of the portfolio of our Migros Cumulus card customers and communications around this.
We will return this business to growth through leverage presented both on the B2C and B2B side and the opportunity to leverage a significant customer base. On the B2B side, our model continues to deliver well both with extending existing relationships as well as adding new ones.
And then the successful launch of the Certo! credit card families is really a significant step forward for us. Product has been well received based on the feedback we have received so far and the transition of existing customers is as simple as we had previously discussed.
And so as such, the migration is off to a good start. Overall, on this basis, we are reiterating our guidance for assets and revenues to return to pre-COVID levels from 2023 onwards.
So next page, a bit on the broader outlook for the year. We expect continued resilient performance. Clearly, delivering on the cards transition program continues to be key. And we do recognize there is some uncertainty around this given the competitive dynamics. But as we've said before, we've got strong programs in place to address this.
Clearly, continued focus on delivering against our strategic road map, coupled with strong operating vigilance is something you can expect from us. And in terms of performance, as articulated, we expect [indiscernible] results in line with the guidance we have provided in February with the cards transition and operational excellence initiatives ramping up in the second half as planned.
So overall, a strong start of the year, confirming outlook for the second half, and now we're happy to take your questions.
[Operator Instructions] The first question comes from Máté Nemes from UBS.
I have three of these. Firstly, on personal loans. I would just like to better understand what happened that -- the yield there. I think Pascal, you alluded to the fact that there has been some change in mix there and a change in the competitive dynamics. But the yield -- the lower yield has been offset or more than offset by lower cost of risk or lower loss rate.
So have you actually shifted towards lower risk or higher quality customers and thereby accepting a lower rate or lower yields compensated by an equally lower loss rates. Is that a fair characterization? Or this is just simply the result of perhaps more stringent lending standards and lower risk appetite in 2020 and 2021, sort of COVID years. And eventually, the situation here could change?
Second question is on the repricing measures that you mentioned on Slide 14. Can you elaborate on where exactly you can implement repricing measures? I believe perhaps in personal loans, there is not so much room due to the regulatory rate cap and the same goes for credit cards. So is this comment really on the order book?
And lastly, a question on buy now pay later. Could you talk a little bit about your traction with BNPL this year? I see the Swissbilling receivables are stable. I think you mentioned the low single-digit million revenue contribution from this initiative. I would love to hear a bit more on this.
Yes, very good. So we'll let Volker kick off the first one and then I'll tackle the pricing and the buy now pay later. Volker?
Yes. Thanks, Máté, for the question. I think, first of all, I want to answer in a way that this obviously is always a combination of items, so it's not yield only, which is also the reason why we like to see into the return of [indiscernible] in receivables. And with your characterization, you're actually absolutely right, during the COVID pandemic. We have been tightening our risk appetite and especially on P loan customers that are more exposed to macro stress.
And as we apply risk-based pricing, we are typically, by that kicking out more of the customers that before would have paid a higher rate. So it would have generated a higher yield. So consequently, in average for the vintages that we have been writing during the pandemic, we also were accepting the lower yield because we didn't want to take the risk on the loss side. And it's paying off as we can see because we now see the lower losses, but obviously, it comes also then for these vintages with a slightly lower yield on these P loan accounts.
This will be, as mentioned, to a certain extent, be a temporary effect as we reverted back our credit risk appetite after kind of COVID would be declared over. So basically from middle of last year starting into that. So I think your characterization is absolutely correct. It's kind of the combination of yields with the cost of risk. And yes, there is this temporary effect where we have been tightening our risk appetite. And consequently, we see the effect in the numbers.
Thanks, Volker. So let me spend a minute on pricing. Look, this is something that was also personally, for me, quite important that we tackle this very proactively given the market that we're in and we've been around the block a few times to know that these things do happen even if we've had a bit of break here from the market perspective. So we tackled this proactively.
You're right in the sense that auto is the most straightforward one in a way, and that's been implemented throughout the business line. But we also do this in personal loans. You are right about the cap being in place.
But obviously, our pricing range is quite wide here. And so we manage this through an internal process and system adjustments in the background. And I don't want to go into too much detail here because, obviously, that's also a bit competitive information. But you will notice this, and you should notice this in both of these product lines, cards a bit different to your point. But again, on auto and personal loans, we've tackled this proactively.
Buy now pay later, your question on the traction there. Look, we're very pleased with the progress that this team is making the business is making. The number of invoices processed has grown significantly by over 60% in the first half, and the billing volumes are also up over 35%, 36%, actually.
We also talked about some product and service improvements and launch that the company is planning and those are as well delivering. So we are very pleased with the progress here. Important for me to note as well, given perhaps a bit of the macro discussion beyond Switzerland. We -- this is a profitable business, and we continue to see that profitability going in the right direction. So we're quite pleased with the progress, Máté. I hope that answers your question.
The next question comes from Daniel Regli from Credit Suisse.
I have couple of those. First, really high level, quickly your full year guidance for 2022, you're obviously guiding 13% to 14%. If I take the H2 shareholders' equity, obviously, this is probably a little bit too low a base, but still I'm getting to CHF 153 million to CHF 165 million for the full year, which would mean kind of CHF 62 million to CHF 74 million for H2, which would be a gap of CHF 20 million to CHF 30 million compared to H1.
Can you maybe give me some kind of bridge on what do you expect in terms of top line and operating expense changes, H2 versus H1? Or is my math completely off?
Then secondly, maybe similarly on your interest expense guidance, you're saying CHF 28 million to CHF 30 million for the full year, meaning CHF 16 million to CHF 18 million for H2, again here, can you maybe explain to me where exactly comes this CHF 4 million to CHF 6 million uplift in interest expense?
And then thirdly, on Certo!, you maybe comment on how the launch was of the Certo! program, can you maybe comment about -- I don't know what numbers you have, but how many cards you have already sent out to previous Cumulus customers? And how good was the pickup or so, any kind of qualitative comment would be very much appreciated.
And then just maybe last, but not least, a little bit nitty-gritty question on Page 10. Where you show the credit card volumes and transaction volumes. And when I look at the lower chart on the right-hand side, honestly to me, if I just add all these bars together, it seems to me a bit that 2022 should actually have been higher than 2019, but credit card commissions have been a lot slower than 2019. So can you just -- is this just a visible dilution? Or what is the point which I'm not getting?
Thanks for the questions. So I'll let Pascal lead into these. I'll take the Certo! launch question. And then Pascal, if you want to take the others? Go ahead.
Yes, certainly. Thank you, Daniel. So first question is on the outlook. So you must have not totally wrong. I think what is important is, first to reiterate our guidance we set for 2022 as of to 13% to 14% ROE as well as the stable as the cost/income ratio. And again, stable cost/income ratio under 40.6% was in 2021.
And it means that for the second half of the year, there is no doubt that we'll have some costs related to our cards at the launch, which will increase particularly in the marketing area. And we clearly have now a ramp-up of some investments related to our strategic initiatives, operational excellence.
The first half of the year, we had a lot of focus in our organization on launching the new app, Cembra app. We had also the launch of our proprietary [ credit card ] with Certo! and obviously, as the second half of the year, we are doing prioritization on our operational excellence initiatives.
At the same time, on the revenue, obviously, there are some uncertainties related to the development of the cards revenue. We also indicated to the market when with the termination of the Migros contract that we will have a temporary, although, some impact. So in that sense, I do not -- I cannot exclude also some impact on the revenue side for the second half of the year. So this is why at this point in time as we are guiding with the 13% to 14% ROE and a stable cost income ratio.
On the funding, your second question, yes, although it's -- meaning there was some CHF 3 million to CHF 4 million increase in the interest expenses. So obviously, as we have the launch or we issued a unsecured bond in May of CHF 250 million, which had a 1-month impact for the first half of the year, and we'll have then a full impact for the second half of the year.
But we also have a regular deposits fall over around which basically means that for the second of the year, we expect this increase. And obviously, the [ rollover ] of the deposits obviously cost higher. If you look at the capital market and the interest rate and development over the last couple of months. Certo!, you want to comment?
Sure. Thank you, Pascal. So Certo!, I think, Daniel, I would split this into two sections or two parts, if you want. And the first one is the launch of the program, right? And if you look at this, we discussed this with you before. I think making sure that we launch this to the date on the 1st of July, getting all the external communications in place, all the CRM metrics, the prioritization of the communication, et cetera.
We could not be more pleased with having achieved that and the outstanding work that the team has done nad this made us really proud on this. So why am I stressing this because that is the foundation for everything that's going on now and that's to come, right? So if you want to look at it that way, the ingredients are in place, and they're in place as we expected to high standards.
Now around sort of Phase II, which is now the migration that we're working on, again, what I can confirm is that there is a full plan in place. That plan was kicked off on the 1st of July. And that plan continues to be executed and delivered on for the rest of the year and beyond, if you want, in terms of CRM campaigns, in terms of mailings, in terms of outbound measures that we take, in terms of contacting customers, in terms of marketing and others. So all of that is in place, and you'll see more of that as you go through the second half.
I hope you would appreciate we can't give you details on how that's progressing and what we're doing for competitive reasons, and we're also 3 weeks into this. But what I would say, Daniel, the migration program has started well. I think that's a fair statement at this point where we said a few weeks into this. And perhaps the last question, Pascal, back over to you on the Page 10, the volumes on credit cards.
I think first, the good news is basically that clearly, as we showed that the cards revenues are back to pre-COVID level, respectively, higher than the pre-COVID levels. Obviously, as compared to 2021, a very strong improvement from CHF 33 million to CHF 47 million on commission and fees and plus 5% if you compare in total the interest income and commissions compared to 2019. It remains competitive as a market environment. But in total, we are pleased with the rebound that we are seeing on the card revenues.
But just quickly, the card fees shown on the below on the right-hand side, this is credit card commissions, which is the line you show CHF 47.5 million in the credit card commission line, correct?
It shows the total revenue, so meaning so the commission and fees as well as the interest income. The interest income were quite stable.
[Operator Instructions] There are no more questions from the phone. Sorry to interrupt, we have a question from Andreas Venditti from Vontobel.
I have only two things left. Firstly, on the cost side, maybe you could provide a bit more color in terms of our expectations there. I mean you mentioned already some investments that you plan, maybe more specifically on the IT expense side? And also maybe on the other expense line.
You could maybe provide a bit more color also whether that was a one-off basically in the first half or not? And then on funding, in terms of ABS, I've seen the switch, if you want, from the -- basically replacing the ABS with the unsecured. Is ABS not a focus anymore? Or are you planning at some point to issue a new one?
Thanks for the question. Pascal, I think you'll take this.
So thank you, Andreas. Look, on the cost side and particularly on the operational excellence, we indicated to the market with our Investor Day that we would expect roughly CHF 10 million of P&L impact related to the strategic initiatives for operational excellence in 2022. And if you look at the first 6 months, I would simply say that basically, the P&L impact of operational excellence was not really a material.
So clearly, we will see a ramp-up in these investments for the second half of the year, also broadly in line with the message we gave during our Investor Day. And on top of that, certainly, as we will have a market income, marketing campaigns related to our new card propositions.
Obviously, as this marketing campaign could only started as of July 1 after the termination of the contract we had with our partner. So it's really the second half of the year where we will see some further material impact on the marketing line.
On the other, it's largely driven, as though by the new valuations of our pension fund. So under U.S. GAAP, we calculate potential of actual profit or losses and then needs to be amortized over a period of, on average, usually 5 years. We have seen a little significant reductions in 2022 as a result of the strong performance we had on the pension fund of 2020 and 2021. So the impact here was CHF 2.4 million positive, which is booked and reported in the line other.
Finally, on the asset-backed securities, no, we like asset-backed securities, we simply -- in the current market environment we had, we decided to go with the unsecured bond. We are very pleased with the placement of the unsecured bond. But we are evaluating regularly at which point we might go with secured bond as well. So it doesn't mean that ABS is not an interesting instrument or it's simply as a more market timing.
We have a follow-up question from Daniel Regli from Credit Suisse.
And again, sorry, coming back to the guidance for the full year. And obviously, you now explained that it's about CHF 10 million is coming from this operational excellence initiative and the cost line, but there's still like kind of CHF 10 million lower revenues or at least it's the conclusion I would make.
And can you maybe just give me kind of -- explain this to me why you're expecting CHF 10 million lower revenues -- partly obviously, the Certo! offering coming at a lower margin as the previous cards, but I think volume should kind of offset a bit this impact and then maybe higher interest expense, but still struggle a bit to kind of see that the picture you're painting for H2.
So you are right. Ultimately, this is the sum of many aspects. You mentioned the interest expense. We mentioned also the normalization on the loss line, which is expected for the second half of the year. The potential uncertainty related to the revenues after Migros terminations.
And finally, the operating expense, first related to our strategic initiatives but as well as related to the launch of our card propositions. So that's the sum of everything. So both numerators and denominators, there are some sensitivities. So at this point in time, we are guiding based on this ROE 13% to 14% and a stable cost income ratio.
Yes, Daniel, just to add to this, perhaps, right? I think that's, in my mind, also the important takeaway here. We're confirming the guidance that we've given in February. The year is going to plan. The expenses that Pascal is talking about in terms of operational excellence will be going in as planned. The fact that there's different distribution between H1 and year -- sorry, first half and second half, again, is something that we had reflected in the planning, and you're just not planning to see this play out. But again, confirm the guidance, so you're going to plan.
Also the next question is a follow-up from Máté Nemes from UBS.
Just a very quick question regarding the operational excellence program. I think you indicated back in December and also reiterated in February that you would start implementing the core banking system for leasing in the first half of this year along with a data center move or started the data center move. Could you give us an update on these? Are these on track? Have these started? Or there's been a delay and these are mainly for H2? Just wondering.
Yes, Máté, thanks for the question. Let me take that. So no, look, they're progressing well. These programs as well as some other ones that constitute the overall operational excellence road map. Data center move is going to plan as we presented it. And on the platform, we've also kicked that off in the first half.
I think we set the implementation towards the end of this year. And roughly, that's still where we are, right? There's an MVP approach. It will be late this early next year, but we've kicked it off the plan. And so we're progressing with that, Máté.
Gentlemen, so far there are no more questions.
Good. Then I would just say thanks, everyone, for dialing in for the questions and attention this morning. We're pleased with the progress that we're making here, a strong first half. The strategy execution delivery is progressing well and again, reconfirming guidance that we had given in February for the full year as well as the midterm outlook that we had presented at the Strategy Day in December last year.
So thanks again, everyone, and have a great day. And if we don't speak to each other, hopefully, some good time off during the summer. Thank you.
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