Hoist Finance AB (publ)

Welcome to Hoist Finance Q3 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 Söderlund. Please go ahead.

Thank you very much. Good morning everyone and welcome to this Hoist Finance earnings call for the third quarter of 2025. I am Harry Vranjes, CEO of Hoist Finance and next to me I have Magnus Söderlund, our CFO and Karin Tycke, our Chief Investor Relations Officer. So first of all, thank you all for joining. Thank you for your interest in Hoist Finance. We will try to run through this presentation in 30 minutes to leave as much time as possible for any questions that you may have. now uh before we dive into the material um i usually sort of do a small introduction to sort of our core business model uh and i will do the same this quarter uh basically our business model is uh is very simple we acquire portfolios of non-performing loans from banks at significant discount historically uh an average we paid around 10 percent of nominal value Now to reach our financial targets, we then manage these portfolios and we collect roughly 20%. And we do this in a banking suit or more specifically a credit market company suit supervised by the Swedish FSA. And this enables us to have stable and cost-effective funding source in the form of deposits from the public, which we are unique in the industry. Now, in the last years, I've often gotten the question of whether we are sort of in some sort of a transition mode now, waiting for the SDR status. And it is true. We are very much looking forward to the SDR status. And we have been following this regulation developed for the last two and a half years. But at Hoist, this so-called waiting mode means that we have invested 20 billion SEC and built Europe's largest non-performing loan portfolio during that time. We have rolled out an operating model based on decentralization and a flexible cost base, and we have completely rebuilt our funding base during this time. Now, we will continue to grow profitably. up until and beyond the SDR notification, which we plan to do in February next year. And we fully intend to reach our volume ambitions and growth targets for years to come. So the third quarter 2025 has been another very active quarter, and the activity has been in our core business around Europe primarily. And now I am supposed to change slides here. So here you see a picture of myself and Magnus. And now we go to the key highlights. So, yes, the third quarter. Headlines, well, profit before tax came in at a strong 349 million SEC compared to 363 million last year. Now, last year, we had some net positive one-offs of around 50 million, 52 million SEC. And adjusting for that, profit before tax has grown 13%. Now, despite taking on 80 million SEC higher funding costs in this quarter compared to last year. Now, we typically don't talk about adjusted numbers, but just as a comparison, if you would adjust for all of this, one-offs last year, the added funding cost and the currency drag, you would see a growth in earnings before tax of more than 40%. So Magnus will take you through this later in the presentation. Return on equity came in at a strong 17.6%, well above our financial targets. Also pushing the year-to-date return on equity above 16% and above our financial targets. And the profitability is driven by the core underlying business. We closed portfolio investments of 2.4 billion in the quarter at accretive and attractive returns. As we talked about already in the Q2 earnings call, there is a lot of activity in the market and this continues. So we are now busy working on portfolio transactions that should close before the end of the year. So typically we have these two timelines or these two distinct moments during the year or where portfolios closed before holidays, before the summer holidays and before New Year. Now we're working on the New Year batch. So the pipeline is strong. We are well capitalized and In the 2.4 billion SEC that we have now invested, there's about 600 million of co-investments. So in practice, we have sourced around 3 billion in the quarter. And then our half of that 1,200 becomes a six up. We will continue to do co-investments also after we qualify as SDR, where we see that as beneficial. Now our portfolio stands at 32 billion SEK, which corresponds to a 9% increase compared to Q2 last year, if we adjust the currency. Quarter by quarter, we are getting closer to our ambition of having a total portfolio size of 36 billion SEK by the end of 2026. Now in the quarter, we also opened up the Finnish market in August through a co-investment. And we plan to grow our activity in Finland going forward. And this also expands our geographical footprint for capital deployments. And we now operate in 14 markets. Very happy to see the collection performance came in at a solid 103%, one percentage point higher than Q3 last year. And we are continuously improving efficiency in all units and with our collections partners around Europe. On the cost side, happy to see tight cost control. We cost flat year on year despite portfolio and collections growth. Now, this is a result of both asset class mix and an operating model, but still very happy to see. We remain well capitalized with a CET1 ratio significantly above regulatory limits, around 12.2%. And our liquidity reserve is at 25 billion SEC, something we are working on optimizing going forward we continue to meet the full sdr criteria now so three out of four quarters in the year we have an nsfr ratio of 142 percent and as mentioned we aim to notify as specialized debt restructure in conjunction with our q4 report in february next year With that, I will hand over to Magnus to take us through the quarter in more detail.

Thank you, Harry. Good morning all. So we had a strong third quarter profit before tax of 349 million SEK, 17.6% return on equity. Versus last year's 363 million SEK and 15.8% return, with an underlying profit before tax of 308 million SEK. So we saw some one-offs in Q3 last year, as mentioned by Harry, related to deferred profit in Poland. with a positive impact of 77 million SEK and also a negative one-off item, 22 million of project costs. So that means a total net positive one-off P&L impact of some 55 million SEK. As we had no material one-offs in Q3 of this year, this means an underlying growth in profit before tax of roughly 13%. Looking at the interest income combined for own portfolios and co-investments, we see a year-on-year growth of 7% or roughly 10% excluding FX. This in relation to a book value growth of 4% or 7% excluding FX. So this indicates we are maintaining a supportive pricing in the markets, resulting in increased total interest income over book value. Net interest income is 1% down on a reported basis, 2% positive growth excluding effects, impacted by the higher net interest expense related to the NSFR minimum target of 130% and the SDR status. And the increased stable funding requirements obviously impacts the net interest margin, which moves from roughly 13% in Q3 of last year to 12% in this year. So it's at similar levels we have seen during the first half of the year. The net funding cost over portfolio book value increases from 3.5% in Q3 last year to roughly 4.4% in this year, a similar level as we saw in Q2. So half of the increase is related to SDR build up and the rest mainly driven by other measures to strengthen our capital base. We see gains from real estate sales, particularly in Spain, and some other smaller asset sales in other income in line with our strategy as this capital will be redeployed to where we see higher return levels. We have a strong and stable collection performance for the quarter, 103.4% to be exact, versus the 102% in Q3 of last year. This demonstrates the continued good health of our book, and we are at the year-to-date collection performance of 104%, which is the same level as last year. And to note, the 77 million won off of last year is reported in the impairment line for Q3 2024. Looking at the costs, we see a continued disciplined development with a good cost control in place. The direct costs are flat year on year, and so is the underlying indirect cost where we had the 22 million one of cost in Q3 of last year. So underlying flat also here. We are very pleased with this cost performance that we are demonstrating. So all in all, we are happy with the outcome of Q3. We are taking off another quarter on our journey to notify as an SDR. We are carrying the increased cost related to this. whilst not seeing the benefits in the P&L yet and at the same time delivering strong returns with a 350 million SEK EBT and a return on equity of 17.6%. We have strong investment volume for the quarter and we continue to see many opportunities for the rest of this year and also in the beginning of next. Go to the next slide, please. The portfolio acquisitions. So we are roughly keeping the pace of Q2 and we come in at 2.4 billion SEK of new investments for the quarter. This keeps us on track to reach the planned 36 billion SEK portfolio book value by the end of next year. The acquisitions completed during the quarter will spread around eight different markets. So we are very pleased with the diversification and the Q3 investment activities. We see a continued strong pipeline, as I said, and we see ample opportunities moving into Q4. We're very happy to have acquired our first portfolio in Finland. And as per our quick entry strategy, we are now set up with a very core of local staff and outsourced servicing already ongoing. We continue to see healthy return levels in the portfolios we acquired with sustained collection of performance in the total portfolio. And we are sticking to the risk profile we want, that is granular risk and no big singular risk exposures. And we have a very positive outlook with ample opportunity, as I said, now in Q4, and also we see the same for the beginning of next year. So if we go to the next slide. We see a similar mix of our two main asset classes and the geographical spread compared to the first half of the year, with no single market representing more than 18%. We see a slight increase in the secured side of the portfolio. The secured side of the business has increased significantly over the past three years. This is not the goal in itself, but it provides the diversification that we want. And our ambition is to stay at this healthy level of spread across geographies with an ongoing focus on new additions in the near-term future. We can go to the next slide. Also here, we see a similar mix of funding compared to last quarters with a slight decrease in deposits from the public, roughly 500 million SEK. Our cost of funding is also at a slight decrease to 3.5%, with a continued funding cost over portfolio book value at roughly 4.4%. And this keeps us at a very competitive level in the market. We issued a 200 million SEK 81 at an attractive price, this to optimize our capital structure and take advantage of a really strong market. And in July, Moody's affirmed all of the ratings and assessments of Hoist Finance. We are BAA2, whilst also changing the outlook on our long-term issuer and senior unsecured debt ratings as positive from stable. We'll go to the next one. This slide we had also last quarter, and this is to illustrate our development of net funding cost over portfolio book value, as also mentioned in the final slide. And we can see that the funding cost of our portfolio book value in Q3 stays similar to the first half of the year. Roughly half of this increase, as said, is related to SDR costs and the rest is related to other items, such as costs for the senior non-performed loan replacing the quality one. We have higher deposits in Poland compared to last year as examples. As communicated in Q2, we are currently in preparation for setting up our own Euro deposit platforms in select markets with a planned rollout in Germany before year end. And this will increase our sort of toolbox to increase the funding efficiency and related costs. So the funding rate has increased in this transitional year of becoming SDR, but we still remain very competitive and in a good place to keep growing. We are very pleased with the cost development. As we have indicated, the direct costs are planned to move with the collection levels and the indirect costs to remain flat. Legal costs come in at a fairly low number, seasonally driven by closed courts during vacation period in the southern parts of Europe. Overall, a very strong cost to collect in the quarter, especially driven by very successful secured collection in Spain. So this is not to be considered a new level of cost to collect, but rather as a very strong performance in the quarter. For the indirect cost, we see a fairly flat development in live with plan. We see a lower FTE figure for the quarter. The reduction of direct FTEs is driven by the closing of our servicing entity in Romania. And the increase in indirect is driven by hoist spar and the rollout of our platform. Go to the next slide. So we maintain a strong capital position, well above the regulatory requirements and still above our target range. We are well positioned to deliver on the opportunities we see now in Q4. And we expect a CAT1 increase of roughly 2.5 to 3 percentage points when achieving SDR status. Looking at our liquidity position, LCR remains at very high levels compared to the regulatory 100% requirements. For NSFR, we arrive at 142%, a similar level to Q2, with a safe margin down to the 130% requirement related to the SDR criteria. As also mentioned in Q2, this is something we are focusing on trimming, of course, with a healthy headroom to the SDR required limit. We see a decrease in the liquidity portfolio, which we are very pleased with, considering the portfolio book value was at roughly 29 billion SEK in Q1, with the liquidity reserve of 27 billion to now be at 25 billion SEK with the portfolio book value of 31.5. This means that the liquidity reserve has decreased in size whilst the NPL book have increased. And this is accomplished primarily by shifting the deposit base from short-dated Euro deposits affected by the legal opinion to either longer-dated Euro deposits or SEC deposits on our own platform. And this will, of course, be further enabled by our future plans to launch platforms outside of Sweden, starting now than before year-end in Germany. And that was it. With that, I hand back to you, Harry.