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.

Yes, we have spoken about the SDR for quite some time now. It is a new regulation and not 100% easy for non-banking regulated MPL investors to understand. There are very few of those regulated MPL investors like Hoist. We are and we will continue to be regulated in the same framework as the selling banks who are our clients. And this helps us. The people we negotiate with on the other side when we buy portfolios, they know that we live by the same high standards of AML, customer protection, door right, etc. All the regulation that they live under. And this is a benefit when it comes to portfolio sales for a bank. It is sometimes difficult, not just for financial reasons, but more often not reputational. So they need to know that they are handing over their customers to a partner that will treat them right. With the SDR regulation, we will be able to keep the benefit of being banking regulated and at the same time be able to handle any type of non-performing loan without those restrictions that normally apply to banks or non-SDR banks. and primarily the backstop regulation. So this is a long-term benefit to Hoist. We will stay banking regulated and can operate without the restrictions that we have been living under since 2019. Now, short term, as we notify, we will be able to release the capital deduction we have for the backstop affected claims on our balance sheet. As Magnus mentioned, this will strengthen our CET1 ratio by two and a half to three percentage points, freeing up capital for further growth and capital repatriation to shareholders. Now, long term, we will be able to act together with co-investors or partners when we see fit, not because of the backstop regulation. So we will, for instance, continue to do what we just now did in Finland, invest together with a collection partner to gain access to new markets, new volumes and expertise. And we will be able to put, and for other portfolios, we'll be able to put the full volume on our balance sheet and therefore basically increase both earnings and growth. So taking more volume directly on our own balance sheet will also simplify our operating model. So this is a long time benefit. Stay banking regulated, but without the restrictions that we have been living under for the last six years. And then before we open up for questions, just leaving you with a few key takeaways. from this quarter. So obviously strong return on equity, 17.6% without major or material one-offs. So it is the underlying business delivering this result. Attractive and accretive IRRs in a highly active market. Also high activity internally with more than 100 investment committee meetings held so far during 2025, which is a new record. Further expanded our investable footprint, increasing flexibility in capital deployment with Finland now. And we will continue to look at other geographical locations. Costs are under control and we will continue on our continuous improvement path to ensure that we constantly get a little bit more efficient every quarter. And we have now finally met the SDR criteria for three out of the four required quarters in 2025. And we intend to notify the status in February 2026. With that, I think let's open up for questions. Now I need to press some button somewhere.

If you wish 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 Marcus Sandgren from Kepler Shoebrew. Please go ahead.

Good morning, guys. I had two questions, one related to growth and the second about margins. So when it comes to growth, I think you are a price taker, given your size versus the total market, and you are and will be even more cash rich. How come that you have not changed your growth target? Is it due to capacity or anything else? So that's my first question.

Good morning, Marcus. I didn't quite follow the question.

Okay, I'll take it again. My point is that you have cash so you can grow. So is the reason that you don't want to grow even more than your growth target, is that because you don't have capacity? Or are you afraid of driving up the prices because it's not a capital restraint anymore?

So I think our growth target in terms of what we have, the 36 billion volume ambition by the end of next year that stays, it is an ambition. So if we would you know, if that turns out to be 35.5 or 37.5, we're happy, right? The base, the core of that ambition is basically to have a critical mass portfolio. And then when it comes to sort of earnings growth or EPS growth, the 15% that we have communicated, I guess that is over a cycle and we intend to keep that.

And perhaps just to augment a bit on that, I mean, we are remaining disciplined in what we buy. You can call that not wanting to drive the price up, but we remain disciplined in everything we look at, and we are very careful with the return levels.

Okay. Okay. And then secondly, when it comes to margins, so now when you say NSFI trimming, What devils are you looking to go to and how much will that impact costs? And secondly, when you move over to more deposits on your own platforms, how much will that impact margins as well?

Well, the first question, Marcus, so we are at 142% in this quarter. I think the way to look at it is 1 million sec of cost per quarter and percentage point is the impact. So we obviously, we are careful to not go down towards 130% because this is not, we need to be careful on that, but we do see room for trimming it a bit further below the 142%. And then if you could repeat your second question, Marcus.

Yeah, when you move more of your deposits to own platforms, how much will that impact in the same way as you talked about, Denna Safar?

I mean, if we look at the liquidity reserve in relation to our portfolio book value, that's roughly at 79%, I think, in Q3. As we launch our own platform, we will have an easier access to gain MSFR-efficient liquidity. And then, you know, where's the limit? That's a good question. But I think we will definitely be able to go below the 79% ratio we see today.

Okay, thank you.

Thank you.

The next question comes from Bjorn Olsson from Seb. Please go ahead.

Good morning, guys. First, just a double-click on Marco's question. When you go to more funding on your own platform in Germany as well, for example, do you have any anticipation or targets of how much of your funding that will be shifted to your own platform versus Resin?

I think over time we expect all the shorter term funding to be transferred to own platforms. And this work starts when the platform goes live and the marketing campaign starts in Germany. And then it will gradually shift.

Do you have a launch date or an indicative launch date? Excuse me?

Can you say it again?

Do you have a date? Sorry guys, do you have a date?

A date? No, we've just said Q4.

Yeah, for the launch. Yeah, Q4. Thanks. And back to investments then. Can we expect an uptick in investments from your side in next year once you qualify as SDR? I mean, you sort of touched upon it in a few places in your presentation.

Well, I think like for like, if we would have invested the same, if we would have put on balance sheet the same amount that we sourced this quarter via co-investments, for instance, that would mean a sort of 25% increase in deployment. And I think that is a reasonable ratio to think about. then you never know right quarter by quarter it is lumpy deals and so on but it will certainly it will certainly help our deployment going forward yeah okay so rough yeah great on the cost side then I mean you're you're it's very impressive how you're trimming IT costs etc but

Could you give any guidance for 2026 and maybe even 2027 on how you view the indirect administrative cost line? Are you expecting any significant IT investments cost to pick up, for example, with the platform rollout? Or have you got like FCP investments that are due? Or how should we view that line looking at the years to come?

I think we should look at that line as basically as we have communicated, you know, we have this operating leverage basically where we keep indirect costs flat-ish growing with inflation and then direct costs growing in line with the portfolio growth. And I think that still goes. We will not have any material sort of IT investments for this platform, for the savings platform, et cetera. So no, I think we can just

stick with the normal i mean we have put a lot of work and money to get to this cost suit that we're now in on this cost base and we will fight extremely hard to remain in this and i think we're doing a great job so far in 2025 as harry said i see no sort of increases in costs in the next year so we remain very disciplined in the cost side of the business okay great thanks

Finally, on SDR and the excess capital, have you any more guidance on how we should view that excess capital for next year? I mean, you can play around with dividends, buybacks, and have you been giving any more thoughts to inorganic growth as well, in addition to just portfolios, but even like smaller players?

No, I think... Can you still hear us? Maybe you can hear us, but we cannot hear you. Let me see if we can. our speakers just went out here just in case you can hear us we basically we we stick to our to our dividend policy and so on right so obviously we want to ensure that we can keep growing the business as capital will go to that but with the release I'm sure there will be discussions and those will be communicated during during the q4 presentation in February um And with that, I hope that you heard the answer. Let's see if we can get... Now I get a text here saying that we can hear you, or that you can hear us. We can, however, not hear you, Björn, unfortunately. Now we can hear you. Sorry, did I answer your question?

Oh, great. Oh, guys. You answered on the dividend side, but have you been given any reasoning to sort of inorganic platform growth? I mean, basically acquiring or merging with a competitor?

or a sort of a competitor's business in a part of the mna is is always a a growth option of course uh looking you know to sort of leapfrog growth um and uh it is something we we look at and if there is uh if there is something that that fits our profile or that we think is uh a creative to uh to shareholder value we will for sure look at it

All right. Thanks, guys.

The next question comes from Airman Carrick from DNB Carnegie. Please go ahead.

Good morning. Maybe just to start a follow-up. What did you say on how much more you would invest if you were an SDR? Is it 25% more, which I think kind of like for life, or would that also mean that you would have more sourcing, you would still do the co-investment, but still take 25% more on your own balance sheet.

Basically what I was... Good morning, Ermin. What we were saying was that if you would have used Q3 as a proxy, it would have been 25% more. This will vary between quarters, but in general, obviously the STR status will mean a higher share of sort of own investments compared to co-investments. Although co-investments are still an attractive tool to open up markets, to gain access and expertise, or to simply just handle very large transactions. So we will continue with that.

Got it, thanks. Back a little bit to the funding questions. You've been showing us kind of the funding cost in relation to the NPL book, which is stabilized around 4.4 now for the last few quarters. What level do you expect you could get that one down to when you've kind of optimized both the NSFR level and the NSFR efficiency?

yes i think as as as magnus mentioned earlier i think in q1 we were at sort of 94 of portfolio i think yeah with the 29 versus 27 and now we're at the 79 right so we have i guess trimmed five percent per quarter uh we will continue to trim uh exactly where uh what the what the level is I guess can be sort of calculated in theory but we need to get there in practice and so we will not give any guidance on that but we will continue to trim it and you should expect to see improvement in that ratio going forward also next year.

Then just on your investment returns and so on given that you increased your investments in secured Should we expect any lower gross returns and then that to be recouped by, I don't know, lower cost to collect to maybe get a neutral net impact on returns? Or how should we think about it?

No, I think we strive to sort of keep the diversification we have. We're happy with it at the moment. When it comes to the return levels, I wouldn't recommend thinking about it like that. We expect to see the same returns independent of the asset class. But then certain metrics are, of course, different, like cost to collect is usually or can tend to be slightly lower on the secured side. But on the returns level, the sort of bottom line returns, I wouldn't anticipate any change going with the change in asset class.

But I agree on the bottom line, right? But I suppose on the top line, there you would have typically a bit lower returns secured, wouldn't you?

I wouldn't say significantly lower, no.

Okay. Okay, that's all for me. Thank you.

Thank you very much.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions or closing comments.

Thank you very much. Thank you all for listening in to this Q3 earnings call. And well, with the key takeaways that we left you with before the Q&A session, strong return on equity, highly active markets, costs under control, SDR in February, We say thank you very much and wish you a pleasant Friday and weekend when it comes.