© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day, and welcome to the GRENKE AG Publication of Quarterly Statement Quarter 2 2021 Conference Call. Today's conference is being recorded.At this time, I would like to now turn the conference over to Anke Linnartz, Director, Investor Relations. Please go ahead, madam.
Good morning, ladies and gentlemen. Welcome to our today's earnings call on the occasion of the publication of our Q2 results 2021. My name is Anke Linnartz, and I'm Head of IR at GRENKE. With me today are Michael Bücker, our new CEO; and Dr. Sebastian Hirsch, our CFO. Just before we lead into things, I would like to let you know that this call is being recorded and will be archived on our website. We will start off with the opening remarks by Michael Bücker. Dr. Sebastian Hirsch will lead you through the presentation, and he will be available for our Q&A session right after the presentation.I stop here, and I pass the call on to Michael Bucker. Michael, the floor is yours.
Yes. Thank you. Ladies and gentlemen, welcome to the analyst conference on the occasion of the financial report for second quarter and first half year of 2021. This conference here today is my first analyst conference in my role as the new CEO of GRENKE AG. Therefore, I would first like to take the opportunity to briefly introduce myself to those of you who did not hear my introduction at the GRENKE Annual General Meeting just a few days ago. I'm 59 years old, and I'm a native of Westphalia. I'm married and have 3 grown sons. I'm a trained leasing professional with banking experience. I actually learned the leasing business from ground up at Commerz- und Industrieleasing followed by Deutsche Immobilien Leasing and then as CEO at Commerz Real. In my last position, I was on the Board of Management at BayernLB, responsible for Corporates & Markets.Ladies and gentlemen, today is my third day at GRENKE. I, therefore, ask for your understanding that I cannot answer your questions as qualified as I would like to. I will be able to get a more detailed picture of the company in the weeks ahead.One thing, however, is already clear to me. After the turbulence of the last few months, I first want to bring calm to the organization. Our staff needs a return to security and a positive perspective. And one of my most important tasks will also be to ensure we have the necessary internal controls and processes embedded in the GRENKE Group's corporate culture. We will drive forward this necessary process of change with unwavering commitment. This is an important precondition for regaining any lost trust also on the capital market. And this is how we will lead GRENKE back to its former position of strength. This is my declared goal, and the reason I will be actively involved in the dialogue with the supervisory authorities in the coming weeks.The question of how quickly GRENKE will regain its former strength also depends on an external factor, the development of the pandemic. And the past few months have already given us a good idea of how the COVID crisis impacts our business performance. And with that, I have the perfect opening to introduce Sebastian Hirsch, our Chief Financial Officer, who will now present to you the figures for the second quarter and the first half of the year in detail.Ladies and gentlemen, the fact that the figures are so notably positive. It's not through my efforts, of course, but through the other efforts of the entire company. In my view, the Board of Directors and all GRENKE employees in all 33 countries deserve recognition. Because they have mastered these first 2 very challenging quarters so successfully. Thank you very much. And now over to you, Sebastian.
Thank you, Michael. Ladies and gentlemen, warm welcome also from my side, and thanks for joining our conference call today. Firstly, let me start by saying GRENKE is on track in the first half of 2021 and things continuing looking up on the back of the ongoing pandemic. We are increasingly returning to a mode of normality at GRENKE and gaining back momentum.In the first half of 2021, we have proven the resilience of our business model. We are profitable despite the pandemic, which continues to impact the global environment and economy, as you are aware of. So far, we have seen a relatively strong performance in 2021 with some impressive results, as Michael mentioned. Consequently, we've just been able to slightly lift our profit guidance up from former EUR 50 million to EUR 70 million net profit for the Group to now EUR 60 million to EUR 80 million. This underlines our belief in the strength of our business, the business model and anticipate the recuperation of the global economy in the months to come.Let me line out also that the special audit of BaFin, related to the accounting the accounting figures of 2019, the so-called enforcement audit has come to an end. That audit has been fully completed as communicated ahead our last week's Annual General Meeting.Let's take a closer look to some highlights of the second quarter results. The new business figures with EUR 580 million, slightly in the area of the previous year Q2 and so quite stable all overall. We achieved a very good contribution margin to level of 18.1%. It increased by 0.6 basis points versus the Q2 in 2020, a very good contribution margin, too, and very good for our future P&L. You are aware of that our contribution margin, too, is a measurement for the profitability for the new business over the next, in average, 48 months.Also the Q2 net profit, better than expected at the beginning of the year with EUR 18.3 million, a plus of 35% versus Q2 2020. And the equity ratio was 17.8%, a very stable base on the balance sheet increased and also very good above our long-term target of 16%.Yes. Looking back to your new business, you are aware of that we announced the new business figures with beginning of July, the -- EUR 580 million, less than 3% overall, including leasing, banking and factoring business, but close to the level of the previous Q2 figures. And we have to take in account that we stopped the small, medium enterprise lending, the bigger ticket business in GRENKE Bank, and also GRENKE Bank is only a small portion of the lending business with roughly 1% of the Group's Leasing business and factoring businesses in plan and also that I can say, the July new business figures are in plan what we guided.The contribution margin development is quite positive, a very stable contribution margin. One, this reflects our net interest income on the total period's view with 11.8%, close to the 12%, 12.1% in the years before. We have a bit higher funding cost to price-in because of the overall environment and our funding costs are rising a bit, and very important, the contribution margin. Two, we are focused on small tickets, very small ticket approach. We are focused on risk adjustment pricing and risk selective business during the pandemic, and so the 18.1% contribution margin, too, level is quite good. And also a contribution margin, too, in euro is higher than in Q2 the last year and that despite less volume.That brings us to our P&L. P&L for the Q2 figures and overall with a net profit of EUR 18.3 million. That's a very good result for that Q2. The net interest income is a bit less because of now, 1, here, less new business, less volume also on the balance sheet. You see that balance sheet is a bit less than in the previous periods, but the profit from new business and the profit from service business is with roughly 5% and plus a very good development.The costs increased as planned and expected with 23.5%. We have to take into account the extraordinary costs because of the special audits and because of the special situation where we are, and that cost should not going forward in the second half of the year as we announced with the beginning of that year, and roughly EUR 10 million are the extraordinary costs we have now in the first half of the year because of audits and legal advice and so on. Very important and that's the main reason driving our new guidance is settlement of claims and risk provisioning and the last year was because of the pandemic, not that easy in the last 12 months to find the right level of loss expectations of risk provisioning because of deferral program, you are aware of that because of the bad debt, the bad debt collection and also the performing loans under IFRS 9 to find the right level of an expected loss.So our guidance and our approach was more careful. But during the year, during the first half of the year, all payments dates, means January 1, April 1 and July 1 now, some days ago it was very positive. Our missed payment ratio is with roughly 5% in a normal level, in the level we had also before the pandemic and also the payment behavior in bad debt, the development of bad debt and risk provisioning was quite good. And that brings us to a new guidance overall and to less settlement of claims and risk provisioning, but we are always careful because of today's situation because of the uncertainties because of pandemic and so on. So we are very comfortable with our risk provisioning. We adjusted today and looking forward to that with the new guidance.Brings us overall to operating result of EUR 28.2 million. And as I mentioned, the EUR 18.3 million net profit was a bit higher tax rate of 24.3%, and the tax rate should be stable, more or less stable over the next month for the rest of the year.Yes, settlement of claims. I mentioned that you are aware of that slide. What we see here is especially the blue portion of the bars becoming smaller and smaller because of the deferrals. You know that we had a bit more than 50,000 leasing contracts with deferral over the last year, roughly 27,000 companies, clients with deferrals.Today, we have some small portion of the leasing contracts with deferred, roughly 1,600 contracts are having a deferral. Many deferrals are paid back over the last month and only 13% of the former deferrals are going into [ damage ] or [ rent on a damage ] as that our bad contracts today, the rest of the portfolio is a small portion running and the rest a big portion offset payback deferrals, as that means. At the end of the day, the deferral program was a great program for small, medium enterprises also for us to bridge the liquidity for our clients and many small, medium enterprises.Overall, the risk provisioning reflects our situation in -- across countries, reflects also the pandemic situations, the macroeconomic situation. So I think we are well prepared with the current level of risk provisioning, the 1.9%. And to go forward, we can expect that the loss rate will be not higher than 2.0% for the full fiscal year 2021.The next slide is the cash flow. You know the slide is quite new, developed over the last year, showing us the cash flow from a bit different perspective. Important is that we see here the strong payments from our lessees, which is quite huge with EUR 1.2 billion, giving us a good base to funding our business, giving us a good base to paying back our liabilities, was roughly EUR 600 million. And the cash flow from existing business was roughly EUR 570 million at the end of the day. That's the main reason why it was not a need go for further funding for the investments in new leasing receivables for the new business on the one hand and also the strong liquidity situation. And overall, we had a liquidity of roughly EUR 1 billion. We started in that year. And also today, our liquidity situation with roughly EUR 800 million is quite comfortable. And that's a small negative cash flow here at all, but we have to take in account a strong liquidity situation on the bank accounts.Our funding mix, there is no significant change over the last months. The senior unsecured part was -- is roughly the half of our funding from a Group perspective, for that portion, our rating, especially the Standard & Poor's rating with BBB+ is quite important, and it was also important that the rating BBB+ is stable, of course, a negative outlook, but the negative outlook was also with the beginning of the pandemic. And so the rating result overall is stable and comparable to the situation before the [ short-seller ] report.Also GRENKE Bank with deposit business, roughly 1/3 of our funding quite important and will be important in the future and ABCP, ABS, as you are aware of, especially for foreign currencies for countries like U.K., Switzerland, important, and will be also important when we're increasing our new business for funding, which is matured to currencies and also from a liquidity perspective from an asset side. So also that is an important box for our funding.Yes. That brings me to the guidance. The new guidance I mentioned, I can say we are on track and are in plan with the new business figures. We stick to the guidance to achieving a new business leasing volume of EUR 1.7 billion to EUR 2.0 billion. And because the investment behavior of small medium enterprises is quite careful at the moment, but on a stable level, the net profit is now guidance EUR 60 million to EUR 80 million. Before, it was EUR 50 million to EUR 70 million year-over-year, especially because of the good development and payment behavior and risk provisioning and land equity ratio, we would like to achieve is above 16% and was today 17.8%. We are more than comfortable on that goal, and we are sure that we will achieve that goal for end of the year [ 2 ].So we started in the year with cautious and sensible guidance. Now we have more confidence to the guidance at all because of the first half of the year. It was a strong half year when we take into account all the circumstances we have. And to summarize now, GRENKE is back on track. We focus on our strategy, and we'll be discussing now with our new CEO, Michael, further ways to regain pace and accelerate growth in the future. Thank you very much.
Thank you, Dr. Hirsch, for your presentation. Ladies and gentlemen, we are now ready to take your questions, and the operator will pass on the instructions right now. Thank you.
[Operator Instructions]
The first question comes from Johannes Thormann, HSBC.
Johannes Thormann, HSBC. Two questions from my side. Just first of all, could you update us on volume trends in July, please? How this has been compared to the second quarter in terms of volumes? If you've seen any uplift or easing of restriction and so on. And secondly, a bit puzzled by the cost trends. You had -- despite extraordinary costs, you had a strong decrease in selling and other admin expenses, whereas staff costs have increased significantly. Can you elaborate on this, please?
Yes, of course. Mr. Thormann. First, update to July, July was quite stable compared to the second quarter. So that means we are on track, volume quite stable. And you have to take an account that July and August are the holiday months, banking holidays, a lot of vacations. And so overall, and compared to previous year, July was okay. It was like expected. And as I mentioned, so we are on track with our new business figures.And the cost trends, you are right, we have some extraordinary costs. On the one hand, you are aware of the legal costs, the audit costs in the first quarter and the second quarter. And the second quarter was roughly EUR 2 million, a bit more than EUR 2 million. Extraordinary overall in the first half of year, EUR 10 million, and that should not go forward for the second half of the year.And also the personnel cost increased. On the one hand, we have now a bit higher variable payment, you see. But a specific thing you have to take into account that are the severance payments we have because of the Board members leaving -- have left the companies. And that's extraordinary, it was also mentioned on the Annual General Meeting. There you can take in account roughly EUR 1.82 million, which was extraordinary in Q2, and will not go forward in Q3 and Q4.
Okay. Just on the legal costs or special costs. Initially, I had EUR 7 million extra earning of cost in mind that you flagged us for Q2. Is this any -- and now you say, just EUR 2 million. Do we have to expect EUR 5 million more? Or is this just different numbers?
We guided EUR 10 million to EUR 15 million extra costs for that year, and in the first quarter it was roughly EUR 7 million to EUR 8 million, I guess. And that's right. So the first guidance was roughly again EUR 7 million. So it was a bit less. And so we should not expect significant costs for that. Maybe it could be that there is a small portion, but it should not be significant in the million range for costs for legal advisers or something like that in accordance what a short-seller report.
Then we'd like to move on to [ Meng Sun ] from Deutsche Bank.
Also 2 questions from my side. One follow-up question on the cost inflation. Looking at the selling and administration expenses, if we exclude the EUR 2 million additional cost, we still see a quite huge inflation year-on-year. And can you give us more color on what's the driver on the cost inflation? And how should we look or expect going forward into the next 2 quarters?And the second question is on the new business. As you mentioned in the first quarter that you have seen some shortage on the IT equipment because of -- due to the logistic issues. And we also heard from some manufacturer that there has been also some shortage due to the semiconductor product? And do you see that as a negative impact going forward for your demand side? A little bit more color on that would be appreciated.
Yes. I hope I got your questions right. At first, you are right. At the cost level, we can split out, as we mentioned, roughly EUR 2 million for the extraordinary costs in Q2. The rest of the cost should be more or less stable because we have some other things in place to going forward, which is quite normal in the current environment and our environment. And so the cost overall at that level should be stable. We would like also to come back -- going in action with our sales cost also including in the sales and administration cost to having some actions on the sales and marketing side, to coming back to the markets because the pandemic should be -- could be more under control. And also, we would like to achieve new business, further growth as we guided and mentioned.And the last question, I'm not 100% sure if I got it right, but we can't see some pressure from a demand perspective. Of course, the environment is not that easy today. That is right because of the pandemic. The overall situation is not 100% safe, but much more better than 3 months ago, half year ago, and we see that investments are coming back. And also the demand is coming back, but it's not on the level where the demand was 18 months ago. That's for sure, but we see that investment and behavior of small, medium enterprises are coming back. And hopefully, that is stable and should be stable for the next months.
If I could come in here for a second. I think this was already the huge part of the question. Another part of the question was about a potential impact of a shortage in IT equipment, whether this would harm us or not.
Yes. That could be -- there could be an impact. We can't really see that today. At the end of the day, when we will see this and we have to deal with that and that for all, for everybody who's needing equipment as a leasing company or a small-medium enterprise, important. From today's perspective, we [ planned fees ] there, a huge topic from our demand perspective. But we cannot say that it will be not up for the next months, it could be.
Then we'd like to move on to Gerhard Orgonas from Berenberg.
I think you have a new revolving credit facility. Could you tell us the finance costs for this new facility that you have incurred or that you will be paying? And then on Slide 8, you talk about Italy being the major driver within the impairment Pages 2 and 3. Could you just update us a little bit about the payment behavior and the situation in Italy overall, please?
Yes. I will start with the last question. So payment behavior is quite stable. As I mentioned, the missed payment rate from collecting our installments per quarter was in Q1 and Q2, 5%. Now in Q3 means that the beginning of July, it was a bit less than 5%. That is absolutely a normal level and the level we had also before the pandemic and the missed payment rate in July now is a bit better than the level before the pandemic. But overall, normal payment behavior and also the bad debt collection is quite normal, which bring us to a comfortable and stable recovery ratio, you can see in our risk provisioning. So from a payment behavior perspective, it's stable over the last quarters. And that should also be stable for the next months and quarters. That's our outlook. We can't see there anything will change. The first question was because of funding costs. I think in funding costs, we have a stable funding mix and funding structure. There was no new huge funding for an expensive cost or something like that. That's why our funding costs from today's perspective are also more or less stable, but we are pricing in, in our contribution margin 1 the expected higher funding costs. But at the end of the day, we will see that when we can go back and we are willing to go back to the capital market, making a bond or something like that. Then we will see that all looking forward, we expect higher funding costs. And the best way to expect that is to look to the current bonds we have. The last bond was 1 year ago and to look to that yield where the bond is noted today, and it's in the area of 3%, 3.5% today. But again, at the end of the day, we have to see when we come back to the bond market and the ABS funding costs, deposit business funding costs and also the credit funding costs are more or less quite stable as we see today.
That means that the revolving credit facility is quite a bit lower, I think, below 1% cost?
Quite below 1%. Yes, that's right.
Next question comes from Marius Fuhrberg with Warburg Research.
The first one would be, could you give us an update on how things are developing in the U.S. since your start over there? And also with the country being quite strict in letting foreigners in. So can you give us an update on how the business is developing?A second question would be on the special audit. I mean you reported that the enforcement procedure is now finalized. And could you give us an update what is still left, which is currently audited and what the time line of the remaining audits would be?
Yes, of course. Mr. Fuhrberg. At first, the U.S. market developing well. The start is 1 year ago. And it's -- like always, we are starting step by step and not with a big bang as mentioned, it was mentioned before. And so it's too early to talk about figures. The new business volume in the U.S. market is quite on a low level, less than EUR 1 million. But it's important to going out, talking with dealers and getting leads, new dealers and from the very beginning on driving a diverse portfolio, not only working with 2 or 3 dealers. That's quite important in our business. And so we look forward for the rest of the year and the next year to going forward in the U.S. business and to proving the business there and to rising the business volume as it was before in all the other countries.And to the special audit. Yes, that's right. The enforcement order is finished, as announced last week. There are no further changes expected or something like that in terms of accounting, in terms of balance sheet, whatever, and that's finished. And the outstanding thing because of the special audit of BaFin in terms of regulations, the second part of the audit of BaFin. There we are in dialogue with BaFin. We started a lot of measures by ourselves. We started a lot of actions by ourselves. We are in a dialogue with BaFin, talking about everything, talking about the status and so on. At the end of the day, it could be that BaFin will bring up some further measures. It could be. We don't know that. It's part of BaFin, and that is outstanding. And all the other audits and measures are finished.
But no time line yet with regards to when the opening audit?
The time line is not up to us, yes.
Again, we'd like to move on to Corinne Cunningham from Autonomous.
Most of my questions have been answered actually. I just had a technical one on deposits. In the presentation here, you said EUR 1.7 billion. The EUR 1.5 billion according to the accounts, which would be a drop quarter-on-quarter. So I'm just trying to work out which figures should I be using there? And was there, in fact, a reduction in the quarter? And is there any regulatory pressure to pull back on deposits? Or is it more driven by liquidity? Just like to get an understanding of what your strategy is on the deposit side at the moment.
Yes. And so maybe we should give you more detail on the slide of the presentation because the GRENKE Bank funding portion is the deposit business, and that's a huge portion with roughly EUR 1.5 billion, as you mentioned, and also see on the accounts. And the rest is -- that are the global loans where we are working together with promotional banks in Germany, KFW, for example. And that's -- there is the rest when you see EUR 1.7 billion to EUR 1.5 billion. It's a -- EUR 200 million is a global loan. We are quite stable with our deposit business because of our liquidity situation.We would like to having that on that level because our strategy is always diversification, and deposit business is a very good liquidity source for us. It's very good for our funding. But at the end of the day, we would be diverse. We would not like to have 80% deposit funding. We would like to have a diverse funding mix between deposit business and global loans of GRENKE Bank, but also ABCP programs and our bonds and promissory notes or credit facilities, whatever. That's important for us.
So we move on to Dr. Philipp Häßler, please, with Pareto.
Yes. Philipp Häßler from Pareto. I have 2 questions, please. Firstly, on your Stage 3 loans, which amount to EUR 300 million. Maybe you could give us some more details? Are there any countries which contribute, in particular, to this EUR 300 million? And then secondly, on your leasing portfolio, we have now seen a decline over several quarters. When do you expect your leasing portfolio to stabilize or even to increase again?
Yes. Thank you to -- for the Stage 3 or also the other stages. There's a table also published in our notes on Page 32, I guess. And of course, there you can see the leasing receivables gross means before risk provisioning for the 3 important countries: Germany, France and Italy and for the rest of the world. And of course, the main portion is Italy in Stage 3 was roughly EUR 260 million, but again, it's gross. And also the main portion of the net receivables is Italy. So roughly 1/3 of that volume is for the Italian business.And you can see that on the table, I think and stabilize the leasing portfolio. That depends on new business development, on the one hand. On the other hand, we have now a quite stable new business development. So when we look to the average lease term is 4 years, the duration in the portfolio is 2 years. And so when we will have that level of new business we had now over the last 12 months, I think 6 months ago, then the leasing volume will be stable, but we would like to increase our leasing volume as mentioned and guided. And so I think the leasing volume could be and should be -- come up per end of the year. But it depends on the new business volume at the end of the day, but I think that should be more or less stable on the level we have today could be a bit dip in Q3. But then, as I mentioned, depending on your business volume, it should be stable and increasing again.
Just on the Stage 3. I meant the other countries, which are EUR 300 million, as we can see in the table. Could you provide some more details on those other countries?
Yes, the other countries, you can also -- it depends on the volume, as you are knowing. And the next country there is Spain, which is quite important, with roughly EUR 120 million and from a gross perspective. So net, it's less. And also U.K. because there are big companies and the rest is diverse over the portfolio, over several countries. But Spain and U.K. are the next 2, and it's also #4 and #5 in new business volume.
Okay. So we move on to Markus Schmitt from PRISMA.
I have actually 2. So 1 question is on your funding and what you just mentioned. I think you have still a planned cash position, but with new business, maybe better in H2 or next year. When do you need to or want to come to market with a new larger bond issue? Because I think you overcome a lot of [ burn ] so far, but what missing for me is that senior unsecured investors show again confidence and currently that you're able to place a larger piece of debt and adequate yield. I find this element quite crucial. So what are your plans there? And maybe you could address you -- when you want to refi or pay back a larger 2,000 -- sorry, EUR 80 million maturity due in February 2022. And the second question is on your rating. So we are still on the negative outlook by S&P. Has the agency implied to you if this will become potentially a 1 notch downgrade? Or could this be more? Maybe you have an expectation there.
Yes. First, the bond market it's quite important for us. I think the first step for us was to delivering the new business figures, delivering P&L figures and also delivering now with a new guidance. And our liquidity position is quite strong, as you mentioned. And now we did our homework. We did a lot of homework also with the Annual General Meeting last week. And now we are quite looking forward. In terms of liquidity, liquidity needs, it depends on the new business volume. And whenever we feeling that the situation is right, that means our liquidity situation and also the market situation is right and we would like to come back. But it's clear we would like to make a transaction and we will also go in discussion and dialogue with bond investors, maybe making some roadshows or something like that, and providing them with all the information they need that's important. And we will do that, and we are doing that also in the background over the last days and weeks.In terms of rating. At first, it's right. The negative outlook is stable, but also the rating is stable. Ever since some weeks ago, there was more or less a global rating action and there were some downgrades in the financial institutions area of Germany and the GRENKE's rating is stable with BBB+ on the negative outlook because of the pandemic situation. And I think I can't give any expectations today, what does that mean, the negative outlook, 1 notch or 2 notches. Important is that the rating committee was some days ago, the result was BBB+ with negative outlook, and that's a result we are feeling comfortable with, and we would like to deal with and our goal is also to covering that rating to having a stable rating on an investment-grade level.
So I'd like to move on to Tobias Lukesch from Kepler Cheuvreux. [Technical Difficulty] Just like to repeat that we are ready to have the question from Tobias Lukesch from Kepler Cheuvreux.
Yes. I have 3 questions, please. First, on the enforcement [ procedure ] of BaFin, I understood that is over. However, there's still a collaboration and BaFin is still looking into issues. So my question would be here. What are the exact topics BaFin is looking at? And could that, again, for example, touch the risk management where you said that you've been quite cautious actually in the last quarters with regards to new business and the provisioning levels? And then is there any possibility to maybe give a kind of cost increase guiding you to envision measures which are tangible to some extent?Secondly, again, touching on your comments with regards to the stabilization of the business of the portfolio with regard to the new business you envision. If I look into your quarterly new business figures, I see that in 2018, you were at EUR 2.4 billion. So my understanding would have been that you have to tackle at least 10% higher new business growth next year, basically, and to stay flattish and even more to grow. Could you please again elaborate a bit on that?And finally, on NII and also the insurance business. Could you maybe give a hint with regards to NII development in H2, maybe even for '22? And the insurance business even was up in H1 '21 compared to last year's H1 nicely. Is that a trend that we might see continue, i.e., that the insurance business is not going down.
Yes. Thank you. Mr. Lukesch. I would like to start with the first question. I'm not really sure if you mentioned only the enforcement audit and things which are coming out because of that audit. I think that was published last week, we published that also in our annual figures and changed a lot before the audit was finished, and there are no further changes expected from us and also from BaFin, that's for sure. So that audit is finished and also the changes in accounting and so on are finished. And so we're having a stable situation and a stable base on that. For cost guidance, I would like to repeat more...
Sorry, on the BaFin thing. I understood that -- and there's still ongoing discussions with BaFin. So since you say the enforcement is over, what are currently then the discussions you're engaging with? And could that again touch on the risk management tools you have?
Yes, I think discussion is -- a dialogue with BaFin because we're taking several actions because of new governance. We have some changes in management, in the Supervisory Board, implementing some tools for anti-money laundering prevention, compliance changes in head of compliance, head of internal audit and so on, and that is -- that are things on our plans for the several measures we have. We are talking about that with BaFin, and I think that's the thing we mentioned, the dialogue with BaFin. And again, that audit is finished because the auditors left the company. But at the end of the day, the final result and the final step of BaFin is BaFin is maybe outstanding, but that's not in our hands and not in our power.And for the cost guidance, I would like to repeat our goal to achieve less than 50% cost income ratio. We are now with a higher cost income ratio for the Q1 and Q2. And so I think that could give more -- a lot of guidance looking forward because we would like to achieve that guidance for the full fiscal year 2021. And that means, again, that the level of cost should be a bit lower than the level of cost we've seen in the first half of the year and more guidance to the cost development on the fact of we can't give to you a new business. Is that right? What you're pointing out with 2018.And as we mentioned in the calls before, 2021 is a transition year for us, and we would like to come back to new business volume of 2019, roughly EUR 3 billion. But we can't say today if we are back on that level quarterly based in 2022. Maybe in 2023 in the first quarter. And that's not important. Important is to go that path, to start that path to coming back on track, and we are back on track. We would like to achieve more new business, increase new business from today's perspective for the rest of the year. And we are in discussion now with Michael and then we will see what's for the rest of the year and also for the next year right guided. But it's for clear we would like to come back to grow and to accelerate our new business.And the service business and the portion which is linked to insurance, as I said, it's quite stable. That business is more linked to the number of running contracts than to the volume because it's a quite strong business in the very small ticket area and not in the bigger tickets. That means for you and your models when you would like to looking forward to that business, it's better to go planning that with a number of running contracts. And that number of running contracts is much more stable than the volume because we reduced ticket size, but a number of new contracts increased in Q2, for example, and that's why it's also right that level should be stable. And of course, we would like to increase that portion of our contribution margin to the portion of -- as a part of our P&L, that's why. But I am looking more to the number of running contracts.
That's very clear. And finally, on NII, any hint on the NII development, which is, of course, just a bit weaker due to lower lease receivables on the balance sheet?
Yes, that's right, but that is also looking forward, and as I mentioned, looking to the balance sheet and taking into account volume perspective. And we have a very short duration in our portfolio that depends on the new business development. From today's perspective of the things we guided, I think, that should also be more or less stable.
Okay. Thank you very much. There are no further questions. This concludes our today's call. Thank you very much for joining us today. If questions spring to your mind right after the session, please email to us. And just to remind you, our new business figures will be published on October 5. Thank you again for your support. Have a great day, and best luck. You may disconnect now. Thank you.
Thank you.
Thank you.