Grenke (ETR:GLJ) executives used the company’s full-year 2025 earnings call to highlight a year of profit recovery amid elevated insolvencies, improving cost efficiency, and continued leasing growth, while reiterating a long-term goal of reaching a 10% return on equity (after tax) by 2030.
2025 results: earnings met targets amid elevated loss rates
CEO Sebastian Hirsch said 2025 remained shaped by geopolitical tension and macroeconomic uncertainty, including what he described as “the highest level of corporate insolvencies in two decades.” Despite that backdrop, Grenke delivered group earnings of EUR 71.8 million and achieved the company’s stated goal for the year.
The company reported a loss rate of 1.7%, above a historic average of 1.5%. Management said the higher loss rate was largely offset by a significant improvement in operating performance before damages, supported by income growth and cost discipline. Return on equity after taxes was 5.2%, described as stable versus the prior year.
Leasing growth and income expansion
CFO Martin Paal reported leasing new business of EUR 3.3 billion in 2025, up from EUR 3.1 billion in 2024, an increase of 7.8%. Paal said growth was mainly driven by the top three markets—Germany, France, and Italy. He added that Germany and France saw an overall contraction in their leasing sectors, but Grenke achieved “significant new business growth” in those markets and expanded its position, while Italy grew in line with market development and maintained a leading position.
By region, Paal highlighted:
- DACH: new business growth of 13.7% (with Germany making up the “lion’s share”).
- Western Europe: growth of 8.5%.
- Southern Europe: growth of 8.9%.
- Northern/Eastern Europe: about 5% below the prior year due to a base effect after a strong prior year, the end of subsidies for e-bike leasing in Finland, and an adjustment of the reseller network in the U.K.
- Future core markets: new business up 21.2% (or EUR 41 million), driven by the U.S. and Australia.
Hirsch said leasing receivables surpassed EUR 7 billion and linked the portfolio’s growth to operating income of more than EUR 660 million, describing leasing as a solution for “necessary small-ticket investments” by SMEs and other customer groups.
Cost discipline lifts operating result; cost-income ratio improves
Management repeatedly pointed to efficiency gains in 2025. Paal said operating income increased 14.7%, driven by both higher net interest income from the existing portfolio and improved profit contributions from new and service business, including disposals.
On costs, Paal said the cost base rose only 7%, mainly from higher staff costs, and remained significantly below operating income growth. As a result, the operating result improved 26% year-over-year and the cost-income ratio improved by 4 percentage points to 55.2%.
In the Q&A, management discussed factors affecting 2026 cost-income ratio expectations, including:
- A “double” cost impact tied to moving into the cloud while still carrying costs related to the prior data center setup, which management said should run off by the end of 2026 and not recur in 2027.
- The prior year’s income included “gains from disposals” that Paal said the company does not expect to repeat at the same range, influencing the income growth comparison.
- Costs also reflect ongoing cloud usage and license fees, platform-related expansion, and legal/advisory costs tied to transactions discussed on the call.
On staffing, Paal said the company plans for staff cost growth to remain in the single digits, estimating “something between 5% and 10%,” and said it was “too optimistic” from today’s view to expect below 5%.
Risk: provisions rose sharply, but coverage held steady
Paal said settlements of claims and risk provisions increased from EUR 131 million to EUR 196 million in 2025, producing the 1.7% loss rate. He stressed that while the increase was steep, stage 3 risk provisions (which include non-performing loans) rose about 23%, and the stage 3 coverage ratio remained stable at “almost 60%.”
Hirsch said the company has become more selective and cautious in accepting new business, even if that can mean accepting “slightly lower growth rates” in the near term. Asked about using more dynamic pricing instead of declining business, Hirsch said pricing must be handled carefully to avoid adverse selection, emphasizing risk assessment over simply charging higher risk premiums.
Discussing 2026 guidance assumptions, Hirsch noted that a loss rate range of 1.6% to 1.7% does not necessarily imply meaningfully fewer defaults; rather, it reflects the relationship between provisioning changes and a growing leasing volume.
Capital, funding, and outlook for 2026
On capital allocation, Paal said equity is growing and the company has “sufficient headroom” for continued growth, adding that Grenke does not plan a capital increase in the midterm. He cited an equity ratio of 15.6% and said the company intends to retain about 75% of profits and pay out 25% as dividends.
Management also detailed 2025 funding activity, including two EUR 500 million benchmark bonds issued in May and September 2025, the launch of an AUD 125 million bond, and the continued importance of deposits at Grenke Bank. Paal also referenced a EUR 200 million KfW global loan granted in early 2026, which he said supports SME customers in Germany with favorable leasing conditions.
In response to questions about regulatory capital headroom, Paal said regulatory capital ratios had been reduced by goodwill and intangible assets from transactions—particularly the Intesa transaction—requiring deductions from regulatory own funds. He said the company had about 150 basis points of headroom and remained comfortable, adding that much of the recent capital ratio consumption was tied to transaction-related goodwill that management does not expect to repeat at the same scale.
Regarding minorities and franchise consolidation, management said the last franchise had been bought back, with one minority stake in the former U.S. franchise close to being closed. However, the company now has a new minority interest: Intesa Sanpaolo holds a 17% stake in Grenke’s Italian company, which management said will affect non-controlling interests going forward.
For 2026, Hirsch provided guidance for group earnings of EUR 74 million to EUR 86 million and leasing new business of EUR 3.4 billion to EUR 3.6 billion. The guidance assumes a loss rate of 1.6% to 1.7% and a cost-income ratio of 55%. Hirsch described the outlook as “driving on sight” given uncertainty, while reiterating the longer-term target of reaching 10% return on equity by 2030.
About Grenke (ETR:GLJ)
Grenke AG, together with its subsidiaries, provides financial services to small and medium-sized (SME) enterprises in Germany, France, Italy, and internationally. It operates through three segments: Leasing, Banking, and Factoring. The company is involved in the leasing activities, such as financing to commercial lessees, rental, service, protection, and maintenance offerings, as well as sale of used equipment; and small-ticket leasing of IT products, such as PCs, notebooks, servers, monitors, software, and other peripheral equipment; leasing office communication products, that includes telecommunication and copier equipment, as well as medical technology products, small machinery and systems, and security devices; and leasing green economy objects, such as wallboxes, photovoltaic systems, and eBikes.
