H1 2026 profit up 25% as cost/income ratio improves to 51.6%, but loss rate stays elevated at 2%
GLJ.DE · Earnings Call · 2026-08-12
A Challenging Environment, Yet Stronger Operating Performance
In its H1 2026 report, Grenke AG delivered a profit increase of nearly 25% despite a persistently weak macroeconomic backdrop. CEO Sebastian Hirsch framed the results around two sides:
the risk environment remains challenging. On the other hand, our operating business is getting stronger.
With cost/income ratio improving to 51.6% from 56.4% a year ago, the story is increasingly about operating leverage. The company now expects this ratio to come in below previous assumptions for the full year, a notable revision from the ~55% guidance implied in the Q1 call.
Operating Leverage: Sustainable Efficiency Gains
The cost/income improvement is not a one-off. Sebastian Hirsch explained that “the cost/income ratio is more or less free from the risk development.” — Sebastian Hirsch, Chief Executive Officer (CEO) · 2026-08-12 He highlighted a widening gap between income and costs, driven by years of investment in digitalization and standardization. In the Q1 call, CFO Martin Paal had said, “We expect the cost/income ratio to remain around 55% regarding our guidance we published.” — Martin Paal, CFO · 2026-05-19 The actual H1 figure of 51.6% clearly exceeds that expectation. The company is also leveraging AI in debt collection, with CEO mentioning “AI agents” — Sebastian Hirsch, Chief Executive Officer (CEO) · 2026-08-12 in the current call, though this was already introduced in the prior quarter.
Risk Elevated, But Loss Rate Expected to Subside
Risk remains the key drag. Settlement of claims and risk provisions rose to EUR 119mn, resulting in a loss rate of 2%, well above the long-term average of 1.5%. While the company had previously guided to 1.6%–1.7% for 2026, management now expects the full-year ratio to come in below 2%, a modest upward revision. CFO Martin Paal stated in the Q1 call, “we are confident to land at the end at our loss rate of 1.6% to 1.7%.” — Martin Paal, CFO · 2026-05-19 The relaxation reflects a more realistic view of the macro environment, but the company is confident that portfolio growth and pricing measures will gradually bring the rate down. As CEO noted, “We expect the loss rate to remain elevated. Although portfolio growth should help bring the full year's ratio below 2%.” — Sebastian Hirsch, Chief Executive Officer (CEO) · 2026-08-12
New Business: Selective Growth, But Market Share Gains
Leasing new business grew 1.4% to EUR 1.6bn, supported by strong performances in Germany, France, and Italy, as well as North America. This is especially notable given weak overall investment activity. The company is deliberately steering away from less profitable regions like Sweden and Denmark, where it is re-evaluating reseller relationships. core markets like Germany and France are driving growth, and the company is also increasingly looking at the U.S. and Canada as future growth engines. The growth in new business portfolios is expected to feed through to income over the coming years.
Residual Value and Disposal Income: A Hidden Tailwind
One of the more interesting developments in H1 was the elevated level of disposal income, which contributed to the stronger profit. CEO Sebastian Hirsch explained the mechanics: “The deviation between your estimation at the beginning and the realization at the end... that is your profit.” — Sebastian Hirsch, Chief Executive Officer (CEO) · 2026-08-12 The company has seen higher residual values than initially assumed, partly because customers are extending lease terms. While this is not a one-off, it is also not permanent, as CFO Martin Paal noted: “this will go down over the next years because then new business portfolios with higher business volume... will run out.” — Martin Paal, Chief Financial Officer (CFO) · 2026-08-12 This dynamic is closely tied to the residual value assumptions embedded in interest income.
Funding Diversification
The company continues to strengthen its funding mix, with the first Canadian dollar bond issued in May. The senior unsecured pillar now stands at EUR 3.5bn, representing 47% of funding. funding mix remains a key pillar for supporting future growth, and management expects an equity ratio of around 15% by year-end, providing a solid buffer.
Outlook
Management reaffirmed unchanged earnings guidance of EUR 74–86mn for 2026, with new business likely at the lower end of the EUR 3.4–3.6bn range. The improved operating leverage is offsetting higher risk costs, and the path to 10% ROE by 2030 remains intact. As Hirsch concluded, “the environment remains challenging... our business is getting stronger.” — Sebastian Hirsch, Chief Executive Officer (CEO) · 2026-08-12
This narrative highlights the key shifts: operating leverage is delivering faster than expected, while risk normalization is taking longer. The combination of strong income growth and disciplined cost control is the core driver of the improved outlook.