Grenke : Presentation Conference Call Q1 2020

Q1 2020 EARNINGS PRESENTATION

MAY 5, 2020

Disclaimer

This presentation contains forward-looking statements. Forward-looking statements are statements that are neither facts nor a description of past events; they comprise statements relating to our assumptions and expectations. Each statement made in this presentation that reflects our intentions, assumptions, expectations or forecasts as well as the underlying presumptions is a forward-looking statement. These statements are based on planning figures, estimates and forecasts currently available to the Board of Directors of GRENKE AG. Accordingly, forward-looking statements refer exclusively to planning data, estimates and forecasts at the time at which they are made. We assume no responsibility to further develop or modify such statements in the event of fresh information being available or future events occurring. By their very nature, forward-looking statements imply risks and uncertainty factors. A large number of key factors can contribute towards actual events varying quite substantially from forward-looking statements. Such factors include the condition of the financial markets and the regional focal points of our investment activities.

This document is not for publication or distribution, directly or indirectly, in or into the United States. This document does not constitute or form part of an offer of securities or subscription rights for sale or solicitation of an offer to purchase securities or subscription rights in the United States, Canada, Australia, Japan or in any other jurisdiction where such offer may be restricted. The securities and subscription rights referred to in this document have not been, and will not be, registered under the US Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States or to or for the account or benefit of US persons (as such term is defined in Regulation S under the Securities Act), except on the basis of an applicable exemption from registration or in a transaction not subject to the registration requirements of the Securities Act. There will be no public offering of securities and subscription rights in the United States or anywhere else, except for Germany.

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Executive

Summary

Antje Leminsky |

Chair of the Board

Q1 2020 Earnings Presentation on May 5, 2020 - Baden-Baden

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Q1 2020: Executive Summary

SOLID START TO THE YEAR DESPITE COVID-19 PANDEMIC

• COVID-19Pandemic
  Health and risk management in place - Full business continuity
• Our business
  Lower growth - increased risk provisioning - yet strongly profitable
• Our markets
  Mixed bag - opportunities still outgrow risks
• Our customers
  SME benefit from governmental liquidity support
• Our shareholders
  New date for AGM: August 6, new dividend proposal: 0.80 EUR
• Our strengths
  Speed and flexibility: Delivering solutions in response to market needs

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Q1 2020: Group New Business Development

GROUP FIGURES UP 5.7%

New Business Development GRENKE Group 2019 - 2020, in EUR millions		New Business Segment Distribution Q1 2020

		+5.7%				2.1%
					19.7%
1,000	910		962
871
		871
824
					LEASING
800
						IS OUR
600						CORE
400						BUSINESS
200							78.2%
0
Q1 2019	Q2 2019	Q3 2019	Q4 2019	Q1 2020	Leasing	Factoring	SME lending business

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Q1 2020: New Business by Segments

GROWTH ACROSS ALL SEGMENTS

New Business by Segments Q1 2020, in EUR millions

GRENKE GROUP LEASING

GRENKE BANK*

GRENKE GROUP FACTORING

+1.6%

670.3681.3

+20.6%

+53.0%

171.7

142.4

18.0

11.8

2019

2020

2019

2020

2019

2020

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*GRENKE Bank New Business only includes SME lending business

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Q1 2020: Leasing New Business by Regions

STRONG REGIONAL DIVERSIFICATION

Leasing New Business Q1 2019/2020 by Core Markets, in EUR millions

				-7.4%
		-5.0%	212.7
+16.4%			196.9
186.7
		177.4
	158.2					+11.3%
136.0
						108.3	120.5
								+6.3%
DE	DE	FR	FR	IT	IT
								26.6	28.3
2019	2020	2019	2020	2019	2020	2019	2020	2019	2020
DACH	Western Europe	Southern	North/East		Other
(without DACH)	Europe	Europe	regions

YOY COMPARSION:

Leasing New Business in total: +1.6%

Thereof:

• Germany: +15.0%
• France:-8.1%
• Italy:-16.4%

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Q1 2020: Leasing Object Categories

SHARE OF IT EQUIPMENT SOFTER - MEDICAL EQUIPMENT STRONGER

Object Portfolio in % of NAV

IT equipment (incl. notebooks)

Machinery and other equipment

Photocopying equipment

Medical equipment

Telecommuni- cateions

General office technology

Security equipment

Others

9.1%

8.4%

7.5%

8.1%

3.5%

3.4%

3.5%

3.9%

1.7%

0.9%

34.6%

35.2%

21.4%

20.7%

18.7%

19.4%

As per 31.03.2020

As per 31.03.2019

KEY FIGURES

• Current contracts: 965,446
• Average duration: 49 months
• Average ticket size: 9,005 EUR

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Q1 2020: Key P&L Figures

SOLID SET OF RESULTS DESPITE COVID-19 PANDEMIC

Key figures		Q1 2020	Q1 2019	Difference
Net Interest Income		EUR 101.1m	EUR 87.3m	+ 15.9 %
Operating Result		EUR 31.4m	EUR 41.7m	- 24.9 %
Net Profit		EUR 23.7m	EUR 33.8m	- 29.8 %
EPS		EUR 0.35	EUR 0.59	- 40.7 %

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Guidance 2020

AS PER MAY 5, 2020

Guidance as per February 11, 2020		Current view
(without the impact of the covid-19 pandemic)
Net profit EUR 153m - 165m		Update of guidance not yet possible
		Current view:
Cost/Income Ratio < 46%
	New Business leasing at 50% of
		initially planned volume
Loss rate between 1,5% - 1,6%		Net profit expected below guidance
Equity ratio above 16%
New Business Leasing growth 14 - 18 %

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Financials

Sebastian Hirsch |

Member of the Board

Q1 2020 Earnings Presentation on May 5, 2020 - Baden-Baden

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Development of Equity

STABLE DEVELOPMENT OF KEY RATIOS

Development of capital 2014 - 2019

	17.7%	18.5%	18.0%
17.4%	17.5%	17.2%

	15.0%		14.6%			12.1%		11.4%		12.1%		7.5%
2016	2017		2018	2019	2019 Q1	2020 Q1
	Equity Ratio (Balance Sheet)		ROE after Tax	Total Capital Ratio acc. to CRR

Capital ratios as of March 31, 2020

as a % of total assets (risk-weighted assets)

22.6%

17.2%16.3%

16.0%*		11.7%**

Balance sheet equity	Economic capital (embedded value)
Regulatory capital	* Long-term minimum set by management
	** Minimum set by regulatory body

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Funding Mix as per 31 March 2020

STRONG DIVERSIFICATION - S&P RATING: BBB+/NEGATIVE/A-2/ APRIL 2020

Approx.		Approx.		Approx.
EUR 3,521m		EUR 1,309m		EUR 1,072m
60%		22%		18%

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Development of Profitability

GRENKE GROUP LEASING

CM1 in EUR millions		CM2 in EUR millions

CM1 is calculated as the present value of the interest margin net of

commissions paid to third parties

CM2 is made up of the present value of operating income of a lease contract less risk and individual contract costs

3,000

2,500

2,000

1,500

1,000											670.3	681.3
500
0
										2019	2020
2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
													Q1	Q1
		New Business Leasing				CM1 Margin

16%

12%

8%

4%

0%

500

400

300

200

100

0

2010	2011	2012*	2013	2014
CM2			CM2 Margin

111.1

123.9

2015*

2016

2017*

2018

2019

Q1 2019

Q1 2020

* New calculation of CM2/CM2-margin

20%

15%

10%

5%

0%

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CM2 Calculation

CM2 MARGINS PROMOTE SOLID P&L- GRENKE GROUP LEASING

40

36

32

88

124

CM1

Forecast

Forecast

Forecast

CM2

subsequent

losses

service

business

business

1

19

51

29

30

10

101

14

92

31

NET

Settlement

Profit from

Profit from

Gains/los-

OPER-Staff costs

Selling and

Depre-

OPER-

INTEREST

of

service

new

ses from

ATING

admin.

ciation and

ATING

INCOME

claims/risk

business

business

disposals

INCOME

Expenses

impairment

RESULT

provision

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Q1 2020: Cost/Income Ratio

AS PER DECEMBER 31, 2019

48.0%

AVERAGE: 44.6 %

47.0%

46.0%

45.0%

44.0%

43.0%

42.0%

41.0%

40.0%

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

CIR

COST/INCOME RATIO

Q1 2020: 43,5%

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Development of Losses

12-YEAR VIEW OF LOSS RATE DEVELOPMENT

Loss rate* (left column)			Loss Expectations
3%	800%		8%
PEAK AT 1.9%	700%		7%

												600%	6%
2%												500%	5%
AVERAGE: 1.5%									400%	4%
1%												300%	3%
												200%	2%
												100%	1%
0%												0%	0%
2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2007	2008	2009	2010	2011	2012***	2013	2014	2015***	2016	2017***	2018	2019

			Settlement of claims and risk provision (2007 = 100%)	IFRS9		Calculated loss expectations at contract start
			Volume of leased assets (2007 = 100%)		Loss rate (left column)		Calculated actual loss expectations per end of period
	* Losses p.a. (of historical asset values, factored in), ** Present value of operating income of a lease contract less risk and individual contract costs, *** New calculation of CM2 margin
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2008 Post-Crisis Business Development

SCENARIO MODELING

New Business Leasing 2008 - 2011

900	18.5%	9

80043.3%

700-16.5%

600			8
500
400
300			7
200
100
0			6
2008	2009	2010	2011

New Business Leasing (left scale, in millions) Avg. Ticket Size (right scale, in thousands)

	Net Profit 2008 - 2011
50	41.4%	5.00%
40	-25.7%				4.00%
13.0%
30						3.00%
20						2.00%
10						1.00%
0						0.00%

2008 2009 2010 2011

Net profit (left scale, in millions)

Loss rate (right scale)

LARGE VARIETY OF ADVANCEMENTS SINCE CRISIS IN 2008

• Aquistion of
  GRENKE BANK
• Strong increase in diversification of object categories
• Further increase in digitalization
• Strong expansion: 152 branches in 32 countries

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Financial Calender 2020

• July 02, 2020New Business (Q2)
• July 30, 2020Financial Report (Q2)

• August 06, 2020
  Virtual Annual General Meeting
• October 02, 2020New Business (Q3)
• October 29, 2020Quarterly Statement (Q3)

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Appendix

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GRENKE Group uses matched funding

TREASURY IS STRONGLY FOCUSED ON FINANCING THE CORE BUSINESS

S&P RATING: BBB+/STABLE/A-2/AND GBB RATING: (GESELLSCHAFT FÜR BONITÄTSBEURTEILUNG MBH) A/STABLE

800			∑ 635					∑ 757					∑ 763					∑ 752
600											528					567			415	∑ 465
								338
400				302
	213				226
200										117
	38	82				95	98			50	68			47	98	40			39	11
									0
0
	2020			2021						2022			2023					2024
			Medium term notes (MTN)		Promissory notes (Schuldscheindarlehen)		Term deposits GRENKE Bank			Global loans

MATURITY STRUCTURE AS PER March 2020

6,000.00
4,000.00
2,000.00
-
-2,000.00
-4,000.00
-6,000.00
31/03/2020	31/03/2021	31/03/2022	31/03/2023	31/03/2024	31/03/2025
Assets	Cash	Debts
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Reminder: Restated financial statements for IFRS 16 lessor accounting

SPECIFIED STANDARDS REQUIRED ADJUSTMENT OF INITIAL DIRECT COSTS (IDC)

• IFRS 16 standards had specified the definition of IDCs
• Since then, IDCs only include variable costs which occurr in direct connection to a lease contract, thus excluding imputed fixed costs
• Restatement mainly shifted positions within the income statement and had marginal bottom line effect
• Balance sheet was affected by a slight decrease in equity (below 1% of total equity)
• Profitability and operational business were unaffected

IMPACT ON KPIs

Positive

CIRCM1

-

Negative

None -

CM2		EPS/Net
	profit
-

Equity ratio		Loss ratio
		-

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Contact

TEAM INVESTOR RELATIONS

Phone:	+49	7221 5007-204
Fax:	+49	7221 5007-4218
E-mail:	[e-mail]
Internet:	www.grenke.com

GRENKE AG

Neuer Markt 2

76532 Baden-Baden

Germany

Reports are available at:

www.grenke.com/investor-relations/reports-downloads

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capability scalability SME focus growth diversification awareness digitalisation