Chief Executive Officer Robert Oudmayer commented: “Our business model has proved resilient in the current economic environment, and our conservative risk management approach is paying off. The lockdown in Switzerland had a clear impact on income from credit card fees. At the same time, we observed a sustainable shift towards cards payments and away from cash. Starting in May, credit card transaction volumes began to recover and were above last year’s levels already in month June. We are also pleased to have successfully completed the integration of cashgate in just 11 months and can now continue to focus on further developing the business.”

Following the completion of the acquisition of cashgate on 2 September 2019, cashgate’s figures have been included in Cembra’s half-year results.

Resilient business performance

The Group’s total net financing receivables at 30 June 2020 amounted to CHF 6.4 billion, a decline of 3% compared with 31 December 2019, largely attributable to the impact of covid-19 lockdown in Switzerland.

In the personal loans business, receivables declined by 4% to CHF 2.5 billion in the first six months of 2020. Due to the acquisition in the second half of 2019, interest income in that business increased by 23% to CHF 97.2 million, with a yield of 7.4%.

Net financing receivables in auto leases and loans declined by 3% to CHF 2.8 billion in the reporting period. Interest income was 32% higher, at CHF 65.3 million, with a yield of 4.5%.

In the credit cards business, net financing receivables declined by 4% to CHF 1.0 billion. Interest income in the cards business grew by 9% to CHF 41.6 million, with a yield of 8.2%. The number of cards issued continued to increase, up 7% year on year to 1,009,000, while transaction volumes declined by 7% year on year.

Revenue increase driven by acquisition

Total net revenues rose by 12% to CHF 249.3 million. Interest income grew by 22% mainly as a result of the cashgate acquisition. Interest expense was 28% higher, at CHF 13.7 million. This reflects the CHF 1.4 billion increase in funding for the acquisition in the second half of 2019.

Commission and fee income decreased by 11% to CHF 60.0 million as a result of the covid-19 lockdown. The decline was mainly driven by a decrease in income from credit card fees (–27% year on year), which were weighed down by lower spending during the lockdown. This caused the share of net revenues generated from commissions and fees to decrease to 24%, down from 30% at 30 June 2019.

Total operating expenses increased by 21% to CHF 125.3 million. Personnel expenses came in at CHF 65.8 million, up 15% following the addition of 134 FTEs (+17%) after 30 June 2019 predominantly from cashgate. General and administrative expenses rose 28% to CHF 59.6 million mainly due to the acquisition and integration of cashgate. The cost/income ratio increased to 50.3%, compared to 46.5% in the year-earlier period. Adjusted for the integration costs for cashgate, the cost/income ratio stood at 47.9%.

Stable loss performance

The provision for losses increased by CHF 11.0 million or 57% to CHF 30.2 million, primarily due to the higher base of financing receivables following the acquisition. Despite the unfavourable environment, this resulted in a loss rate of 0.9% (H1 2019: 0.8%) and the non-performing-loans (NPL) ratio came to 0.7%. The rate of over-30-days past due financing receivables remained stable at 2.1% (H1 2019: 2.0%).

Integration of cashgate successfully completed

In the reporting period, Cembra continued as planned with the operational integration of cashgate and completed it in July 2020. The legal merger is planned for 2021. Adapting to the accelerated digital transformation, Cembra further consolidated the branch network and will be operating a network of 13 branches across Switzerland going forward.

The invoice financing provider Swissbilling continued to grow, more than doubling its net financing receivables since year-end 2019.

Stable funding

In the first six months of 2020, the Group’s funding portfolio declined by 3% to CHF 6.0 billion, in line with the lower asset base. The funding mix remained stable compared to 31 December 2019. The weighted average duration was 2.8 years (31 December 2019: 2.9 years), and the period-end funding cost was 43 basis points (31 December 2019: 44 basis points).

Solid capital position

Cembra remains very well capitalised, with a solid Tier 1 capital ratio of 17.0% (31 December 2019: 16.3%). Shareholders’ equity decreased by 3% to CHF 1.055 billion after Cembra had paid out the full dividend in April 2020, amounting to CHF 110 million, for the financial year 2019.

ESG recognition further improved

In the reporting period a number of leading ESG rating agencies upgraded Cembra’s sustainability ratings based on Cembra’s strong corporate governance and its low ESG risk profile. In April 2020, MSCI ESG^® upgraded Cembra to A from BBB. In May 2020, Sustainalytics^® upgraded Cembra to “Low ESG Risk”, and among all of the 112 consumer finance companies rated worldwide, Cembra ranked first.

Outlook

In 2020, Cembra currently expects to deliver a resilient business performance, with revenues being impacted mainly by lower volumes in credit cards. Cembra expects a solid loss performance for the full year 2020. The costs of integrating cashgate should increasingly be offset by synergies of the acquisition as planned. Assuming an economic recovery in Switzerland in 2021, Cembra confirms its mid-term targets¹.

All documents (investor presentation, interim report and this media release) are available at www.cembra.ch/investors.

¹Mid-term targets ROE > 15%, Tier 1 capital ratio of at least 17% and dividend pay-out ratio 60-70%

Audio webcast and telephone conference for investors and analysts (in English)

Please dial in 10–15 minutes before the start of the presentation and ask for “Cembra’s half-year 2020 results”.