Q3 2020: GRENKE increases net interest income year-on-year despite the corona pandemic
- Net interest income increases 2.5% to EUR 96.0 million (Q3 2019: EUR 93.6 million)
- Settlement of claims and risk provision amounts to EUR 48.8 million (Q3 2019: EUR 32.2 million) as a result of the corona pandemic and IFRS 9 provisions
- Net profit equals EUR 17.7 million (Q3 2019: EUR 35.6 million)
- Short-seller attack has no significant impact on business
- Hengeler Mueller is mandated to provide legal advice in connection with the short-seller attack and ongoing audits
Baden-Baden, October 29, 2020: GRENKE AG, a global financing partner for small and medium-sized enterprises, increased its net interest income in the third quarter of 2020 compared to the same quarter of the prior year. The short-selling attack to which the Company has been exposed since September 15, 2020 did not have any significant impact on the daily business in the third quarter of 2020. GRENKE has mandated the law firm Hengeler Mueller to provide legal advice during the ongoing audits and the short-seller attack.
In the third quarter of 2020, GRENKE AG generated net interest income of EUR 96.0 million, which was 2.5% higher year-on-year (Q3 2019: EUR 93.6 million) in an economic environment that continues to be overshadowed by the coronavirus.
"GRENKE continues to succeed despite the pandemic as well as the short-seller attack", says Antje Leminsky, Chair of the Board of Directors of GRENKE AG, in her comments on the business development in the third quarter of 2020 and the further outlook: "We are confident that we will continue to successfully conquer these two waves at the same time thanks to the broad support of our customers, our investors and our employees. With the risk-adjusted management of our new business, a sufficiently high level of liquidity and appropriate cost savings, we are well equipped for the months ahead".
Higher costs for settlement of claims and risk provision
As a result of the corona pandemic, the Consolidated Group's settlement of claims and risk provision increased year-on-year by 51.7% and amounted to EUR 48.8 million in the third quarter of 2020 (Q3 2019: EUR 32.2 million). According to IFRS 9, this item includes not only impairments that have already occurred but also expected impairments. The resulting loss rate was 2.2% in the third quarter of 2020, which was below the internal target of 2.3% set for the 2020 financial year.
In the Q1-Q3 2020 period, the settlement of claims and risk provision amounted to EUR 161.8 million (Q1-Q3 2019: EUR 92.9 million). Of this amount, EUR 53.7 million were temporary impairments related to deferrals granted to leasing customers as a result of the corona pandemic. The loss rate in the first nine months of 2020 was 2.4%.
Due to the corona pandemic, the longer-term economic outlook in some countries deteriorated again in October 2020. Consequently, the Consolidated Group recognised an extraordinary impairment for a total of EUR 7.1 million as of September 30, 2020 on the goodwill of the leasing companies in Turkey, Brazil and Poland, and the factoring company in Switzerland.
The operating result in the third quarter of 2020 declined 39.9% to EUR 25.9 million (Q3 2019: EUR 43.2 million) as a result of higher risk provisions and goodwill impairments. Earnings before taxes decreased 46.3% to EUR 22.9 million (Q3 2019: EUR 42.7 million). The comparatively sharper decline in earnings before taxes was due primarily to an increase in other interest expenses to EUR 3.4 million (Q3 2019: EUR 1.2 million). This rise was partly the result of negative interest that the Company is required to pay on its credit balances at the Deutsche Bundesbank. Since the goodwill impairment charges were not tax-deductible, the tax rate rose to 22.7% in the third quarter of 2020 (Q3 2019: 16.6%). As a result, net profit in the reporting quarter was down 50.3% to EUR 17.7 million (Q3 2019: EUR 35.6 million), corresponding to earnings per share of EUR 0.38 (Q3 2019: EUR 0.77).
"We are in a relatively comfortable position, especially due to our strong liquidity. By matching the incoming and outgoing payments in the coming quarters, we can handle both higher and lower levels of new business," explains Sebastian Hirsch, Chief Financial Officer of GRENKE AG, in his comments on the business development in the third quarter 2020 and further outlook. "This gives us ample leeway to respond with flexibility to the dynamic developments related to the coronavirus".
eSignature continued its success, with around 30% of all lease contracts in the third quarter of 2020 processed fully digitally.
The average number of employees at the GRENKE Consolidated Group rose by 3.0% compared to the prior-year quarter to 1,761. Staff costs in the third quarter of 2020 amounted to EUR 26.0 million, which was 8.9% lower than in the previous year (Q3 2019: EUR 28.5 million). Selling and administrative expenses decreased 4.4% to EUR 18.5 million compared to EUR 19.3 million in the third quarter of the previous year.
Total assets of the GRENKE Consolidated Group as of September 30, 2020 increased to EUR 7.4 billion, or 3.4% higher than the level at the end of the 2019 financial year (December 31, 2019: EUR 7.1 billion). This increase resulted primarily from a rise in cash and cash equivalents as of the reporting date to EUR 0.8 billion (December 31, 2019: EUR 0.4 billion). The higher level of cash and cash equivalents was due mainly to the higher deposit volume at GRENKE Bank. As of September 30, 2020, deposits, including global loans, amounted to EUR 1,669 million, representing 28% of the refinancing funds of GRENKE AG.
With an equity ratio of 17.1%, the Consolidated Group's balance sheet structure was solid and remained above the long-term benchmark of 16.0%.
Outlook for 2020
New business development in the current financial year remains dependent on the further course of the corona pandemic and the associated economic restrictions. In light of the general economic situation resulting from the pandemic, the Board of Directors expects new business in the fourth quarter of 2020 to be approximately 60% of the previous year's level.
The Consolidated Group can operate profitably during this crisis with a lower volume of new business and the appropriate cost savings. Based on the solid liquidity situation and the stable number of employees - especially in sales - the GRENKE Consolidated Group is in a position to respond immediately to any respective easing or normalisation developments.
The quarterly statement for the third quarter of 2020 is available on the Internet at www.grenke.com/investor-relations/reports-and-presentations.
Overview of key figures (in EUR millions)
|New business GRENKE Group
|New business GRENKE Group Leasing
|New business GRENKE Group Factoring
|New business SME lending business (incl. business start-up financing)
|CM2 margin on Leasing new business in %
|Net profit GRENKE Consolidated Group
|Cost-income ratio in %
|Equity ratio in %
|Consolidated Group's average number of employees
(in full-time equivalents)
Please note: Rounding may result in differences in individual values compared to the actual values achieved in euro.
For further information, please contact:
Investor Relations Team
Neuer Markt 2
Phone: +49 7221 5007-204
Executive Communications Consulting
D-53572 Unkel (near Bonn)
Phone: +49 22 24 98 77 98
Mobile: +49 (0) 171 20 20 300
The GRENKE Group (GRENKE) is a global financing partner for small and medium-sized companies. As a one-stop shop for customers, GRENKE's products range from flexible small-ticket leasing and demand-driven bank products to convenient factoring. Fast and easy processing and personal contact with customers and partners are at the centre of GRENKE's activities.
Founded in 1978 in Baden-Baden, the Group currently operates in 33 countries and employs more than 1,700 staff worldwide. GRENKE shares are listed in the MDAX on the Frankfurt Stock Exchange (ISIN DE000A161N30).
Further information about GRENKE and its products is available at www.grenke.com.
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