Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ProCredit Holding AG (XTER:PCZ, Financial) achieved a top line growth of 9% in the first nine months of 2024, with significant contributions from smaller banks in Albania, Moldova, Bosnia, Georgia, and Romania.
- The company reported a return on equity of 11.3%, which was within their expectations for the year.
- The cost of risk remained low at eight basis points, with a defaulted loan ratio of 2.3%, indicating strong portfolio quality.
- ProCredit Holding AG (XTER:PCZ) successfully increased the share of deposits from private clients to more than 50%, with a 10.4% growth in this segment.
- The company is on track to achieve its medium-term targets, with a strong focus on growing its loan portfolio in lower volume segments and funding growth through local deposits.
Negative Points
- The cost income ratio increased to 65.7%, driven by strategic investments in growth catalysts, leading to visible cost increases.
- ProCredit Holding AG (XTER:PCZ) faces headwinds in Ukraine and Ecuador, with macroeconomic challenges affecting their operations in these regions.
- The anticipated tax hike in Ukraine could negatively impact the company's return on equity, potentially reducing it to around 10%.
- In Ecuador, the company is dealing with a challenging market environment due to a catastrophic drought, energy crisis, and deteriorating security situation.
- Net interest margins are under pressure due to negative pricing effects and higher refinancing costs, particularly in Ukraine and Ecuador.
Q & A Highlights
Q: Could you provide more details on the management overlays released and the outlook for risk costs?
A: (Chairman of the Management Board) The overlays released in Q3 were primarily from banks outside Ukraine, totaling over EUR10 million. We continuously assess the justification for overlays, and the underlying risks no longer applied. We still have a substantial overlay stock of EUR51.6 million, representing over 25% of total loan loss provisions. There is no indication of further releases in Q4.
Q: Regarding the tax hike in Ukraine, is it included in your current figures, and what is the current tax level?
A: (Chairman of the Management Board) The tax rate was supposed to be 25% for this year, but if the law passes, it will increase to 50%. This is not yet included in Q3 results and would be effective in Q4, impacting results by a high single-digit million amount.
Q: Can you elaborate on the sustainability of personnel and IT costs, and whether these are one-off expenses?
A: (CFO) Some IT costs have a one-off character, but licensing costs will affect the full year P&L next year. Investments are planned for 2024 and 2025, with scaling effects expected from 2026 onwards. Marketing expenses are ongoing and help drive growth, with no expected reduction in the budget for the coming years.
Q: What is the outlook for the net interest margin, considering the full inclusion of the tier two bond?
A: (CFO) The tier two bond is fully priced in Q3, with a EUR3 million interest expense quarterly. Net interest margins are stable in most banks, with pressure from Ukraine. Repricing dynamics affect income from cash negatively, but positive volume effects on the loan portfolio help offset this.
Q: Can you provide an update on the situation in Ecuador, including capital ratios and group exposure?
A: (CFO) We have reduced cross-border finance exposure, currently a mid-two-digit million amount. Local capital ratios have buffers in excess of 2% points. We have a subordinated loan that can be converted into equity if needed.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
