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Investing.com -- Berenberg initiated coverage of Grenke AG with a “buy” rating and a €29 price target, saying the small-ticket leasing provider is entering a phase of renewed growth after several years of weak volumes, margin pressure and elevated costs. The target more than doubles the company’s €13.04 share price as of Nov. 19.
The broker’s initiation flags that Grenke’s €11 billion leasing portfolio is expanding again as low-volume years from 2020 to 2022 roll off.
New leasing business reached record levels in 2024 at more than €3 billion, and portfolio volume rose 7.5% in 2024 to €10.1 billion before climbing to €11.1 billion in the first nine months of 2025, up 12.2% year over year.
Berenberg expects this trend to continue because expiring volumes remain subdued.
Grenke, a long-standing specialist in leasing contracts averaging just under €10,000 across 31 markets, saw net interest income weaken from 2021 to 2023 as low-margin contracts replaced older high-margin business and refinancing costs rose. According to the brokerage, margin conditions have since stabilised.
The CM1 margin on new contracts increased to 12.2% in 2025 from 9.8% in 2023 as refinancing costs normalised and earlier rate hikes were passed on to customers. Berenberg forecasts net interest income to grow at a 15.7% CAGR from 2024 to 2027.
Risk costs, which climbed during pandemic-era volatility, have also normalised. The long-term loss-ratio average is 1.5%.
The brokerage notes a rise to 1.7% in 2025, but expects the ratio to stabilise rather than increase further, supported by the company’s scoring model and diversified SME customer base.
Operating costs remain a focus. After regulatory, IT and compliance investment and inflationary effects pushed the cost-income ratio to 59.2% in 2023, Grenke held it at similar levels in 2024.
The ratio stood at 55.4% for the first nine months of 2025. Berenberg expects the figure to fall to 54.5% in 2025 as top-line growth accelerates and extraordinary investment moderates.
The brokerage forecasts net income to rise from €70 million in 2024 to €126 million in 2027, with return on equity increasing from 5.3% in 2025 to 8.8% in 2027.
It expects double-digit ROE beyond 2028 as scale effects from higher volumes meet more stable cost trends.
Berenberg bases its €29 target on a residual-income model using a 9.35% cost of equity and 1% terminal growth rate.
The brokerage emphasises that the company’s valuation remains near multi-year lows, with current P/E and P/B ratios far below 10-year averages and market capitalisation below the embedded value of the existing portfolio.
Grenke’s 2025 guidance calls for €3.2-3.4 billion in new leasing business, net income of €71-81 million, a CM2 margin above 16.5%, a roughly 1.6% loss ratio, a cost-income ratio below 60% and an equity ratio around 16%.
After nine months, new business totalled €2.4 billion and net income €48.6 million.