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Good afternoon, and a warm welcome to everyone out there to our scheduled Q3 2020 earnings call for the third quarter 2020.As you have seen in the invites, I've got Antje Leminsky, our CEO; and Sebastian Hirsch, our CFO, with me, who will lead you through the presentations. After that, we will have time for a Q&A session. Before we start, I would like to remind you that the presentations and discussions are conducted subject to the disclaimer. We will not read the disclaimer, but propose we take it as read into the records for the purpose of this conference call. Please note that this call is being webcast live and will be archived on our website, so the future [ to see there ]. And with that, I would like to hand over the call now to Antje Leminsky.
Thank you very much, Ms. Linnartz, and good afternoon, ladies and gentlemen. Sebastian Hirsch and I would have liked to welcome you personally here with us today, but unfortunately, the increasing corona numbers have unfortunately made this impossible again. But -- however, it is important to ask that you can see us in person during this report today. And we want you, all of you to see us and look into our eyes again. That's why we have chosen a webcast format, and we appreciate very much that many of you, again, have dialed in today. As you know, GRENKE AG has gone through very challenging weeks. Our employees suddenly found themselves in the spotlight, and we, as executives, we were confronted with a lot of critical questions. And our long-term investors were also affected by a decline of our share price. And at the same time, like all companies, we have to face the impact of COVID-19. Yes, we have completed the current quarter with a profit again, and we can see a positive momentum in our new business. Our customers continue to have a strong demand for our service and our products. And despite COVID-19, our new business in the third quarter reached 70.5% of the level of last year's third quarter. And we also managed to improve our CM2 margin to 18.4% compared to the last quarter in 2019. The payment performance of our customers is a lot more robust, at least in Q3 compared to Q2 this year. Our balance sheet is solid, and we have a strong liquidity position, as all of you know in detail now, and can react quickly to changing circumstances. Our equity ratio of 17.1% is excellent and is above our long-term target of 16% and above the regulatory requirements. Furthermore, we have, of course, intensely dealt with the accusations made against us in the past few weeks, and I can tell you that we have made good progress in that. The investigations of the auditing companies are progressing, and we are in very close coordination with many of you, many investors, many banks, many authorities as well. And one thing I'm particularly proud of is the great support that we receive from our employees, and that is what motivates us and drives us, especially through those long days and also night shifts that we have in the last few weeks. And at the same time, we are, of course, in intensive exchange with our Supervisory Board, and I would first like to explain the changes that we've decided together as a result of this, before Sebastian later on presents the quarterly figures. We are well aware that the short seller attack destroyed a lot of trust in the last few weeks. And trust, we all know, is a very valuable asset. And this is why we have held many conversations in the past few weeks with all parties involved and many of you as well. And we've listened closely. We've understood that we can also take on this crisis as an opportunity, an opportunity to further modernize the company. And thereby, we want to maintain the many good attributes that characterize us as a medium-sized company. This is, above all, the entrepreneurial spirit, our reliability and the focus on long-term growth. And however, in the future, we want to combine this even better with what the capital market expects from us. And this is even more transparency, even more professional governance and even more modern compliance without any ifs and buts. With the now decided actions, we want to emphasize 2 aspects. Our business model, we feel, is intact, given the 40 years of history it is based on. And we are sticking to our strategy, but we are aligning 2 of the pillars of the strategy that we have in our own hands now. And this is, first of all, that we plan to integrate the existing franchise companies into GRENKE AG. And secondly, that we will reinforce our Board of Directors by implementing the Chief Risk Officer, and we will reallocate the responsibilities within the Board of Directors. So let's start with the franchise companies first. You all know that for almost 2 decades, we have been very successful in expanding through the franchise model. And in the past, as you know, this allowed us to develop new markets for GRENKE, both in leasing as well as factoring. And however, our expansion strategy to date, we feel [ cloud ] is difficult to fully grasp for outsiders and as numerous discussions with you, our stakeholders, have shown us. In the past, the expansion of this of -- into, to go into new countries was, of course, a risk for the group, and we preferred not to have this risk on our books. And if you compared, for instance, our total balance sheet of about EUR 500 million, looking back 20 years ago, and a profit of about EUR 10 million a year compared to EUR 7.140 billion last year, this certainly is a relative difference. So today, we have the right site, that's what we feel and the experience that enable us to establish and manage such start-up ourselves. And we are doing this because now we feel we are able to do so and because we never want to face those kinds of accusations again, accusations of lack of transparency, too much complexity of valuation discussions. And we have learned, and we want to do this better now. And therefore, we want to integrate the 16 franchise companies and acquire the financial investors' stake and do this gradually over the term of 12 to 18 months. And what is important, any transaction, of course, shall only be carried out on the basis of independent value assessments. And to meet the transparency requirements of investors ahead of time, we will publish a pro forma consolidation of the franchise companies in the 2020 annual financial statements. And this will also show the expected effect on the balance sheet and especially on the equity position, of course. Ladies and gentlemen, we also know that the issue of allocated-related parties, in connection with the franchise model, has been critically questioned. And the allegation is pending. The topic is part of comprehensive ongoing investments. And without any restrictions, I can tell you, we are supporting all 3 audit companies, involving KPMG and Warth & Klein Grant Thornton, which we have commissioned ourselves as well as Mazars, which was commissioned by BaFin. And we would like to present results as soon as possible, of course. But especially in this respect, [ foreigners ] has priority over [ speed ]. And as soon as we have reliable results from the audit companies, we, of course, intend to publish them. So let's now move on to the Board of Directors. And here changes, you've seen it, are about the reinforcement on the one hand side, and about the reallocation of responsibilities on the other. We are aware of the outstanding importance of internal control system. And here, too, we want to be not well, but ideally positioned, in terms of quality and in terms of quantity. And this means the Board of Directors will be expanded to include Chief Risk Officer, our CRO, very soon. And the CRO will be responsible for the areas of risk controlling, legal affairs and compliance. And you've read it, the search for this external candidate has already begun. In terms of internal audit, this will become a matter for the CEO, so for myself. From now on, I will assume responsibility for this area. And there's one more change with regard to the Board of Directors, and many of you are waiting for this already. Sebastian has been appointed our CFO, with immediate effect as well. So ladies and gentlemen, let me summarize. Even in the midst of the corona pandemic, GRENKE AG is in good economic shape. Our figures for the first 9 months have proven this. We've generated decent profit. Our financials are solid. Customers trust us and our employees are highly motivated. But we've also understood, economic success alone is not enough. It requires more transparency, more professional governance and more modern compliance systems. And this way, we regain trust that has been lost. And I can tell you, we are working on this with all efforts we have on the Board side, on the Supervisory Board as well as every employee of our company. So let's finally have a quick look on our Q3 results, and just let me point out the highlights. Again, we have seen a sequential recovery in our new business. We focused, again, on profitable small ticket business, and this was, again, a key driver for the increase of our CM2 margin to 18.4%.In the fourth quarter, we have also seen an uptick in -- little uptick in risk provisions, which led to a decrease in our operating income. We continue to pursue our conservative term matched funding strategy that Sebastian certainly will go a little bit more in detail in a few minutes. And -- but our current position business is fully financed, as always, through a very diversified mix. Regarding the capital ratio, 17.1%, well above the minimum regulatory requirements. And if we have a quick look ahead, I can tell you that the ongoing uncertainty in terms of the pandemic, and we are facing the next lockdown very soon, starting on Monday at least here in Germany, and relevant -- being relevant for many of the countries we are present in, it makes it difficult for all companies, including GRENKE, to give reliable forecasts right now. But from today's perspective, we expect our new business for the fourth quarter to reach about 60% of the comparable figure of previous year, and we've seen a very strong fourth quarter last year. We will expect the equity ratio, and that's important too, to remain above the 60% in Q4. So that was it from my side for the moment. Thank you very much for your attention, and allow me to hand over to Sebastian now.
Thank you, Antje, for the [ wise ] insight. And this Sebastian Hirsh speaking, and a warm welcome from my side as well. I'm going to guide you through our financials of the first quarter -- third quarter, sorry, 2020. Let's start with our contribution margin 2 in new business. This contribution margin 2 of leasing new business, in absolute terms, stood on the third quarter of 2020 to EUR 95.2 million compared to EUR 170.3 million in the same period of the previous year. However, and as Antje Leminsky already mentioned, we managed to increase our margins for the CM2 to 18.4% in Q3 2020 compared to 17.1% in Q3 2019. We continue to consider a stable development in the CM2 margins as key factor in steering our business. Likewise, the key focus on small ticket business helped to foster strong margins. This was also recorded across all regions. And the highest CM2 margin expands the possibilities to absorb potentially higher risks that have not yet occurred. The contribution margin 1 -- with a slightly increase in the CM1 margin of 12.7%. Against the backdrop of COVID-19 pandemic and the overall situation, we have delivered a solid set of results. The short attack to which we have been exposed since September 15 had no significant impact on our third quarter results. We would like to share, at that point, also, that we have mandated the law firm, Hengeler Mueller, as coordinator and legal adviser, for the ongoing audits. But, back to our figures, on that slide. The net interest income was up 2.5% compared to Q3 2019. Our settlement of claims and risk provisionings increased by roughly 52% compared to the previous year quarter, and amounted to EUR 48.8 million in Q3 2020. Due to the COVID-19 pandemic, we still have a higher-than-usual amount of settlement of claims and risk provisions. As in the last quarter, this position was formed proactively in accordance to IFRS 9, for expected, but not compulsory actual defaults of leasing receivables. As expected, the settlement of claims and risk provisions decreased quarter-on-quarter to the EUR 48.8 million in Q3 from EUR 62.2 million in Q2 2020. Consequently, the loss rate for the first 9 months 2020 was 2.4%, while the loss rate for Q3 was 2.2%, which puts us in a good position to achieve our prediction of a loss rate of up to 2.3% for the fiscal year 2020, as Antje mentioned. The increased loss rate compared to last year is attributable to higher risk provisions resulting from the current pandemic as well as the lower growth in the volume of lease assets. When it comes to the operating cost, we noted a decrease in almost every position. I would like to draw your attention to one position in particular, the depreciation and impairment. Here, we have seen a specific impact because of corona 2. The reason for the sharp increase was the impairment of goodwill of the leasing companies in Turkey, Brazil, Poland and the factoring company in Switzerland, totaling EUR 7.1 million. The impairments are based on reducing long-term planning figures for the companies concerned, and are mainly the result of lower growth expectations resulting from the current pandemic because this situation changed since summer this year, especially in the last weeks. Staff costs came down roughly 9% year-on-year to EUR 26 million. I want to underline here that we still did not have any COVID-19-related layoffs. In total, selling and administration expenses amounted to EUR 18.5 million, translating into a decline of 4.4% year-on-year. Overall, this leads to an increased cost/income ratio of 45.5% in Q3 2020, but please take in account that without the pandemic-related goodwill impairment, the cost/income ratio would be 40.1%, slightly below the level of Q2 2020, was 40.2%. Therefore, we achieved, in this challenging environment, a net profit of EUR 17.7 million. On the next slide, we will look and take a short, but deep, dive into our risk provisions. We are talking about a balance sheet perspective, that's important here. On the left side, we see the gross leasing receivables for end of September and the distribution of them. The individual bars represent individual IFRS 9 stages and the sum. And within the bars, we are showing the relative contribution of the main countries within each IFRS 9 stage. And you see there, Germany, France, Italy and the other countries. And switching to the right-hand chart, we are talking about the risk provisions, on the balance sheet perspective, by stage of impairment. Within each stage, we are showing provisions for performing loans without deferrals, we are showing the portion of deferrals and amounts related to nonperforming loans. That amount is only part of Stage 3. Overall, the risk provisions of deferrals are EUR 53.7 million, and that's part of the EUR 467 million we've shown here for end of September. And to avoid misunderstanding, not only for Q3, for all deferrals until now. [ I note ] it is important to make a point regarding the payment behavior. The ratio of missed payments in October, and that means for Q4, nearly because we have a lot of quarterly payments of around 5%, was stable compared to July and January this year. So the peak so far was in April. And now I would like to give you an update and overview of our funding mix, per end of September [ 2 ]. This chart presents you with the diversified refinancing measures that continue to put us in a comfortable liquidity position. We have created this scope for ourselves because of 2 important things: first, a consistent and diversified base of refinancing; and second, we pay strict attention of the synchronization of incoming and outgoing cash flows, which means that we [ allow the switch of ] maturity transformation. We see the first point shown here, the various sources of our funding. Those sources, in addition to our own strong cash flow, to refinance our business. These include above all bonds and various similar products, as you know. But GRENKE Bank and its deposit business is very important too. Because this important pillar is part of our refinancing. That's why we attached great importance to concluding fixed-term deposits in which our clients from GRENKE Bank can invest money in GRENKE Bank deposits for a fixed term. GRENKE Bank then use this liquidity to refinance leasing receivables within the group. And for this reason, GRENKE Bank also ensures that the average term of all fixed term deposits are closely related to the average term of the outstanding leasing contracts. And at around 1.6 years for the fixed term deposits, that's absolutely the case. Our liquidity situation gives us enough perspective to be able to react flexibly to the dynamic development in connection with the current coronavirus. And in addition to liquidity, a solid equity base is essential for our business. Anke mentioned the 17.1%, and we are very well positioned there. Due to the corona-related lower new business and the largely stable balance sheet, we don't expect significant changes there per end of the year. That's why we there see also room to [ calmly ] tackle the upcoming challenges also from an equity side and also from a funding side. So it applies to acting in the general environment of the pandemic as well as the desired integration of the franchise companies. And last but not least, I would like to invite you to a new view to our cash flows and cash flow statement. The first step, and you will find all the figures in the bigger cash flow statements in our notes. And the first step is to look at the main cash flows in accordance with our new business. And this includes all investments in new leasing receivables, they are at EUR 1.6 billion roughly as well as the cash flows attributable to our new funding and deposits you see also here. The sum of that free cash flows is negative. And it shows our strength to fund new business partially by ourselves. Or in other words, use negative cash flow means that we did more new investments for leasing new business than taking new funding. And the funding structure of the leasing new business you see in the cross bar on the right hand. The second step is to look at the existing business, and the cash flow here, the cash inflow corresponding to the payments of our lessees and accordingly, the cash flows representing the repayments for our funding. And that cash flow at roughly EUR 532 million is highly positive. And that is the main driver for our strong liquidity. It also illustrates our system by which we manage our maturities without maturity transformation. And that shows also the second bar the usage of the cash -- cash in from our leases to repay funding on the one hand and to strengthen our liquidity. I think the change of view adds another perspective to our cash flow and our liquidity, and we will go forward with tables and bars like this for the future. In sum, I would like to make clear, we have a solid business model. We are able to manage our business and our companies through this crisis. I don't know, we don't know what the new dynamic of corona means. Nobody can reliably predict that today. But I know that we will stay. We will stay in our business during corona, and we will be able to come back to growth with our committed employees, with all our subsidiaries and integrated franchise companies and our strong profitable business. That's what we are looking for.
[Operator Instructions] So the first question comes from Marius Fuhrberg, Warburg Research.
Actually, I have 2. The first one on the loss rate and your expectation for Q4. I mean, we are facing another lockdown in Germany already, I guess, other companies -- other countries in Europe will follow. Does this change your view on your risk perception going forward? Also, I mean, you're trying to achieve a lower -- even lower loss rate in Q4, looking at your guidance of 2.3% for the full year. So how does this fit to your lockdown times? And the second one is on the independent audit. Is there any sort of timing the auditors gave you? Can you guide us what to expect? Is it rather weeks or rather months?
So Mr. Fuhrberg, thank you very much for your questions. Let me start with the second one, before I hand over to Sebastian. As I said before, we are -- we're doing all we can. We are really working full steam to answer all the questions to the auditors, provide all necessary documents very fast. That's the only thing we can do right now. What we do not have in our hands is the timetable behind. So we cannot commit to strict dates when the next release of results will be happening. What we hope for is providing at least parts of results that the investigations have brought up very soon. But unfortunately, we are not in a position to give you exact dates on that.
Yes. And I will add to the first question. It's absolutely right. It's in a pretty dynamic environment today. And we stick to the 2.3% because of 2 things. On the one hand, there's no further payment event for that year's Q4 payment event is done. And as I mentioned, with a pretty stable missed payment rate in accordance to the quarters before. So that means for the settlement of claims, the resettlement of claims, we can't see and estimate other things than we know today. The scene can change, and it's not easy to say today because the dynamic is quite new. There are also many programs in place and announced from several governments, and we don't know how effective that programs will be. And what can change is the outlook for end of the year in the next year. So the expected loss could be affected. But from our today's knowledge, we can't see that, and that's from today's knowledge we stick to the 2.3%.
The next question comes from Bankhaus Lampe, Andreas Schafer.
Mr. Schafer, maybe you are muted. Would you mind to unmute your phone? We cannot hear you talking.
I have 2 questions. The first one is on -- also on the coming lockdown. Are you willing to give again customers who will be again in trouble, due to the lockdown, some sort of new moratorium with respect to payments? The second question is with respect to refinancing. I mean, Q4 seemed to be again a quarter with relatively low new business volumes. But in case that new business volumes will pick up strongly in 2021, your refinancing costs for senior bonds are still fairly high. So do you have other sort of options to raise money? And do you have -- what kind of unused credit lines do you still have? And is it possible that you will again raise your interest rates for retail deposits?
Thank you for your questions. The first question is really the same answer, it's quite new, and there are quite new programs and also it's not easy to say today how effective that programs will be and what does it mean for payment behavior, repayments are deferred or something like that. So we can't give there that much detail today because of the numerator, which will be commonplace maybe. And the second question, in truth we have a strong liquidity situation, on the one hand. On the other hand, the new business volume will be not at 100%, in comparison to the last year. And on the third theme here is, yes, we have several funding options. And as we mentioned in our chart, you're right, the senior unsecured bonds, but also GRENKE Bank is in place with deposit business, ABS programs could be in place. But again, from our liquidity position today and our own cash flow, we are able to manage new business on a very high level. And so we can go forward with our own cash flow and we are able to fund business with the several sources we have in place.
Then we'd like to move on to HSBC, Mr. Thormann.
Johannes Thormann. 3 questions from my side, please. First of all, could you provide a breakdown of the new business in October, by weeks? Has there been any difference in to get in how you come up with the 60% guidance? Secondly, if we look at the senior owned secured as a follow-up, remains frozen, how much can you fund via IBS and bank deposits? What do you think is this possible? And then last but not least, if we look at the tax rate, any implications for the next years from less business in Italy? Or in general, what is your current feeling about that?
3 more questions for Sebastian.
Yes. Thank you, Mr. Thormann. Of course, October was pretty good and nearly in the line the first weeks, like September. But the last days and also the outlook from today's perspective, it gives us more flavor or more details that we stick to 60% in comparison to the last year. Very important is from a today's perspective, nobody can say how the last weeks of the year will be. In a normal environment, you will always have a late run in new business because there are some investments for end of the year in leasing business, the same like in all investment businesses. So the last 2 weeks are pretty strong in a normal environment, and we don't know, from today's perspective, with the new corona environment since some days, how the last weeks will be. That's why we say 60%. And as Antje Leminsky mentioned, the last Q4 in 2019 was pretty strong. And so there's also a basic impact included. Funding. It's not easy to answer how many funding we can achieve over the several programs that are -- the programs are in place, that are sources. We have in place and we are doing that also in October. We did [ ADS ]. We did a deposit business. So it is working. And as long as we need funding, we can work in that pillar. But again, our own liquidity is pretty strong. For end of September, it was roughly EUR 800 million, and that's a good base to go forward with new business. And when we look quarter-to-quarter, with the beginning of the next quarter, we will have the next payments of our lessees, a huge amount of roughly EUR 400 million. So that's enough space again to pay back the outstanding funding in Q1 and also making new business on a good basis. On the tax rate, there's one point important when you look to the Q3 tax rate, and that's the goodwill impairment is not taxable. It's 100% expense without a tax impact. And you're right, the new business in Italy is lower from a [ course ] compared to Germany, especially today. But the super [ amontamente ] program of the existing business is still ongoing. And it's not easy because of several portfolio impacts what the right tax rate could be for the next year. In a normal environment, the tax rate should come up, as we talked about in the last times, roughly 2.5%. It means 250 basis points per year because of the ending [ super amontamente ] program.
Thank you, Johannes. With that, we'd like to move on to Ms. Sun from Deutsche Bank.
Two questions from my side. To the first one, on the Stage 3 lease receivables, thank you for providing the details again. But if I compare it to the second quarter, I can see that the Stage 3 lease receivable is decreasing by EUR 80 million. What is the reason here? Do you see any credit improvements in the mix? Or what's the exact reason? And the second question is regarding to the cost. When do we expect to see the cost to be booked related to your legal advisory as well as the internal auditings? In this year in the fourth quarter? Or should we expect it in the next year?
I can tell you that at least we had an accrual right Q4, in terms of the auditors as well as supportive providers, such as legal or communication, which, besides the auditors, the auditors, also become more important. So we will definitely see this in our P&L this year. But on the other hand, we have also the effect of decreasing costs in several positions, especially on the sales side. and -- but also in other positions on the cost side. So we will hopefully see this to a digestible amount in the policy [ act ].
Yes. And to say, Stage 3, that's absolutely right. And that's also what we mentioned in the last call, according to the figures of June. They're performing loans in Stage 3 should not be staying very long in Stage 3 because Stage 3 is an overdue of 90 days and performing leasing contract done when it is performing and not an unperforming loan. And then over the next days after that overdue, there should be the decision. On the one hand, it could be a termination because of the overdue and the unsuccessful reminder process and then it's a bad debt becoming an unperforming leasing contract. The overdue is over the last year is able to pay back as outstanding amount. And then it is a running contract again in Stage 2, maybe Stage 1, normally in Stage 2 because of the overdue event before. And that's what's happened. There were some late payments and absolutely late payments. That means lessees were able to pay over July and August, the outstanding amount. And some of the Stage 3 went into the [ debit ] classes as bad debts and now are unperforming loans. So it was a very specific situation in -- per end of Q2, that so much leasing receivables stood in Stage 3.
Next question comes from Philipp Habler from Pareto.
Sorry. Two questions from my side as well, please. Firstly, on the goodwill write-down. Have you been able to look at all your lease subsidiaries, do you expect something more to come in Q4? And more details? I know it's very early in the pretax profit?
Yes. Thanks for the question. It draws from the goodwill perspective that our perspective from today. And so from our today's knowledge, that is the impairment for that -- for companies. And we will check that always on each balance sheet date, it was in the past, and it will be also tomorrow and in the future. But from today's perspective, there's nothing to expect, but we don't know what the future will bring and especially the dynamic of corona, as we mentioned, that we have to see per end of the year when we go for the goodwill impairment test again. And the question of what is the impact of the franchisees? I can say, roughly 50 million new business volume for the first 9 months that are all the leasing franchisees. We are talking about roughly EUR 10 million contribution margin 2. We split out that also in our report we announced today. You can find that and that can give you a flavor to say how the impact on P&L and balance sheet will be in detail, it's too early. We were working as soon as possible on the pro forma consolidation and will at a minimum announce it with our annual statement, and then we will have more details and more flavor on that.
Okay. But if I understood you correctly that you said that you feel strong enough from a liquidity and capital position to consolidate those 16 franchise companies?
Yes. We feel strong enough to do that. And to integrate from a legal perspective, it was also mentioned by Antje, it would take 12 to 18 months, because we have to do due diligence. We need an external auditor for the valuation of the company. So it's, let's say, a step-by-step integration, but we feel comfortable to integrate the franchise companies and to consolidate them, yes.
I like to move on to Mr. Lukesch from Kepler Cheuvreux.
Thanks for the presentation. Two questions. First of all, again on the goodwill impairment, respectively the potential consolidation. If I remember correctly, you have kind of a call option. So my question is, do you have these kind of call options still for all these 16 companies? And if so -- how could we -- how can you describe the potential process of integrating these companies? So is it quite easy for you to take a call opportunity, from tomorrow on you are integrated? And based on the kind of valuation approach that has been kind of set in stone. So my question is here how actionable this is to some extent at the end of the day? And also like if this pro forma data, it would have been great to already have that, again, assuming you have call options and you have a clear view on the development of the company, you're funding the company. You have the contingent liabilities outstanding because you provided liquidity, one could have thought that you have a very precise view on the development and the valuation here, which you would be able to share. Secondly, on the funding part. Again, you mentioned that the kind of funding profile and the distribution between the sources would potentially not change. I was wondering, with regards to deposits, and they are around EUR 1.3 billion, up EUR .5 billion year-on-year. The deposits due within the next 12 months are at 52%. And if I look at the average lifetime of a loan, which is 48 months, I was wondering if not the kind of average is slightly below 2? So you would rather fund the short and basically here of your portfolio, potentially, you could begin -- give a bit more clarity around that funding profile? And lastly, potentially the kind of amount which is above the EUR 100,000 threshold which is basically backed by the government? Thank you.
First, the integration and valuation, as mentioned, again, we will evaluate that with external auditors. And that has nothing to do with the call option. Of course, yes, there are call options, but the call option is defined on the one hand on the strike, the exercise price, on the other hand, on the date. And so not in that 16 cases. We are in line with the day-to-day. So it's not and by buying the shares via the call option, it's outside of that call. And we will valuate the companies, and external auditors will valuate the companies, and that's the basis for the pricing and the basis for the SPA at the end of the day, and not the call option and not the former pricing in the call options. And to the deposit business, that's right, the leasing contract on average is roughly 4 years. But as you are aware of, we are talking about leasing contracts with monthly or quarterly payments. So the average lifetime, weighted by capital, by whatever you want, is not 4 years, it's roughly 2 years, a bit lower because the lessee is paying at the beginning of the period, means at the beginning of the quarter the lessee pays the leasing installment for the whole quarter. And so the average lifetime is less than 2 years, and I think 1.6 years in deposit business, which is -- and ending in deposit business means there's no amortization during the lifetime of a deposit. So a client is giving EUR 10,000 to GRENKE Bank. And in average of 1.6 years, GRENKE Bank has to pay back that deposit, and it fits very well in average of the portfolio to the roughly 2 years' duration. And of course, we are always looking to manage that. We are always looking to funding also existing business and the existing duration in our portfolio of leasing receivables is roughly 1.5 years. So it's a pretty good fit, I think, and from a portfolio perspective. And as the average ticket size in deposit business is roughly EUR 50,000, quite stable over years. And I hope that's enough information to answer the question to the EUR 100,000. The main business is less than EUR 100,000.
I would like to move on to Corinne Cunningham from Autonomous.
Just wanted to develop a little bit more on the funding side of things. Are you able to tell us what your cash position looks like now? And together with what your funding mix looks like now? And you mentioned that you've had deposits or lease payments made at the beginning of October. So we note that the cash position has reduced quarter-on-quarter. So anything you can provide, color-wise, on what the cash position and what the funding mix looks like now would be very helpful. Also just on deposits. How has the cost of deposits, so in terms of the, I suppose, the advertised rate, how has that changed between September and October?
Yes. Thanks for your question. As far as the funding mix and the structure of funding is pretty stable 1 month's new business may be a bit different in funding, will not change our whole funding mix for the whole balance sheet. So it's pretty stable. In the chart we saw is also a good chart for the today's situation and liquidity. We had roughly EUR 800 million liquidity per end of September. Then at first of October, there was a huge payment date with roughly EUR 400 million lessee payments and also some maturities in bonds and loans. We had, I think, roughly EUR 200 million. So the net impact of liquidity was there to fund new business, of course, the liquidity position was strong. So today's liquidity is a bit lower than the liquidity per end of September because we fund our new business, and we set strong liquidity. And that was the plan in Q2 as we go for -- or went for more deposit business as we went for our bond that was the plan, to have enough liquidity to go through that pandemic situation independently from the capital market. And the rates for deposits, you can see that in the Internet on several platforms are a bit higher, but only some basis points, and that has to do also with the platform rankings. You have to manage that. And we are looking a bit for deposit business but not that hard until the rates on deposits are pretty stable. In the main terms, you have less than 1%, so not a significant change since summer.
We now move on to Alexei Lougovtsov from Bank of America.
Actually 2 questions, both on funding. If I understood you correctly, you used deposits to fund the leasing book of GRENKE AG. Can you please explain how exactly it happens? Do you buy receivables from GRENKE AG for GRENKE Bank AG? Or do you just provide a loan from GRENKE Bank AG to GRENKE AG to refinance the receivables? So this is one question. And the other question is about unsecured wholesale funding. Presently spreads are wide, so if temporary your unsecured funding remains expensive. Do you think instruments, like say, KFW loan or any other government institute assistance would be available for you to temporary plug the funding gap?
Yes, thanks for your question. I'll start with the second question there. There's no plan and not willing today to go for government loans or something like that, because, as I mentioned, we have a strong liquidity situation and also some other funding sources. And so maybe it is an opportunity, but not already checked, but we are in contact with KFW and these other promotional banks in Germany because we have some promotional programs in place to fund business, leasing business, for our clients and to give the advantage of access to KFW to our clients, and we are doing it since years very successful. And the leasing and deposit business connection it's like you said. We are buying the leasing receivables or selling the leasing receivables and depends on, from the chart, we are looking, means GRENKE Bank is buying leasing receivables and using the deposit business. And that's why it's pretty important to have a matched funding from a term perspective. And that way of funding is proven by the supervision in Germany, it's proven by, there's a deposit guarantee fund in Germany, they are knowing that, they are checking that nearly each 3 years. I think the last year, the deposit fund was checking that in their regular audit. And so it's a pretty good system, and proven by that external views from the supervision and also from the deposit guarantee fund in Germany.
Next question comes from [ David Wallen ] from [ ETPC ]
Just going back to the cash weakness, on a quarter-on-quarter basis. Can you just explain the difference between the EUR 800 million at the third quarter versus the EUR 1.1 billion? And then I haven't got a good breakdown of pending maturities over the coming quarters. So perhaps if you could split out the asset-backed commercial paper and commercial paper maturities over the next few quarters? The reason I ask is because it looks like you've got around EUR 800 million of debt maturities next year, almost half of which is the asset-backed commercial paper of EUR 315 million of euro bonds. So just wanted to get a rough idea. Is that front-end loaded? Or is it more of a consideration for the second half?
Yes. Thanks for your question. The last question, it's not that easy to split up. One split up which could help is to look at our balance sheet and there we have the short-term financial liabilities and long-term financial liabilities. And I think that's also splitted out what is asset-based funding and asset-based is more or less equal over the quarters. You will see also the senior unsecured short-term liabilities. And there you I think, can get a bit flavor of what will happen over the next 12 months. And there's no peak in 1 quarter, so that means when we look to the senior unsecured funding of roughly EUR 660 million, short-term, it's not in quarter 1, EUR 660 million maturity, it's more or less over the next 4 quarters because we are always looking to the maturities of incoming and outgoing cash flows, as I mentioned. And the difference in cash, it's -- the plan was and is to use the cash means to having much cash or many cash is a good situation. But at the end of the day, we would like to use cash and to bring the cash into leasing receivables in our business. And to having their funding with our liabilities and not a funding for cash, and that was the plan in Q2 during the pandemic, and that's what we did. Over the Q4, we used the cash, and there was no wider deposit business. It was pretty stable in Q3 compared to Q2. And so the difference is we used our cash for new business, as we explained in our part before.
We have still time for 2 more questions, which is why I'd like to move on to Mr. Thormann, again, from HSBC.
I have 1 follow-up I couldn't answer as is. On the new business for Q4. Could -- maybe I've missed this, the October level of new businesses, I know you can track your business on a daily level. You should have a pretty good clue how much this business has been? At which level are we currently in October? And secondly, just a different number. Could you provide a sector breakdown of your customers? How much is probably in the troubled sectors of tourism and entertainment?
Okay. I have no sector business with me, but we can check it later and pass that through if that's okay. And for October and October is not over yet. But I guess, October will be a bit less than 70% because the last days, we saw that corona is back. Also on client behavior, and over the first week, it was pretty stable to September, and as I mentioned before, but a bit less than 70%, I think.
And Mr. Fuhrberg From Warburg Research again, please.
One follow-up on the potential franchise transactions. [ Woffram Rinker ] already offers to accept shares as a payment. So would you consider a cap increase against contribution in kind as a payment for the franchise companies? What I actually would consider to be quite a good way to purchase those companies, in order to keep your equity ratio? And then the second one, do you consider publishing the purchase price mechanisms, which the independent auditor will provide to you to publish those?
Actually, to answer the first question. First, right now at the moment, we want to look at the transactions itself. We are not in the position yet, not even talked about it in detail in what way this -- the payout will take place. So first of all, it's more a question of the valuation than about the object itself that we have to look at and the way of paying those prices. That's actually the second question we have to answer. And in terms of publishing the results, which concrete transaction are you talking about?
So use the base transaction as -- It's -- I can't say today if it makes sense to publish the way how to calculate the purchase price, I think we will publish the price, of course, and maybe the parameters which are important for the valuation, I think that is pretty important, and it depends a bit also on how to calculate that, maybe there will be a way. Not a question we talked about. At the last stage for us, it's important to have a pro forma consolidation, the impact of P&L and balance sheet to showing that to you. And as Antje mentioned, absolutely the valuation is important and then we will find a way to pay that valuation to the financial investors in which way ever.
So there's a final question from Corinne Cunningham from Autonomous.
Just 1 quick add-on. Just in terms of running down the cash balances. Do you publish your liquidity coverage ratio? And has the -- would the regulator actually ask for some kind of restriction here? I'm just thinking, given what's going on, it strikes me as perhaps unusual that the regulator would be content to see cash balances reducing?
No, the regulator didn't give us restrictions, but has only mentioned the interest of being a lot closer to the reporting compared to the past, but this is, I think, nothing specific about our institution, but the case for many institutions out there. So we are rather talking about the term in which we report rather than restrictions in any case.
Yes, Antje and the regular reporting to the regulator, and the regulator is in a very good situation because he knows our cash position very well. The most cash of our cash position is based on Deutsche Bundesbank and they are aware of that.
So just wondering if there's any question left?
This will be very very final, if you...Christoph Blieffert from Commerzbank.
Two questions left on the funding side, please. Your EUR 677 million of deposits, which are maturing over the next 12 months, what is the split between term and side deposits, please?
So side deposits means overnight deposit is, say, roughly EUR 90 million and the rest is term deposit.
Okay. And given that you face above an investigation at the moment, are there currently any restrictions in place to gather deposits in excess of the EUR 1.7 billion you had at GRENKE Bank at the end of the second quarter?
No, there are no restrictions.
Okay. And as a last question, what is the amount of leasing volume for which you have granted deferral at the end of the third quarter, please?
So leasing amount, contract are roughly 50,000 contracts is quite stable. It was not rising over the last month, so it's quite stable. And it's representative for our portfolio so we can set out with average leasing receivables the amount that we shown in the balance sheet, and the risk provisions and the expected losses for that deferral is an extra.
So I take the 50,000 contracts and multiply at 9,000 per contract, and then I'm roughly right?
No, No, it's roughly wrong. And the leasing receivables -- divide the leasing receivables is through 1 million running contracts, and then you have the average leasing receivable and not the initial investment which was a 9,000 investment. And then you have roughly the amount for deferrals and then you compare it also with the risk provision, say, of 53.7 million, I guess, which is also split out in the balance sheet and the notes for the deferrals.
Okay, understood. Thank you.
Okay, as there don't seem to be any further questions, we'd like to thank you all -- thank all of you for your questions, for your support. And this is the time to say goodbye. Thank you.
Thank you very much.
Thank you very much.
Bye-bye.
Bye-bye.