Please note that this website shows an excerpt from the grenke AG Annual Report 2024. The annual report, which is also available in the “Reports & Presentations” section of the grenke AG website, prevails.

The grenke Group has implemented a comprehensive risk management system based on its many years of experience, in accordance with the German Stock Corporation Act and relevant regulatory requirements. This system is subject to ongoing development. The risk management of the grenke Group is designed to ensure long-term, sustainable, and successful business operations. In particular, the Board of Directors includes profitable operations, ensuring consistent and appropriate dividend payments, adequately strengthening equity beyond dividend payments to enhance the Company’s financial stability through regular profit retention, and enabling investments in the ongoing development of the grenke Group to secure its future viability. A key principle is to maintain an appropriate balance at all times between profit opportunities and manageable, well-controlled risks.

We have always followed the philosophy of only taking on risks that are inherently linked to our business model. It is our guiding principle to develop the best possible statistical models for assessing and measuring these risks. Therefore, we do not aim to minimise credit or default risks associated with our leasing business but instead focus on ensuring high predictive accuracy in our models. This allows us to precisely quantify and ideally price these risks at the time of contract conclusion. We strive to avoid market price risks, maturity transformation risks, or liquidity risks, or to economically eliminate them through appropriate hedging strategies. Another core principle of our business model is placing great importance on diversification to minimise dependencies. As a result, we maintain a broad customer portfolio across more than 30 countries, a well-diversified object portfolio, partnerships with over 39,000 specialist resellers, and various refinancing instruments. This comprehensive diversification forms the foundation of our resilience, which we have demonstrated in recent years. In addition to the core principles of our traditional risk culture, which stem from our business philosophy and sense of responsibility, our risk management is also subject to additional requirements. These arise primarily from extensive banking regulations, which we must comply with both as a leasing company and as a group of institutions, due to our subsidiary grenke Bank AG.

According to Section 25a of the German Banking Act (KWG), an institution must have a proper business organisation, with a particular focus on adequate and effective risk management. The regulatory requirements for this are specified in the Minimum Requirements for Risk Management (MaRisk). Based on Section 25a (1) KWG, MaRisk provides the supervisory framework for the qualitative and quantitative design of risk management. As grenke AG is the parent company of a group of institutions as defined in Sections 10a and 25a KWG, the grenke AG Group is classified as a financial holding company under Section 1 (35) KWG in conjunction with Article 4 (1) No. 20 of the CRR. grenke AG also has a credit institution subsidiary, grenke Bank AG. Both the grenke Group and grenke Bank AG are subject to the regulatory requirements of the Capital Requirements Regulation (CRR), taking into account the revisions under CRR II and the upcoming CRR III, which will come into effect on January 1, 2025, as well as the Capital Requirements Directive (CRD V) and the KWG.

The grenke Group must implement the Minimum Requirements for Risk Management (MaRisk) and the “Supervisory Requirements for IT in Financial Institutions” (BAIT) issued by the Federal Financial Supervisory Authority (BaFin). These include qualitative and quantitative requirements for risk management, which institutions must implement taking into account their size, as well as the nature, scope, complexity, and risk profile of their business activities.

In addition, the financial services institutions GRENKEFACTORING GmbH and GRENKE Investitionen Verwaltungs KGaA are subject to the KWG and supervision by BaFin and the Deutsche Bundesbank at individual institutions. grenke AG applies the so-called waiver regulations pursuant to Section 2a (1) or (2) KWG in conjunction with Section 2a (5) KWG for these group companies. Therefore, these institutions have notified BaFin and the Bundesbank that certain regulatory requirements are implemented at the group level instead of the individual institution level, as the necessary organisational arrangements are fully met by the parent institution. BaFin approved grenke AG’s application in 2009 to align the regulatory scope of consolidation with the accounting scope of consolidation used for the consolidated financial statements. As a result, all group companies attributable to the grenke Group are included within the regulatory scope of consolidation.

Furthermore, grenke AG, as the parent company, prepares a recovery plan upon request by BaFin in accordance with Section 12 (1) of the Restructuring and Resolution Act (SAG). Restructuring planning is a standard industry preventative measure involving the preparation of operational implementation plans for strategic planning, with the aim of addressing effective courses of action in the event of a potential crisis.

The grenke Group’s risk management system follows a holistic and integrated approach. It encompasses all measures for identifying, assessing, evaluating, monitoring, and managing the risks arising from the business. The system takes into account all relevant units within the grenke Group and is designed to recognise all significant individual risks as well as potential risk concentrations and interdependencies between different types of risks.

The grenke Group’s risk management system includes the key elements outlined below, which are aligned with one another as part of a regular annual update process. The fundamental orientation of the risk management system is based on the business model defined in the business strategy and the associated strategic objectives set by the Board of Directors.

Accordingly, based on the content and guidelines of the business strategy, the risks relevant to the grenke Group are identified once a year as part of the risk inventory and assessed in terms of their materiality. This results in the Consolidated Group’s overall risk profile, which provides the Board of Directors with an overview of the risks that could have a material adverse effect on the net assets (including capital resources), results of operations and liquidity position. Particular focus is placed on the systematic identification and assessment of the impacts of ESG risks.

grenke’s Group risk strategy includes the fundamental risk policy approach and, in this context, covers the guidelines and objectives of risk management, the determination of risk appetite, and the definition of appropriate measures to achieve these objectives.

As part of the Internal Capital Adequacy Assessment Process (ICAAP), it is ensured at the Group level that the material risks and potential risk concentrations are covered at all times by available risk capital. It also ensures that the regulatory capital and liquidity requirements are met for at least the duration of the three-year capital planning period, thereby maintaining the Consolidated Group’s risk-bearing capacity.
The risk-bearing capacity framework at grenke includes two management perspectives: the normative perspective, aimed at the continuation of the institution, and the economic perspective, aimed at creditor protection.

In the normative perspective, risk-bearing capacity is ensured if compliance with regulatory key figures is maintained both in the planning scenario, based on the current business plan, and in the three existing adverse scenarios over a three-year planning horizon. The risk coverage potential primarily consists of regulatory own funds. On the risk side, credit, market price, and operational risks are quantified using the prescribed regulatory procedures. Key control metrics include the Common Equity Tier 1 (CET1) requirement, the Supervisory Review and Evaluation Process (SREP) total capital requirement (Pillar 2 Requirement, P2R), the combined buffer requirement, the supervisory capital guidance (Pillar 2 Guidance, P2G), as well as other regulatory structural requirements, such as the leverage ratio.

Since January 1, 2025, the grenke Group has to comply with the regulator’s additional capital guidance, the Pillar 2 Guidance (P2G). The P2G, alongside the Pillar 2 Requirement (P2R), forms the second component of the institution-specific capital add-on, which is mandatorily derived from the implementation of the SREP (Supervisory Review and Evaluation Process). It extends the concept of the capital conservation buffer, serving to safeguard the grenke Group’s assets even during stress periods and can be offset against the capital conservation buffer. The level of the P2G is determined by the results of the regulatory stress tests of grenke Bank as a Less Significant Institution (LSI), meaning the P2G of grenke Bank has been applied to the grenke Group.

In the economic perspective of the ICAAP, the determination of the risk coverage potential and the quantification of material risks are carried out from an economic standpoint, i.e., on a present value basis. For risk management purposes, the risk coverage potential is subsequently allocated to the material risk types in the form of risk limits. In its risk calculation, grenke follows a conservative approach, as also expected by regulatory authorities, to ensure that rare or extreme events are adequately considered and mitigated through management (limitation). In the economic perspective, quarterly stress tests are also conducted for the material risks to critically reflect on the results and identify any necessary actions for the grenke Group.

In addition to the traditional stress tests conducted as part of the risk-bearing capacity assessment, the Consolidated Group also carries out an inverse stress test once a year. Inverse stress tests examine which scenarios could threaten the survival of the grenke Group.

Furthermore, the implemented process to ensure adequate liquidity at all times (ILAAP) guarantees that the grenke Group maintains sufficient liquidity buffers and refinancing within a defined time horizon to ensure liquidity adequacy.

The normative perspective takes into account the regulations of the European Capital Requirements Regulation (CRR) and focuses particularly on the liquidity ratios of liquidity coverage ratio (LCR) and net stable funding ratio (NSFR).

A key component of the risk management process is also comprehensive, standardised risk reporting. Corporate Risk Management prepares a quarterly risk report for the Board of Directors, the Supervisory Board, and key decision-makers (risk owners) within the Company. This report provides analysis and monitoring of the current risk situation at the Consolidated Group level. It includes the results from ICAAP and ILAAP as of the reporting dates, the volume and structural development of new business, the risk development across individual risk types, and, in particular, the trends in key regulatory and economic risk indicators, along with their associated early warning indicators. These indicators provide insights into compliance with the risk appetite and signal whether additional management actions are required.
The key risk indicators and the liquidity position, including the ILAAP, are also monitored and reported to the Board of Directors and relevant risk owners on a monthly basis. In the event of a particular risk situation, internal ad hoc risk reports are additionally prepared.

Another element of the extended risk management framework is the regulatory-required restructuring plan, which grenke continuously updates upon request from BaFin. This plan is based on the key risk (early warning) indicators and is therefore closely integrated into governance, linking it directly to ongoing risk monitoring and management. This enables grenke to respond quickly and effectively to potential crisis situations, thereby strengthening its resilience.

The risk management framework is accompanied by an actively practiced and continuously evolving risk culture, as well as a functional organisational structure with clear responsibilities and defined processes.

grenke’s risk management is organised according to the “Three Lines of Defence” model. The clear functional separation between front office and back office is consistently implemented up to the Board of Directors’ areas of responsibility.

The overall responsibility for the adequacy and effectiveness of grenke’s risk management lies with the entire Board of Directors. In addition to approving the business strategy and the risk strategy, including the risk policy guidelines, the Board also determines the risk appetite (Risk Appetite Statement) and approves all key methodological and procedural elements of risk management.

The independent risk control function, in accordance with MaRisk, is responsible for the proper monitoring and communication of material risks, taking into account the impacts of ESG risks. In the 2024 reporting year, this role was held by the Chief Risk Officer (CRO).

The operational implementation of the risk control function’s tasks is carried out by the Corporate Risk Management function of the grenke Group. In addition to risk control, this unit is also responsible for regulatory reporting, the development and maintenance of quantitative risk models, and the independent validation unit, which regularly assesses the adequacy of internal risk models.

The Risk Working Group (AK Risiko) is also part of the risk management system. It primarily discusses current risk-related topics, the results of the risk inventory, any ad hoc risk reports, and legal developments related to risk management.

In alignment with MaRisk, grenke has a compliance function, a money laundering officer, a Chief Information Security Officer, an outsourcing officer, and a data protection officer.

The core task of the compliance function is to ensure the implementation of effective procedures to comply with the key legal regulations and requirements applicable to the Consolidated Group. To this end, it identifies and analyses potential compliance risks, conducts legal monitoring, and carries out relevant controls. For adherence to the grenke Code of Conduct, which forms the ethical framework for actions within the Consolidated Group, the compliance function operates the Group-wide whistleblowing system, designs and develops training and awareness programmes on compliance topics, and contributes to the development of policies for Group-wide compliance risk management. The function is also responsible for the relevant regulations on specific core compliance areas, such as handling potential conflicts of interest.

The money laundering officer is responsible for ensuring compliance with anti-money laundering regulations, including adherence to due diligence obligations under the German Money Laundering Act. Based on policies aligned with legal and regulatory requirements, an up-to-date risk assessment of the Consolidated Group, and the use of monitoring and analysis tools, the officer implements risk-based measures to prevent grenke from being misused for money laundering, terrorist financing, or other criminal activities, thereby also mitigating legal and reputational risks.

The Chief Information Security Officer (CISO) is responsible for all matters related to information security. Through guidelines and advisory services, the CISO ensures that the defined objectives and measures regarding information security are clearly communicated and that compliance with these measures is regularly and event-driven reviewed and monitored. In addition, the CISO oversees information risk management in coordination with Corporate Risk Management.

The outsourcing officer manages and monitors compliance with legal and regulatory requirements related to outsourcing. In line with supervisory requirements, the Consolidated Group has implemented internal control procedures for managing and monitoring these risks, based on the structure and workflows of the respective processes.

The data protection officer, together with the data protection organisation, ensures compliance with all relevant data protection regulations at grenke. He/she monitors whether the applicable processes are followed and whether employees receive sufficient training and awareness regarding data protection matters. The data protection officer also serves as the contact point for cooperation with data protection supervisory authorities.

The Internal Audit department conducts an annual risk-based and independent review of the adequacy and effectiveness of risk management. In the 2024 reporting year, the ongoing audit of risk management by Internal Audit revealed no significant or serious findings.

As part of the risk inventory conducted in the 2024 financial year, the following risks were classified as material for the Consolidated Group (aggregated presentation):

This means that these types of risks, due to their nature and extent and/or their interaction, can significantly impact grenke’s capital, earnings, or liquidity position. The following section defines the origin of the material risks in relation to grenke’s business model and explains how these risks are measured and managed within the risk management system.

The grenke Group’s strategic business focus is on small-ticket leasing for small and medium-sized enterprises (SMEs), freelancers, and self-employed professionals. grenke operates in over 30 countries. Due to the predominantly small-scale business across more than 30 countries, the portfolio is highly granular and well-diversified from a risk perspective. The contracts are characterised by low acquisition values, with an average below EUR 10,000. While SMEs are the preferred target group, contracts are also concluded with larger customers, exceeding the SME criteria (number of employees, revenue, total assets) to diversify the portfolio and maintain the dealer network.

Due to the grenke Group’s strategic business orientation, credit risks primarily arise from the leasing business. These include, in particular, default risks and migration risks. The default risk refers to the possibility that a customer is unable to meet payment obligations arising from utilised loans or leasing contracts. Migration risk reflects changes in value resulting from a change in the credit rating (rating migration) of a borrower or lessee. Both types of risk were classified as material in the risk inventory due to their potential impact on the Consolidated Group’s financial position.

To assess credit default risk, an internally developed, largely country-specific application scoring is conducted before concluding a leasing contract. This process takes into account both customer-specific and contract-specific characteristics, as well as information from external agencies. The models used by the Consolidated Group generate a forecast of potential future default losses, which are considered as risk costs in the contribution margin calculation. As part of the contribution margin analysis, the expected value contribution, factoring in other anticipated income components, is then determined as the key basis for the contract decision. Across the Consolidated Group, broad portfolio diversification is pursued to spread risk when entering into leasing contracts.

For existing portfolios, expected losses from credit default risks in the leasing, factoring, and lending business are also covered by appropriate risk provisions based on internally developed risk models in accordance with IFRS 9 requirements. Additionally, expected losses from non-performing exposures in leasing and factoring are accounted for through standardised individual impairments.

The regulatory own funds requirements for credit risks (minimum capital requirements under Pillar I in accordance with CRR) are calculated using the Credit Risk Standardised Approach (CRSA). To determine unexpected losses under the economic perspective of the risk-bearing capacity assessment, grenke applies a hybrid model that evaluates large exposures using a CreditMetrics model, while other exposures are assessed using a cluster approach.

The migration risk, which is also classified as material, is addressed not only through the recognition of credit quality deterioration via the IFRS 9 levels as part of the risk provisioning process but also within stress testing, where historical increases in risk parameters are considered.

Market price risks refer to potential losses arising from uncertainties regarding the future development (level and volatility) of market risk factors. As part of the risk inventory, interest rate risk, currency risk, and credit spread risk were classified as significant subtypes of risk.

The Consolidated Group’s interest rate risks arise from changes in market interest rates affecting positions in the interest rate book and their corresponding impact on net interest income. The grenke Group does not engage in maturity transformation to generate net interest income but instead aims for maturity-matched financing.

Interest rate risk is measured within the risk-bearing capacity framework using a historical simulation with a 12-month risk horizon and a confidence level of 99.9 percent.

In addition, interest rate risk is analysed using interest rate shock scenarios in accordance with the requirements of BaFin and the European Banking Authority (EBA), allowing analysis from both a net present value and periodic earnings-oriented perspective. The net present value perspective is assessed using the economic value of equity (EVE) method, while the impact on the profit for the period is analysed through the net interest income (NII) perspective. This includes parallel shifts as well as various twists in the yield curve.

Operationally, market price risks are monitored and managed by Treasury. Due to the strategic principle of avoiding significant maturity transformation, market price risks are kept at a relatively low level. The limitation of market price risks (interest rate and currency risks) is also managed based on risk limits approved by the Board of Directors within the framework of the risk-bearing capacity.

Open interest rate and currency positions should only be entered into in connection with operational business and within the economically necessary limits. On a case-by-case basis, derivatives are also specifically used in this context. The grenke Group uses derivative financial instruments particularly when ordinary business activities involve risks that can be reduced or eliminated through the use of suitable derivatives. Only interest rate and currency swaps, as well as foreign exchange forward contracts, are used. Each derivative contract is linked to an underlying transaction with an opposing risk position. Counterparties are banks with predominantly good or very good credit ratings, holding an S&P rating of at least BBB+. Further details on market price risks, especially interest rate and currency risk management, are provided in the notes to the consolidated financial statements under Chapter 7.3 Derivative financial instruments.

Due to the international nature of its business, the grenke Group is exposed to currency risk. Internally defined hedging strategies are used to limit or eliminate these risks. The derivatives used are recognised on the balance sheet as of the reporting date at their fair values under the line items financial assets or financial liabilities. In the larger markets, such as Great Britain, the Consolidated Group refinances the new business acquired in local currencies. The subsidiaries generally conduct their business in the respective local markets rather than internationally (cross border), which excludes currency risks almost entirely.

The risk calculation of open currency positions is carried out within the framework of risk-bearing capacity using a historical simulation with a 12-month risk horizon and a confidence level of 99.9 percent.
In general, risks arise from currency fluctuations related to financial assets and receivables, onerous contracts denominated in foreign currency and from the translation of the Consolidated Group companies’ financial statements. The use of derivatives (forward exchange contracts and currency swaps are used for currency risk) lessens the market sensitivity of the underlying transaction, i.e. cash flows from financial assets and receivables. Ideally, this results in almost perfect compensation.

Currency risks mainly arise in the financing of Group companies operating outside the eurozone. The hedging of open foreign currency cash flows is carried out based on internally defined hedging limits, which are applied when the balance at the daily exchange rate reaches the equivalent of EUR 500k per currency. The exchange rare is firmly fixed for the majority of Group companies. In addition, there are external agreements for refinancing in local currency for some companies.
Currency risk resulting from the cash flows of the issued foreign currency bonds is hedged by the conclusion of cross-currency swaps with matching maturities.

Credit spread risk in the banking book (CSRBB) encompasses risks arising from market-wide changes in credit spreads (including market liquidity spreads), without considering idiosyncratic components or credit-induced changes (e.g., rating migration). Rising credit spreads increase grenke’s costs for new capital market issuances, which can only be incorporated in the leasing new business’ terms and conditions with a time lag. As a result, this risk type is also considered in the adverse scenarios of capital planning.

Fluctuations in the segment- and rating-specific credit spread curve (financial non-banking, rating BBB) are used as the risk factor for CSRBB. The credit spread curve reflects the credit premium (spread) of bonds issued by non-banking financial institutions with a BBB rating compared to risk-free yields across various maturities. Changes in the spread curve are not due to rating changes of the issuers but instead reflect market-wide factors relevant under CSRBB requirements.

Liquidity risk refers to potential losses that may arise if liquid funds are unavailable or more expensive than expected to obtain to fulfil payment obligations when due. The key sub-categories of liquidity risk include liquidity risk in the narrow sense, i.e., the risk that current and future payment obligations cannot be met in full or on time, and refinancing risk, which is the risk that refinancing at the required time can only be secured under more expensive conditions than anticipated.

Liquidity risks can arise from all positions entered into with external parties. The grenke Group’s sources of refinancing primarily consist of ABCP programmes, bond and promissory note issues, the deposit business of grenke Bank AG, a syndicated credit line from a banking consortium, and the issuance of subordinated debt instruments (hybrid capital).

The grenke Group’s liquidity risks are limited by the compliance with regulatory ratios LCR (liquidity coverage ratio) and NSFR (net stable funding ratio). The objective is to achieve, primarily based on duration, a match between balance sheet assets and liabilities and, where possible, a broad diversification of refinancing sources. Refinancing concentration risks are reduced to economically reasonable levels.

As with market price risks, liquidity risks are generally reduced by the principle of avoiding significant maturity transformation. Liquidity risks are managed operationally by the Treasury department, strategically by the management, and monitored by Corporate Risk Management. Liquidity risk is managed at the Consolidated Group level, including weekly monitoring through various liquidity reports (e.g., LCR and NSFR) and monthly through dynamic liquidity planning and the refinancing plan. Three stress scenarios (institution-specific, market-specific, and a combined scenario) are usually analysed. The investment of excess liquidity is carried out in accordance with the approved counterparty limits.

Liquidity risk management consists of the day-to-day management of incoming and outgoing payments. A liquidity overview is prepared for short-term reporting on the first working day of the calendar week and is discussed by the Board of Directors. The overview includes all of the relevant information on the short-term liquidity developments expected in the following weeks. The weekly liquidity overview gives the Consolidated Group’s current liquidity status and focuses on cash flows from the leasing business. Wages and tax payments are also taken into account.

Reporting distinguishes between three liquidity levels:

• Liquidity 1 (cash liquidity): Money in all accounts plus overdraft facilities at banks and all “immediately” (time horizon of approx. one week) flowing funds.
• Liquidity 2: Liquidity 1 plus cash flows due or to be received up to the one-month horizon and those tied assets that can be monetised without significant losses in value at the one-month horizon.
• Liquidity 3: Liquidity 2 plus cash flows that are not due or received by one month’s notice and plus those tied assets that require more than one month to monetise without significant loss of value.

Monthly static liquidity planning is carried out in addition to short-term liquidity management and weekly reporting. The basic assumption of this planning is the liquidation of the existing leasing, lending and factoring portfolio in accordance with the contractual agreements so that the proceeds from the assets flow in due time. The liabilities are also repaid on time based on contractual agreements. As the duration of the liabilities side (liabilities) approximates that of the portfolio, financing largely matching maturities is ensured. For more information, please also refer to the overview of the expected outflows from contractual obligations in Chapter 2.7.3 Liquidity.

Dynamic liquidity planning is also carried out monthly to assess the liquidity position under stress conditions and, therefore, the liquidity risk in the strict sense for upcoming periods. This planning supports the Consolidated Group’s overall liquidity management. Refinancing risk is assessed at least quarterly as part of the risk-bearing capacity analysis. This involves evaluating whether and to what extent an increase in credit spreads raises refinancing costs and, consequently, the refinancing risk.
 

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems or from external events. The definition of operational risks includes legal risks but not strategic or reputational risks.

Operational risks (in accordance with CRR) result especially from external fraudulent acts and human error, physical hazards, inadequate internal regulations and internal fraudulent acts. The risk subtype is assessed as material in the risk inventory due to its potential impact on the results of operations.

Behavioural risks arise from the inappropriate provision of financial services in the areas of leasing, banking, factoring and issues relating to customers, products and business practices as well as internal fraud and human error. Model risks can arise from errors in the development, implementation, or application of models. Compliance risks arise, among other things, from inadequate internal regulations. These three risk subtypes are assessed as material as part of the risk inventory due to their potential impact on the net assets, results of operations and liquidity position.

ICT risks arise for grenke from cyberattacks and technical failures/errors as well as from human error and inadequate internal regulations. The risk subtypes of ICT risk are assessed as material as part of the risk inventory, particularly due to their potential impact on the results of operations.

Operational risks are limited through thresholds within the risk-bearing capacity model. Routine risk quantification within the risk-bearing capacity calculation is currently carried out using the standardised approach in accordance with Basel IV. To determine the total capital ratio in accordance with CRR II at Group level, operational risk is calculated using the regulatory basic indicator approach. Individual characteristics of ICT risk are determined on a quarterly basis and recognised within the scope of risk reporting. While legal and compliance risks are already taken into account using the standardised approach under Basel IV, model risk is considered separately as part of the risk-bearing capacity calculation. Model risk is recognised in the form of a risk buffer derived from the risk inventory.
For Group-wide monitoring of operational risks, grenke has implemented indicators (e.g., cost and organisational indicators). In addition, all fraud cases and other operational losses are recorded and analysed in a loss event database. To enable early management action, the value of operational loss events is monitored against predefined thresholds. A Group-wide compliance management system oversees the diverse international requirements, and all employees are regularly informed and trained through awareness programmes.

In addition to the annual risk inventory and the ongoing reporting of losses and risks, the annual OpRisk Self-Assessment also contributes to the identification of operational risks.

The objective of the operational risk management process is to mitigate potential losses while maintaining business operations and optimising the use and protection of assets.

All of the grenke Group’s core business, management and support processes are aligned with the business strategy, standardised and digitalised. Ongoing development is carried out with the aim of simplification and acceleration. This requires a technologically modern and highly flexible system architecture whose changes (change management) are systematically documented in terms of content and methodology and regularly reviewed. A high level of operational stability is achieved through the continuous modernisation of the infrastructure. This is based on a fully redundant data centre architecture.

The development of an appropriate multi-cloud infrastructure, which began in 2023, was continued in 2024, and the first components were migrated. IT risk management encompasses complete risk transparency across all functional areas of IT, i.e. organisation, processes, applications, and infrastructure operations, including IT security, projects and compliance.

Cyber risks and information and communication technology (ICT) risks are measured and managed based on information networks, drawing from grenke -specific business process clusters. These are supplemented with additional IT-specific information, including the applications and hardware components used. As a result, the measured ICT and cyber risks relate to the key business processes and provide a reliable statement on the quality of service support provided by the grenke Group’s ICT systems. The following risk subtypes were recorded in the risk inventory for ICT risks and cyber risks carried out in the reporting year: availability and continuity, security, further development, data integrity, outsourcing, maintainability, adaptability, compliance, performance, organisation, costs and information security. Despite some existing latent risks, the overall performance of the grenke Group’s ICT systems is at an appropriate level. The key takeaways are being addressed in ongoing projects.
 

In 2024, BCM implemented further strategic measures to strengthen operational resilience. A particular focus was placed on the continuous improvement of the BCM framework to ensure risk-based, efficient, and regulatory-compliant management.

A key milestone was the approval of a new BCM policy by the responsible member of the Board of Directors, which further clarified the strategic direction and governance of BCM. In close coordination with Internal Audit, the existing BCM guideline was expanded to establish clear framework conditions for grenke. These adjustments created consistent Company-wide standards, enabling improved management of time-critical processes.

To strengthen the security architecture, regular risk-based penetration tests and red-teaming exercises are conducted. Insights gained from the incident response tabletop exercise lead to targeted optimisation measures that further enhance the organisation’s ability to respond to business-disrupting events and safeguard the stability of time-critical business processes.

Another focus was the further development of the business impact analysis (BIA) to ensure a comprehensive assessment of time-critical processes and dependencies. The methodology was optimised to enable more precise analyses and improved identification of business-critical components. Additional criteria were introduced to identify and assess dependencies, allowing for more effective prioritisation. These enhancements help increase the organisation’s resilience and address potential risks at an early stage.

In parallel, BCM was increasingly integrated into the support of information security initiatives. The growing regulatory momentum, particularly in connection with the implementation of DORA, highlights the importance of a closely interconnected BCM approach.

Further strategic developments are planned for 2025 to strengthen operational resilience in the long term. This includes revising the written set of rules (sfO) in close collaboration with IT, the CISO, and Corporate Risk Management to specifically address regulatory requirements such as DORA. A key component will be the introduction of a new BCM tool that enables seamless integration with existing grenke systems. In particular, the close linkage with protection needs analyses, outsourcing management, and process-oriented risk management will provide improved transparency and control. Additionally, the BIA will be fully integrated into the tool to optimise standardisation processes and ensure seamless interface integration. These measures will contribute to the further development of a future-proof, resilient, and regulatory-compliant operational structure.

Business and strategic risks refer to the risk of unexpected earnings development not covered by other types of risk. This includes the risk that losses cannot be countered due to changes in key framework conditions (e.g. economic and product environment, legal changes in the context of sustainability, customer behaviour, competitive situation) and/or due to inappropriate strategic positioning. The grenke Group considers business and strategic risks to be material.
The grenke Group’s business success depends to a large extent on the success of its sales activities within the intended sales channels. The risk of not achieving sales targets lies in the possibility that sales performance does not materialise as expected due to external or internal factors, causing the assumptions underlying the sales plan (new business assumptions) to develop contrary to expectations.

This business and strategic risk is taken into account within the risk-bearing capacity framework through a general buffer, which is derived from deviations from the plan.

In a dynamic market environment, it is important to anticipate changes at an early stage and take timely measures to adapt to new market conditions and limit potential risks. grenke AG therefore monitors exogenous market influences and any risks that may arise from them.
 

Reputation risk refers to the risk that damage to the Company’s reputation or image results in negative impacts on key indicators such as income, own funds, liquidity, and share price. Reputation risks are considered material within the grenke Group.

Reputation risk holds particular importance. For grenke, as a capital market-oriented company, maintaining an impeccable reputation is especially relevant, particularly concerning its market position and refinancing opportunities.

Within the risk-bearing capacity assessment, reputation risks are accounted for through a general risk buffer, which is derived from the risk inventory.
The management of reputation risk is primarily carried out through proactive and sustainable corporate governance and adequate risk management, supported by solid governance structures and transparent corporate communication.

In addition to the risks arising from changes in the legal, political and social environments, other risks include or consider the following risks: pension risk, insurance risk, property risk, investment risk, step-in risk, sovereign risk and tax risk.

The risk types and risk subtypes under the “Other risks” category are considered to be immaterial.

The process for analysing the risks classified as immaterial in the risk inventory is supplemented by an overall analysis, taking into account all downstream companies, for risks that are individually immaterial. This includes a review of the materiality of the sum of all individually immaterial risks.

In a dynamic market environment, it is important to recognise changes at an early stage and to take timely measures to adapt to new market conditions and limit potential risks. grenke therefore monitors exogenous market influences and any resulting risks. Through the establishment and continual further update of the risk inventory and set of early warning indicators, other risks within the Consolidated Group are identified, assessed and monitored according to a standardised model.

Risk-bearing capacity from the normative perspective was consistently maintained within the grenke Group in 2024. The capital ratios exceeded the regulatory capital requirements on every risk reporting date.

Compared to the previous year, both the Common Equity Tier 1 (CET1) ratio and the total capital ratio decreased as of December 31, 2024. The total capital ratio under CRR stood at 17.4 percent on the reporting date (previous year: 19.4 percent), while the CET1 ratio was 14.4 percent (previous year: 16.1 percent). The main drivers of this development were strong new business growth, which led to an increase in risk-weighted assets (RWA), and the successful execution of share buybacks in 2024, which led to a slight absolute decline in the level of own funds.

In addition to the risk-adjusted capital requirement, the CRR also mandates consideration of a largely balance sheet-based and thus risk-insensitive capital ratio through the leverage ratio. As of the reporting date, the leverage ratio in accordance with Article 429 CRR stood at 14.34 percent (previous year: 16.87 percent). The minimum ratio of 3.0 percent required by the supervisory authorities as of the reporting date was therefore met.

The following table shows the composition of Tier 1 capital, the total own funds, and the relevant risk positions as of the reporting date, December 31, 2024:

Risk-bearing capacity from the economic perspective was consistently maintained within the grenke Group in 2024.

As of the reporting date, December 31, 2024, the grenke Group’s risk coverage potential from the economic perspective amounted to EUR 2,299 million (previous year: EUR 1,969 million). Of this, a total of EUR 1,509 million (previous year: EUR 1,204 million) was allocated as risk capital in the form of limits to the material risk types as of December 31, 2024. The limits approved by the Board of Directors within the economic perspective were adhered to on every reporting date.

As part of the risk-bearing capacity assessment, the net present value of the grenke Group’s total risk at a confidence level of 99.91  percent amounted to approximately EUR 1,001 million as of December 31, 2024 (previous year: EUR 863 million). This resulted in a limit utilisation of 66 percent as of the reporting date (previous year: 72 percent). The Consolidated Group’s risk strategy, valid as of the reporting date, specifies a total risk utilisation of permanently below 95 percent, which was therefore maintained.

As in the previous year, there were no risks as of December 31, 2024 that could threaten the existence of the Consolidated Group or any material Group company. No special risks exceeding the normal business-related risks are apparent regarding the future development of the Consolidated Group, the Company, or its subsidiaries.
 

The unexpected loss from credit risks amounted to approximately EUR 743 million as of the reporting date (previous year: EUR 647 million). The utilisation of the risk limit stood at 65 percent (previous year: 70 percent). The increase in risk compared to the previous year is primarily due to the higher receivables volume resulting from new business growth.

grenke Group

As of December 31, 2024, the grenke Group’s total receivables volume amounted to EUR 7.7 billion (previous year: EUR 6.6 billion). Of this, around EUR 6.5 billion (previous year: EUR 5.7 billion) was attributable to current and non-current leasing receivables.

As of December 31, 2024, cash and cash equivalents included a balance with Deutsche Bundesbank amounting to EUR 790.7 million (previous year: EUR 484.7 million). The remaining cash and cash equivalents consisted of balances with domestic and foreign banks, except for EUR 6.8k in cash on hand (previous year: EUR 17k). The financial instruments with positive market value represented the Consolidated Group’s derivatives measured at fair value as of the reporting date.

The expected default losses for the grenke Group’s 2024 new business portfolio averaged 6.0 percent (previous year: 5.1 percent), based on the acquisition costs of the leased assets and covering the entire average contract term of 49 months (previous year: 49 months).

The distribution of the grenke Group’s new business by size categories is shown in the following table.

As the receivables from the factoring business are consistently short-term in nature, the breakdown of receivables from new business by maturity categories is provided exclusively for the leasing and banking segments. The average contract term for new business concluded during the reporting year was 49 months (previous year: 49 months).

As of December 31, 2024, lease receivables accounted for 84 percent of the grenke Group’s total receivables volume (previous year: 86 percent). Accordingly, the Consolidated Group considers the credit default risk of its leasing customers as the most significant risk. As of December 31, 2024, the portfolio is primarily concentrated in the top 6 countries – Germany, Finland, France, United Kingdom, Italy and Spain – which together account for 70 percent of the total lease receivables volume.

To determine risk provisions for lease receivables in accordance with IFRS 9, these receivables are classified into three levels based on their respective credit risk.

Impairments for Level 1 leasing contracts correspond to the expected loss over a twelve-month period. For lease receivables in Level 2, a risk provision is recognised for the expected loss over the entire remaining contract term. For lease receivables in Level 3, the expected losses are recorded as risk provisions. The total addition to risk provisions at Consolidated Group level for the leasing business amounts to EUR 135.1 million in the current year.

Through the purchase of intra-group lease receivables, grenke Bank AG represents an important pillar in the grenke Group’s refinancing strategy. In addition, receivables from grenke Bank AG’s lending business mainly consist of microloans, start-up financing, and SME loans. Accordingly, credit default risks represent the primary financial risk for grenke Bank AG.

In cooperation with the Mikrokreditfonds Deutschland and selected microfinance institutions, grenke Bank AG has been granting microloans of up to EUR 25 thousand to SMEs since 2015. The processing and refinancing are carried out on behalf of the Federal Republic of Germany. The credit default risk is fully borne by the Mikrokreditfonds Deutschland. As of the end of 2024, grenke Bank AG’s receivables from the microloan business amounted to EUR 91 million (previous year: EUR 96.9 million). Until 2020, grenke Bank AG also offered loans under its own risk to SMEs as a financing partner. At the end of 2020, grenke Bank AG made the strategic decision to largely discontinue the SME lending business and focus its lending activities primarily on the microloan segment. As of the end of 2024, the remaining receivables from the SME lending business amounted to EUR 4.13 million (previous year: EUR 8.2 million). grenke Bank AG’s lending business also focuses on the small-ticket segment, with the average receivables volume per customer standing at EUR 7k as of December 31, 2024 (previous year: EUR 7k).

The determination of risk provisions for receivables from grenke Bank AG’s lending business is based on an expected credit loss model. In 2024, grenke Bank was able to reverse EUR 7.3 million in risk provisions for the lending business. The decrease compared to the previous year was primarily due to the reversal of additional risk provisions established in the prior year due to uncertainties in the corporate loan segment and a reduced receivables portfolio following a portfolio sale.

The grenke Group’s factoring business also focuses on the small-ticket segment. In addition to its own subsidiaries in Germany, Switzerland, the United Kingdom, Ireland, Poland, and Hungary, branches of grenke Bank in Italy and Portugal provide factoring services. The Consolidated Group’s factoring units primarily handle factoring contracts with domestic debtors. The main service offered is  notification factoring, where invoice recipients (debtors) are informed of the assignment of receivables. Under certain conditions,  non-notification factoring is also offered, where the debtor is not informed about the assignment of receivables to the factoring company. Additionally, the service portfolio includes “non-recourse factoring,” where the credit risk remains with the factoring clients. As of December 31, 2024, the total volume of factoring receivables across all entities amounted to EUR 103.41 million (previous year: EUR 106.7 million).

As of December 31, 2024, the Consolidated Group’s factoring business had nine customers with receivables exceeding EUR 1.0 million, accounting for 12.66 percent of total factoring receivables.

Impairments for expected losses from factoring receivables are recognised based on the 12-month expected credit loss. Since factoring receivables are short-term, the 12-month expected credit loss corresponds to the lifetime expected credit loss. As of December 31, 2024, the balance of impairments in the factoring business amounted to EUR 10.0 million (previous year: EUR 11.0 million). The reduction in risk provisions at Consolidated Group level for the factoring business totalled EUR 1.0 million in the current year, primarily due to a decrease in fraud-related losses.

As of the reporting date, the Consolidated Group holds a 13.7 percent stake in Munich-based Finanzchef24 GmbH through grenke Bank AG, which is included in the consolidated financial statements. In 2023, the Group acquired a minority interest of 26.0 percent in Miete24 P4Y GmbH.

The unexpected loss from market price risks is determined using a historical simulation with a 99.9 percent confidence level and amounts to approximately EUR 116 million as of the reporting date (previous year: EUR 102 million). The utilisation of the risk limit stood at 58 percent (previous year: 68 percent). Interest rate risk was EUR 114 million (previous year: EUR 101 million).

As of the reporting date, the result of the regulatory standard interest rate shock for the economic value of equity (EVE) showed a decrease of -5.18 percent (previous year: -4.28 percent) under a parallel increase in interest rates of 200 basis points, while a parallel decrease of 200 basis points resulted in an increase of +4.80 percent (previous year: +3.81 percent). From the net interest income (NII) perspective, the change in net interest income under a parallel interest rate shock of +200 basis points was +0.66 percent, and under a parallel shock of -200 basis points, it was -0.85 percent.

The VaR calculation for currency risk with a 99.9 percent confidence level resulted in a risk of EUR 1.5 million as of December 31, 2024 (previous year: EUR 1.3 million). Due to strict volume limits on foreign currency holdings and a historical focus on eurozone countries, currency risk remained low during the reporting year, even amid significant exchange rate fluctuations. According to management’s assessment, the Consolidated Group is materially exposed to exchange rate risks primarily related to the British pound (GBP), Australian dollar (AUD), Swiss franc (CHF), Swedish krona (SEK), Canadian dollar (CAD), and Danish krone (DKK). The selection of these currencies was based both on potential impacts identified through analysis and the volume of lease receivables in the respective countries.

The table shows, from the Consolidated Group’s perspective, the sensitivity of a 10 percent appreciation or depreciation of the euro against the respective other currencies as of December 31, 2024 or during the reporting period and its impact on the annual result before income taxes.

The effect on the annual result before income taxes arises from changes in the fair values of monetary assets and liabilities, including foreign currency derivatives not designated as hedging instruments, as well as from actual cash flows that were partially or fully recognised in profit or loss during the reporting period and had to be translated into euros during consolidation. All other influencing factors, particularly interest rates, were held constant. The effects of forecasted sales and purchase transactions were not considered. The changes in the value of cross-currency swaps have no material impact on the annual result before income taxes, as these are accounted for as hedging instruments. The value changes of these swaps primarily affect the Consolidated Group’s equity directly.

Operational risk amounting to approximately EUR 54.7 million (previous year: EUR 51.1 million) resulted in a limit utilisation of 68 percent as of the reporting date (previous year: 73 percent). This includes a risk buffer for model risks of EUR 10 million (previous year: EUR 10 million).

In the 2024 reporting year, 21 ad hoc risk notifications were submitted (previous year: 15). Of these, twelve were classified as material and nine as immaterial. We view this increase as a positive indication that our internal awareness-raising measures regarding the identification and detection of risks in business operations are having an effect and are promoting transparency.

As of the reporting date, December 31, 2024, the risk buffer for reputation risks amounted to EUR 40 million (previous year: EUR 30 million), and the risk buffer for business and strategic risks was EUR 47 million (previous year: EUR 22 million). The increase in business and strategic risk is due to the fact that the buffer is determined based on past plan deviations. The plan deviations in 2024 resulted in greater uncertainties, leading to an increase in the buffer.

As of December 31, 2024, the liquidity coverage ratio (LCR) stood at 343.7 percent (previous year: 265.6 percent). The LCR minimum requirement of 100 percent was met at all times during 2024.

The net stable funding ratio (NSFR) was 115.8 percent as of December 31, 2024 (previous year: 114.0 percent), remaining above the regulatory minimum requirement of 100 percent.

The focus of the economic perspective is on the liquidity gap analysis and the defined stress scenarios. The specified minimum survival horizon was consistently maintained throughout the 2024 reporting period.

ESG risks encompass a variety of aspects. ESG risks in the areas of climate and environment (Environmental) are divided into physical risks and transition risks. Physical risks refer to the direct impacts of climate change and environmental pollution, such as floods, droughts, and other extreme weather events (acute physical risks). They can also arise from long-term changes in climatic and economic conditions (chronic physical risks). Physical risks can also have indirect consequences. On the other hand, transition risks are those that may result from politically motivated changes or changes in consumer behaviour. Social risks (Social) concern the social aspects of corporate governance and can include both internal aspects such as working conditions and employee motivation, as well as external factors like relationships with customers, suppliers, and the local community. Issues like human rights, occupational safety, diversity and inclusion, and responsibility within the supply chain play a central role here. Governance risks (Governance) concern how a company is managed and include aspects such as transparency, ethical business practices, corruption prevention, accountability of executives, and the independence and integrity of the supervisory board.

The grenke Group considers ESG risks as a sub aspect of the known risk categories. This means that ESG risks are not defined as an isolated risk type in the risk catalogue for risk inventory. ESG risks impact various risk categories. In addition to the current influence of ESG risks, the future impact is also considered across different time dimensions.

As part of the risk inventory, a qualitative assessment is made for ESG risks as risk drivers for the various risk categories, and a heatmap is created to illustrate the development of their influence over time. Currently, an influence from ESG risks is identified for all risk categories. In particular, climate and environmental risks are expected to increase over time and are considered material in the long term. To further analyse the impact of ESG risks, an assessment based on the ESG scores has also been carried out. The ESG score serves as an internal scoring model for evaluating ESG risks for the volume business. Based on this scoring model, a regular portfolio clustering can be performed, which will, in turn, allow for regular change analyses and more detailed risk analyses, particularly in the peripheral areas. Scores can be aggregated, particularly for sub portfolios (e.g., sectors and countries). Individual risk driver scores (E-physical; E-Transitional; S and G) also provide good differentiation. The consideration of physical risks explicitly includes scientific future projections.

In the context of stress testing, ESG risks are incorporated into the economic and normative perspectives of risk-bearing capacity with respect to capital.
The integration of ESG risks into the risk control process is a crucial step in responding to the increasing importance of sustainability and responsible business practices. The continuous adjustment of risk management processes, as well as close collaboration between the relevant departments and corporate management, ensures that ESG risks are appropriately embedded into the long-term corporate strategy.
 

At grenke, the internal control system and the risk management system are both interlinked with regard to group accounting. In the following, the term “ICS” is used when referring to the internal control system. ICS represents the entirety of the principles, procedures and measures introduced by the Company’s management that are aimed at the organisational implementation of the management’s decisions in the organisation and ensures

• the effectiveness and efficiency of business activities, including the protection of assets and the prevention and detection of losses to assets;
• the correctness and reliability of internal and external accounting; and
• compliance with the legal provisions relevant to the Company.

The Board of Directors bears overall responsibility for the accounting process at the Company and the Consolidated Group. All of the companies included in the annual financial statements and the consolidated financial statements are also a part of a defined management and reporting organisation process. The Consolidated Group’s accounting and consolidation are organised centrally. The posting of each country’s local entity transactions is centrally recorded and processed in accordance with mandatory schedules for generating qualitative and quantitative information. The cross-check principle generally applies.

The principles, structures, process organisation and accounting methods used by the ICS are documented in writing and updated at regular intervals.
The systems used for the group accounting process and the required IT infrastructure are regularly reviewed by the Internal Audit department with regard to the necessary security requirements. The same applies to the continuing development of the Consolidated Group’s accounting process, particularly with respect to new products, facts and revised legal regulations. External consultants are brought in if necessary. To ensure the quality of the Consolidated Group’s accounting, the employees involved are regularly trained on a demand-driven basis. The Supervisory Board is also involved in the control system and supervises the Consolidated Group-wide risk management system, including the internal control systems in the areas of audit, accounting and compliance. The Supervisory Board also reviews the contents of the non-financial statement. The Supervisory Board is supported by the Audit Committee, whose focus is to oversee internal and external accounting and the accounting process.

In view of the accounting process for the Company and the Consolidated Group, features of the ICS are considered to be significant when they are capable of materially influencing the accounting and general statement presented in the financial statements, including the combined management report. These features include the following elements in particular:

• Identification of significant risk and control areas relevant to the accounting process
• Controls to monitor the accounting process and its results at the levels of the Board of Directors and the companies included in the financial statements
• Preventative control measures in the finance and accounting systems as well as in the operative, performance-oriented company processes that generate material information for the preparation of the financial statements and the combined management report, and a separation of functions and predefined approval processes in relevant areas
• Measures that safeguard the orderly IT-based processing of accounting issues and data
• The establishment of an internal audit system to monitor accounting-related ICS

To reduce the identified risks, controls are implemented as part of the Group’s accounting process. For the effectiveness of the ICS, the design of the controls, their integration into the process, and the operational implementation are the important determinants of risk minimisation. Internal Audit regularly examines the ICS for the Consolidated Group’s accounting process in sub areas on a rotating basis, which reinforces the ICS.

1 This implies that the probability of insolvency from a present value perspective on an annual basis is at most 0.1 percent.

In the 2024 financial year, we surpassed the EUR 3 billion mark in leasing new business for the first time, representing a significant milestone in our growth trajectory. Overall, leasing new business increased by 18.4 percent compared to the previous year. The CM2 margin, which rose year-over-year to 17.0 percent, exceeding expectations, provides a solid foundation for our planned income growth in 2025.

Especially against the backdrop of ongoing macroeconomic challenges, achieving our growth targets in new business confirms the resilience of our business model and the strength of our global sales presence. This enables us to continue growing successfully in the market and to contract sustainably profitable new business, even under challenging economic conditions. For 2025, we plan to maintain our growth trajectory, albeit at a slightly more moderate level. In doing so, we will continue to rely on our proven strategies:

• Focus on Small-Ticket Leasing: We concentrate our efforts on our core leasing business to support our customers with their investments.
• Gaining Market Share: We aim for a market share of at least 10 percent in our markets. With over 25 million registered SMEs in Europe alone, this represents an addressable customer potential in the millions.
• International Growth: We operate in three future core markets – the USA, Canada, and Australia – which, due to their size and market structure, promise above-average long-term growth potential.
• Customer Portfolio: With 680,000 lessees, we have a broad customer base that already values our financing solutions. By directly engaging existing customers, we unlock significant potential for repeat business.
• Object Diversification: We flexibly expand our portfolio of leasable assets to meet the needs of SMEs, opening up new potential customer segments.
• Megatrends: We benefit from megatrends such as the green economy, e-mobility, medical technology, and robotics, enabling SMEs to invest in future technologies through our financing solutions.
• Expansion of Dealer Network: We continuously grow our dealer network by actively acquiring new specialist reseller partners and introducing new object categories.
• Digital Excellence: We leverage state-of-the-art digital technologies to streamline our business processes and service offerings, ensuring speed, simplicity, and cost efficiency.
• Channels: We use a variety of customer acquisition methods and continuously expand our sales channels.
• Financing: We unlock our business potential through a diversified financing approach, utilising both grenke Bank and the bond market, as well as receivables-based financing instruments.

As, in our own assessment, a leading provider of small-ticket leasing in Europe, we are growing in our core markets primarily by gaining market share. Opportunities arise especially where competitors partially or fully withdraw from markets – due, for example, to increased regulatory requirements or a lack of cost efficiency in high-volume business. Our location management is becoming increasingly efficient, as we can cover an ever-broader sales network without additional branches through the digital presence and sales staff working from home.

At the end of 2024, the grenke Group was operating in a total of 30 countries. In addition to our core markets in Europe, we are also present in North and South America, Asia, and Australia. In the 2024 reporting year, these countries accounted for 6.4 percent of the grenke Group’s leasing new business volume (previous year: 5.9 percent).

We see above-average growth potential in our future core markets—the USA, Canada, and Australia—in the niche segment of high-volume small-ticket leasing for SMEs. In Italy, grenke is entering into a strategic partnership with Italy’s largest bank, INTESA SANPAOLO S.p.A., to serve the Italian market. This partnership includes collaboration with ISP’s branch network and its approximately 1.2 million business customers, as well as joint refinancing of future activities. In the past financial year, Italy was grenke Group’s third-largest market, with new business exceeding EUR 400 million, following France and Germany. Double-digit growth rates are expected for future new business in Italy over the next few years.

As a financing partner for SMEs with over 45 years of experience, we have a deep understanding of our customers’ evolving needs. We use this experience to continuously and flexibly develop our service offerings, providing financing options for a growing portfolio of objects. We also focus specifically on megatrends, such as the green transformation of the economy and the increasing use of intelligent robotics. This approach is creating growing opportunities for us, even in already established markets.

We maintain long-term business relationships with numerous SMEs and dealers that go beyond individual contracts. Many SMEs are repeat partners, often managed at the branch or country level, and increasingly across multiple countries simultaneously.

Beyond the growth of new business and the overall contract portfolio, there is potential for efficiency gains through digital approaches. To leverage this, we launched our “Digital Excellence” programme. Designed as a three-year initiative, the programme focuses on efficiency improvements and was launched in the 2023 financial year with a total investment volume of EUR 45–50 million. In the 2025 financial year, it is expected to achieve further efficiency gains in sales and administrative expenses.

Due to strong growth in leasing new business over the past three years, we have a solid foundation for future interest income that will exceed cost developments. Through these measures, we are pursuing the strategic goal of sustainably expanding the grenke brand and our global market position.

The global macroeconomic conditions at the beginning of 2025 remain challenging. Several of our core regions are experiencing persistently high insolvency rates. The Russian war of aggression against Ukraine and the war in the Middle East continue to create uncertainty for the global economy. The tariffs and trade restrictions announced by the new U.S. administration, along with the U.S. withdrawal from international organisations, represent a risk factor for global trade and are triggering reactions from national and international (economic) policymakers. The economic and political consequences of the U.S.’s fundamental realignment are currently difficult to fully assess. The formation of the government following the new elections in February 2025 may impact economic activity in Germany and Europe and currently makes a reliable forecast difficult.

On the other hand, the market’s expectation of continued monetary policy easing by central banks worldwide is likely to stimulate economic activity. The European Central Bank (ECB) anticipates that inflation in the eurozone –estimated at 2.5 percent in January 2025 – will fall to its target of 2 percent over the course of the year and then stabilise at that level. At its meeting on January 30, 2025, the ECB cut its key interest rate by another 25 basis points to 2.75 percent. Despite this, the ECB still describes its monetary policy stance as “restrictive” and expects the easing measures already introduced to gradually influence lending conditions and boost economic activity in the eurozone. An ECB survey from mid-January 2025 indicates that financial markets expect the key interest rate to drop to 2 percent by mid-2025 and stabilise there in the medium term.

In contrast, the Federal Reserve System (Fed) kept the target range for the key interest rate unchanged at 4.25 to 4.5 percent during its meeting on January 29, 2025. According to the Fed, while economic momentum in the U.S. had improved ahead of the meeting, inflation remained above the 2 percent target. Projections from members of the Federal Open Market Committee suggest that inflation is likely to stay above the target throughout 2025, leading financial markets to expect only minimal monetary policy easing in the U.S. this year. After U.S. inflation rose sharply in January 2025—contrary to expectations—the Fed is expected to carefully weigh when, or even if, a rate cut would be appropriate.

In its forecast released on January 17, 2025, the International Monetary Fund (IMF) predicts global economic growth of 3.3 percent for 2025. Growth in the eurozone, however, is expected to be much lower at 1.0 percent, largely due to significantly higher energy prices. Countries with energy-intensive industrial sectors are expected to grow more slowly than those with strong service sectors. The IMF forecasts growth of 2.3 percent for Spain, 0.8 percent for France, and 0.7 percent for Italy. Germany is expected to see modest positive growth of 0.3 percent, though this figure does not yet account for the recent election results. The outlook for Germany’s export-driven economy is particularly affected by the high level of uncertainty in international trade with China and the U.S. The IMF projects the United Kingdom’s growth at 1.6 percent.

The IMF maintains its global growth forecast of 3.3 percent for 2026. Growth in the eurozone is expected to reach 1.4 percent. The IMF predicts greater convergence within the eurozone, with Germany (1.1 percent), France (1.1 percent), and Italy (0.9 percent) projected to grow at nearly identical rates. The United Kingdom is expected to grow by 1.5 percent, while Spain’s growth is forecast to slow to 1.8 percent.

The IMF suggests that the U.S., with its already strong economic performance, could help drive even stronger global growth. On the downside, the IMF highlights the risk of intensified protectionist trade policies, including potential tariff increases. In early February 2025, the IMF stated that it was still too soon to accurately assess the effects of the tariffs announced by U.S. President Donald Trump. Growth could also be negatively impacted if central banks pause their monetary easing due to renewed inflationary pressures.

According to an October 2024 study by Allianz Trade, global insolvencies are expected to rise by 2 percent in 2025 and stabilise at a high level in 2026. The U.S. (+12 percent), Germany (+4 percent), Italy (+4 percent), and Spain (+1 percent) are likely to see further increases in insolvency cases in 2025, while conditions in France (–6 percent) and the United Kingdom (–6 percent) are expected to improve slightly.

The ifo Business Climate Index for Germany’s leasing sector declined sharply in January 2025, falling to –11.9 points from –2.5 points in January 2024. Companies surveyed rated their current business situation more negatively this January, with a score of 9.5 points, compared to 33.1 points a year earlier. Ongoing economic uncertainty and cautious investment behaviour have made companies more hesitant about the future. Business expectations for the next six months remained firmly negative at –31.2 points in January 2025, only slightly improved from –32.7 points in January 2024. The Association of German Leasing Companies (BDL) emphasises that a clear political commitment to sustainable transformation, along with a concrete implementation plan, is essential to provide companies with greater planning certainty.

The following statements about the future business development of the grenke Group are based on assumptions regarding key market and industry trends. They reflect the Board of Directors’ current assessment of what is considered realistic given the information available at this time.

These assessments involve uncertainties, especially since the underlying assumptions could change significantly and at short notice if conditions shift. Therefore, the developments forecasted below may not unfold as expected.

In January 2024, the Board of Directors announced its intention to focus on the leasing business and decided to initiate the divestment of all factoring companies. The Board of Directors does not expect the planned divestment to have any significant impact on the Company’s KPIs in the first year. We want to concentrate our resources and investment capacity entirely on advancing digitalisation and driving further growth in its leasing business. grenke Bank AG will continue to play a key role in securing refinancing through deposits.

For the 2025 financial year, the Board of Directors expects a growth rate in leasing new business of slightly over 10 percent. Based on the 2024 financial year, this corresponds to leasing new business between EUR 3.2 billion and EUR 3.4 billion.

A CM2-margin of more than 16.5 percent is targeted. Key factors in achieving this goal include refinancing costs, the terms of newly signed leasing contracts, and the average ticket size. For the 2025 financial year, the average value per leasing contract is expected to remain around EUR 10,000. The focus on small tickets continues to be a core part of our strategy.

We intend to expand our object portfolio. However, we do not expect any significant shifts in object categories in 2025. We will remain flexible in responding to new customer demands and, if necessary, will offer new object categories for lease financing, as we have already done during the green transformation with products such as eBikes, wall boxes, and solar panels. At the same time, the ongoing digital transformation will enable us to achieve further growth in our core areas of IT and office communications.

The Board of Directors expects a positive income performance for the 2025 financial year. The strong leasing new business from the past financial year provides a solid foundation for income growth in 2025. The monetary policy easing already implemented should positively impact the development of operating income from the leasing portfolio—which includes net interest income, profit from the service business, profit from new business, and gains and losses from disposals—during the 2025 financial year.

Although the first half of 2025 will reflect the fact that the loss rate was significantly better in the first half of 2024—leading to lower quarterly results compared to the previous year—the Board of Directors expects moderate profit growth for the 2025 financial year. Group earnings after taxes are expected to reach EUR 71 to 81 million for the full year 2025. This earnings forecast for 2025 is based on the assumption that the loss rate will be around 1.6 percent in a challenging market environment, taking into account political and macroeconomic uncertainties. Despite this, the expected loss rate remains at a historically average level. Furthermore, the Board of Directors assumes that the divestment process for the factoring business can be completed during the financial year. The cost-income ratio is projected remains expected below 60 percent under this earnings outlook.

In the medium term, the CIR is expected to decrease to below 55 percent due to efficiency gains and an increasing level of digitalisation. For the 2025 financial year, the Board of Directors also aims to continue its long-term dividend policy with a payout ratio of 25 percent.

As a result of ongoing growth and investments in digitalisation, staff costs, and sales and administrative expenses are also expected to continue rising. To further advance our successful international expansion strategy, we will continue investing in the digitalisation of our entire value chain across more than 30 countries. The foundation of the digitalisation programme – and the largest single initiative, accounting for one-third of the investments – is the transition to cloud technology. The remaining investment funds will be allocated to automating all core processes related to the leasing business.

As a result of the planned new business development, total lease receivables, which are the basis for interest income, are also expected to grow in the high single-digit percentage range in the 2025 financial year. Total assets will increase accordingly. Based on the expected development of Group earnings, grenke continues to aim for an equity ratio of around 16 percent (December 31, 2024: 16.1 percent). This figure serves as a benchmark rather than a strict limit for the Consolidated Group’s capital management.

The Board of Directors expects unchanged stable cash flow from operating activities, which can be used to fully finance the planned investments internally. The Board of Directors also assumes that the grenke Group’s solid equity base and cash flow development will enable it to refinance the expected volume of new business in 2025 at risk-adequate conditions in parts through its access to various money and capital market instruments and in parts through the deposit business.

In the past financial year, our non-financial performance indicators, as part of our sustainability strategy, continued to focus on the categories “Climate and Environment,” “Social Contribution,” and “Responsibility and Trust.”

In the “Climate and Environment” category, we monitor the share of green economy objects in our leasing new business volume. In the 2024 financial year, this share was 7.8 percent, compared to 7.7 percent in the previous year. We expect this figure to remain stable or see a slight increase in the current financial year.
In the past financial year, our greenhouse gas emissions, measured in tonnes of CO2 equivalent (t CO2e), amounted to 2,690 t CO2e for Scope 1 (2023: 3,184 t CO2e). Scope 1 thus accounts for around 34 percent of our total emissions (2023: 40 percent).

For Scope 2, emissions totalled 960 t CO2e (2023: 1,197 t CO2e), representing about 12 percent of our total emissions. The reported indirect emissions for Scope 3 Due to missing or insufficiently reliable data, our Scope 3 emissions do not yet include figures or estimates for our leased assets. amounted to 4,183 t CO2e (2023: 3,581 t CO2e), accounting for approximately 45 percent of total emissions.

We aim to reduce our business operations’ emissions to net zero by 2050. On the path to this goal, we have set interim targets to reduce our Scope 1 and Scope 2 emissions by 50 percent each by 2030, and our indirect Scope 3 emissions by 25 percent, compared to the base year 2022. Our reduction efforts focus on areas with the highest emissions. For Scope 1 and Scope 2, this includes our company fleet and electricity consumption. For Scope 3, we have launched initial measures to reduce emissions from business travel, employee commuting, and downstream transportation and will continue to expand these initiatives. We also aim to improve the completeness of our Scope 3 data, such as by incorporating estimates for emissions from our leased assets, and to further enhance our Climate Action Plan with corresponding targets.

Our goal remains to continuously improve the efficiency and sustainability of our processes by leveraging a high degree of automation. In this context, we continuously measure the number of countries with available eSignature and eInvoice solutions, as well as the eContract ratio. We calculate the latter based on the proportion of leasing contracts signed with eSignature in relation to the total number of new contracts in the financial year. In the past financial year 2024, the number of countries with eSignature solutions remained at 27 markets (2023: 27 countries), while eInvoice solutions continued to be available in 26 countries (2023: 26 countries). The eContract ratio stood at 40.5 percent in the past financial year, up from 40.1 percent in the previous year. Given our “Digital Excellence” programme, we expect the eContract ratio next year to continue rising, with the goal of consistently signing more than half of our contracts through this channel.

In the “Social Contribution” category, we track employee satisfaction, the turnover rate, and the number of training days per employee during the financial year.
To measure satisfaction, we developed the grenke Engagement Score (GES) based on our annual employee survey. The GES uses a scale from 1 (high satisfaction) to 7 (low satisfaction). In the 2024 financial year, the score was 2.1, consistent with 2023 (2.1). The turnover rate decreased to 8.9 percent in 2024, compared to 9.7 percent in the previous year. The number of training hours per employee was 23.65 hours (2023: 29.39 hours), slightly below the previous year’s level. We aim to maintain a largely stable development, on an absolute basis, across all three key indicators.

In the “Responsibility and Trust” category, we use our “Overall Strategy Awareness Score” to measure our employees’ awareness of our strategy along a scale of 1 (high awareness) to 7 (low awareness). In the 2024 reporting year, we achieved a score of 2.6, compared to 2.6 in 2023. Our goal is to achieve a score of 2.5 next year.
We also look at the proportion of top management whose variable remuneration contains sustainability components. The variable remuneration of all Board of Directors members is linked to sustainability targets. Sustainability components are also integrated into the variable remuneration of top management. The ratio is measured as the proportion of top management positions with a sustainability component in the variable remuneration compared to the total number of top management positions (i.e. the Board of Directors as well as the first and second management levels below the board). In the 2024 financial year, this resulted in a ratio of 100 percent for the Board of Directors and 1.69 percent for the Board of Directors and top management as a whole (2023: 1.8 percent). Next year, we plan to expand the integration of sustainability aspects into the variable remuneration of all top management.

To measure the effectiveness of our internal governance structures, we track the percentage of audits completed by Internal Audit in relation to the audits planned in the annual audit plan. In the past 2024 financial year, this figure was 63 percent, compared to 81 percent in 2023. Our goal is to increase the completion rate of the total planned audits compared to the prior year beginning in 2025.

The forecast for the 2025 financial year is based on the above expectations and assumptions regarding overall economic developments and the specific market and industry developments described above. Our forecast is also based on the assumption that geopolitical tensions will not increase further. The Board of Directors firmly believes that the grenke Group is well positioned to continue its profitable growth trajectory and further expand its position as one of the leading providers of financial services for SMEs with a focus on small-ticket financing. 

The “Digital Excellence” digitalisation programme, launched in spring 2023, continues to move forward. The focus is on end-to-end digitalisation in the core leasing business, with the automation of all core processes for leasing in over 30 countries. This is intended to enable a significant increase in efficiency and greater use of cloud technologies.

Against this backdrop, the Board of Directors expects leasing new business of between EUR 3.2 billion and EUR 3.4 billion in 2025. With a stable equity position, the Consolidated Group has the necessary financial foundation to achieve the targeted new business.
At the same time, Group earnings after taxes of EUR 71 to 81 million is expected for the 2025 financial year. The Board of Directors considers grenke to be well positioned to continue pursuing its international growth ambitions beyond 2025 in a profitable and scalable manner.