ProCredit Holding - Investments starting to level off

ProCredit Holding (PCB) reported a Q125 annualised return on equity (ROE) of 9.5%, broadly in line with management's reiterated FY25 guidance of around 10% but down from 13.4% in Q124, as the company's operating expenses continue to reflect investments to deliver PCB's updated strategy. This was coupled with further pressure on PCB's net interest margin (NIM), which fell to 3.2% in Q125 versus 3.7% in Q124. Consequently, the cost-income ratio came in at 70.8% versus 61.7% in Q124. PCB's operating expense has begun to stabilise as the company is nearing the peak in its strategic investments. Moreover, the pricing of PCB's liabilities should at some stage decrease, reflecting recent monetary easing across Southeastern Europe (especially the fall in euro rates). This, together with scaling effects from continued robust growth in PCB's loan book (2.5% in Q125 or 3.2% excluding fx) and the ongoing shift to higher-margin, lower-volume clients (which accounted for more than 70% of loan portfolio growth in Q125) should allow PCB to drive profitability towards its reiterated medium-term ROE target of c 13-14%.

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