The new business of the leasing company GRENKE suffered significantly from the Corona crisis in the second quarter.
Financial services provider GRENKE sees the first signs of improvement after a sharp slump in new business in April and May. “We can see that the situation has eased somewhat in many regions. We saw a first recovery in our new business in June,” said CEO Antje Leminsky when he presented the first key figures for the past quarter on Thursday in Baden-Baden. The GRENKE share then rose significantly.
At times, the price skyrocketed in the morning by more than seven percent. Most recently, paper was still one of the strongest stocks in the MDAX with a plus of 5.5 percent. Since the turn of the year, however, the GRENKE share has lost more than a fifth. Above all, the fear of investors of high credit losses as a result of the Corona crisis had pushed the price down in recent months.
However, analyst Philipp Häßler from Pareto Securities was disappointed with the quarterly figures. They were even weaker than he thought. He expects the numbers to improve again in the coming months. However, the third quarter just started is usually the weakest period of the year due to the vacation time, he warned.
It is too early for GRENKE boss Leminsky to infer the future from the recent positive business trend. “Whether we can speak of a trend will continue to depend heavily on macroeconomic developments,” she said. It is not yet clear whether and how quickly business will move towards normalization. She therefore still did not dare to make a forecast for the current year.
In the second quarter, new business in the leasing division declined by 45 percent year-on-year to EUR 402 million and was thus of the size previously announced. GRENKE had expected around half of the business volume that the Management Board had set itself at the beginning of the year and thus before the corona pandemic.
When looking at the regions, Germany in particular performed comparatively positively with a decline of just 15 percent. By contrast, new business in Western and Southern Europe outside of Germany, Switzerland and Austria fell by more than half.
The margin in the leasing business developed positively on the basis of the so-called contribution margin. The value available from sales to cover fixed costs also fell significantly. However, since the decline was only 42 percent to EUR 70.4 million, the margin, which experts paid close attention to, rose from 16.6 percent in the previous year to 17.5 percent.
In the meantime, promotional loans in the wake of the corona crisis brought GRENKE Bank a strong increase in business with small and medium-sized companies. The total new lending business in this segment in the second quarter was 54.2 million euros, more than four times as high as a year earlier. At the same time, the deposit business grew by more than 70 percent to 1.3 billion euros.
Investors reward revival of new business at GRENKE
Encouraging statements by the management of financial services provider GRENKE lured investors back into the shares on Thursday. At times, the papers were at the top of the MDAX with an increase of more than seven percent. They clearly moved away from the 50-day line to which they had fallen in their setback since the beginning of June. Meanwhile, analysts reacted to the key data presented by the group for the past quarter with mixed feelings. At the end of trading, the GRENKE share was still 2.49 percent up at EUR 69.90.
Despite the current profits, the GRENKE share balance sheet has been deep red with around a fifth of a minus since the end of 2019 – a good 30 percent are missing from the intermediate high of over € 100 reached in February. The stock had plummeted in the wake of the Corona crash, largely due to investors’ fear of high loan losses. The low in March had dropped to € 40.50 before the paper recovered to almost € 82 by the beginning of June. Since then, the stock has been struggling again with the downward pull.
Despite the bright spot in June, the company’s new leasing business shrank 45 percent year-over-year in the quarter. Although the decline was within the previously announced order of magnitude of around 50 percent of the new business volume planned at the beginning of the year and thus before the pandemic – Philipp Hässler from the Pareto analysis company spoke of values well below his expectations.
Hässler also reminded that the third quarter, which is usually the seasonally weakest, is now approaching. Although he believes that GRENKE should hold its own in a difficult environment and that things could go up again in the coming quarters, he feels comfortable with his neutral stance and the current price target of 72 euros.
For the Warburg expert Marius Fuhrberg, however, the sharp decline in new business was not a big surprise – after all, the management had already prepared extensively for the strain caused by the pandemic. The analyst now assumes that growth rates in new business should pick up again in the second half of the year. It remains to be seen how the loss rates in the group portfolio will develop and whether the provisions that have already been created will suffice. However, Fuhrberg still sees the investment background at GRENKE intact and recommends the share to buy unchanged. He believes the paper can still do a lot up to its target price of 99 euros.
(Dow Jones / dpa-AFX)