Swissquote Group Holding SA

SIX:SQN

Earnings Call Analysis

Swissquote Achieves Record Growth and Raises Guidance

Swissquote reported a historic first half of 2024 with revenue growth of 19.3%, reaching CHF 316 million, and a 35.9% increase in pre-tax profit, totaling nearly CHF 170 million. Client accounts soared by 36,000, while net new money was CHF 3.8 billion. Consequently, the yearly pre-tax profit guidance was raised from CHF 300 million to CHF 320 million, and revenue guidance increased from CHF 595 million to CHF 615 million. The firm remains cautiously optimistic about the second half of the year, especially regarding its crypto asset sector, emphasizing sustainable growth and strategic investment.

Swissquote's Best Half-Year Ever

Swissquote has reported its most successful half-year in history, with revenues surging by 19.3% to CHF 316 million and a pre-tax profit reaching almost CHF 170 million, a significant 35.9% increase. This period also saw an influx of net new money amounting to CHF 3.8 billion, alongside a 33% growth in client numbers since H1 2021, bringing the total to over 610,000 clients.

Client Growth and Net New Money

The primary driver of Swissquote's performance is robust client growth and net new money. In H1 2024 alone, the company added over 36,000 new clients. Client assets per account remained stable at approximately 100,000 to 111,000 CHF, boosted by favorable market trends. The company's target for net new money is between CHF 6 billion to CHF 7 billion, with H1 2024 already achieving CHF 3.8 billion, exceeding initial targets.

Geographical Expansion

Growth has been especially strong in Switzerland, the home base, contributing significantly to net new money. Other key regions include Europe, particularly Luxembourg, which added almost CHF 1 billion in net new money, and the Middle East and Asia. This geographic diversification aligns with Swissquote's global strategy.

Crypto and Forex Developments

Swissquote continued to see significant activity in its crypto and forex operations. Despite lower volatility in the forex market, the company remains optimistic, given the record client forex deposits of CHF 673 million. Crypto assets income reached CHF 35 million in H1 2024, and the company remains confident about meeting its CHF 45 million target for the year.

Strong Balance Sheet and Cautious Investment

Swissquote's balance sheet grew by over CHF 1 billion from December 2023 to June 2024. Client deposits increased across all currencies, primarily in Swiss francs. The company maintains a cautious investment approach, with CHF 4.8 billion of total assets held with central banks or in short-term placements, ensuring a strong liquidity ratio. Investments in securities also saw growth, capturing higher revenues.

Loan and Equity Growth

Loans to clients grew by more than 20%, reaching CHF 1 billion for the first time. Swissquote's total equity approached CHF 1 billion, highlighting its sound financial health and robust capital position with a Tier 1 capital ratio of 25.9%, far exceeding the regulatory requirement of 11.2%.

Revenue Strategy and Marketing Efficiency

Revenue from various segments, including forex, crypto, and interest revenues, showed notable contributions despite market fluctuations. The company's marketing expenses remained stable, benefiting from strong brand awareness, which allows for continued efficiency in acquiring new clients without significant increases in marketing costs.

Guidance and Future Outlook

Given the exceptional performance in H1 2024, Swissquote has raised its guidance for the full year. The new targets include a pre-tax profit of CHF 320 million and revenues of CHF 615 million. The company's initiative to handle client money growth and maintain a cautious outlook on the volatile crypto market continues. Despite anticipated interest rate cuts in various currencies, Swissquote expects to maintain close to its original net interest income targets.

Strategic Investments and Product Development

Swissquote is focusing on strategic investments rather than returning excess capital to shareholders immediately. The company is keen on acquiring smaller firms that can enhance growth potential. Additionally, Swissquote's 'Invest Easy' product has replaced its Robo-Advisory service, showing promising growth with CHF 690 million in assets by the first half of 2024.

Yuh Joint Venture and Market Position

The Yuh joint venture with PostFinance continues to thrive, now boasting over 235,000 clients and CHF 2 billion in assets by June 2024. This success underscores Swissquote's strong market positioning and growth potential in the Swiss financial landscape.

Earnings Call Transcript 2024-Q2

[Marc Bürki, executive]

Good morning, everyone. Welcome to our half year press conference 2024. We are here at our headquarter in Gland, and I am together with our CFO, Yvan Cardenas. And the two of us will bring you to the presentation this morning and then also be available on the Q&A session that will follow the initial presentation. So I hope you had a chance to download the PowerPoint presentation. Otherwise, you can just follow the presentation here, and I will directly start to Page #4, that gives the main numbers for this first half year results.

It was an exceptional half year, the best in the history of Swissquote, which is -- we have -- we used to say that because half year after half year, we are able to improve our bottom line, our top and bottom line. And this has been the case now since the 6 consecutive half years more, if we forget about the year '20 and '21, it is the special COVID years, but Swissquote is a company that is growing since, many, many years. But this first half year has really been mind blowing in terms of revenue and profit. Look at the numbers here. The revenue grew by 19.3% to CHF 316 million. Pretax profit to almost CHF 170 million. So that's a plus 35.9%. We also had a strong increase of net new monies to CHF 3.8 billion. And fundamentally, the company is also growing in terms of new accounts since we have been able to welcome more than 36,000 new clients and new accounts at Swissquote. So all in, an exceptional half year with record numbers in all dimension.

If we look on what we consider as being the fundamental growth because all the rest is a little bit of market volatility. But what is making our day is the two most important things, which is client growth. And you can see this year on the right side of the chart, you see that it's growing and growing since many, many half years to more than 610,000 clients now. So that's a jump if we compare it with H1 2021, that's almost 33% of growth. And this in a situation where the average assets per account has been stable to around 100,000 or 111,000 here at the end of the year, of course, pushed a little bit by very good markets that we had in the first half.

If we go on the net new money side. CHF 3.8 billion that's better than 2023 and better than 2022. If you forget about this inorganic growth in the first half of 2022. So this is within the bandwidth, we have set ourselves for the target. Remember, we say that usually, we want to grow between CHF 6 billion to CHF 7 billion of net new monies. And here, CHF 3.8 billion we in the first half, we have more than achieved our initial target. So very good numbers and gives us a lot of hope for the coming half year. And we also proved that our products and our service level is appealing to many clients.

Where do we grow the most? Here, these are 4 main geographical locations where we do grow. So of course, #1 is Switzerland. This is our home base, and it has always been a very strong contributor to net new money. And here in the first half, Europe and mainly our bank in Luxembourg has had strong growth with almost CHF 1 billion of net new monies in the period, and we have Middle East Asia, where we have one -- which is one of our stronghold. And the Rest of the world a little bit lower. That depends a little bit on the market dynamics. This picture may be a little bit different in the second half where we see other growth avenues. But again, Switzerland and Europe are the most 2 important contributor to our assets and this is in line with our global strategy.

If you look at net revenues now at CHF 316.9 million. So it's a well diversified picture. Looking at the 5 revenue segments, we are publishing. So all revenue segments has contributed to this higher net revenues with 2 exceptions, the eForex and the Interest Revenue, which are which are flattish compared with H2 2023. So in the case of Interest Revenues, this is kind of normal, even though the balance sheet has grown, so the client has put more cash, you're aware that the interest rates have come down a little bit. We have had a few rate cuts in the period.

And this explains why it has stayed flattish. So one has compensated the other, so more cash, but lower interest -- lower interest rates. In the eForex side, it was a half year with low volatility, but we think there we have quite a high potential because the eForex assets which at the end of the day is the fuel that you put into the trading machine is at the record level of CHF 673 million. So this also gives us good, good hope that as soon as volatility is coming back in the currency markets that they will have, again, growth in this sector.

Now, looking now at the Clients assets of CHF 68 billion. So that was the situation at the end of June. So at the end of the first half. It's mainly in Securities. So our clients are mainly are invested in various different securities up to 86% and the rest 14% is cash. And you can see here on the right side of the chart, the evolution of our total client assets up to this best results ever of CHF 68 billion. Now it's fair to ask since we are already in August, what's the situation after the market crash we experienced last -- over the last week? So currently, and that was the situation -- last Friday, we are at CHF 66.4 billion after the market impact. So of course, like every other bank, we had an impact on the market crash, but many of that has been recovered today after when the markets recovered.

So nevertheless, we have -- this is the highest client asset we ever had. And also, if you look at the margin on assets, so which is the revenue divided by the clients' assets with almost -- with more than 100 basis points. This also is a very good number, which is at the highest level of our bandwidth, which is between 90 and 100 basis points.

If you look at the net revenues by customer profile, it's -- and especially concentrating on the customer domicile here on the left side, you see that Switzerland is still the biggest contributor, but all the other markets have now improved and increased with Europe, as I said before, being the second largest contributor with 19%. And then we have the Middle East Asia region, which is with 13%. So this picture does not change a lot.

It's compliance with our strategy and the places where we would like to grow our business. If you look at the net revenue by customer type, it's about 2/3 is -- or 3/4 is B2C business. That's the historical business of Swissquote. We started as a retail bank many years ago, but as you can see, we have really improved the Institutional business and the B2B and the B2B2C now represents 26%. And this is also a picture that hasn't changed a lot compared with the previous half years.

If you look at net revenues by asset class. So it's a very nice picture. I like it a lot, the one on the left, it shows that we are making money with various revenue classes. So the first one, of course, here being the cash. That's the situation with interest rates and the reversal of the situation since we went out of the negative interest period, but then comes fixed income and the foreign exchange.

And you can see here, ordered by the highest percentage, the various revenue segments. Crypto assets mainly worthwhile to mention, we had quite a good half year, and it represents 11% of the total net revenues. So the trading with Crypto Assets has been very active in the first half.

If you look at the net revenues by nature, which is transaction and non-transaction based. Still, the non-transaction base represents 54%. So of course, it's triggered by higher interest revenues, but our target is to have a balanced situation between transaction and non-transaction base, probably over the long term -- over the very long term when interest rates will reach the final level. We think that it will balance between 60% and 40%. so 60% being transaction-based and 40% non-transaction based. So that's part of our -- of the way we forecast out our view in the future.

Now total expenses. This is the main topic for the management of the company, we want and we need to have our costs under control. It goes against a little bit our entrepreneur spirit because we have so many ideas how we could further develop the company that we have to refrain a little bit on hiring new employees. It's -- we are absolutely in our targets. We have set targets for CHF 295 million total cost for the year. And if you look now what happened in the first half, with CHF 147.2 million. We are exactly at 50% of what we want to achieve. So we don't see any reason why the growth should -- or the cost should grow over the second half. This is our target to keep the costs under control.

And it's remarkable that we have achieved the highest revenue without a strong impact on our costs. So that's part of the business model is the -- once you have built the system you have to maintain it and you have to build additional system, but the marginal new clients will not contribute directly to the cost. If you look at where the costs are coming from. That's, of course, that's mainly payroll and related. And then marketing represents, that you see here in orange, represents the smaller part of our cost. The rest is operating expenses and, of course, depreciation of our previous investments. If you look at the headcount. So you see that this is a tech company. So you should say we are a tech company with a bank license that still applies. And you see that 36% of our total head count is in technology and that's no surprise for a tech bank, like we are, and the rest is distributed between sales trading, marketing. And then, of course, like every bank, we had to beef up our compliance & risk staff, which goes in line with our geographical expansion and the compliance which we want to render to our clients.

So profitability has grown. As I said before, this is the highest number ever achieved CHF 320 million. Remember, a few years ago, we forecasted CHF 350 million of pretax for 2025. Now we think that we will reach CHF 320 million of pretax in 2024. So we are absolutely in line with our 2025 target, which really I think is good news. So if you look at the profitability here. You can see it over the last half year, the way it did grow. So I would say it's the 6th consecutive growth bottom line growth since the first half of 2022. And here, derived from the CHF 68 billion of assets we had at the end of the first half we are generating about 100 bps on the revenue. And out of that, we are generating 54 basis points of pre-tax. So a very strong cash generating or profit generating machine and organization.

Now to finish, let's have a look at our balance sheet. So first of all, the balance sheet has grown by more than CHF 1 billion from the 31st December 2023 to the 30th of June 2024. And what has grown is the customer deposits. If you see here on the right side of the chart, in all currency segments, the clients deposits has increased mainly in Swiss francs from CHF 4.3 billion to CHF 4.9 billion. And you see the same thing happened in other currency, which is very good for a bank that is not tuned for saving accounts. We are a transaction-based bank but clients apparently like our services, and this is the reason why they deposit so much cash with the company.

What are we doing with the cash? Well we have a very cautious approach. As always, we are about CHF 4.8 billion of our total assets are held with central banks or are placed very short term. That's a large part, and this also explains why we have such a good liquidity ratio. So again, a very cautious a very cautious approach, our investment strategy with our balance sheet. If you look at the investment portfolio here, it has grown for about CHF 0.5 billion from CHF 2 billion to CHF 2.5 billion, a little bit more. And of course, we're trying to capture the higher revenues, and we are going a little bit longer with our investment portfolio. That's part of our strategy.

Also, the loans to clients has grown over the period of 20 more than 20% -- so we went from CHF 800 million to CHF 1 billion for the first time. And also about speaking about CHF 1 billion, if you look at the total equity, we have now almost reached CHF 1 billion of equity and this also is a very strong number.

Now this is a little bit complicated chart, but it's not the first time we are showing it to you. So let me comment it on the -- let's start with the CHF 68 billion we have on the upper left corner. So CHF 68 billion, 14% is in cash. The rest are investment securities and the securities do generate trading revenue, net fee and income revenues. So everything less the interest income, and this represents CHF 207.1 million.

Now the 14% that represents CHF 9.8 billion, so 37% of that part is used to finance our margin lending portfolio up to CHF 1 billion, and then the rest are the investment securities as mentioned. This is CHF 2.6 billion and you see here, that's the distribution of our investment securities we invested in. So it's 99.8% of that is, of course, investment grade and then about half -- 53.4% are HQLA investments. So a very solid and a very sound and secure investment securities portfolio.

Now the rest here, the 63%, if I go back to the central picture, this is the liquidity portfolio, so 63% of CHF 9.8 billion. This represents CHF 6.2 billion. And you see here, the distribution in the various currencies and also to mention that we -- the interest rates are decreasing.

We had 2 rate cuts in Swiss in Swiss francs, down from 1.7% to 1.2%. The U.S. dollar is stable, and Euro, we had 1 rate cut from 3.9% to 3.66%. So that is in line with our forecast, and we do forecast for the rest of the year, additional rate cuts, especially on the dollar. So that's part of our -- the way we forecast our revenues. Now these all together, so the net interest income together with what we earn on the margin lending portfolio and the investor securities portfolio represents the famous CHF 109.8 million added to the CHF 207.1 million. This gives the CHF 316.9 million, which is the revenues we achieved in the first half of 2024.

Speaking about equity, yes, close to CHF 1 billion. That's a solid number, expressed in terms of Tier 1 capital ratio at 25.9%. This is, of course, much higher than the regulatory 11.2%. We should have -- in our Tier bank, so it's a solidly capitalized bank, much higher than the average Tier 1 ratio of the Swiss banks, I think, which is about 18% and also this, of course, this accumulated profit over time. And this slide also explained why we can't finance a payout ratio of 30%, at least that is what happens in 2023, but there's no reason this will change for 2024.

Okay. Now almost the last slide, guidance 2024, given the good numbers in the first half, we have revised our guidance, and we initially had a target of CHF 300 million pretax. Now given the good numbers in the first half, we are increasing this target to CHF 320 million. And on the revenue side, our guidance was CHF 595 million. So we are able to increase this to CHF 615 million. You see that it's the CHF 20 million additional revenues almost goes bottom line since the cost should not be touched by the higher revenues.

And now a look on how we build our guidance for the full year. So we are building this on an estimated client money of CHF 71 billion. So that's basically the situation we had at the end of -- at the end of the first half, proofs the anticipated CHF 3 billion of additional net new money. We do forecast for the year, so that gives us CHF 71 billion. And then we are distributing this CHF 71 billion in the various margins now calculated on total assets, we think that the crypto assets was -- the growth was significant in the first half, but we have a certain level of cautious -- caution in the second half. But that's what the market -- the crypto market is about. It's very volatile -- and -- but our ambition is to have a cautious forecast for the second half. This is why we think that for the -- for H2 2024, we will have a smaller revenue than in H1.

For the Interest Rates, we also think that the rates are set to decrease in the second half. But overall, the net interest income should remain close to our initial target when we did the full year 2024 forecast. And then on the same thing, same situation on the on the trading side.

The year started on a positive note for Securities. The investor sentiment were quite good. And -- but let's see what will happen in the second half. We still have this growth potential on the eForex side. Again, it's the highest client money deposits we ever had. So this sooner or later should transform into additional revenue. And if the markets are again becoming more volatile and more active not only on the eForex side, but also in the Securities, then you will see here an uptick of revenues.

But anyway, cautious forecast for the second half, that's the way we do. We build our guidance and with CHF 320 million of pretax. This is already a nice growth that we can announce today.

Okay, here. Yes, these are the appendices. I will not commence them at this stage. But of course, if you if you have -- if you have some questions, I would be happy to respond to it. Maybe just have a look at the -- at the one here. This is an important one. So Swissquote is growing in our domestic markets. I remember a few years ago, when investors were asking if we have reached our highest level possible in the Swiss market?

At that time, maybe it was true because we had a very simple and a very basic service levels. We were only dealing with trading on Swiss securities, since then our service level and the various offers to our clients has increased a lot. So this also gives us hope that we can grow the business in Switzerland dramatically. If you look at the big picture, so how wealthy and how big is the Swiss market?

We are speaking about CHF 1.8 trillion of financial assets. And from this CHF 1.8 trillion, Swissquote has a market share of 2.1%. So a tiny small market share, but we think that the quality of our products and our services give us the opportunity to grow this market share further off in the next years. So it's not the end of our growth story in Switzerland. I would say it's maybe just the beginning and also the market is consolidating, some banks are disappearing, but Swissquote is solidly installed in the Swiss market landscape, and we think that we will be able to expand our services in it further and they'll benefit from additional growth in Switzerland.

Last but not least, let's have a look on Yuh. So this is our joint venture with PostFinance. It's working really well. I think in the meantime, we have become the #1 in the Swiss market. We now have more than 235,000 clients. And you also see that the asset growth is in line with the number of clients. We have the impression that it's growing faster. And now we have reached CHF 2 billion of assets by the end of the first half 2024. So a very nice success story and soon to become profitable and then have margin -- a profit margin contribution to the overall Swissquote revenues.

Okay. Now the last 2 slides are the key figures as usual, but that would conclude my presentation. And then, of course, now we are happy to enter the Q&A session. I'm sure you may have a lot of questions for us.

[Operator]

[Operator Instructions] The first question comes from Tam Haley, UBS.

[Haley Tam, analyst]

Haley Tam from UBS. I had two, please. Could I check on the cash, I think it's now 14% of client assets. I think that's below the 15% to 20% range we've seen historically. So I just wondered if you are expecting that to go back up? Or should we consider this to be a continuing falling trend as interest rates continue to fall?

And then the second question was just on the strong flows in Europe, congratulations on that. Could you give us some color on the regions there? Is it the Belgium, Netherlands, France that actually groups you highlighted? And could you remind us, please, if your -- where you're winning these clients from in these countries?

[Marc Bürki, executive]

Thank you a lot, and Yvan is happy to take this question.

[Yvan Cardenas, executive]

Haley, thanks a lot for the questions. Well, a good one for the 14%. Well, I have to say we're slightly below the 15%. In my opinion, it's more a matter of a significant market impact. So if you calculate, we had the market impact close to CHF 6 billion to CHF 7 billion. Crypto Assets have doubled in terms of market value. And therefore, despite we had a good inflow of cash because we can see the balance sheet really did increase when it remains stable in 2023, I think it was not enough to compensate such a market impact.

So I still expect in the future to be between 15% to 20%, probably closer to 15% than 20%, but it's more -- at a point in time, market impact is a bit significant. And therefore, when we can compute the ratio is slightly below the 15%. So I would not change my moving forward, my assumption of 15% to 20%.

On the European inflows, no particular change. The top countries where we get money are always the same, Benelux, Germany, France, so no particular change, but it's important to highlight this is probably the highest organic inflow we ever had in Europe. So things are a bit moving in Europe, and we're much closer to the net new monies we want to achieve there.

[Haley Tam, analyst]

That's very clear. And is there any comment on where you're winning those clients from in Europe?

[Marc Bürki, executive]

I think -- it's the same. So Benelux, Germany, France, these are the biggest contributor of new clients in Europe because it...

[Haley Tam, analyst]

Sorry, sorry, I was not asking clearly. I think in those countries, -- what is the -- are there particular mainstream banks you're winning from or these new clients to investing in overall. Just to understand that. Sorry.

[Marc Bürki, executive]

No problem. No problem. No, no, it's new clients. I mean that is -- it's really the client growth that is triggering the net new monies.

[Operator]

The next question comes from Daniel Regli, ZKB.

[Daniel Regli, analyst]

Congratulations to the good H1 results. I have a couple of questions on, first, the margin guidance on Page 20. So I just noted that the numbers in terms of basis points of client assets have changed a bit. I mean, Crypto Assets, I think you explained it well. But the other changes, are these mainly driven by the higher client asset base? Or has there anything changed in terms of your expectations on absolute terms of these revenue lines?

And then also kind of into the same kind of category or a direction. Can you talk a bit about client activity in H2? Obviously, you mentioned the volatility driving assets or client assets down, but has this had a positive impact also on client activity and securities trading? And obviously, the securities trading margin in the first kind of 1.5 months in H2?

And then on net interest income, you said close to our initial target which was obviously -- when I remember it correctly, slightly higher in 2024 versus 2023. Do you still expect a slightly higher net interest income? Or are we now kind of on a level where you would expect more like an in line-ish result, which could depend on both directions?

Can you also maybe talk a bit about your expectation for interest income in 2025 based on the current developments on the policy rates, et cetera.

And then last but not least, can you talk a bit about net new money growth? I heard you say CHF 6 billion to CHF 7 billion being the net new money target when I remember it correctly, you previously always were talking about CHF 7 billion. So have you lowered your ambition for net new money growth, particularly after we have seen CHF 3.8 billion in H1. This would sound a bit odd to me. And can you maybe also talk a bit about what exactly drove the strong pickup we have seen in net new money in Switzerland where you were up like CHF 2.5 billion in net new money?

And then also about the mid- to longer-term outlook on net new money, should we kind of imagine this more to be an absolute growth number of CHF 6 billion or CHF 7 billion, whatever it be? Or do you think more in relative terms in terms of a percentage amount of assets under custody or client assets?

[Marc Bürki, executive]

Lots of questions. I may ask you to repeat a few of them. So let me take the last one on the net new monies. So it's true that our basic forecast is CHF 7 billion. And with CHF 3.8 billion, we are -- we have more than achieved this in the first half. But it's just out of experience, if I look back a little bit in the previous half year. So sometimes we have been at CHF 3 billion at CHF 2 billion. So it's -- we cannot always control, of course, how much assets is coming in. It's also sometimes a little bit of market dependence when and there is a lot of things happening to the market and people are eager to transfer more assets.

So this is why we have this, let's say, these bandwidths of CHF 6 billion to CHF 7 billion, but I would be disappointed if we would have less than CHF 7 billion in the 2024 and also really disappointed if you would have -- if I would have less then CHF 6 billion.

No, we don't express this in percentage. It's simply out of experience. We have this -- this step is of growth. I remember in the very early stage, we had this CHF 1 billion net new monies as a target, then we went to CHF 3 billion, and now we are at CHF 7 billion. If it continues like this, then, of course, in the new forecast, we will uplift these net new monies.

So why has it been better in the first half? I think there was a Credit Suisse effect. It's coming now. So we -- I remember people were a little disappointed that we did not get Credit Suisse assets in the beginning, but that's not the first money that was flowing out of Credit Suisse. This was more institutional money that, where we were not the right recipients for that. But now that the merger is taking place, we can see here and there that former Credit Suisse clients are also looking to diversify their bank relations, and we think that we are getting a part of that. So that would be good news, because then it would mean that there is a lot of additional potential for the rest of the year and maybe also the year to come.

And then about the -- let's start with the margin, the basis points margin. So this is the one on Page 20. And maybe here, I give over to Yvan.

[Yvan Cardenas, executive]

Yes, with pleasure, you spot it right, Daniel. That's mainly because the client asset increased. And therefore, mathematically speaking, it impacts a bit, the margin on assets I don't see a major change to the assumptions. But if you look back at our full year presentation, the end value for client assets was CHF 65 billion. Now we have CHF 71 billion. So this is basically pushing down the basis points we do calculate. And to summarize in the nutshell, the new guidance 2024, this is more or less what we have achieved in H1, plus half of the initial guidance.

So we -- basically, for the second half, we think it's better to be a bit more cautious, and we basically come back to our initial assumptions in terms of activity ec cetera. We have summer season now, so Crypto Assets have somehow slowed down in May and June. So we believe it's a better forecast to come back to this initial guidance divided by [ 2 ].

You had a question about the client activity in July. Well, I cannot comment too much. But for the time being, I would say, we're positively surprised. So the summer seasonality is lower than what we would have expected in July. But we still have 5 months to go. So we'll see how it develops in the future. But it's true that volatility should bring more activity at Swissquote, and we recently faced more volatility.

[Marc Bürki, executive]

And then I can't remember the third question you asked?

[Yvan Cardenas, executive]

Interest income. About the interest income. So what we aim to say is the initial guidance and the net interest income that we had in this initial guidance, we believe that we will achieve the same number despite interest rates have decreased. So this is what we tried to say in our side. So we expect rates have been cut in CHF and Euro. We expect more cuts to happen in H2. But despite these cuts because we have more cash deposits than initially expected, we should get the number we had in the initial guidance 2024.

This is what we have to say. For 2025, that's a bit difficult to assess? No. I would love to have a clear view on interest rates for 2025, but it's true that we may face a decline in interest income. That could be of something like probably 10%. This is what we will have in mind currently. That being said, we still are paying interest on some balances of customer accounts. This is one of the mitigation measures we called out for 2025. We have decreased what we pay on CHF accounts, but Euro and USD have remained intact. So we still have this measure. The day rates really start to decrease in USD and Euro. We have this measure that could compensate somehow the decrease.

This is what I can say at this point in time.

[Marc Bürki, executive]

Daniel, was there an additional question?

[Daniel Regli, analyst]

No. Maybe just a quick follow-up. I remember you're talking about in March about having like CHF 4 million to CHF 5 million in crypto revenues for January and February and then March seems to have been a pretty good month. But obviously, given you have achieved this CHF 35 million in H1, the trading and transaction activity was then back to the CHF 4 million to CHF 5 million in the rest of the months. But are we now even below this CHF 4 million to CHF 5 million? Or are we still more or less at the CHF 4 million to CHF 5 million monthly run rate?

[Yvan Cardenas, executive]

Well, if you look at market data, July was pretty good. When I look at volumes on various crypto exchanges, July was somewhere between February and March. The question is -- the visibility that we have. So you may remember on the Crypto Assets, we always try to avoid any downside risk in our guidance. So I'm relatively comfortable we can reach what we have forecasted for H2. And if things are better, then there is an upside bonus. But I will answer this way.

We are actively confident to reach H2 forecast on crypto asset income.

[Operator]

Next question comes from Grégoire Hermann, Berenberg.

[Grégoire Hermann, analyst]

Congrats on the good results. Three questions, please. The first one would be on the market effect on the asset under custody. Just a bit curious to know what is basically the impact from FX and simply the market because it seems like the market effect has been quite high in the first half of the year?

The second question would be on the net new money from new clients. I think in the past, you gave this figure. Can you please, if possible, give the split between how much of the net new money is from new clients in the first half of the year and how much is from existing clients?

And last one would be maybe on the Robo-Advisory accounts. I mean, obviously, you've had a good growth in Trading accounts. But I think there has been quite a good figure on customer growth for Robo-Advisory accounts. So can you maybe give a bit of an insight of what happened here, please?

[Marc Bürki, executive]

Okay. So for the market effect. So again, the -- I was speaking about the CHF 66.7 billion after the crash. So I'm not 100% sure whether I got your question right. So the -- are we -- the question is what was the market effect on the CHF 68 billion that we had in the first half? Is that the question?

[Grégoire Hermann, analyst]

Yes, basically, I mean, if we look at the net new money that you had, I think it's CHF 3.8 billion and the total assets under custody that you have at H1, there are like CHF 68 million. So just a difference between the net new money and the final assets under custody that you have. I think we have a gap of around CHF 4 billion. So just trying to understanding here. If everything of this is FX or just higher equities or this kind of impact?

[Yvan Cardenas, executive]

Well, so if you take the client assets 1st of January, you add CHF 3.8 billion of net new monies, you basically end up with a lower number than the CHF 68 billion that we are reporting. And the difference is the market impact here together, you combine basically a market plus FX rates. So it's mainly driven by equity markets that were up as well Crypto Assets, the value of Bitcoin was like plus 50%. So in terms of Crypto Assets, we have doubled. So now the Crypto Assets almost contributed to CHF 2 billion in market impact. So it's mainly linked to the performance of the various asset classes.

In terms of FX rates, it should takes USD -- they -- it's improved, but then it more or less moved back to the level of the 1st of January. So I will see the FX impact is relatively limited. It's more equity markets, crypto market performance, et cetera, et cetera.

[Marc Bürki, executive]

And then to your questions about net new money. So you have -- you have the slides here, that I just pasted on the screen. So -- and this is interesting to see that the distribution of client assets of about 4% of the CHF 68 billion are coming from new clients acquired in 2024.

Now of course, this is not -- this would be -- this would then represent CHF 2.8 billion. But they're also part of that is already client growth a little bit. So I think it's fair to say that out of the CHF 3.8 billion probably CHF 2 billion of our net new monies that has been generated by new clients that we acquired, that we earned in 2024.

So CHF 3.8 billion in total, CHF 2.8 billion of client assets from new clients in 2024. But there with a market impact. So I would say that collectively the new clients that we hired in 2024 has brought about CHF 2 billion of net new monies.

[Grégoire Hermann, analyst]

Okay. That's clear. And maybe just on the Robo-Advisory accounts growth, please?

[Marc Bürki, executive]

Yes, yes. So we actually discontinued the Robo-Advisory. it's no longer a service that we do offer. So we have replaced it with some -- we call it Invest Easy. So it's -- it's still a little bit derived from that, but it has been very much simplified. And there, you see that the growth was quite okay in the first half. The -- so together with the old accounts that are now switched slowly to Invest Easy, we now have CHF 690 million.

I think our Robo-Advisory product was really good in the past. But somehow we're not exactly tuned to the market needs of our clients, it is why we have simplified it. But we have good growth, and we think that our Invest Easy products will continue to grow over time. You see here, it went from CHF 611 million at the end of December 2023 to CHF 690 million. So that's CHF 80 million of additional money flow in our various Invest Easy products.

[Operator]

Next question comes from René Locher, KBW.

[Rene Locher, analyst]

Can I just start with Slide 20. So I guess when I'm right, your calculated the margin, not on the CHF 71 billion more on the average assets which would be like CHF 64.5 billion because if I take the CHF 64.5 billion and the 95 bps revenue margin, then I end up somewhere at CHF 615 million -- this is how you -- I the budget -- that's fine.

Okay, that's right. And interestingly, where I was surprised to see the higher revenue margin in H1, I guess, this was also driven by NII and Crypto, which offer higher revenue margin. But then you would go for something like 90 bps in H2 -- so that's how I end up at the 95 bps revenue margin for the entire year. So that's the first one.

Just -- the second one, a very strong pre-tax margin for the first time above 50%. I was just wondering if this is the new normal. So H1 was 53.5%. If I take a look at the guidance, then have to achieve roughly 52%. So just your view on the pre-tax margin. Is that new normal above 50%.

And very good quickly on the cost on the expenses. I mean we have discussed this for many, many years and now it's interesting to see that marketing expenses are broadly stable at CHF 16 million. So I was also wondering is this yes, [indiscernible] happy with the CHF 16 million, there was also that the 6% growth in expenses was partly driven by depreciation and amortization, which increased by 15%. So I was just wondering what's in there?

[Marc Bürki, executive]

Okay. Yes, I can talk a little bit about marketing. And then I'll give over to Yvan for the rest and appreciate the fact that you think that we are too conservative for the second half.

We have a stable marketing budget that's true. But this has a reason and explanation. So we believe that as part of the marketing in a company like Swissquote is also viral marketing. And this has to do with the brand awareness of Swissquote and the brand. And we have made a -- we have just made a new brand study, and it was quite amazing to see that we are now in position 2.

So the question was, please, write the names of all online brokers on banks that allows you to invest in securities? And then #1 was UBS, but the #2 is Swissquote. And the #3 is Yuh, so that, of course, it helps actually keep the marketing expenses low. When you have a spontaneous brand awareness in Switzerland that has been built over time with smart marketing investments, then this also explains why we can keep it at that stage, and we don't need to go to extreme marketing expenses.

So you have to maintain it rather than build up the new brand, and this has a positive impact on the costs. So going forward, we may increase a little bit over time, but we don't see doubling, for example. We think that we will stay in the magnitude around CHF 30 million to CHF 35 million of marketing expenses more than for the years to come.

Yvan for the....

[Yvan Cardenas, executive]

So you had a couple of questions on expenses. Just a small comment on marketing. It increased by 20% compared to H2 last year. So probably it's not too small increase.

On depreciation, there is somehow a timely increase. And if you look at the IFRS financial statements, we have with this Optimatrade transaction that created for 2 years, the intangible assets that we need to depreciate.

So there is somehow an exceptional item for this year, next year on depreciation that is related to the acquisition. I invite you to have a look at the note and if you have questions later onwards, let me know.

On the pretax margin, well it was higher than initially guided, for the second half, we are a bit more cautious. It was certainly positive development, well pushed by rates that were still high and recovering trade activity, in particular, Crypto Assets. So in this type of environment, I think it's a pretax margin that you could probably sustain but will not change now the -- basically the assumptions that we had for our outlook 2025. So for 2025, we guided for a pretax above 50%. I think we have demonstrated we can achieve it. And it makes the net revenues we need to achieve closer to current levels. So I'm optimistic to be at a pretax margin above 50% next year, most likely well between 50% and 53.5%. This is what can I say. But to the extent to state it as a new normal, I would say we probably need a bit more time.

[Rene Locher, analyst]

No, that's fine. Very interesting just food for thoughts on 2025, if you end up at CHF 71 billion, if I add CHF 7 billion net new money than I am at CHF 78 billion average would be CHF 74.5 billion, 95 bps revenue margin and 50% pretax margin, and then you are too conservative. But I mean, analysts are also a bit bullish. Not an issue.

[Marc Bürki, executive]

Rather it is usually the opposite. So usually, it's the company that is bullish and the analysts are conservative.

[Operator]

The next question comes from Christoph Blieffert, BNP Paribas.

[Christoph Blieffert, analyst]

I would like to go one by one. Let's start with interest income. Can you please quantify the interest income you have generated in July, please?

[Yvan Cardenas, executive]

Well, I expect this one is Christoph. So first of all, I'll just make a couple of comments. So we have the positive aspect of the cuts we faced in H1 is that we see that now we're capturing again additional cash deposits. We could grow the balance sheet by CHF 1.3 billion. So it's not small. It was flat last year. And in 6 months, we could go about CHF 1.3 million.

So the rate cut, they certainly have impacted us. There was 2 rate cuts in CHF, 1 in Euro. But 1st of July, we decided to adjust what we serve on trading accounts in CHF. So we have almost decreased to 0, what we serve on CHF trading accounts. So this move will probably neutralize the impact of the last rate cut in CHF.

Moving ahead, we still expect rates to be cut in the 3 currencies for the second half. We basically rely on market consensus, but we see that the balance sheet is growing, so there is a compensating effect. So this is really important to take into account. And we could later on, adjust what we pay on euro and USD accounts for the time being, we kept it unchanged. In July, net interest income was around CHF 18 million to CHF 19 million. This is a rough indication I can give to you.

[Christoph Blieffert, analyst]

Excellent. And let's continue with Crypto. Can you give us an update for monthly crypto revenues you have seen over the last couple of quarters -- sorry, a couple of months?

[Yvan Cardenas, executive]

Well, I think I answered it partially with the question of Daniel Regli from ZKB. July was not bad at all. It was probably somewhere the months of January, February and March. So it was not at the level of March, but still a positive compared to January and February. You can check it with market data. You see that the volumes, they have picked up in July. Then the question with crypto is they're relatively volatile. So it's always a question of how much time it will last. But for the time being, the situation is -- is in a good trend. This is why I made clear that the second half guidance should be achieved on the Crypto Asset income.

[Christoph Blieffert, analyst]

So the CHF 45 million you had indicated in the last call is still valid?

[Yvan Cardenas, executive]

Yes.

[Christoph Blieffert, analyst]

Okay. And on the second -- next question on Crypto, is on your exchange. What has been the spread income you have generated in the first half of the year?

[Yvan Cardenas, executive]

Well, you can check it in the IFRS financial statements and have a look and if you have more questions, I can take them later on. But you can see that we did CHF 35 million of Crypto Assets income in H1. But now this is split across fee and commission income and trading income, and you have this information in the IFRS financial statement. Therefore, you can see basically -- somehow the new mix in the Crypto Asset income since we have really all the assets on the exchange, and we faced higher volumes. You can see that it's not only about Fee and Commission income, that is what we basically charge to the customers, but as well what we earn on continuously providing CHF 1.5 billion spreads through the exchange. So have a look. You should have the implication and let me know if you need more clarification.

[Christoph Blieffert, analyst]

Okay. Excellent. And then the third question is on excess capital. What are your thoughts with regards to returning excess capital to shareholders, are you paying a special dividend at some point in time?

[Marc Bürki, executive]

Well, it's -- so we don't have such a plan right now. We have just adopted our dividend policy that would see a payout of 30%. Now of course, if within a given amount of time, if we don't find any smart things to do with our excess cash, like doing some M&A, then there will come the moment when we'll have to return it to the shareholders, but we think that it's not yet the moment.

We think that there will be opportunities coming to the market, and we have been very successful in the past of acquiring companies, not the big ones. We're not going for the transformational acquisition, but rather companies that would help us grow faster. And this would then consume part of the of the excess capital we have. So -- but no decision made there other than we're looking out for potential acquisitions.

[Christoph Blieffert, analyst]

Okay. And the last question is on Yuh. What is future of Yuh from a financial point of view. It's a focus to make it a cash machine rather short term or to invest -- reinvest profits and marketing in order to do client wins? What is the strategic idea behind it?

[Marc Bürki, executive]

Well, I think so the idea is to continue to invest in the product. It's -- so that was -- the first idea was to become #1 in the Swiss market. And then to operate at a profitable level. But of course, we are much more ambitious than that. We think that the growth is due to continue.

As you see here on Slide 24, you see that it's almost a straight line when you see the number of new clients, and it's even exponential when you see the assets under custody. So I think it's a great product, and we have lots of new ideas how we can make it even better. So it's not -- so the idea really is not to make it -- to transform this into a cash machine, but we are still -- still in the investment phase, but happy that it's actually beyond the breakeven side, so that would reduce the cash injections from the partners going forward.

[Operator]

Gentlemen, there are no more questions.

[Marc Bürki, executive]

Okay, then that's great. So again, thank you very much for joining us.