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 Vragnus, CEO of Hoist Finance and next to me I have Magnus Södolund, our Acting CFO for his first presentation and Karl 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-effecting 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 Hoist 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. Now 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 STR criteria per every reporting date during the preceding year, we now conclude that we are on track to notify as an STR in 2026. Now let's dive into the material. Key highlights from Q1. Profit before tax came in at 332 million SEC 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 presentation. Our core measurement return on equity came in at a strong .7% driven by the core underlying business. As we continue to execute on our strategy, the underlying core is now generating profit to a higher and higher degree. So those of you who followed us already in 22, 23, you know that we had a lot of positive one-off effects that 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 and 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. Now 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 right and in the quarter we also issued senior preferred and 45 billion SEC 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 a stock compliance also with increased costs that brings. Looking at the cost side we have no materially extraordinary one of costs to consider for the quarter during 2024. We have completed our structuring with the extraordinary cost reported particularly in Q2 to Q4. Whilst the extraordinary costs one of costs 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 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 effects and we remain cost flat versus Q1 last year but we also didn't have any material one of us in the PNL. So looking at our cost to income ratio from Q1 it comes in at 68% to be compared to last year with the 71%. So we're very happy about that improvement. Then as Harry concluded we saw rather sharp effects 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 effects movements that occurred in the later days of the quarter. So for the PNL the impact was not as significant since its average currencies of 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 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 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 deal sequel 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 the 36 billion SEC 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 FINA. Next slide please. So the mix our assets and the geographical spread remains similar to last quarters. We have a healthy diversification of the book with 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 effects 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 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 of students 2024 that mostly related to the restructuring program. And also to keep in mind that the flat number of indirect FTs includes an increase of roughly 40 FTs that came with the sourcing 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 FTs 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. 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 I mentioned we call 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 it will be. It's a diversified stable competitively priced funding base which is supporting our growth. We have an average cost of the .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 1500%. 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% requirements, the legal position of the SFSA and the removal of the flex accounts. So this is all detailed 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 move from .5% in Q4 to .1% now in Q1. 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 plans for the remainder of this year. With that I will hand back to you. 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 SDR. 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. 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 that 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 2026. Key takeaways. Before we open up for questions I just want to leave you with some key takeaways for the quarter. Now we have a strong investment pipeline for the year and we reiterate our ambition of having 36 billion SEC portfolio by the end of next year actually. We have a strong investment pipeline for the year and we reiterate our 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 and as mentioned a couple of times now we are on track to notify as SDR 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? To

ask a question please dial pound key five on your telephone keypad. To enter the queue if you wish to withdraw your question please dial pound key six on your telephone keypad. The next question comes from Bjorn Olsen from SEB. Please go ahead.

Good morning guys. So a few questions on the SDR then. First one on page 11 in your slide pack as you mentioned there basically when you qualify as SDR you become exempt from the MPL desktop freeing up apparently around 890 million SEC by 2026. How should we view this sort of excess capital that you then hold? Should we look at this as an additional buffer for additional acquisitions or an extra dividend or could you guide any on that?

I think the excess capital that will be released at that moment will be utilized either for portfolio purchases which is always our preference but the board may very well choose to do something else related to that. We always have the options of share buybacks etc and I guess we will continue to inform the markets of how we're going to handle that going forward.

Excellent. And on the growth side then your funding like you mentioned is basically flat due on Q. Has this shift in deposit intake as you're trying to qualify as SDR affected the growth of your portfolio acquisition pace? Has it limited you or?

No, there has been no link between those two.

And finally then since you now know that you will qualify or are on tap to qualify as SDR will you shift your acquisition pace or change what you're purchasing or how should we view that 36 billion target?

I think we reiterate the 36 billion target and I mean we have a wide range of options for what we purchase. Obviously the closer we get to SDR the options expand further let's say right but we have the tools with securitizations, we have the co-investments already now, we have the secured asset class which we are very successful in where we see a strong pipeline for the year. So we expect that becoming an SDR will give us a little bit more options and of course it will the benefits will be that we will have a greater independence in our sourcing.

Great. Finally on the acquisition pace then or investment pace is it since it's still quite low is it explained by sort of lack of supply in the market or that you've felt that the competition in pricing has been not attractive enough or how should we view that? You said it was sleepy in January but no

after

Christmas is there any other explanation? I

think that is a question of timing and I think usually Q1 starts, usually there's sort of a burst of activity in Q4 and then Q1 typically starts slowly. Previous years we have had portfolios that have started out or were supposed to close in Q4 where the seller for some reason has chosen to postpone the closing into next year. This year we had fewer of those but in terms of sort of sleepiness of January it is pretty much the same as it has been other years as well. So it is a traditionally seasonally weaker quarter but as we say we saw the pace pick up again in February, March which now means we have signed 1.3 billion already in April. So we are positive for the acquisition pace for the full year and for the 36 billion target in 26.

Great thanks.

Thank you.

The next question comes from Marcus Sandgren from Kepler Shoevue. Please go ahead.

Hi guys, now I was just thinking three things. First FX, how much of income is denominated in non-SEC and the same for the cost base?

Yes Magnus.

Yes thank you for that question Marcus. I think if we look at our income and that pretty much follows our book value split. So it is roughly 70% euro, 16% slotty and then smaller parts for the sterling roughly 8%. And on the cost side looking at OPEX we have approximately 50% of our cost in euro, 30% in SEC and then 10% in sterling and the PLN, Polish slotty respectively.

Okay so 30% SEC and not much on the income side then?

No, no that's definitely. Okay good

and then on this SDR status again, sorry for asking but is there any uncertainty in your view about that this is going to happen Q1 2026?

What we need to do is we need to continue to deliver on these criteria for three more quarters. That is all in our own hands and we

Okay great and then lastly costs in Q1 now, are they representative so to speak? So if you grow that will be direct expenses that mostly grows from here?

Yes as I said in the presentation we're very happy to see our no cost base. I mean our cost base is improving and we are flexible if and when we grow we will grow for sure then the direct costs will move accordingly and on the indirect costs are on the flats. So yes.

Okay very good that's all from me thanks.

Thank you very much Marcus.

Question comes from Airman Karik from Carnegie, please go ahead.

Good morning gents and thanks for the presentation and for taking my question. Maybe I'll just start with following up on the cost question. I suppose it's almost what you just answered but do I get it correctly then that the best way to forecast your cost going forward would be to kind of look at the gross collection to direct cost and we just use kind of the rolling 12 month average something going forward as well and then indirect cost is it now flat instead of going with inflation so you're actually a little bit more ambitious on indirect cost or is it still the same?

I think the way of looking at it is comparing it to the collection rate but then the investment volumes also plays a part right because if we have a quarter with intense investments that will likely drive some of the direct costs up for that the sort of starting period of the portfolio so it's not exactly linear from that sense but I think looking at the collection levels is the best indication. And sorry Airman you had another question.

And the indirect costs. There was the indirect cost I think previously you said that they should grow in line with inflation and now you said flat. Is that just because you expect inflation to be further low this year or are you more ambitious on how much indirect costs you can

take out? That's a fair point. I'm an apologist for that. We always have to consider inflation as well.

Yeah no so the guiding remains the same on that. We see the IT insourcing is basically giving us the savings this year to sort of offset the inflation so far so that's actually delivering better than expected but I think the guidance stays at indirect costs will follow inflation. Great.

Then on the impairment gains and losses how should we think about that going forward? It was obviously a bit higher last year even though you still have a solid kind of collection rate relative to your active forecast now as well.

Yeah we do have a very solid performance last year and yes Q1 of this year is like lower but these things can move up and down as well depending on time. We have a very healthy book. We have a positive tilt in our book and I mean as long as we're above 100% we're happy but we will always be a guide for this in the future but I mean our ambition is to remain in this range or at this level and considering the quality of the book that's definitely something we believe in.

Great. Then one last question just for my understanding on the SDR. So obviously you need to keep above all the criteria for the rest of the year to notify into next year. How does it work thereafter? If you would list below on let's say NSFR for one quarter in two years does it reset? You lose your status and you have to qualify for another year or how does that work? And maybe as a follow-on on that then just like how much buffer do you want to have to the NSFR requirement

on a long-term

basis?

I think let's the buffer we will keep some 10 to 13 percent above the NSFR target of 130. That's where we want to or well from 5 to 15 let's say right is where we want to be and now we're smack in the middle of that range for this quarter. Then in terms of how this will work going forward we will need to stay on these criteria throughout the full time. Should there be anything then there is a discussion with the FSA. So but we fully intend to stay within and above the criteria that are set by the regulators for the full period.

Great thank you.

Thank you Ermin.

Okay. Yeah okay

so no more questions on the phone.

Hi again yes one last one on the 81 redemption. So was that what kind of costs was it in this quarter? Was it for coming quarters or was it related to the redemption in itself or what was it that took it higher?

So in February we paid the full year coupon for the redeemed 81 the 40 million. So going forward we will not have that right. Okay thanks. The remaining 81 the 700 million SEC has a quarterly interest payment. Super any more questions?

More phone questions at this time. So I hand the conference back to speakers for any written questions or closing comments.

Thank you for that. Thank you for the questions we have.

Yes let's do some written questions as well. So there's one here on the CEO letter. Harry you write that if market rates rise our lead will increase and a great fall we will see an immediate positive impact on our results. Can you please elaborate on that?

Yes well typically higher market rates means higher rates basically for bond financed peers right and I think this is one of the benefits we have seen with the hoist model and one of the core benefits that we have is our very very competitive funding. So we have seen also now during this let's say turbulence after the second of April how bond markets briefly froze. Now of course we are less dependent on those markets than many other actors in the industry. So typically higher market rates will make us more competitive on the it comes to portfolio purchases. Then obviously if interest rates fall then we typically we will see that immediately in our interest expense lines right. Our deposit funding we can very quickly react and adapt interests to the market levels right. So it is that's what that's the sort of the point of that statement in the CEO letter.

Very good that's actually all the questions we have today so thanks very much for listening in.

Thank you all very much and have a great continued day. Thank you.