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Hello, and welcome to the MLP SE Publication Results Q3 2022 Call. My name is Laura, and I will be your coordinator for today's event. Please note, this call is being recorded. [Operator Instructions]
I will now hand you over to your host, Frank Heinemann, to begin today's conference. Thank you
Ladies and gentlemen, welcome to our conference. With me today is our CFO, Reinhard Loose. He will guide you through our numbers. And of course, we are happy to take your questions after the presentation. So please go ahead, Reinhard.
Thank you, Frank. Good afternoon, ladies and gentlemen. The MLP Group continued on its growth course in the first 9 months of what has certainly not been an easy financial year considering the economic challenges. Our sustainable, highly diversified business model, in particular, has had a very positive effect. As a result of this positioning, we not only benefit more than average in economically dynamic basis. Rather, in phases of overall economic strain, such as at present, the fact that our business rests on several interlink pillars proved to be strategically prudent. Its certainly not a given to achieve a plus in turnover and earnings in such times, which we have succeeded in doing in the first 9 months of this year.
The environment is, as you know, characterized by significant recessionary tendencies in the economic as well as increasing strength in the markets. We have no influence over such external negative effects, but we have a good grip on all things we are able to influence as a company. In addition, we are currently experiencing just how much important our clients attach to comprehensive and independent support from a personal adviser, especially in times of crisis. We, as the MLP Group, are especially active in high-quality and solvent client segments. This gives us further stability, also in view of the further increased fundamental strength in our markets, which we pointed out repeatedly and early on in the past months.
In light of this pressure, we remain very vigilant and for good reason. Yet we continue to be generally optimistic for this year, and also have a close eye on our medium-term planning for 2025.
You can find an overview of revenue development on Slide 5 of the presentation. The months January to September 2022, MLP increased total revenue by 7% to a new record level of EUR 674.7 million. Commission income, in other words, revenues from commissions and fees, is now at EUR 611.6 million after the first 9 months. The commission income shows just how closely and stably our consultants served their clients, fulfilling their task as the contact person for all financial matters. And this business figures reveal something else too because we have continuously developed the MLP Group. We are now established with client groups that we only served in very small numbers just a few years ago, including high net-worth individuals and institutional investors plus corporate clients whom we advise on occupational pension provision as well as industrial insurance.
We have worked hard to win the trust that all our client groups place in us, especially in these difficult times, and we are very aware of how significant this is. A glance at the individual consulting field shows that we were able to record particularly strong growth in real estate and non-life insurance in the first 9 months of 2022. The real estate field, which includes real estate brokerage and real estate development recorded a particular significant increase of 66% in the period from January to September '22. This is due especially to the successful project business of the MLP subsidiaries in the DEUTSCHLAND.Immobilien segment. What's more real estate brokerage primarily by MLP consultants contributed to the positive development over the past 9 months.
As at the end of the reporting period, real estate brokerage experienced a market-related dip, which we were unable to avoid. Nevertheless, real estate continues to be a very good option as protection against inflation with a highly diversified portfolios of our clients.
Non-life insurance also grew considerably by 17% from January to September 2022, rising to EUR 142.1 million. The first-time consolidation of the entities in the industrial broker segment in the first quarter also had an effect here. Therefore, RVM has been fully consolidated since the second quarter of 2021. DOMCURA and MLP's private client business also displayed positive developments in the first 9 months. Health insurance also performed modestly positively with growth of 2% to EUR 41.6 million after 9 months in 2022. Particularly the third quarter, there were signs of an increase in business. This was due especially to the so-called auction tariffs which allow clients to secure rights to accept private health insurance early and to subsequently switch to the private system. Not least due to the effects of the pandemic. More and more clients are inquiring about high-quality private health insurance.
Loan and mortgage business too achieved slight growth of about 2% to EUR 16.1 million after 9 months despite very gloomy market conditions. The recent sharp rise in financing interest rates had already caused many people to refrain from considering the purchase of a property before the third quarter. While it is to MLP's advantage that our interested clients enjoy above-average income and wealth, we too felt the pressure on the market in mortgage lending in the third quarter.
In old-age provision, revenue saw a stable development in the first 9 months and stood at EUR 136.3 million. Market-related challenges were also felt at the start of the second quarter in this consulting field. This applies for both private and occupational pension provision. This can be attributed to the current uncertainty for consumers at the strain that numerous companies are currently facing, in particular, due to natural gas supply drive this ongoing disruptions to supply chains as well as rising inflation.
Nevertheless, the topic of occupational health insurance, in particular, is increasingly in the demand. More and more SMEs are recognizing this as another good instrument to increase their employee retention, especially in this competitive market for skilled workers. At the same time, it has been an extremely welcome extension of their own health coverage for many employees. Development of our revenue in wealth management too must always be viewed in the light of developments on the capital markets. Just as in the second quarter, this was characterized in the third quarter too by geopolitical crisis and tensions, inflation, high energy prices and not least by ongoing supply chain issues. Recession can no longer be avoided, is simply a question of how long and how severe it will be.
In this increasingly looming climate, MLP has performed more than respectively. The relevant key figures in asset management have shown how strongly we are positioned in this area. Despite the challenging situation of a very significant decline in performance-based compensation associated with this, the MLP Group was able to achieve almost constant development of wealth management in the past 9 months.
Revenue amounted to EUR 240.1 million compared to EUR 249.8 million in the same period of the previous year. However, revenue did drop in the second and particularly in the third quarter of '22 as we expected. Following a significant contribution to revenue in the same period of the previous year, particularly in the third quarter of 2021, negative capital market development in the second quarter of '22 meant that almost low performance-based compensation were collected in the period under review. Indeed, these fees were already significantly lower than Q1 2022 than in the same quarter of the previous year.
Having once again successfully compensated this effect particularly highlights and will place the stability and strength. The continued net cash inflows at FERI and MLP Banking show just how well positioned we are with our expertise among our clients, both at FERI and MLP's private client business. Volume of assets under management in the group reached EUR 54.4 billion as at September 30, 2022. This puts us just slightly above the figure of EUR 54.2 billion for the previous quarter.
The fact that the non-life insurance portfolio is managed by the MLP Group have once again seen an increase is equally pleasing. At EUR 623.2 million as of the 30th of September '22, we are now operating more than ever before at the level of a medium-sized nonlife insurer. Such portfolio volumes as we manage in the group are another important stabilization sector, all the more in difficult economic times.
You can find the current income statement on Page 8. At the value of EUR 52.2 million, MLP succeeded a significantly increasing EBIT after 9 months, thanks to its broad diversification. This was driven primarily by the strong increase in EBIT in the first quarter of '22 to EUR 34.6 million. Q3 EBIT totaled EUR 8.2 million in '22 in a significantly less favorable economic conditions. By comparison, the figure for '21 was EUR 15.9 million, while in 2020, sorry, it was virtually identical to '22 at EUR 8.1 million. Far higher EBIT in the third quarter of '21 was marked by high performance-based compensation.
Our net profit rose from EUR 31.2 million to EUR 34.9 million after the first 9 months of '22.
The next slide shows you our balance sheet. As of the balance sheet date, shareholders' equity rose slightly from EUR 496.2 million. to EUR 511.1 million. The equity ratio was 17.9% at the end of the reporting period. This puts us in a very good position. We are anticipating a comparable level of the cost of the year.
The consultants in the MLP Group was serving 568,400 family clients as at September 30, '22. The gross number of newly acquired family clients was 13,700. We also served 25,100 corporate and institutional clients. The number of consultants in the MLP Group as of the 30th of September was 2,040.
This now brings me to our forecasts. Despite further increased risk in the markets, we are still aiming to achieve an EBIT of between EUR 75 million and EUR 85 million for 2022. Yet we remain highly vigilant in view of the pressures I mentioned at the beginning and the possibility of them worsening. Over the past years, we have specifically developed MLP's strategic position and phases of external economic strain in particular. The group's business model is able to offset declines in individual areas against growth in other areas or even to overcompensate for them.
As such, MLP continues to expect ongoing satisfactory development in revenue. For '22 as a whole, we have slightly adjusted our revenue expectations in individual consulting fields. In view of the current market situation, the strong fourth quarter in the previous year, MLP now anticipates stable to slightly downward development in old-age provision. In light of the very steep decline in the building economy due to the increased interest rates and building inflation, MLP now expects to see a slight downward trend in revenues for '22 as a whole in the loan and mortgage business. In terms of health insurance, however, MLP has raised its expectations and now records a slightly positive development in revenue. This is based on the increased demand for private health insurance cover following our client's experiences over the pandemic and clients' gradual transitions to private health insurance using option tariffs.
MLP continues to expect significant growth in revenue in real estate and nonlife insurance. Although the current market situation is slowing our growth in the real estate business segment, a relatively new area for us, it should still remain at a considerable level for the year. As I already mentioned, buying property as protection against inflation is also an important topic especially for our clients.
With this in mind, we do not hold with the recently expressed and sometimes extreme pessimism with regards to the real estate market. After the boom comes not the crash, but a new normal. This is also the conclusion of a recent study by real estate experts from the Institute of Deutsche [indiscernible].
Regarding the interest rate business at MLP Banking, we are reckoning with a significant increase in revenue for 2022 as a whole. In our Banking business, the normalization of interest rate is having exactly the opposite effect on construction financing and real estate. Previously, we had to pay negative interest rate for deposits with the Bundesbank, but now we are again generating a reasonable interest contribution here. At the same time, we are continuing with our consistent cost management in the entire MLP Group, not least in view of the development and inflation.
Based on the forecast for the current year, we therefore reaffirm our medium-term planning. By the end of '25, our EBIT is set to increase to EUR 100 million to EUR 110 million paired with a revenue of more than EUR 1.1 billion in the same year. This planning is still essentially based on 3 central strategic success factors, which I have explained in detail over the past month. Today, I will just mention them briefly. The further increase in assets under management in the group, sustainable growth across all consultant areas and the continued expansion of our real estate business, even under worsening conditions.
Ladies and gentlemen, allow me now to move on to the summary. Firstly, the first 9 months, we continued our growth trajectory, increasing sales revenue and earnings, and this in a continually glooming market environment. More than ever, the MLP Group is benefiting from the great stability we have created with our strategic development in the past years. Secondly, the result achieved after 9 months formed a very solid basis for achieving our annual goals in the final quarter. We are generally confident that we will be able to manage this, yet we are very aware of the risks that may potentially increase further in our markets. And thirdly, we have reaffirmed our medium-term planning for 2025 today. We have already entered of this further growth phase, which does not necessarily have to be linear. We are consistently pursuing the path to our goal of raising turnover and earnings for MLP Group to the next level.
Many thanks for your time. I'm now happy to take any questions.
[Operator Instructions] .
Fabien Le Disert from Kepler Cheuvreux. I have 4 questions. The first one on performance fees. What was the exact amount of performance fees in Q3? And what do you see for Q4?
The second one, in the Banking business, could we expect the same kind of impressive growth in the coming quarters, nearly 27%? The third one in the Industrial Brokerage segment, given the difficult situation, are you still looking for suitable targets in this segment? Or are these projects on all spending maybe better visibility on the macro picture?
And the final one, I noticed that the number of consultants was slightly down at the end of September. Do you still expect the number of consultants turns to grow in the coming quarters, given the environment? Or will you become more conservative?
Thank you for the questions. I'm trying to answer them in the order of your questioning. Number one, the performance fees for Q3. In Q3, we had performance fees and carries together of around EUR 0.3 million and that means for the whole year, the Q1 to Q3 together, we are now at performance fees and carried together of around EUR 5 million. Your question concerns Q4, obviously, is a little guess. Seeing the market conditions, we would not expect any significant performance fees there, perhaps a smaller number, but no significant number.
Your second question was if we could see Banking growth similar to Q3 and the next quarter. I would also say that, yes, we will see a growth number there. We will see very comfortable results in Q4. I wouldn't think that's exactly the same growth number. But I think the direction is good and the overall earnings for the whole year in the Banking segment will be quite good.
Your third question was concerning the Industrial Broker segment. We are growing there, and our intention definitely is also to grow not only organically, but also alegotically.. That means we are still in M&A discussions and talks with other participants in the markets. Obviously, no one knows if they will be finally successful. But our intention there is to continue the growth. Like in many other segments, we are interesting times there because, obviously, interest rates and prices are linked together at the moment. I think the turn in interest rates, the different conditions in the market are not understood by everyone in the market, let's say, this way. Therefore, the discussions are intense. And finally, we'll see if we find targets for reasonable prices, which is very important for us that for us, it's important that they fit to us, the culture, obviously, is the segment. But finally, for us, it's important that the price is a price which we see as a reasonable price.
And number four, the number of consultants, yes, there was a small decline in the last quarter. At the moment, I think we also talked about this also already in the last quarter. We have the market conditions where new starters in the market or employees overall are in a very good situation and that makes it very difficult for us to find enough consultants or as many consultants -- as many good and fitting consultants as we would like to have. We are struggling to see a growth in Q4. But at the moment, it's not realized. That means we are looking forward and our plan definitely is to grow consultants at the year-end. But as I said, it's a tough competition at the moment in the market outside. And with this, I hope I answered your questions.
We'll now move on to our next question.
Philipp Häßler from Pareto. I have 3 questions, please. Firstly, on the net flows, could you please give us a figure for Q3 or rather the first 9 months? And then secondly, on the real estate brokerage business, you sound quite optimistic. Other developers don't sound that optimistic. Maybe you could explain again why you are more optimistic and maybe differentiate a little bit between the developer business and the demand among your customers for real estate brokerage?
And last but not least, maybe it's possible to dig a little bit more into your net interest income expectation. I think you once said you used to pay around EUR 5 million of negative rates. How has this changed in 2022? And how do you see or what do you expect for the next year?
Philipp, thanks for your questions. Your first question was considering the inflows and the outflows, so net flows concerning our asset under management. In the first 9 months, we had inflows of EUR 6.4 billion and outflows of EUR 3.4 billion. And with this, we finally come to the asset under management, which we reported with EUR 54.4 billion.
Your next question was concerning real estate, and why we are optimistic or more optimistic than others in the market. I think we should differentiate there a little bit. Definitely, we see that the market conditions have changed drastically, which is, let's say, positive for us just figure wise, is that we, as you know, are here in a relatively new business that means we have something like a base effect. We start from relatively small numbers and from small numbers, it's easier to grow than if you are an experienced and established player in the market. And this is an effect why we, for us and for our business, expect growth, although we are in the same different -- difficult market than everyone else.
We see and you asked for the differentiation between developer and demand for brokerage. In the brokerage business, definitely, we see that it will be more difficult to see growth even on the basis where we are in the last weeks and months, the demand there also dropped with our consultants, perhaps not as much as in many other areas. But definitely, it dropped. What we see positive there is the developer business. There, we see that, again, from the relatively small base we started, we see that the products which are ongoing, that the projects will deliver additional revenues for us in this year and also in the next year. And altogether, this brings us to the forecast which we had and also for the outlook for the next year that we see potential for us in the market, although definitely, it will be much more difficult than it was 1 year ago.
And sorry to interrupt. So you saw the rising construction costs are not a problem for you? Are you able to pass this on to your customers?
At the moment, we have contracts where the construction costs are, let's say, the rise is very limited to us because we are not buying but because we have companies where we have fixed contracts. Obviously, there's a risk in it. If you will go more in detail, definitely, there's a risk that they can't take this rise. But normally, from the contracts, the risk is not in our books. And if we start new projects or if we would start new projects, definitely then we would pass the expectation for the building phase, we would pass to the prices. . Does it answer your question there?
Yes, yes. Yes. And then pay for higher interest rates, please.
Yes, of course. And now you asked for the impact on interest rates. As you mentioned in your question, last year, we paid and I mentioned that we paid EUR 5 million negative interest rates. Definitely, we will see a number of around EUR 1.5 million, also a negative interest rate in this year, obviously, because in the first half of the year, there was still negative interest rate. But this number will be, obviously, less, and next year, there will be no negative interest rate in our P&L. And on the positive side, definitely, there is a swing. And you know that we have balance sheet volume in the Banking of around EUR 3 billion, a small bank. But nevertheless, if you have an interest of EUR 3 billion and if you see in our books at the year-end, the '21, we had EUR 1.2 billion just in cash at the ECB. And if you just calculate this EUR 1.2 billion last year, negative -- minus EUR 0.5 million, this year positive, whatever you would like to calculate for next year on, but it will have one -- a positive 1, at least in front of it. You see that there is an impact to our P&L.
So 1, you mean it's a double-digit net interest income for next year can be expected?
Sorry, the 1 I mean the interest rate because ECB is being 1.5% -- to this -- to the cash which we have. And therefore, just very easily was giving you the inflows for the calculation of before minus EUR 0.5 million for EUR 1.2 billion and now EUR 1.5 billion positive for around EUR 1 billion. .
[Operator Instructions]
It's Jochen Schmitt from Mettler. I have one question on MLP Bank. Segmental EBIT was relatively high in Q3. I mean, obviously, you had tailwinds from interest rates, but I believe that interest rates have probably not been the only reason for the rise in EBIT. So could you please comment on that?
No, definitely not. Interest rate was not the only one. We had also, like in the quarters before, still very good inflow for our asset under management in the bank with a positive impact on the P&L. We have overall, especially also in Q3, well-managed cost base. And yes, and finally, also, the risk costs are at the moment, very limited. And all these 4 factors together led to the steep increase in Q3, and therefore, to the positive result. Let me -- perhaps add one thing because risk cost, obviously, in times like this, and although it's a small bank, nevertheless, we talk about risk costs you might have in mind that at our loan volume to individuals is relatively limited there. And the risk -- the total risk is also extremely limited. I from time to time, like to underline that in the whole year 2022, we have 1 new customer, which we where we have -- was the necessity to put risk costs on. And definitely, we see the risk that the number will be a little higher next year. But overall, I see our credit portfolio is relatively -- with a relatively low risk.
Sorry, if I just may follow up. I mean, obviously, you have probably even more tailwinds from interest rates or interest result in Q4. But nonetheless, would you say it's a fair assumption that we segmental Banking EBIT, which you posted in Q3 might maybe be not reached in Q4?
Good question. I would expect and also tried to give this a little bit before. I think the Q4 results for the bank will be lower than the Q3 results, that's true.
[Operator Instructions] We have no further questions in queue.
I would now like to hand it back to Frank for any closing remarks. Thank you.
Okay. So if there are no further questions, I would like to thank you for taking part in our conference call. And of course, you can reach us if any further questions arise later. Have a good day, and goodbye.
Thank you. Ladies and gentlemen, this concludes today's call. Thank you for your participation. Stay safe. You may now disconnect.