Hoist Finance AB (publ)

Thank you. Good morning, everyone, and welcome to this Hoist Finance earnings call for the first quarter of 2025. I am Harry Vranjes, CEO of Hoist Finance. And next to me, I have Magnus Söderlund, our acting CFO for his first presentation, and Carl Intik, our chief investor relations officer. So before we dive into the numbers and the highlights, I just want to thank you all for your interest in Hoist Finance. We will try to run through the presentation today in 30 minutes to leave room for any questions you may have, as usual. But first, just very shortly about Hoist Finance for those of you who are new to us. So on a high level, our business model is very simple. We acquire portfolios of non-performing loans from banks at significant discounts, historically an average discount of 90%. So basically we buy on average for 10% of nominal value. Now to then reach our financial targets, we manage these portfolios and we collect circa 20% of the nominal value. We do this in a banking suit or more specifically a credit market company suit that enables us to have a stable and cost-affecting funding source in the form of deposits from the public. Now, in an industry that is undergoing significant change, we are and will continue to be a capital-heavy industrial actor, and we strive to become the leading investor and asset manager of consumer and SME non-performing loans in Europe. Now, the first quarter of 2025 has been another very active quarter for Hoyst Finance on many fronts. During February, we received clarity on the interpretations of the two outstanding criteria for the qualification for so-called specialized debt restructure. This has triggered a host of activities within HOIST, mainly with regards to our funding. where we've replaced all our flex accounts with the three to six months term accounts. All of these activities were completed before the 31st of third, so before the end of the quarter. And as you need to fulfill the SDR criteria for every reporting date during the preceding year, we now conclude that we are on track to notify as an SDR in 2026. Now let's dive into the material Key highlights from Q1. Profit before tax came in at 332 million SEK compared to 279 million in Q1 of last year. Now, the market uncertainty or turbulence towards the end of the quarter and FX had only a minor impact on the income statement, more on the balance sheet. but magnus will take you through this later in the in the presentation our core measurement return on equity came in at a strong 16.7 percent driven by the core underlying business as we continue to execute on our strategy the underlying core is now generating profit on a higher and higher degree right so those of you who followed us already in 22 23 You know that we had a lot of positive one-off effects that drove the result. Now it is the core business. We closed portfolio investments of 1 billion SEC in the quarter at good returns. After, I guess we could call a sleepy January, the market woke up and is now very busy. Our investment team is currently working on 60 transactions across Europe. Now volumes and pricing in the market are still attractive. But as you know, investment levels will continue to be lumpy between quarters as our average portfolio size keeps going up. During April, so after the quarter ended, we signed acquisitions for an additional 1.3 billion SEC that we expect to close now during Q2 and Q3. Our portfolio now stands at 29 billion SEC, which corresponds to a 10% increase year on year. But FX adjusted, that would be like 16%. Now the FX is also the main reason the book shrinks between Q4 and Q1 this year. Now net interest income up 19% compared to Q1 last year, despite the added cost of the liquidity portfolio. And a 19% interest income growth versus a currency adjusted portfolio growth of 16% means that our so-called operating leverage continues to expand, much benefited by cost control as well. Now, collection performance came in a solid 103 and we keep continuously improving efficiency in all units and with our collection partners around Europe. And this cost structure that we have spent the last few years building has helped mitigate the lower investments in the quarter, just as it should for an investment business. During Q1, we also called our Euro 81 of 40 million euros without replacing it with another 81 instrument. You will not see the full effect in Q1 as we paid the full year coupon in February, but that is now not reoccurring. And in the quarter, we also issued senior preferred and non-preferred bonds for a total of 1.45 billion SEK. And as you can see, our capital and liquidity position is very strong and we have ample purchasing power. Our CET1 ratio came in at 13.1%. Now, with that, I will hand over to Magnus to take you through the numbers in detail.

Thank you, Harry, and thank you all for joining this call. So if we start with our financial summary. So for Q1, we're delivering a solid quarter from an earnings and returns perspective. We have 332 million in profit before tax, which is a 19% increase from last year, and then a return on equity of 16.7%. So this is slightly lower, the ROE, than last year's 18.4%. But that was also partially impacted by a materially lower than usual tax rate for the quarter that related to timing differences. We have a net interest income of 920 million for the quarter, which represents a growth of 19% versus last year. And our net interest margin remains at good levels at the same time as we are meeting all requirements of becoming SDR compliant, also with increased costs that brings. Looking at the cost side, we have no material extraordinary one of costs to consider for the quarter during 2024. We have completed our structuring with the extraordinary costs reported, particularly in Q2 to Q4. uh once the extraordinary cost one of course will likely appear also in the future it will be to a lesser extent our ambition is to be less volatile than previous years on the cost side we're seeing the benefits from the completed the rejuvenation program and further restructuring activities during last year coming through now in q1 So we are growing the book by 10% or 16% excluding FX. And we remain cost flat versus Q1 last year, but we also didn't have any material one-offs in the P&L. So looking at our cost to income ratio for Q1, it comes in at 68% to be compared to last year with the 71%. So we're very happy about that improvement. uh then uh as harry concluded we saw a rather sharp fx impact towards the end of q1 so the size of our book decreases versus last quarter by roughly 1.7 billion and out of this 1.5 billion is driven by fx movements that occurred in the later days of the quarter So for the P&L, the impact was not as significant since it's average currencies over the quarter. But for the portfolio, which is reported as point in time, the impact was more significant. All in all, we are very happy with the results for the quarter and the fact that we are managing a 16% growth in our book with a flat year on year. So next slide, please. Investments. So volumes comes in at roughly 1 billion for the quarter, which is a relatively low number compared to our quarterly average run rate during 2024. But also in our line of business, some quarters are slower than others and some more intense. For instance, Q3 of last year, where we acquired close to 4.5 billion. But we remain disciplined in our investment and pricing strategy. We're very data-driven and granular in our cash forecasts when assessing new deals, and we are very careful to minimize the level of assumptions in our valuations. Hence, the risk level of our book is in a very good place, which is also proven by our collection performance, which has been above forecasted levels throughout the whole of 2024 and now also in Q1 of this year. So we are in a supportive market where we're still seeing good and healthy return levels and we believe this will continue and support us as we see a shift in the market to more capital light business models for some of our peers. We have a really strong business model and our funding capabilities continue to be a competitive edge for us. And as Harry mentioned, we have signed the additional deals equal to book value 1.3 billion in Q2, which we expect to close and implement later this year. And we remain convinced and aligned to meet our plan of 36 billion SEK in book value at the end of 2026. We also have a very healthy and big pipeline that will provide many good opportunities during the rest of this year. We are also worth mentioning continuing with our strategic partnerships to expand our sourcing network. We are continuously working with servicing partners, industry and financial peers to source and potentially co-invest where we see fit. In Q1, our cooperation with co-investors represented a total share of roughly 25% of the total acquired portfolios. and also worth iterating that we will always only report and show our share of all co-investments in the balance sheet in Fianna. Next slide, please. So the mix of our assets and the geographical spread remains similar to last quarter's. We have a healthy diversification of the book with the granular risk monitoring and a very low single risk exposure. We have a solid pan-European presence and geographical diversification. And our main two asset classes we invest into remains to be secured and unsecured. And there are a couple of sub-sectors as well, but those are the main asset classes. And our collection performance is the evidence of a healthy book and risk profile. So if we go to next slide. So looking at our operating leverage, we continue to see an increase in operating leverage and scale effects also during Q1. We have a growth in the book, 16%, as mentioned, excluding FX, and the profit before tax increased by 90%. So we're growing our net interest income by 19% whilst remaining costs flat year on year. This is a result of our cost control activities and completed restructuring work in last year. And we are obviously also actively working with further cost efficiency improvements in our daily business. And we can go to the next slide. So I think this is a new slide in the presentation. The purpose of this is to illustrate the development of our direct and indirect costs over time. And as you can see, when comparing the direct cost to collections, collections is the top graph, sorry, the top line in the graph. So we have a very flexible cost base and we are becoming more flexible over time thanks to our outsourcing model applied in a number of our markets at this point. Looking at our indirect costs we see a fairly flat underlying cost development with the previously mentioned and discussed one loss during 2024 that mostly related to the restructuring program. And also to keep in mind that the flat number of indirect FTEs includes an increase of roughly 40 FTEs that came with the insourcing IT initiative. This also brought the cost savings that make up for the high inflation environment. So we are becoming more flexible over time. We can also see the number of FTEs reducing over time, which is a combination of efficiency improvements and outsourcing where we find it optimal. So the next slide. The funding. Looking at the funding, it is a similar mix to the one we presented in Q4. The largest portion consists of our deposits, which are by the end of Q1 transformed into 100% deposits with contractual maturity. We also issued two bonds during Q1 of a total of 1.5 billion SEK. And as Harry mentioned, we called the 40 million euro 81. So 80% of our funding consists of term deposits, three months to five years, and the rest consists of different types of market funding in order to maintain healthy diversification. This ratio can vary slightly throughout the year, but this is roughly where we'll be. It's a diversified, stable, competitively priced funding base, which is supporting our growth. We have an average cost of 3.7%, which is in the same range as Q4 of last year. Next slide, please. So our liquidity position. Looking at the LCR, we continue to maintain a very high level. We have more than triple the liquidity portfolio and reserve year over year, and we have an extraordinarily high LCR at over 1,500%. Regarding NSFR, we are now reporting in accordance with the legal position of the SFSA. We have also restated Q4 now of 2024 accordingly. And for Q1, as you can see, we are above the required 130%. The growth of the liquidity reserve is basically driven by three factors. It is the 130% MSFR requirements, the legal position of the SFSA, and the removal of the flex accounts. So this is all related to the SDR criteria that Harry will cover more in detail a bit later. We can move to the next one. Our CET1 capital position, we maintain a very strong capital position, materially above regulatory requirements. We moved from 11.5% in Q4 to 13.1% now in Q1. And this increase is mainly driven by three factors. First, the new standard model with calculating financial risk that came with the updated banking package. Secondly, the FX impact. And third is the fact that we had a relatively slow investment quarter in Q1. But we have a continued and significant purchasing power sufficient to meet our growth plans for the remainder of this year. And with that, I will hand back to you, Harry. Thank you very much, Magnus.

Yes, SDR. So as mentioned, we are aiming to notify as SDR in 2026. Now to do that, we need to fulfill a number of criteria. And in the beginning of this quarter or the discussions between regulators that started in late autumn 24 and continued until clarification in February this year have centered around two criteria. Primarily, what does preceding financial year mean? Basically, one of the criteria is that you need to have fulfilled all the other criteria during a full year before being able to notify as STR. Now, this has now been clarified exactly how that should be interpreted. And that is the interpretation. The clarification is that we need to meet all the criteria at each reporting date for a full financial year before notifying as SDR. And feel free to go through the appendix to see all the other, the full article text and the other criteria as well. But basically we conclude that we are fulfilling all the criteria per first reporting date of 2025 to date. So we are well on the way towards SDR 2026 based on this criteria. Now the second question where there was discussion around the interpretation was how site deposits should be defined. Now also here the Swedish FSA has clarified that all deposits without contractual maturity should be considered site deposits. Now so for that reason we have phased out all our so-called flex accounts which did not have contractual maturity. And we now only offer fixed term deposits with a duration from three months to five years. So no overnight or flex accounts anymore. And this makes us very confident that we are now well on the way to notifying as an SDR in the beginning of 26. so key takeaways before we open up for questions uh just want to leave you with some key takeaways for the quarter now uh we have a strong investment pipeline for the year and we reiterate our ambition of having a 36 billion sec portfolio by the end of by the end of next year actually uh MPL ratios in European banks are growing again and we see a highly active secondary market still. Our operating leverage continues to increase with good cost control and a flexible cost model, which we have spent years building. Significant, of course, purchasing power and we also have an unmatched funding cost in the industry. And as mentioned a couple of times now, we are on track to notify as STR in 2026. I should also repeat that the board of directors has suggested a dividend of two SEC per share after Q4, which is up for decision in the AGM tomorrow. So with that, that concludes actually our remarks for the first quarter. Thank you all for listening. Let's open up for questions. Do we press anywhere here?