German leasing company Grenke has reported earnings of €12m in the third quarter (Q3) of 2024, a 50% decrease from €24m in the same quarter last year.
Earnings amounted to €57m in the first nine months of 2024, marking an 11.5% drop from €64.4m recorded in the prior year.
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The decline was driven by higher expenses for the settlement of claims and risk provisioning.
These expenses reached €37.8m in Q3 2024, as a result of increasing insolvencies, especially in key markets such as France, Spain, and Germany.
The company projects similar levels of claims and provisioning in the final quarter.
However, Grenke’s net interest income increased by 7.4% to €92.8m in Q3 2024, buoyed by the growth of leasing new business. In the corresponding quarter of 2023, net interest income stood at €86.5m.
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By GlobalDataGrenke chief financial officer Dr Martin Paal said: “Despite the influence of the current development in risk provisioning on the quarterly and annual results, it is important to note that we have laid critical foundations in key areas that will secure our long-term profitability.
“The strong growth of our leasing portfolio in the first three quarters of this year has led to an increase in our net interest income. We also have our costs under control and will gradually increase our efficiency.”
Looking ahead to 2024, Grenke maintains its forecast for leasing new business at €3bn-€3.2bn, with a slight improvement in the CM2 margin expected.
However, the board of directors has revised the group earnings projection, lowering it from the initial range of €95m-€115m, down to €68m-€76m, based on the anticipated continuation of third-quarter expense levels for claims and provisioning.
The average loss rate for the financial year is projected to remain under 1.5%.
Grenke CEO Dr Sebastian Hirsch said: “Although we are very well positioned due to our strong diversification, the current rise in insolvencies among our existing customers does not, of course, leave us entirely unaffected.
“What is crucial is that the demand for leasing solutions remains strong. In addition, the valuable data and insights we are now gaining about payment behaviour offer tremendous potential. We will leverage this information to continuously improve our forecasting accuracy in our leasing markets and optimise our receivables management.”
