flatexDEGIRO AG (FNNTF) CEO Frank Niehage on Q4 2021 Results – Earnings Call Transcript
flatexDEGIRO AG (OTC:FNNTF) Q4 2021 Earnings Conference Call March 1, 2022 3:00 AM ET
Company Participants
Frank Niehage – Chief Executive Officer
Muhamad Chahrour – Chief Financial Officer
Conference Call Participants
Marius Fuhrberg – Warburg
Christoph Greulich – Berenberg
Benjamin Kohnke – KBW
Christoph Blieffert – Exane BNP Paribas
Operator
Dear ladies and gentlemen, welcome to the conference call of flatexDEGIRO. At our customer’s request, this conference will be recorded. [Operator Instructions] May I now hand you over to company’s CEO who will lead you through this conference. Please go ahead, sir.
Frank Niehage
Good morning, everyone and a warm welcome to our preliminary earnings call ‘21. Today, I am very proud to show you very impressive KPIs, not only that revenues were up 60% last year, both EBITDA and client goals were up 55%. But the most impressive KPI last year was that, we increased the revenues per trade, especially in Q4 and that amounted to €5.22.
Why is that so important to highlight? I think it proves that DEGIRO Goes Zero, our very massive initiative which we started last quarter last year, proved to be right. For those of you who might not recall exactly what we did, we lowered the fee in 80 markets to zero and we increased at the same time the FX margin by 15% and that proves now that profitability per trade is going to increase. But I don’t want to talk too much about the KPIs, because I leave this to Mu and he will show you much more details in the following presentation. And today, we try to increase a bit possible transparency.
However, I want to take the opportunity to talk about two very important strategic projects. But before I do that, please allow me to just mention the situation and the impact of the war in Ukraine to our company. First of all, we employ 40 different nationalities among our employees and obviously people from Ukraine. And we are very happy that there is only a few people from Ukraine who have indirectly been impacted. None of our employees have directly been impacted, wherever their family and roots in the Ukraine and we have started several initiatives to help our employees. We’ve donated money. We have given a budget to the voluntary – the committee of employees who help at the border, and we try to support refugees and offer shelter and help wherever it’s possible. Needless to say that we condemn this war, and obviously hope that it’s going to come to an end as soon as possible.
Business wise, we can be lucky that there is no serious impact on our business. Why is that? There is only very few Russian clients. There is only very few trades and products, relatively speaking. So to comply, obviously, with a sanction and execute the sanction, does not have a serious impact on our business. So this is the good news. However, you all know, the war leads to volatility, and obviously, volatility does benefit our business model. However, we hope that this war comes to an end as soon as possible. And no negative impact so far to our business. Again, we’re going to monitor it closely, and we hope it’s going to end soon.
Now, let’s move on for a moment to the very important strategic projects. Needless to say, we’ve last year focused on the merger of DEGIRO, and the good news is, we harvest 80% of the low-hanging fruits. However, there’s 20% left and this will keep us busy the next couple of quarters in this year, and we find that right. However, we are working also on two new strategic projects: one is robo-advice and the other is cryptocurrency. And here, there’s always a discussion about make or buy, and obviously we are focusing on entering into partnerships in order to do not lose time to market and to speed up things and to make sure we don’t increase the risk level. So I’m very confident that we will publish news to those two projects in the next quarter. So please keep crossed fingers that everything goes right and we can give you more details on that. So beyond the organic growth and the 20% left low-hanging fruits with respect to the DEGIRO merger, robo-advice and cryptocurrencies are the new two projects.
So that’s so far from my side. Now I’m happy to hand over to Mu. He will shift gears and run you through a very comprehensive and detailed and transparent presentation. Please enjoy the presentation. Mu, the floor is yours.
Muhamad Chahrour
Thank you, Frank. Good morning, everyone. Great to have you on this conference call on our preliminary results 2021. Yes, we have we have taken your feedback serious and mainly I’d just like to highlight in the beginning that, we tried to increase now also transparency with respect to many KPIs. I think, some of you will be very happy about reading more details about certain things which we will start as of now. I think also, this is what I and we always promise to you, that we will work on these things. It did take some time, especially after the reorganization and transformation with the DEGIRO merger.
I would suggest let’s jump into the KPIs, into the numbers and the slides, to get here the explanation for 2021. It is very important to highlight, it was a tough year, mainly driven by COVID the first 12 months, or the whole year actually, despite every now and then some light at the end of the tunnel that very quickly flipped into lockdowns and again issues. Nevertheless, despite having a transformational year, we managed to outperform on all key metrics. We have published the customer accounts growth, and we have published the transaction growth. What we are publishing now as one important metric, the assets under custody, that increased by almost 38% to €44 billion assets under custody, obviously driven by 2 things; on the one hand side the customer growth per se, that provided us and contributed more assets on the custody, but on the other hand side what we also saw is that, during 2021 and the trade pickup, more money inflow was recognized during the year.
More trade, more assets under custody result also in higher revenues for 2021. We have achieved €417.6 million in total revenues, which is an increase by 60% compared to 2021. And I think we always have to remind ourselves that 2020 was already a highly volatile year, a very profitable year for us. But we are very thankful and very proud for the work that has been put throughout the year 2021 by our colleagues into the business, to take the further step and increase our revenues by 60%.
The marketing expenses ended up to be at €46.1 million. I’ve indicated that in the call when we have published the commercial KPIs, that we have spent more than €45 million in 2021, ended up to be €46.1 million. The increase in marketing is obviously determined by the client growth of the customer accounts growth. That’s one part of the marketing story. The other part is that – and this effect kicked in mainly in Q4 2021 – are the expenses that we had for production of documentary that we have broadcasted all over Europe, together with Discovery and are now streaming it also via Discovery+.
It’s been a very, very important project for us, and we will also enjoy the footage of this documentary, for all future marketing campaigns. So in total, the documentation cost plus the ad space that we booked mainly in December 2021, also for Q1 2022, amounted to €5 million. So there’s a special effect that kicked in in Q4, so second half of the year, with respect to marketing expenses. Nevertheless, if you would take the whole €46.1 million and divide them by the customer account growth, which was gross 750,000 clients, you will see that we managed to continue client acquisition costs, an average of slightly above €60. As we always said, the benchmark a long term is €50 plus minus 20%, depending on how we spend the money and where we spent the money.
A second effect on the marketing expenses as well to notice is that, in the second half, we have increased to win clients in Germany and Austria. So with the brand flatex compared to the first half, in the first half the flatex growth contributed 14.8% of the total growth, whereas in the second half it was 22%. So winning more clients in Germany and Austria also means higher client acquisition costs. You will all notice that these two markets are relatively expensive compared to all other European markets, but they also contribute a highest ARPUs over time, so higher investment costs in Q4 for Germany and Austria Q3, Q4, which should result also in higher ARPUs. Going forward, this results all-in-all, in adjusted EBITDA pre- marketing of €223 million and slightly – €177 million adjusted EBITDA, both picked up by significant numbers, the adjusted EBITDA pre-marketing up by more than 60%.
So all in all, we can summarize that it was a very successful year despite the transformations that we had, given DEGIRO, our merger. We managed to get our commercials right and our financials right. We managed to continue our profitable growth path again, which makes us very proud, and we are really, really thankful to all our employees that have contributed during tough times. A lot of work and a lot of support given the situation.
Yes, coming to the growth, significant growth. I think the KPI that also surprised us after all our competitors have disclosed also their numbers, and I think it’s also important to highlight these things. We have managed to grow with flatexDEGIRO faster than number 3, 4, 5 and 6 in Europe together. And very often, we ourselves don’t really realize what speed and what velocity we are putting into all our growth. But this is a fabulous result of the implemented measures and to the implemented products and projects during the last 1.5 years that we own DEGIRO. And that shows that this growth path is the right way to continue with, and we are looking forward to not being only Europe’s largest broker, but also to continue to be the fastest growing broker in Europe.
One new slide that most of you have not seen in this way is, that we, for the first time, split up our super capitalized business and the margin generation on our assets. Our total assets under custody, which amounted at the year, and as I said almost to €44 billion are split into two parts. 93% of the assets are securities, which amounts to €41 billion, and 7% €2.8 billion are deposits. And for the first time, we brought this into a context to show what the margin generation on these both assets under custody is.
On commission, we managed to generate €314 million in commission income, which equals 96 basis points on every single euro in securities. The 7% deposit the €2.8 billion, are split into two parts. They are of €1.5 billion in a liquidity portfolio, which is mainly held through ECB and Deutsche Bundesbank. I don’t have to tell you what this generates, but it creates massive future potential for us. If interest rates will increase throughout the future, we would see a shift up of 100 basis points in the ECB rev. This would result in €15 million, 1-5, €15 million more EBT and gives you a good feeling for the elasticity of this today, yes, more or less zero or even negative yielding liquidity portfolio. €1.3 billion are sitting in the credit portfolio, whereas the vast majority is allegedly in margin lending products to our clients.
We are continuing to maintain a very conservative approach when it comes to margin lending. The average loan to value is at around 33%, 34%. We only provide maximum 60% to blue chip stocks, so very respected and highly collateralized. Generating 300 to 500 basis points on this portfolio depends on the country and the brands. 16% are unsecured – almost fully secured alternative investments that generate 200 to 300 basis points, which results in total, to an interest income of €59 million or 242 basis points on our deposits.
To give you a closer look, it’s exactly what I’ve now told you, again, shown in a clear split and between 2020 and 2021. You see that the credit portfolio beautifully increased – mainly the margin loans that increased. Actually the secured alternative investments decreased. This is a clear strategy by the management that we have entered last year and the second half, to say we will decrease the so called byproduct of investments and we’ll focus mainly on the margin loans, and having this byproduct mainly in fully secured real estate assets. That is the strategy going forward. But the key focus is to continue to grow the margin loan product, which is a beautiful product, highly collateralized. And if you look into the credit losses, you will see why we why we love this product so much. In 2021, the total losses were at 7 basis points. So €1 million of credit losses, generating €60 million of interest income.
We have included a couple of efficiency indicators to show also, again, the revenue by income type, the assets under custody by product, and the revenue margins by product. Again, here it’s the deeper detail level to see how well we have managed to grow our revenues. Yes, that’s absolutely obvious. But what we managed is to grow mainly our business in the valley asset light area of commissions. And even on the interest side, which you see very nicely, we grew the interest income mainly on asset light credits and loans, especially on the margin loans that are carrying a much lower equity reserve building than classic mortgages or consumer loans or any other type of high solvency assets. So that helps us to continue to grow profitably and with significant margins, without the requirement for millions and tons of millions of capital reserves.
What we see as well is that the revenue margin by product grew over the last 4 years very nicely. We had a pickup obviously in 2020. This is due to the fact that the growth didn’t kick in as much as in 2021, while the revenues were relatively high, given the high volatility in 2020. As you remember, it has been in the history, the year with the highest trading activity that we ever had. Yes, since I am speaking about trading activity, as you know, trading activity adds to the long term growth, but doesn’t determine it, and also here again, we tried to highlight a bit of discussion that we have again and again and again, about what we expect where the trading activity will be. Obviously, no one can really say where we will have the trading activity over the next 5 years. Since it’s a KPI that is highly correlated with macroeconomic developments, whether its geopolitical situation, whether it’s the interest situation, whether it’s the inflation situation.
But I am again here very, very – or I would love to be very, very clear on this. We expect and we benchmark and we forecast the very conservative trading activity of our client base. The orange line that you see indicates 40 trades per customer account per year. This is what we are planning with – our Vision 2026 actually indicates even at the lower end a trading activity of less than 35 trades. And the blue area shows what I call windfall profits. This is the hidden reserve that we generate with our business model, if volatility is higher than expected.
What you see here very nicely is that given in 2020 and 2021 – the high volatilities we saw also here shift up above our benchmark curve. For 2022, we almost assume that this will go over. Let’s see the current market situation and circumstances obviously contribute also to volatility and trading activity. The revenues per trade, I remember when we had together the call in the first half, and we discussed a lot about the revenue per trade and the drop in revenue per trade back then. The reason for that drop is – and we tried to highlight this in a lot of meetings and in a lot of calls – had a lot to do with obviously how you win clients. And if you remember right, one key reason was that we offered in Germany, the first 6 months – for new clients in Germany and Austria, sorry – for the first 6 months, zero commission trading. And I started with it when I described the marketing expenses. Clients in Germany and Austria, yes, are higher and more expensive to win, but they generate also higher ARPUs. So if you allow these clients to trade for free, you obviously are giving away a massive number of revenues and especially on the trade.
What we have shown here is beautiful growth and a steady growth throughout the last 4 quarters. And the benchmark has always been for us in the Vision 2026, and we reiterated on that again and again, €4. If we look into the last 4 quarters, we have managed to outgrow our own benchmark that we said back then of €4, significantly reaching €5.22 in Q4 2021. And the main reason is, obviously, because all the clients that we won in Q4 2020 and Q1 2021, and in Q2 2021, started to pay for trades in Q4. And as the flatex brand in average generates higher revenues per trade than DEGIRO brand, this kicks obviously into our average revenue per trade across the whole group.
What other upside potential do we have? Frank touched on this. The DEGIRO Goes Zero offering that we started only in December 2021, has not fully kicked into the €5.22, but will have an effect onto the Q1 revenues per trade. Second, the ETP partnerships that we introduced only in December, had also no time in 2021 to kick in, but will kick in, in 2022. And we introduced early and late trading only in August 2021, had an impact already in the Q4 2021, which is also visible, not only here on the big numbers, but also if you go into details that it picked up and supported the revenue per trade, but will continue also to support the revenue per trade. Long story short, we assume that the revenues per trade on the mid-term will continue to be at levels that we saw, let’s say, during the last two quarters in Q3 and Q4, depending on the success, which we believe will be very clear and very significant of DEGIRO Goes Zero. We will even see maybe here or there a pickup on the revenue per trade.
All this growth and the pickup on the revenue per trade is mainly explained and characterized, and the success of this business is characterized by its savers and investors, by its clients and client base. And we have seen a lot of brokerage companies across the globe that started with a brokerage idea and have turned out to be whatever they are, whatever business they conduct. Our clear strategy and focus is to be the place in Europe for savers and investors to shape their own financial future, and to give them access to classic capital markets.
And this is what you see here, the AUC share by product. 92% of all our AUCs are cash products, the stocks and ETFs. And this is what we feel good with, and this is what our clients are feeling good with, and this is what generates sustainable revenues on the business. When looking to the revenue share, for stocks, AUC split or AUC share equals almost the revenue share. It’s also, 68% of our revenues are generated with equity cash transactions, 23% are coming from ETPs. And if you look into the other, which includes things like options, futures, CFDs, all these things that are having or are being highly scrutinized during the recent quarters and years, are contributing less and less of our revenues, and are held less and less by our clients.
So a very sustainable setup for our clients, for our savers and investors, that should also generate going forward very sustainable returns. Yes. Getting more into the quality of our customer base, and I think those are also slides that are – yes, for most of you – or actually for all of you, rather new. Let’s start with the cohort analysis that you know from our previous decks.
What we see here is the revenues contributed by the different cohorts. And we always had this big question, especially about the 2020 cohort. How sustainable is that cohort? Will this cohort not drop away, because 2020 included so many clients that only jumped on because they had time and they wanted to trade maybe around, but they will go away after a year or 2? I’m absolutely happy that our belief in our client base and the way how we win clients, and the quality of clients that we win, has been proven with these numbers. The 2020 cohort contributed massively to the 2021 revenues, and shows how sustainable the cohorts are that we are winning across all the years in the past. And this is something that we also saw with the 2021 cohort that contributed quite well to the 2021 revenues.
Again here, let’s see how they contribute to the 2022 revenues. What we see is that, our clients are stably and significantly and sustainably trading with us and generating revenues. When we consider the activity of our clients, what we see is that, throughout the last 3 years, so despite winning a lot of clients, the activity rates have increased. When we look into the share of medium active clients, so clients doing between 100 – sorry, between 10 and 100 transactions, that client share increased from 40% in 2018 to 45% in 2021, which indicates again that we are winning the right clients.
The clients that we are winning are not doing only one trade or two trades or three trades per year and then give up, or they tried it out, or are maybe betting on the wrong horse and losing all their money and jumping away. No. While the share of low trading clients from one to 10 has decreased by 5 percentage, 4 percentage points, the medium active client base grew by 5 percentage points.
That is, in the end, also the focus going forward, to try to win and steal market share in Continental Europe from incumbents, and to grow with clients who have a certain brokerage experience, but are looking for the best possible product and pricing structure all over Europe. That is exactly the medium active customer base that we are focusing on. When we look into the revenue generation across AUC cohorts, we’ve been discussing also here around especially smaller accounts, and the discussion always went into a point where we talked about that almost half of our clients has €2,500 and less on their accounts, by the way, which is 10x more than what we see with most of the neobrokers in the industry. The median there is usually around €200 to €300. Our median is around €2,000.
What we see is, and more important than where the median is, that also the smaller accounts are contributing to the profitability of the flatexDEGIRO business. So to give you a reading example, 7% of our customer base has €200 to €500 AUCs in securities and cash, but this cohort that has €200 to €500 on their accounts, still generates an ARPU of €44. If you compare this to the average client acquisition cost that we had, what you would say is that clients below €2,500 in assets in their accounts, are literally breakeven after a year, which shows again that, also when we win clients with smaller accounts, we are managing these clients to trade with us, to have their ETF saving schemes with us.
That’s very often the reason why the ARPU is less, because they are not very trading active with stock picking, but rather have their ETF saving schemes that are more or less super cheap or even costless for these clients, and thus the dilutive effect on the ARPU. But it’s important for us to see that these clients are active with us. This is a new chart that we have included also, to give you an understanding of what type of clients are we winning versus what the AUC split is across ages. And what we see is, mainly with increasing age, we see also increasing AUC development. So clients are with us. We have a churn rate that is super, super low, and thus explains the high loyalty and stickiness of our clients throughout many years, and we see how the portfolio sizes of these clients are increasing over the years on the one hand side.
On the other hand side, what we see is that the share of new customers in 2020 and 2021 is very, very similar to the share of total customers pay age group. So we don’t see here a big shift away from the average with respect to the last 2 years, which were, let’s say, very much determined and characterized by a big move of very young trading clients. Again, here we see this move has not been seen with us. Yes, we see a little tick and uptick, a shift to a younger client base, when you look into the peak of the yellow line, which is roughly at 26, 27 years compared to the average where the peak is rather at 29, 30 years, we see that it moved 1, 2 years, but the peak was not at 18 years as with other, again, competitors and peers in the market. And given the fact that we will continue in the future and in the past, we always have focused on winning clients, as I said, that have a certain experience in brokerage, and are from more or less day 1, accretive to our business.
When we look into the revenue contribution across age, we see here as well that, the older the clients get, the more revenue they contribute. And also, this is a fact why we are focusing steadily on rather clients in the age of 25 to 65 and less 18 to 25, because the revenue generation starts literally when you look into this chart at around 30 years. This is where the ARPU becomes €100 per client in average, whereas if you look into the 18 years old, you’re at roughly €20.
So the add-up is roughly €80 by just shifting your age focus by 10 years, and this is the clear strategy going forward to win clients that become very quickly trading active and revenue contributing to our business. And when you look now into the share of new customers, you see that, we are managing to keep the curve at exactly that point where it should be roughly 28 to 30 years, where the revenue contribution, the ARPU, which has a payback period of literally less than 8 months. This is with respect to growth. With respect to the overall portfolio of our client base, we have added up some charts and some information to the customer activity. One important point to highlight is that, the activity, so the share of active customers across the last 3 years, so since Q1 ‘19 until Q4 2021, has increased over time. In Q1 2019, we had roughly 35% of the client base being active in Q1 ‘19, whereas in Q4 2021, we were at around 40%.
When you look at that into the share of customer accounts with at least one trade per annum, so how active was our client base? You see that it grew by 10 percentage points between 2019 and 2021, which also indicates that you very often have situations where clients are in a certain year, not active at all, but reactivate in a year later. Long story short, having activity ratios of – in general, more than 60%, is a massive benchmark, and again, describes very well the quality of our asset base.
The number of trading customer accounts has literally increased from 250,000 to almost 800,000 clients. This is in absolute terms speaking. The trades per active customer accounts per quarter is quite significant. It’s been over the last 3 years always about 20 trades per customer. So when clients are trading and when they are active, they do, in general, more than 80 trades per year, if you just take the activity rates of active traders and not the whole base. We added on top of that also the share of U.S. volume. What we also see very nicely is a shift up – a continuous shift up, if you would eliminate the outlier Q1 2021, which was the meme stock GameStop hype that we had last year, you would see a very nice growing curve touching now 20% of total volume going into the U.S. volume. As you know, we indicated always a trading volume of roughly €250 billion to €300 billion. If you take 20%, we are talking about €50 billion plus. This is what we indicated when we have disclosed the DEGIRO Goes Zero that we do, and estimate €50 billion of U.S. equity flow.
I touched on this while I was speaking, retaining the right clients and losing the right clients. In 2021, we had a low churn literally on all metrics. We lost in terms of customer accounts, 2.5% of our client base. In terms of churned trades, which is more important than only to look at what client – or how many clients you lose, is to look into what type of clients are you losing. We churned 1.3% of our trades in the last 12 months, which is only half of the number of accounts. So what you see is that, we are losing literally low trading active clients. And when we go into the annualized revenues, LTM of these churned clients and trades, you see it’s only 1.1% of our total revenues.
Again, the summary here is that, when we are losing clients, we are losing literally the right clients and not clients that are super trading active or super profitable to our business, so that it could end up in a harm for our structural development and growth. Yes, that’s literally – it’s in information, data points and KPIs. Before we get into the Q&A, I mentioned it with respect to our marketing efforts, especially in the Q4, the documentary that has been a big success. We broadcasted it across Europe with great success. The success was so big that Discovery has decided to take this documentary into their Discovery+ streaming service. For us, it’s a very important project to contribute to the education of the retail markets in Continental Europe, to attract more and more clients into the capital markets, especially given the situation around the discussions about inflation.
One way to avoid inflation or to mitigate inflation is obviously to invest into assets and in the capital markets. So it’s been a great success. I’m really thankful for the whole team that has contributed massively to the development of this documentary. We will make use of the documentary, obviously, in all our future market campaigns. So yes, a one-off investment that we did, but we will be able to enjoy a lot of – out of the documentary going forward through 2022 and 2023, with respect to our marketing. And we truly believe, as a market leader, we also have to contribute to the education, to the development of this market, and not just sit around and wait for waves to bring us clients.
So whoever haven’t seen it yet, take your time. It’s a 4x 12 minutes documentary. It’s on Discovery+, but it’s also on our website, both on flatex.de as well as on our DEGIRO website in – if I’m not mistaken, 6 or 7 languages, so Spanish, French, Italian, German, English, and Dutch, and a couple more – Portuguese, a couple more. So feel free to enjoy a short and nice documentary about the true stories of investing.
Yes, that’s literally it from our side. The financial calendar is available to you and here on the slide, but also on the website. End of March, we will publish the full annual report. End of April, we will come out with the Q1 results of 2022 and so on.
Frank Niehage
Yes. Thank you, Mu. Before we’re going to open up for Q&A, maybe one more important information. We like this documentary really a lot, and we are proud that over 1 million people in Europe have already taken the time to watch it. So you will be in good company if you take some time to watch it, and we are happy for any feedback. So let’s open up for Q&A now.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] The first question is coming from Marius Fuhrberg at Warburg.
Marius Fuhrberg
Yes. Hi, Mu, first of all, thanks for providing such deep transparency and information on your customers and activities. The first question would be, what is your expectation on the revenue per trade for 2022? I mean, we saw the different effects, some accelerating, but also some diluting effects over the next year. So am I wrong when you – when I assume that you expect the revenue per trade at roughly the same level for 2022 that we saw also in Q4? Second question would be on the trading activity so far in 2022. I mean, the horrible war, of course, drove the capital market volatility, but we also saw go-to-market volatility in Q4 last year, but customers were rather not so active as we would have expected. So how has this developed in Q1 so far? And one last question is on the 38% of accounts without activity in 2021. How many assets under custody are allocated to those accounts? And when would you consider such low activity accounts – that accounts and maybe cancel the customer relationship?
Muhamad Chahrour
Yes. Thank you, Marius. Thanks for the question. Happy to answer. So the first question with respect to the expectation in revenue per trade for 2022. I think we’ve shown in Q4 a significant uptick in the revenues per trade. On top of that, we have implemented a number of product and pricing measures, as you know, so that we can expect, as I have indicated during the presentation, that the revenues per trade will be around what we have seen in Q3 and Q4. With kicking in structures like the U.S. equity, FX changes, you could even expect that this revenue per trade base might even increase more. How does it develop throughout the whole year? It depends very much again then on the trading product mix, and which clients are trading in which countries and what assets. But the €5, I think, have indicated a certain watermark that is very sustainable. I hope that answers the first question.
The second question with respect to trading activity in Q1 2022, as you know, we don’t comment on numbers until we publish them. I think everyone is currently following the capital markets. The volatility in the capital markets is given. It’s obviously not similar to what we have seen in Q1 2021. That is, I think, very clear and very obvious. But the development so far is something that we feel quite satisfied with. Yes, that’s – I think, it’s what I can say is the trading activity in Q1 2022. And obviously, the current situation is, yes, unfortunately, I have to say, contributing to the activity level. So it’s good to have the activity. The source of this activity is super unfortunate.
Your third question with respect to the activity level of the 38% non-active clients in 2021. Again, here, let me rephrase that, please, for a second. 68% of our clients were active. This is a massive number for a financial services company, that more than two-third of all your clients have acted and have conducted business with you. But the 32% is nevertheless an asset base that is super important for us. And Frank mentioned it in the introductory. One reason why we believe that an asset management product/robo advisory product, could be also accretive to our businesses, to give also these type of clients a certain access to the capital markets and a certain access that is maybe different from what you see in general with classic brokers, to re – in the end, revitalize also this client base, and to invite this client base for whatever reason why they are not trading. Maybe because they have no trading idea, maybe because they have no money because they are in a circumstance that doesn’t allow them to invest or they bought a house and needed the money for something else. So they are very – there are a lot of reasons why this might be the reason. But with this additional product, especially on the asset management side/robo-advisory side, we hope to reactivate also a significant part of this client base. So sorry, I said 68%, it’s 62%, not 68%, which is almost two-third.
Marius Fuhrberg
Thank you very much. One follow-up if I may on this. Just that’s what I was pointing to. I want to know how many on a custody are in those less or not active accounts, so to get a feeling for whether or not there is potential to reactivate those clients as to the point that they were already active, or are those like zero euro accounts where nothing ever happened?
Muhamad Chahrour
Again, let me go back to that slide where we showed very nicely – here we go. I hope you see it all. That slide indicated that, even clients with less than €200 on their account generated €44 in ARPU. So again, this connection that clients with low – super low accounts don’t generate ARPUs, is wrong. It’s literally wrong. And this is exactly where we say, this is something that we should or that we can, with additional products, even increase. So, we can create an additional ARPU to this €44 by maybe introducing additional products that are today not used by these clients. So, it doesn’t make a difference for us, whether a client has €100 or €50 or €10 on his account, because we see that these clients are active in a certain way, but we believe that we can increase the activity rate with additional products that we will contribute and provide during this year.
Marius Fuhrberg
Okay. Thank you.
Frank Niehage
You’re welcome.
Operator
The next question is coming from Christoph Greulich at Berenberg. Your line is now open.
Christoph Greulich
Yes. Good morning Frank. Good morning Muhamad. Thanks for taking my questions. I would like to start with – sorry, questions on the two new projects that you were mentioning with regards to crypto and robo-advisory. So, did I understand it correctly that this decision if that will be made organically or through acquisitions, this decision has not been made yet?
Frank Niehage
Yes, maybe I can answer this.
Muhamad Chahrour
Yes, Frank, please.
Frank Niehage
We have decided to rather enter into partnerships with existing businesses versus building up ourselves, but we will not enter into an acquisition, but rather into a partnership. And we will make sure, especially when it comes to crypto asset trading, that we will not increase our risk profile. You all might be aware of what’s going on with Mica markets and crypto assets. There is a directive in a draft version available on the European Commission level, and this still provides for unlimited liability in the draft version for those who offer those services. So, this still gives us a bit of a headache. And we think we found a solution how we can enter into a cooperation with a partner, where the partner keeps liability and risk, and we provide for our clients, access to their partner, to a reputable and good partner. Like, our clients can always expect us, if we introduce new products or partners that they belong to the best, and have a track record, and high quality and so forth. So, that goes to the crypto asset trading project, and with respect to the asset under management as combo advise project, again, we believe that we have screened the market very prudently, and that we come up with a partner with a long track record, a very established portfolio strategy, and again, where this business will not negatively impact or poison our business with respect to the fact that we focus on self-directed clients, and self-directed clients are treated from a regulatory point of view, very different than clients you provide advice with or for. So, we don’t want a situation that the whole regulatory scheme, which is applicable for advising clients will be imposed over us. So again, here we look for a partnership where we offer access to a partner who is then liable for the advice and who is providing the advice, and it’s not us. So, that is complied with. I hope that makes sense and answer the question a bit.
Christoph Greulich
Yes, that’s very clear. Thank you for that. And then I was wondering, regarding the revenue per trade that we have seen in Q4, and could you just clarify to me the – when we talk about the pricing overhaul at the DEGIRO in November last year, so the key, let’s say, accretive part of that was the increase of the FX conversion fee. So, what was the timing of that becoming effective?
Muhamad Chahrour
No. The FX change of DEGIRO did not impact the €5.22. It became effective – the FX change became effective on December 20th. So, it looks we didn’t have enough time over the last 10 days were off, 6 days – 5 days, 6 days were bank holidays to become effective on the revenue per trade base. The revenue per trade base was mainly influenced and significantly influenced during Q4, as I mentioned, mainly also by clients that we won in Q1 and Q2 in Germany and Austria, that started to pay for the transaction. And you know that with flatex, the average revenue per trade is actually usually €7 plus, especially on equities and ETPs, which finds, we are able to trade, as I said, the first six months of their lifetime with us for free. So, this contributed massively to the revenue per trade basis. It’s not the auto FX that only became effective in December 20th. We introduced it literally on – in November, absolutely right. The clients actually were allowed for four weeks to trade literally for zero U.S. equities, because the increase in auto FX only applied after the 20th of December.
Christoph Greulich
Yes, that’s clear. Thank you for that. And then just a last one from my side, maybe if you could say a few words on how you think your cost base – if you go apart from where you spend on marketing, I mean you talked about that, but just the other part of the cost base, how you see that evolving going forward?
Frank Niehage
Yes. Thanks, Chris, for that question. Apart from marketing, the personnel expenses were very much in line with what we expected. We didn’t have a big pickup, although we have obviously increased also the workforce, given the massive growth, mainly on the customer service side and the customer risk side. Our admin costs jumped more than linear, if you would just generate linear growth. That had two reasons. The first reason is that we had gross bookings on one effect that increased our admin costs as well as the other operating income, each by almost €3.5 million to €4 million. So, it’s a P&L or EBITDA zero effect, but it increased the P&L, so to speak, because we had to book it from accounting perspective in a gross way. And the second effect that we saw as well is that our banking license fees increased. This had two reasons. The first one is we are growing. More deposits means also that the Basile Benoit Bank are charging you more fees on the one hand side. On the other hand side, there was a special payment that all banks unfortunately had to do, given the downfall of a German bank, which was not Wirecard in this case, but Greenville, that added up as well unexpected costs, which is more or less a one-off item, to the depository scheme. So, apart from these one-off items that amounted to, let’s say, €5 million – altogether €5 million, €5.5 million, we expect the personnel expense side as well as – so the operational personnel expense side, so without the long-term incentive plans – as well as the general admin expenses to be – and to continue to be at a level that we have seen now in 2021, despite the growth.
Christoph Greulich
Okay. That’s very clear. Thank you.
Frank Niehage
You’re welcome.
Operator
[Operator Instructions] The next question is coming from Benjamin Kohnke at KBW.
Benjamin Kohnke
Good morning guys. I hope you can hear me.
Muhamad Chahrour
Yes. Hi Ben.
Benjamin Kohnke
Hi, Muhamad good morning. Frank good morning. A couple of questions, please. First one, back to the strategic projects, and a very simple one, is this part of your initial 2022 guidance in terms of new customers and number of trades?
Frank Niehage
We always guide prudently and with a certain forecast of projects that we will have in the business, so yes. But nevertheless, if things change, we will make the market aware of the fact that this might change.
Benjamin Kohnke
Thank you. Second one, I guess around that topic. I mean you – we all know you sit on quite a bit of excess cash on the balance sheet. And Frank, you made very clear you are going for partnerships rather than any sort of M&A. So, let’s assume that excess cash remains and will even grow. So Mu, any sort of update on, let’s say, your current thoughts on the use of cash? I mean you continue to print money like crazy. I am assuming your guidance holds, and therefore, I think that question becomes ever more imminent.
Frank Niehage
Yes. Maybe I can start and then Mu…
Muhamad Chahrour
Yes, please.
Frank Niehage
So, first of all, when we have a chance to enter into a very smart partnership where we don’t have to bring equity to the table, then we rather go for it instead of investing. Second, we still believe that it’s good to have that excess cash and that capital available for future situations. Imagine the payment for order then comes into force, and then a lot of neo-brokers get into trouble. We then think it might be the right time to go for acquisition and take some of those over, wherever it makes sense, yes. On the other hand, with respect to our growth and the speed, it’s good to have enough regulatory capital to finance that growth. So, that’s a bit of a strategic view towards that, but maybe, Mu, you want to complete from the financial point of view.
Muhamad Chahrour
No, absolutely. I mean with all respect and all humbleness, with respect to our cash flow generation, Frank mentioned that, with respect to AUM and crypto, we don’t consider acquisitions. But that doesn’t mean that we don’t consider acquisitions at all. It means we don’t consider it with respect to these two products, given the risk profile and the risk situation and the regulatory situation around these products. But if there are opportunities in the market that make sense for our development, we will always have a look into them for a second. You also know I am a big friend of cash. And I remember when we acquired DEGIRO, we had this beautiful situation not to ask anyone out there for a single penny to finance that transaction. And this is why here I am very classic and very conservative. I love to have one-time EBITDA and cash on my accounts, which allows me at any opportunistic moment, to take together with Frank and the Supervisory Board decisions, and not relying then on capital access that, as you know, might take a lot of time. And given that situation also maybe in a capital market situation where prices are low, I am really, really reluctant to giving away our share at low prices. So, that is all-in-all why we believe it’s good to have that cushion and then let’s look into the next years. If we end up in 2 years, 3 years having all this cash, but still no opportunities, there are some plans, obviously, and some strategic ideas that we discussed left and right of that decision.
Benjamin Kohnke
That’s very clear. Thank you. And my last question centers on customer acquisition costs. And if I understood you right, Mu, there was this sort of special impact in Q4 around the TV campaign, of around €5 million, right? But still – I mean, still significantly above your sort of long-term target of around €50 per new customer. So, just maybe a bit of an outlook into 2022. I mean the TV campaign continues in the first half and will bear costs. And so is it fair to assume customer acquisition costs in 2022, anywhere between €50 and €100?
Frank Niehage
Let me clarify this, because the hypothesis is wrong. We had €46 million in client – in marketing costs. We are off – roughly €5 million went into the production costs of the documentary and the advertisement. So, if you would clean up for this, you will end up with €41 million, if I am not mistaken. If you divide €41 million by 800,000 gross clients that we wanted, was 798,000. So, let’s round it up to 800, 000, it’s €51.25 of client acquisition costs. As I said, we always indicated €50 plus-minus 10%, depending on the market environment, depending on where you grow, so – and we will hold on this. I am not assuming to see tax going towards €100, absolutely not. But yes, maybe it will not stay at €50, maybe it ends up at €60, but definitely not at €100, which brings us back to the point of €50 plus-minus a certain variance depending on in which markets you grow faster. As I said, Germany, just to give you an example here, the tax in Germany are rather between €150 to €200, whereas, for example, in Italy, the tax are below €30. And the speed of growth in different markets determines also the client acquisition cost. But overall, holistically, as a group, we will continue to focus on the €50 to €60 in client acquisition costs.
Benjamin Kohnke
Great. Thank you very much.
Frank Niehage
You’re welcome.
Operator
The next question is coming from Christoph Blieffert at Exane BNP Paribas. Your line is now open.
Christoph Blieffert
Good morning. I have a couple of questions, and I would like to go through one-by-one. First of all, how would you describe the competitive behavior of Trade Republic at the moment, given that you and Trade Republic enter similar markets? And related to that, what would you consider as you key competitive advantage?
Muhamad Chahrour
Hi Chris. Let me clarify this. We are not entering any new markets. I would rather say, Trade Republic is entering markets in which we have been now for 5 years plus, number one. Number two is we are growing in these markets very successfully, whether it’s France, whether it’s Spain, whether it’s Italy, Netherlands is a domestic market of the DEGIRO, which also, I think allows us to continue to feel very good. Plus on top of that, we have entered the DEGIRO Goes Zero exactly in these core markets and core growth markets. How is the competitive movement of Trade Republic, I don’t know. I know as much as you know. And we all know that they don’t disclose very much about what they do and how they do. The only thing that we read is there is the press release, that they will – they want to go into these countries. But I have neither numbers nor do I know what they do or how many – or how successful they are. Our competitive edge has not changed over the last years. It’s still the PPP strategy. It’s still the price, it’s still the product, it’s still the platform. And starting with price, as I have said, we offer zero commission trading on all regulated exchanges, charging only €0.50 handling fee. Since you mentioned Trade Republic, if I am not mistaken, they have zero commission trading plus €1 handling fee, and they only allow you to trade via the market make a long short, not like with us across the whole world. Exchanges, we have showed it in our presentation very well, how important it is to offer also a product portfolio, an exchange portfolio. That is what differentiates us from neo-brokers in general. We are not going for 18-year, 19-year, 20-year-old clients who want just to try out a bit of Tesla buy and sell – although most of them cannot afford most probably the Tesla stock to look into the assets under custody in average versus the Tesla stock price. So, all those things are things that we are considering to be important for us. And going forward, I think I have said it a couple of times, we should not be considered as a neo-broker in this market. We should be considered as the best retailized form of interactive brokers, which is here for the European markets, winning the right clients, winning active clients, winning from day one, contributing, and profitability contributing clients. Plus, the other point is, Frank touched on this as well, the PFOF discussion. We will end this year most probably with, I would say, on the exchange side, definitely zero PFOF. The PFOF discussion with other brokers is also limiting them with their growth in these countries. So yes, long story short, I think, we are on our track. We are not focusing what is happening left and right, as long as we cannot analyze it. But what we see is that we are doing it the right way. So far, we see there is competition. And don’t get me wrong, we are evaluating this competition very, very diligently and prudently. But so far, we see ourselves in a situation that will allow us to continue that growth, irrespective of further market entries by peers or competitors.
Christoph Blieffert
Very clear. As a second question, how would you describe the ideal trading environment for your client base? Is it rather a rising market with low volatility or a volatile market we are seeing at the moment? What is the ideal world for you?
Frank Niehage
The ideal world, the ideal world follows very much the idea of volatility on the one hand side, paired with the market awareness. Because, I mean in the end, look, what is ideal to us. Ideal for us is, if the first KPI of our formula success increases, the number of clients. How is number of clients increasing mainly, obviously, due to brand awareness and marketing, but in general, the awareness for capital markets. So, the more awareness we have in the society for capital markets, which usually happens with very volatile markets, because then every newspaper is publishing every day 20 articles about the capital markets, that increases the attractiveness of capital markets for clients. So, that is per se, an interesting environment, on the one hand side. And with respect to trading activity, volatile markets are always attractive, and are contributing, as we have seen in our slide, with the hidden reserve, so to speak. Here we go – that these markets are contributing additional windfall profits to our business. That would be the ideal dream, to have everyday volatility days, with a lot days, with a lot of capital market awareness. Unfortunately, Chris, you know as much as we know. It’s – life is not a wishing place. So, we have to deal with the environment we have and to try to make the best out of it. What we see is that, however – and this is the most important point for us, irrespective of the current market environment, our clients are loyal, they are sticky, and they are sustainably active. This is the important part.
Christoph Blieffert
Okay. The chart on Page 16 is showing the share of U.S. volume, is this for flatexDEGIRO or for DEGIRO only?
Muhamad Chahrour
That’s the group. We always show group figures. We don’t – and if it’s only one brand which we never – which we would never do, we would disclose it’s only for one brand.
Christoph Blieffert
Is it fair to assume that the share for DEGIRO is probably higher given that flatex clients in Germany could trade on Tradegate U.S. stocks in euros?
Frank Niehage
And Xetra. Yes, they are. Yes.
Christoph Blieffert
Okay. And that’s the last…
Frank Niehage
Germans – right. Germans tend to trade U.S. stocks, euro-denominated at local exchanges, which is an abnormality in the European environment. I think it’s only Xetra literally that allows for that, plus, obviously, Tradegate, to trade stocks euro-denominated, exactly.
Christoph Blieffert
And as a last question, it would be helpful if you could disclose your CET1 ratio at the end of 2021, please?
Muhamad Chahrour
We are happy to discuss this when the final figures are disclosed, Chris, because it obviously depends not only EBITDA, but on the net profit. But both are – also in the bank, it’s super profitable, super high, so 20% plus. And in the group, after the audited accounts, we assume it to be at least 15% plus.
Christoph Blieffert
Okay. Thanks so much.
Frank Niehage
You’re welcome.
Operator
There are no more questions coming in right now. For closing remarks, I will go back to speakers.
Frank Niehage
Yes. Thank you very much for attending today’s call. Thanks a lot for your support. I hope we have allowed you to get more transparency about certain data and facts, and are here also supportive to your wishes. We wish you all, yes, calm days, hopefully, with the geopolitical situation that comes also down as soon as possible. All the best, stay healthy, and hope to speak to you soon. If you need something, please let us know.
Muhamad Chahrour
Yes, the same from my side. Thank you all very much, and good luck to you, and please stay healthy. Keep crossed fingers that this war comes to an end as soon as possible and that we will have peace in Europe again. So, have a nice day. Thank you.
Operator
Ladies and gentlemen, thank you for your attendance. This call is being concluded. You may disconnect.
