Hoist Finance AB (publ)

Welcome to Hoist Finance Q2 Report for 2025. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to CEO Harry Vranisch and CFO Magnus Soderlund. Please go ahead.

Thank you very much. Good morning, everyone, and welcome to this Hoist Finance earnings call for the second quarter of 2025. I am Harry Vranjes, the CEO of Hoist Finance. And next to me today, I have Magnus Söderlund, our recently appointed CFO, and Karin Tycke, our chief investment relations and comms officer. So just want to start by thanking you all for your interest in Hoist Finance. As usual, we will try to run through the presentation in 30 minutes to leave room for questions you may have. But before we dive into the material, a bit of repetition for those of you who are new to Hoist Finance. So Hoist Finance's business model on a high level is very simple. We acquire portfolios of non-performing loans from tier one banks around Europe at significant discount. Historically, we've had an average price of around 10% of nominal value. Now then to reach our financial targets, we then manage the portfolios and we collect circa 20%. Now, so we do this in a banking suit or more specifically a credit market company suit. and this enables us to have a stable and cost-effective funding source in the form of deposits from the 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, during this second quarter of 2025, again, it has been a very active quarter, and I'm happy to report that this activity has mainly been in our core business. When I meet investors around Europe, typically I get two questions. They always pop up. Are there still MPLs for sales? The MPL ratios in the European banking sector have gone down. Is there anything left to buy? The answer, and as I think you can see from our activity during this quarter, is that we see, if anything, a larger pipeline than last year. Yes, there are MPLs for sale. The second question I typically get is, how are you doing on the SDR criteria, the Specialized Debt Restructure criteria? And here we did most of the heavy lifting during the first quarter, as those of you who followed us are aware. And we are now comfortably reaching all criteria. We will, of course, continue to monitor this, trim our very competitive funding costs. But for now, we prefer to be on the conservative side of the KPIs required for the SDR status. And we still expect to become an SDR in 2026. Now, let's dive into the material. Next slide, please. Q2 highlights. Well, profit before tax came in at 310 million SEK compared to 377 last year. Now, this quarter, we had a negative VAT ruling from the Netherlands that brought down the result. And last year, as those of you who have followed us know, we had one time profits from portfolio sales in the quarter and also some higher costs due to restructurings. Now, adjusted for that, the underlying result for the quarter is 335 million SEK. And Magnus will take you through this later in his presentation. Return on equity came in at a strong 14.7% in line with our external financial targets and again driven by the core underlying business. We have mentioned before that we want to have as little sort of one-offs as possible. I think we have delivered that so far this year. Some one-offs are sort of unavoidable, but I think we have delivered on that promise so far this year. now making the same adjustment as as on as on profit before tax this would mean an underlying return on equity of a very strong 16.1 percent compared to then 13.7 last year now one of the highlights of the quarter and i guess we we flagged for that already in the q1 report uh it has been the investment volumes 2.6 billion sec booked in the quarter at stable returns it has been a busy period it has continued into july with an additional signed volume of 1.9 billion sec so far in q3 and we see basically increased volumes in in mid-europe and let's say still significant unchanged volumes in the south. Our portfolio now stands at 31 billion SEC and adjusted for currency. That means 17% increase compared to the same quarter last year. Now, and quarter by quarter, we are getting closer to our ambition of having a total portfolio size of 36 billion SEC by the end of 2026. Also core business collection performance came in at a solid 104, even 104.4% as we continuously keep improving efficiency in all our units around Europe and together with our collection partners. Tight cost control with the underlying direct costs trending in line with collections and indirect costs flat-ish adjusted for the one-offs. Now this cost control and not unimportantly cost flexibility is helped by this cost structure that we have spent the last year's building with outsourcing partners in select geographies and for select asset classes around Europe. We have a strong capital and liquidity position with a CET1 ratio of 12.5% and a significant liquidity reserve of 26 billion SEK and we continue to meet the full SDR criteria with an NSFR at a safe 143% in the quarter. And as I hope most of you have noticed, in July Moody's ratings affirmed all the ratings and assessments of Hoist Finance and also changed the outlook on the group's long-term issuer and senior unsecured debt ratings to positive from previously stable. And I think with that, I'm going to hand over to Magnus to take you through the numbers and the details of the quarter.

uh thank you harry and thank you all for joining this call so uh we had a very solid and good quarter uh with the profit before tax of 310 million sec uh with a 14.7 percent roe compared to last year's 377 million sec and 17.5 percent roe so we see a really positive intake of volume in the quarter 2.6 billion and a as harry mentioned continued high level of cost control and regarding the one-offs as we're expecting to see fewer and less material one-off items in 2025 that is sort of disturbing the year-on-year comparisons and underlying business development we did have some impact in q2 of this year but even more so in the second quarter of last year as mentioned by harry as well In this quarter, we see a negative 25 million SEC impact, which is the net of the VAT court ruling that we mentioned in the Q1 report. But then we also have some accrual releases related to VAT and other items. So the net was 25 million SEK. Last year, we saw a material impact from several extraordinary items with a net positive profit for tax impact of 62 million SEK for the quarter. And this was a combination of asset sales and costs related to improvement and restructuring activities. As an example, our insourcing of IT, where we see the benefits in this year. And for further reference, we have a detailed slide in the pack in the appendix illustrating the non-recurring items by quarter. So if we look at the underlying performance of the business, we see a 335 SEC profit before tax in the quarter versus the equivalent 315 million SEC in 2024. So this gives us a 6% underlying growth. If we look more into the details, we see a total interest income growth of 14% year over year. If we also include the co-invested interest income, which we should. And this is in line with the portfolio growth. The investments in Q2 were heavily tilted towards June, which leads to a lesser impact in terms of interest income for the quarter coming from these new investments. They will, of course, be fully realized during Q3. The 4% growth in net interest income reflects that we are now fully financed for a whole quarter in relation to the MSFR criteria to qualify as an SDR. Our net funding cost versus book value is tracking at 4.4%, same level as in Q1, as we saw in Q1. And we have an NSFR ratio of 143%. And here we see some room to trim going forward. We see a continued strong operational performance, 104.4%. This demonstrates our collection abilities and the good health of our portfolio. And the really strong investment volume for the quarter, 2.6 billion as mentioned, we are continuously buying portfolios at attractive levels that are accretive to our overall quality of the portfolio. Looking at the costs, they are tracking at a very good level, as they also did in Q1. We have an increased flexibility in our direct expenses. This will be further demonstrated in a future slide. facilitated by our expanded outsourced servicing optionality. And we have a stable indirect cost base, which will enable us to leverage a robust platform going forward. So all in all, we are very happy with this quarter. We're taking off the second quarter of the year on our journey to achieve SDR status. We saw a sharp and very positive increase in investments with a continued strong potential for the second half of the year. We are on top of our costs. We maintain our cost control and solid performance. Underlying ROE for the quarter adjusted from the one of items comes in at 16.1% versus the equivalent of 13.7% in last year. And as this is sort of a transitional period for us in 2025, considering we are carrying the SDR costs but not seeing the benefits yet, We are very happy with the results of the quarter, maintaining a healthy return level. So if we can move to the next slide, please. So we're picking up pace from Q1 with a really strong intake of the volume in Q2. This is the third highest single quarter in the past three years. Looking further into the second half of the year, we see a very strong pipeline with many interesting opportunities in the short as well as the mid-term. And this really brings us to a good place to reach the plan of a 36 billion portfolio book value by 2026. Already now in July, as I think Harry mentioned, we have an additional 1.9 billion SEK signed. And this is ready to be implemented in Q3. Parts of it possibly sliding into Q4. So we have a really good momentum in our investment activities. To mention some specifics, very happy to increase our presence in the Portuguese market with an additional leave closed during Q2. So far, we're very happy with the performance of this latest addition to our footprint. Overall, we're seeing return levels in our new investments this year that are accretive to the quality of our total portfolio. We, as always, remain disciplined in our investment and pricing strategy with a healthy risk level in our portfolio. This is also proven by our collection performance remaining above forecasted levels. And we are also continuing working with our strategic partnerships, both for servicing and for expanding our sourcing network. And our funding cost remains a very competitive edge for us in the market. I think we can move to the next slide. Looking at our asset class mix, 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. Our main two asset classes we invest into remains to be secured and unsecured. The secured part of the book is gradually increasing over the past year or years, but still at a rather moderate pace. All in all, we believe we have a very healthy portfolio and we manage it with the aim to deliver a stable and predictable performance. We have a continued positive tilt in the book. and with this i mean we we have a materially more portfolios over performing than underperforming in the mix of the total book and we will continue to focus at upholding these levels and believe the quality of the book is supporting that so if we go to the next slide please Looking at our funding, we see a similar mix to the one we presented in Q1. So we have 80% or 41 billion SEK consists of our deposits, now held at contractual maturity, three months or longer. We issued two bonds during Q1 to a total of 1.3 billion SEK and we repurchased 230 of older senior preferred. Our funding cost remains at similar levels as the previous two quarters. To sum it up, we have a diversified and competitively priced funding base, which is really bringing us to the forefront in the debt purchasing market. So this slide is to illustrate our development of net funding cost over portfolio book value. So we go from a 3.4% in last year to a 4.4% now in Q2. We also saw the same in Q1. uh roughly half of the increased 100 bps we see is related to sdr costs and the rest is related to other items such as the s p bond replacing the call the 81 in q1 and further bonditions to safeguard our rating so other activities we're currently in preparation for setting up our own euro deposit platforms in select markets this will bring a diversified set of tools and also bring lower costs For this quarter, we are at a rather high level of NSFR, as I mentioned before. This is something we will actively work to tighten a bit moving into Q3 and the second half of 2025. But also with this increased funding rate, we remain extremely competitive and in a really good place to keep growing. Next slide. Also in Q1, we see the continued trend of flexible direct cost versus collection with a slightly improved cost to collect in the first half of this year, mainly coming from increased level of outsourcing and other efficiency improvements. Looking at the indirect costs, we see a fairly flat underlying cost development. We are very cost conscious and focused to maintain the benefits of a former rejuvenation program and other cost saving activities such as the insourcing of IT. We're obviously also continuously looking for further optimization, but with this stability, we're in a very good place to leverage the future growth of our portfolio. You can go to the next slide. So this slide is basically describing the past five quarters ROE excluding, this is the reported number. So not the underlying. In summary, what we see is a continued strong quarter to quarter ROE trend with the underlying returns above 15%. So this is also after absorbing all costs associated with becoming an SDR organization. but before being able to see the full impacts of the benefits yet so we're very happy with the with the 15 roe in q2 and with a strong pipeline type cost control and more than adequate capital we are set to continue to grow in a very active market and we can go to the capital position we maintain a very strong capital position Materially above regulatory requirements, we move from 13.1% in Q1 to the illustrated 12.5% in the slide in Q2. This decrease is mainly driven by increased level of backstop and net investments for the quarter that were really high. So we have a continued strong and significant purchasing power sufficient to meet our growth plans for the remainder of this year. And looking at our liquidity position, looking at the LCR, we continue to maintain a very high level driven by the materially increased liquidity portfolio associated with becoming SDR. We have the 143% NSFR as mentioned, and this is something we will look to trim at reasonable levels during the second half of this year. And the liquidity portfolio remains at similar high levels as the past two quarters driven by the SDR criteria fulfillment. And I think that concludes the sort of results slide. So with that, I hand back to you, Harry.