Good morning, ladies and gentlemen from Baden-Baden, and welcome to our earnings call regarding our quarterly statement for Q3 and the first nine months of 2025. My name is Franziska Randt, I'm Head of the IR Department, and today here with me is again, as just before for Q1, our CFO Dr.

Martin Paal. We will start with the presentations, and afterwards we will enter into our Q&A session.

With having said that, I would now hand the floor over to our CFO Dr. Martin Paal.

Martin, please go ahead.

Thank you Franziska, and ladies and gentlemen, a very warm welcome to our earnings presentation for the third quarter and the first nine months of 2025 from my side. Today, I'd like to start my presentation with an update on the three strategic levers: operating income, cost, and risk.

On the operating income side, we saw our new business improving steadily in the first nine months. Our leasing new business volume grew by over €200 million or 9.3% to €2.4 billion.

At the same time, our CM2 margin, which measures the profitability of our new business, also came in stronger at 17.1%. With both factors continuously improving, we are laying the foundation for our future earnings growth.

On the cost side, we achieved a solid improvement across the year through consequent cost discipline and efficiency measures. With a cost-income ratio of now 55.4%, we are not only 2 percentage points below last year, but also well within our target of below 60% for the whole year 2025.

The risk side, however, remains challenging. We see continued elevated losses in our portfolio, reflecting the currently difficult macroeconomic environment.

With a loss rate of roughly 1.8% in the first three quarters, we are above our predictions. Our figures indicate that we have left the peak of losses behind us, and we continue to strengthen and grow our operating income.

Accordingly, we achieved the compensation of the higher loss rate in Q3, and with group earnings at €48.6 million, we are right on track for our annual targets. Let's now take a brief look at our top-line figures with our new leasing business performance on a quarterly basis.

As you can see, we continue on a clear growth path. In the third quarter of 2025, which is traditionally the weakest quarter in our business year, our leasing new business reached €781 million after €739 million in 2024.

At the same time, our CM2 margin normalized to 16.6% after three very strong quarters. In sum, this puts us well on track for our annual targets of €3.2 to €3.4 billion in leasing new business at a CM2 margin of above 16.5%.

Looking at the bottom line on a quarterly level, the trend reversal in our earnings development becomes clearly visible. After four quarters of earnings below €20 million, we have, as projected, returned to our earnings growth path.

While losses remain elevated, our strong earnings performance was driven by the solid operating income from our portfolio, as well as our effective focus on cost discipline and efficiency measures, which resulted in a significantly improved cost-income ratio. Looking forward, we expect our group earnings to continue on this track in the fourth quarter.

Regarding our annual earnings guidance, we are confident to reach the projected corridor of €71 to €81 million. A mere repetition of our Q3 result in the last quarter would take us past the threshold.

Should our loss rate, however, remain elevated at the current level of 1.8%, we expect group earnings at the lower end of our annual guidance for the full financial year 2025. As I just touched upon the still elevated losses in our portfolio, I would like to cast some light on how we are dealing with this situation.

Since we experienced the first higher losses in Q3 last year, which resulted in increased settlement of claims and risk provisions since, we have implemented measures to compensate for this trend and improve our profitability, both on our cost side as well as our risk side. The effects of these measures are shown in the widening gap between the two bars.

Driven by the strong development of our operating income, coupled with our focus on cost discipline, our operating result before settlement of claims and risk provisions increased by €7.2 million to €78.7 million compared to the previous quarter. During the same period, our settlement of claims and risk provisions increased only by €4.4 million to €51.5 million in the third quarter, thus being overcompensated by our higher operating result.

We will continue our measures for higher profitability and expect a further strengthening of our profitability in the upcoming quarters. Now, I would like to turn to our income statement in more detail.

In the first three quarters of 2025, we saw a continuous improvement of our operating efficiency. While income from operating business increased by €68.1 million, driven equally by growth in net interest income and profits from new and service business, our operating expenses only rose by €25.9 million.

This solid overcompensation translates into our improved cost-income ratio of 55.4%. Taking this together, our operating result before settlement of claims and risk provisions grew strongly by roughly 20% to €217.2 million.

This positive trend stood in contrast to the continuously elevated settlement of claims and risk provisions, which reached €146.3 million. Consequently, our operating result came in at €67 million, while our group earnings for the first three months reached €48.6 million.

With this result, we are, as I said, well on track for our annual target of €71 to €81 million. I would now like to draw your attention to our cash flow statement.

We started the year with a strong cash position of €973 million, and throughout the first three quarters of 2025, we saw an increase of over 9% in payments from our lessees to €2.1 billion. Repayments of refinancing of €2.9 billion stood against €3.1 billion in new refinancing, while our deposit business remained widely stable.

Resulting from €2.4 billion of investments into new lease receivables, our cash position on the 30th of September this year normalized, reaching €775 million. This continued strong cash position, combined with our diversified funding mix, provides us with a solid foundation to finance our future new business growth.

Now, before we come to our guidance for 2025, I would like to also share some insights on the just mentioned funding mix. As you are aware, we continue to rely on our well-diversified, well-established four debt pillars to finance our new business.

Senior unsecured with €3.1 billion made up 36% of our funding mix. Our newest addition to this pillar is our fifth benchmark bond of €500 million at a favorable coupon of 3.875%, which we launched in September.

Further, we successfully placed our first Australian dollar bond of 125 million Aussie dollars also in the third quarter this year, which underlines our continuous growth ambitions in our future core markets. The deposit business of Grenke Bank remains an integral part of our refinancing mix, accounting for €2.2 billion or 25%.

Our asset-backed pillar, including especially ABCPs and global loans, made up 14% or €1.2 billion. Last, but not least, external funding, such as through our cooperation with Intesa in Italy, for example, accounted for around €650 million or 8% of our whole funding mix.

Ladies and gentlemen, our outlook for 2025 remains unchanged. In a continuous challenging macro environment, which is shaped by economic uncertainty for many of our customers, we have successfully maintained our strategic course.

With a strong new leasing business at a solid CM2 margin, we are laying the foundation for our future profitability, and are well on track to meet our annual target of €3.2 to €3.4 billion in leasing new business. Given the still elevated loss levels, we are satisfied that our measures are effective.

By growing our operating income while implementing stringent cost discipline and efficiency measures, we keep improving our operating leverage and have compensated for the higher loss levels. This is reflected in our current cost-income ratio, which is well below our annual target of below 60%.

Now, should the full year 2025 loss rate remain just under 1.8%, as it has so far for this year, we expect group earnings to come in at the lower end of our annual guidance of €71 to €81 million. Lastly, before entering into our Q&A session, I would like to inform you of a change in our reporting.

In the future, we'll align our communications more closely with our strategic focus on profitability and enhanced efficiency in our reporting. Therefore, starting with our 2026 financial year, we'll publish our new business figures for the respective quarter within the scope of our regular reporting publications, and no longer publish quarterly new business figures separately.

Yet, we'll publish our new business figures for the full year 2025 on January 7th of '26. You can find all our publishing dates in our Q3 report or on our website alike.

With that, I would like to thank you for your attention and look forward to your questions.

Thank you very much, Martin, for your remarks and your presentation. Ladies and gentlemen, we will now enter into our Q&A session.

Now, depending through which link you joined us today, you have the possibility to ask a question orally or written. If you want to ask an oral question, please use the button with the hand symbol on it that says raise.

If you want to remove yourself from the question queue, then you have to press this button once again. You are also free to use our written chat box and submit your questions through our chat.

With having said that, I would now like Mr. Pfänder to go ahead.

We will unmute your audio line, please do not forget to unmute your device as well. Mr.

Pfänder, please go ahead. Yes, good morning.

Some questions from my side, please. Net interest income, it's hovering around €100 million for the last three quarters.

I would have expected a little bit better or faster development upwards, are there some points behind this you could highlight? Second question, could you give us an update on the digitalization initiatives and the efficiency gains you are planning to get out of this next year?

Maybe you could also indicate headcount growth and staff costs growth for next year, just to see if this allows for operational leverage going forward. Thank you.

Thank you, Mr. Pfänder, happy to answer your questions.

Let me start with your first one right away. The Q3 of this year was actually the first quarter where we fully had in our P&L the whole business of the Intesa part of the Rent4You business, which we assumed at the end of the second quarter.

With the Intesa business, we also assumed, as I showed in our funding mix, a couple of loans, and these are shown in the interest expense, which weighs a little bit on net interest income with a low single-digit million effect. However, the income side from this portfolio, because it's an operating lease portfolio, is shown in a different line from a P&L perspective, which is shown in the service business.

You have to take this in account when evaluating the evolution of our net interest income. Your second question on the digitalization program, yes, we are making very good progress there.

We have already implemented some measures regarding everything that is around regulatory requirements on borrower unit checks, which are now easier to do, no longer manually, but really automatically, which helps our sales guys in saving time to concentrate on settling new contracts and to make new business. Also from a cost perspective on our digitalization program, we are in plan there, spending around these roughly up to €10 million for the first three quarters where we expected a little bit more than 10, maybe up to €12-15 million for the whole year.

There we are both on a good way, not only from a cost spending side, but also from the implementation side. Also, when it comes to our transition to cloud services, to the migration more from hardware-related IT systems into the cloud, which is integral part of our digitalization program.

Your last question on the headcount and staff costs, well, we have not out any plans for next year's out there. The guidance will be published, as at the beginning of next year.

What I can say is that roughly 60% of our costs are related to FTEs, are staff costs. If you take all costs in the P&L into consideration, it might be even more.

You can imagine that we really need to be careful when it comes to FTE increases. What we can say is that we expect FTEs and staff costs to increase at a lower pace than 10%, at a really single-digit cost growth only there.

Mr. Pfänder, do you have follow-up questions?

Your line is still open. Maybe just one follow-up.

Obviously, this quarter was helped by disposal gains again. How sustainable is this?

I think you guided that the expected value is rather close to zero. Nevertheless, the last quarters were quite supportive, and maybe you could just again shed a light on what's going on there and what you expect maybe for next year.

Thank you.

The result from disposal gains is a lasting effect still from the lower new business portfolios around the corona pandemic of 2020 and 2021, where relatively less objects coming back because relatively less contracts were settled, which have come to an end now, four years later, with our average maturity. On the other side, relatively more contracts are still in subsequent lease and contributing also to this result of disposals, which would be otherwise if they would be still in a normal leasing contract shown in the interest income.

It is currently higher than in a normalized world, I would say, and what we have seen as a fading-in effect, I would call it, over the last four to five quarters, we expect this as a fading-out over the next quarters as well. We do not expect this high level of disposal gains for the next quarters.

We will move on with the next question coming from Mr. Lukas from Kepler Cheuvreux.

Mr. Lukas, your line is open, you can go ahead with your questions, please.

Good morning. Thanks for taking my questions.

Also three questions on my side, please. Firstly, touching on the consolidation effect of Intesa you just mentioned, could you maybe run us quickly through the P&L lines which are really affected here and give us the impact just from Intesa?

Secondly, on the risk provisioning, which was clearly at a higher level, you guided that this might be higher than we would only reach the lower end of the earnings guide or pretax profit guidance for the year. Could you maybe elaborate a bit more on the economic environment?

You mentioned the macro. What changed?

Why is the amount up, probably on also larger business, because impairments were a little bit down on the quarter, but how do you expect that to continue combined with the macro effect? Thirdly, on the cash balances, you ran us through the cash flow, where do you see the minimum threshold for cash balances since you reduced cash by €200 million this quarter, and together with that, where do you see then the equity ratio?

I think you have the target of around 16% still for the year, would that imply an additional reduction of cash? Thank you.

Thank you Mr. Lukas, and also starting with your first question.

I just mentioned the Intesa effect shows up, firstly, in our interest expense, which weighs on net interest income as just explained. The second one is then the other way around with a positive sign in our service business, namely the income from the operate lease of the running-out portfolio of Intesa, which we still have on our book, which were around €200 million running out smoothly over the next years.

The new business, that's also important to mention, new business coming from Intesa is already treated in our Grenke world, namely as finance lease receivables under IFRS. Also, we have effects on the cost side, from the consolidation of the Rent4You company, especially staff costs and other costs.

These are the three main line items from a P&L perspective. Also, you might have seen that, from a balance sheet perspective, there are minority stakes that is also affected or reflects the transaction with Intesa, where Intesa holds 17% of our Italian subsidiary.

On your—

Could you maybe quantify the amount on the interest expense and also on the service business? As I understand, on the service business, going forward, we will see kind of normalization of that line, right?

That was a one-time effect or will it phase out? Is it a one-time which will disappear next quarter or is it a phase-out over the next quarters?

On the interest expense side, this will remain, to speak, because this is part of our whole funding, and all of the funding is reflected in our interest expense. However, the effect on the operate lease income, which is part of the service business, this will fade out over the next quarters and years.

On the cost side, these effects will remain because they are now integral part of our Italian subsidiary. On the risk provisioning side, yes, we have this still elevated level of risk provisions on that end.

However, we have first signs that the losses, the termination of contracts, has reached its peak, and we are seeing some positive signs there that it will no longer increase, which is a positive one. You have already also mentioned that the impairments have come down a little bit.

That's right. In the third quarter, the increase in stage 3 loans has increased to a much smaller extent as in the quarters before.

That is also a positive sign. However, which also weighs still on our risk provisioning is that within this stage 3, these loans, whether they will recover or not, could have also continuing, also fading-out effect on the risk provisioning.

Overall, we expect this risk provisioning level to be stable, and currently we have this loss rate of 1.8% for the whole year. If we would add another digit to that number, it would be 1.7 high, we are also near to a 1.7 that could be possible, but rounding-wise it has to be shown as a 1.8%.

On the cash balances, yes, we have now €700 million on our balance sheet. It's also some date effects, if you wish, because if there is a new benchmark bond just in that quarter or just one day after the end of the quarter, this cash balances are fluctuating.

We feel very comfortable with this €775 million currently. Maybe €900 million is a little bit too much.

However, we have a growing business, though there always needs to be some hundred million of cash balances at least. Also, we have some regulatory requirements for which we have to hold cash on our balance, and a rough number between €500 million to €1 billion would be a good ballpark.

However, 775 is a good one currently. Also, it shows that we have a better deployment of our cash, if you wish, into the new lease contracts, shifting from cash to lease receivables to higher earning assets on our balance sheet contributing to the P&L.

Lastly, coming to your last question on the equity ratio, that strengthened our balance sheet, and with that also strengthened our equity ratio, which is currently at 16%. I wouldn't say that we have a target equity ratio of 16% balance sheet equity ratio.

It's more a orientation figure for us. If it would be below 16%, which could be expected because our fourth quarter is traditionally the strongest one in terms of new business, we expect the equity ratio to come a little bit below 16%, but that's nothing where we have to matter about, because we are always looking at our regulatory requirements where we have enough headroom and take this balance sheet equity ratio more from a orientation perspective.

Mr. Lukas, your line is still open.

Do you have follow-up questions?

Last one if I may. On the Intesa, it would be great if you could quantify a bit so that makes the modeling a bit easier going forward.

Secondly, on the loss rate, in my notes from the last quarter, I noted down that you expect a 1.6% as a loss rate, and that was quite decisive to reach the targets. Now you're reaffirming targets, saying, yes, it goes to the lower end if we do see the 1.7% to 1.8% loss rate.

Just to understand, what is then underlying fundamentally better in the business compared to last quarter, which still gives you the support for the guidance? Thank you.

Your first one on Intesa, we have a single-digit one on the interest expense side with a negative sign. A positive one on the operate lease income in the service business, which is also single-digit with a positive sign, as I said, and a more low, roughly €1 million, not more, on the cost side relating to staff costs and so on from the consolidation of Rent4You into the Italian Grenke business.

The second one on the loss rate, yes, we are currently at a 1.7%, 1.8% or expecting that towards the end of the year, which would us bring to the lower end of our guidance towards €71 million. What is better compared to the last quarters is that our efficiency measures, especially on the cost side, are working.

They are becoming effective now, which drives especially our cost-income ratio to already 55%.something, which was our mid-term target, and we've reached it right now in that quarter. Whether this is lasting is another question, but especially in that quarter, we have this 55%, expecting to be significantly below 60% towards the end of the year.

This operating leverage, combined with a strong income side coming from our new business, coming from our portfolio which we have on our balance sheet, that taking all together makes us confident to also for the full year overcompensating a little bit higher loss rate, even if it's 1.7% or 1.8%, to really come into this corridor of our earnings guidance.

Thank you very much. Thank you.

We're moving on now to our Q&A through our chat function, where Mr. Häßler from DZ Bank handed in some questions.

First, on the risk development, if there are some particularities region-wise, is there risk cost, especially in our core markets, Germany, Italy, France, UK, below or above the 1.9% risk cost? This is the first question.

The second one is that our cost-income ratio in Q3 is very low, if there are any one-offs included in that development. The third one is about the overall economic development about Germany and the outlook here.

There are some optimistic comments, as Mr. Häßler mentioned, if we see this development as well in our numbers.

Thank you, Mr. Häßler, for the first question on the risk cost development.

Compared, for example, to last year, where we had these effects especially in the largest markets, in France, in Germany, and in Spain, what we see is that we have still elevated level of losses and risk provisions all over our portfolio. There's no special region or country that is hidden more or less in a significant way by risk provisions or risk costs, it's an overall effect that hits the whole portfolio, first of all.

The second on your cost-income ratio, there are some smaller one-offs, if you wish, but they had been planned, especially when it comes to a deconsolidation effect of our factoring business from Poland, which was planned for because we were going into this transaction and anticipated that we would deconsolidate the Polish entity. However, we expect also these effects for the next entities that are going to follow, namely UK and Ireland, in the fourth quarter, and some provisions that were released because they were no longer necessary.

If you wish, these were one-off effects. Overall, from a macroeconomic perspective, the overall situation in Germany especially, from, for example, new business side is very positive.

We mentioned that also in our new business calls and new business figures that especially the larger countries like France and especially Germany, which drives the DACH region, has a strong development in new business, and that gives us confidence for the next years, because this shows then up this new business in our P&L for the next years. However, from a risk perspective, as I said, there is still this elevated level of losses, but not only in Germany, also in the rest of the world, to speak.

Ladies and gentlemen, there are no further questions for the moment, I, once again, kindly invite you to use our Q&A function in the chat or to raise your hand. There it goes, Mr.

Pfänder, you have a follow-up question. Your line is now open, and you can unmute your device.

Please go ahead, Mr. Pfänder.

Yes, thank you for the opportunity to have this follow-on. Just a very theoretical question.

You pointed to this CM2 margin normalization, what's going on. Looking at the, yeah, let's say challenging macroeconomic environment, and, yeah, high volatility in the loss rate, wouldn't you need to price for a higher CM2 margin just to be on the safe side or to reflect this in the overall, yeah, cushion?

Yes, the CM2 margin normalization comes from the interest rate side, meaning that we have seen interest rate decreases over the last months, and our competitive landscape, and we at the end had to come down a little bit with our conditions. That's just a question of, yeah, conditioning on the rates that the lessees have to pay on the funding side that brought the CM2 margin to a more normal level.

As I said, the CM2 margins of above 17% for the last quarters were a little bit higher than we normally see, so that's on the CM2 normalization. On the macro side and the volatility, we have already priced in higher expectations of loss levels into this CM2, meaning that the expected credit loss, which is anticipated to be higher, is already part of the CM2 margin what you see.

When we are talking about a CM2 margin of 16.5% to 17%, there's already factored in a higher expectation of losses.

If there is no follow-up question from your side, Mr. Pfänder, I would just wait a second.

You're muted your device. That doesn't seem to be the case.

We have another question from our chat where it says that the staff costs rose less than the headcount, despite salary inflation. Has there been any change in bonus accrual, or what is driving this in Q3, and what is our estimate going forward for Q4?

One effect is the consolidation of the Rent4You, which I just mentioned. The other one, there has been no special bonus, however, we have to take care, given the development of our whole earnings performance and our expectations for the whole year, where we have provisioned for staff costs.

This has been done in Q2 also, already, but also in Q3, and that drives a part of these staff costs to be higher as opposed to last year.

Then there's a follow-up question where we are invited to shed some light on how the timing impacts of lease rate pricing compared to funding cost will develop going forward, given the comments you made, Martin, on becoming more competitive on lease pricing on new business. I don't think you said that, but should we expect the interest element of the CM2 margin to be becoming down going forward?

No, what we have seen 1.5, 2 years ago was that we had in a very short time very steep increases in interest rates, and that meant that we had some delay to move on these higher interest rates into our asset side, into our customers' rates from a CM2 margin perspective. That was a very special time.

As I said, 1.5, 2 years ago. Now with these levels, with these time gaps between interest rate decisions by central banks and with these smaller steps especially in interest rates, we feel very comfortable, we are very good in pricing them into our asset side, and there is no further delay expected.

We expect a stable CM2, as I said, between 16.5% or above 16.5% for the full year, which is a normal, a good CM2 margin for us.

Thank you for handing in all your questions, whether it be orally or written. I kindly invite you once again to ask your questions at this stage.

I will wait just a second here whether we will have further questions. That doesn't seem to be the case.

In this case, ladies and gentlemen, thank you for joining us today for our Q3 earnings call. If you have further questions that will spring to your mind later, please don't hesitate to drop us an email at [email protected].

You will hear from us again at the beginning of January on the 7th, where we report once again new business figures for the entire fiscal year of 2025, and the annual report will be published on the 12th of March. If you want to see us personally, you're invited for us to meet in Stuttgart with the forum we're going to hold a presentation here on the IR level.

We're going to be at different conferences. We're going to host a roadshow, you're always invited to meet us personally.

With having said that, this concludes our call for today. We wish you a pleasant time going ahead.

Take care, have a lovely Christmas time, and talk to you soon. You may disconnect now.

Thank you.

Thank you very much.