TF Bank AB (publ)

Thank you very much. Good morning everyone.

Vi kan nu summera ett kvartal där tillväxtnivån i banken avsiktligen har kontrollerats för att säkerställa en god kreditkvalitet. Detta i kombination med att kunderna har spenderat lite mindre än normalt, ett normalt resultat av konjunkturen, resulterade i en tillväxt på 4% i lokal valuta. Summerar man kvartalets aktiviteter får vi ett slutligt operativt resultat på 158 miljoner kronor, vilket är hela 29% bättre än motsvarande period föregående år. Omvandlingen av banken fortsätter. Kreditkort blir en allt mer dominerande verksamhetsgren. Även geografiskt sker en förändring när en allt större del av affären bedrivs utanför Norden och Baltikum. Framförallt är det i segmenten kreditkort och e-commerce som driver EPS-tillväxten på koncernnivå. Det glädjer mig särskilt att intäkterna växer snabbare än kostnaderna och KI-talet fortsätter förbättras. Affärsmodellen skalar väl. Under kvartalet har vi sett en fortsatt stabilisering av kreditkvaliteten. Det man måste ha i åtanke när man analyserar kreditförlustraden i TF Bank är att vi är under stark förändring och har varit så i flera år. Vi växer snabbt. Vi ändrar också skepnad, både i form av affärs- och geografisk mix. Och då särskilt kreditkorten har en högre marginal men också en högre kreditförlustnivå i sig. Under andra kvartalet i år lanserade vi en kreditkort i Spanien. Kan vi vända till sidan tre. Som jag inleder med är kvartalets organiska tillväxt i lokala valutor 4%, ger och ger var en 18%. Kreditkort, TF Banks tillväxtmotor, växte med hela 12% under kvartalet och 63% ger och ger. E-commerce minskade med 2% under kvartalet i lokala valutor och också ger och ger med 2%. Det ska ses i ljuset av ett säsongsmässigt mönster där det lugnar i handen under första halvåret men framförallt av att verksamheterna i Polen och Baltikum är i run-off. Consumer lending did not grow during the quarter to the local currency, but increased by 1% year-on-year. If we look at the market, we can start with Germany and Austria, which geographically is the core of the growing part of the bank's credit card business. Vi ser fortsatt en stark efterfrågan på TFs bankskreditbord och vi förväntar oss en stark volymtillväxt under kommande kvartal. Vi har nu över 250 000 aktiva kunder i portföljen. I den tyska marknaden förbereder vi också för att lansera Avardas krediterbjudande under Q3, inledningsvis till nordiska handlaren. Allt är nu tekniskt på plats och det här kommer ge oss en ingång i den tyska marknaden men vi ser också att det är en styrka för vår försäljning i Norden eftersom Tyskland är en attraktiv marknad för nordiska e-handlare. In Norway, the credit card business is growing well, and we have previously added Apple and Google Pay. We now see that this often makes us the preferred card in the plan book. In the Nordic region, we have a full focus on our business in e-commerce, iAvarda, where we see ourselves as unique by being a flexible white label alternative, and that gives us success in the market. I övrigt i Norden är det också fokus på att upprätthålla lönsamheten och kreditkvaliteten i konsumtionslåneaffären när funding och riskkostnader har ökat. Vi har fortsatt medvetet håll ner i volymerna i konsumtionslånen i Norden för att bevaka kreditkvaliteten extra noga. Samma lönsamhetsfokus gäller för Estland, Lettland och Litauen. I alla tre baltiska länder är kreditkvaliteten rimligt stabil. Vi arbetar med att optimera portföljen för att upprätthålla det starka resultatet. Som sagt har vi under kvartalet etablerat kreditkort i Spanien och nästa steg i vår geografiska expansion är att testa den italienska marknaden, vilket vi planerar att göra under året. Nu vänder vi till sidan fem. Vi kan titta lite grann segment för segment. Vi börjar med credit cards. Vi fortsätter att växa i form av nyutgivna kort. I Tyskland växer antal utgivna kort med 56% year on year. And of the segment, the credit portfolio is now over 6 billion in Germany. We also see an improved QE segment, which shows that the business is scaling well. In this case, when we grow so much, then the end is very important for us. As I have described earlier, we have launched Apple Pay and Google Pay. At the end of the quarter, we have also introduced Cash-to-Account, which increases the attractiveness of our offer even more. It gives the potential to increase the benefit rate in general in our card business. And as I said, we have also launched the product in Spain and are preparing to launch the product in Italy during the year. We can wait for page 6. Within the e-commerce segment, we see the effect of the trade still having a calm period during the whole half year. We see that the efforts we have had to re-price the business still appear in the results and profitability is therefore strong, despite the fact that the trade has a tough period. As I said earlier, we are preparing for the launch of the Avada Skrita offer in the German market during the next quarter. Technically, we are aiming primarily at Nordic traders. We are humble about this challenge in the German market, but we also believe that this will be a strength for our business in the Nordic. In Baltic, we have paused new businesses from the beginning of the year, and since then, the business is in Poland. This contributes to the lower growth in the segment. we can turn to page 8. Within the consumer lending segment, we have, as I said, deliberately kept the growth rate down with a focus on defending margins. And as I presented already in connection with Q4, we made a tactical decision after last summer to keep the rate down, most clearly for Sweden, where we paused new sales all the way. But also for other markets, we have been restrictive to monitor credit quality and margins. And now, with the phase in hand, when the worst is over, you can see that e-commerce, which is our second segment that we run in the north, we have seen higher credit loss levels in the last quarter. And there we cannot control the growth rate in the same way, because it is a partnership with our traders. So with that said, and with that analysis, you can say that it was most likely the right decision to slow down the consumption loan last year. And with that said, we have seen a stabilization in margins in several markets. And also an improvement in credit quality in the segment. And that applies to all markets. Now I'll hand it over to Mikael to continue the presentation.

Thank you very much. If we turn the page, we can first look at our turnover. We can see that they rose to 595 million under the second quarter, which is 24% higher than the corresponding quarter of 2023. The main driving force behind the increase is the growth of the loan portfolio in the credit cards segment. I also want us to look further at our financing costs. You can see that they have plummeted during the second quarter, and the interest rate costs in absolute numbers are somewhat lower than in the first quarter. If we look further at our credit losses, they went up to 202 million during the second quarter. The credit loss level increased marginally to 4.2, which is explained by the mix effect, as the growing credit cards segment has a higher credit loss level than the other segments. As Joakim mentioned, Consumer Lending has improved its credit quality in the last quarter, which I will return to later in the presentation. If we look at our risk-adjusted revenues, we see a constant increase and a stable risk-adjusted margin in the past year. We can look at that on the next slide. Thank you. And here we can look further at the company's moving costs. We can see that they increased by 18% to 235 million under the second quarter. And I would like to mention that the cost of the quarter is affected by higher credit volumes and more employees in the bank. But despite the increased costs, our revenues grow faster, which makes our KITs improve to 39.5%. And that is mainly due to the scale of what we see in the credit cards segment. Och som ni också kan se i diagrammet har kredittal för segment credit cards kommit ner till 36 procent det senaste kvartalet. Motsvarande period 2023 uppgick credit cards kredittal till 41,5. Men jag ska också säga att en del av denna förbättring beror på något lägre direkta marknadsföringskostnader också. If we look at our largest segment, consumer lending, we see that the KU rate has increased to 33%, which is mainly related to increased costs for central functions in the bank. If we look at our third segment, e-commerce solutions, we can see that the KU rate has decreased to 58% in Q2, and the costs have been stable in absolute numbers in the last quarter, and thus we have had an improved income margin, which means that it has a positive effect on the KU rate of the segment. If we move on, as Joakim mentioned, we can see that our turnover is strong. We increased with 29% to 158 million in the second quarter. The driving force behind the profit growth is mainly increased turnover from the growth of the loan portfolio within the credit cards segment. If we look further at the bank's profitability, it has been stable during Q2 and the drop in its own capital rose to 22.5% and the share profit rose to 5.43 kronor. We can move on to the next page. Then we can look at our segment. First, we look at credit cards. We see that the moving profit is 52 million kronor in Q2, which is 105% higher than the corresponding quarter of 2023. This is above all higher income from the growing loan portfolio and scale distribution, which gives a lower K-retail contribution to the segment's reduction in allocated capital, up to 21% in the quarter. Here I can also mention that the calendar effect has had an impact on the segment's loan portfolio, which means that about 5-6 million euros will affect the segment's loan portfolio positively in July. And this was on the opposite side, which also happened in April this year. And then I also want to say that, as Joakim mentioned, we have launched a credit card in Spain and we are also planning for a launch in Italy in the coming quarter. And on the margin, this segment's profitability is something in the form that the costs come before the revenues, quite simply. If we scroll further and look at the e-commerce solution segment, we can see that we had a turnover of 22 million in the second quarter, which is a whole 33 percent higher than the corresponding period in 2023. Here, the income margin has been greatly improved in the past year, and the positive trend has also continued in Q2. However, the income has decreased somewhat in absolute numbers compared to the first quarter, which is explained by a somewhat lower loan portfolio. If we look at the segment's credit loss level, as Joakim mentioned, we can see that we have increased to 4.3% in Q2, and that is mainly credit quality in Sweden and Finland, which has been weak in the past quarter. And here it is of course so that we work actively with different solutions to turn the trends and strengthen the credit quality over time. But despite increased credit losses, the segment's cost of allocated capital has still improved to as much as 23% in Q2, which is due to the improved income margin that I mentioned earlier. If we move on to the next page, we look at consumer lending as a segment. We can see that we are ready to see a turnover of 83 million in Q2, which is 4% higher than the corresponding period before the year. As I mentioned earlier, the segment has increased somewhat due to increased costs for central functions in the bank. I would also like to mention that the last quarter of consumer lending has also been negatively affected by rising financing costs, but under Q2 a certain stabilization has occurred, I would say. But even more positive, as Joakim mentioned, is that the credit loss level has decreased and that we see a slightly improved credit quality on several markets in the segment. The risk-adjusted margin is therefore stable if we compare with the corresponding quarter of 2023 and the segment's drop in allocated equity capital has therefore been able to maintain 24% even under Q2. If we scroll further, we can look at the bank's financing and liquidity. Så fortsätter vi att ha en diversifierad inlåning geografiskt. Lanseringen av nya inlåningsprodukter i Spanien, Irland och Nederländerna i slutet av fjärde kvartalet har varit framgångsrika och genererat en ny inlåning på omkring 2,7 miljarder, varav merparten har tagits upp i Nederländerna. Under kvartalet har vi också ökat andelen fastränteinlåning till 57 procent i enheter innan. And as I said earlier, our previous liquidity reserves have now returned to more normalized levels and have risen to 20% of the income balance at the beginning of the quarter. And as you know, most of our liquidity reserves were previously placed in state debt changes with a short-term running time of up to six months. We can scroll. And then we can look at our capital relations. We can also see that these have been stable since the change of year. At the beginning of the quarter, the core primary capital relation increased to 12%, the primary capital relation to 13.5% and the total capital relation to 15.6%. I would like to mention that all capital relations have a safe distance to the regulatory capital requirements. In the second quarter, our capital base has been affected by 92 million kronor in relation to the Capital Technology Regulatory Act, which requires a higher reserve rate on distributed goods compared to revenue. Eftersom vi har sålt en övervägande del av våra förfallna forningar till tredje part ligger det potentiella större effekten av regelverket några år framåt i tiden för vår del. Men vi undersöker här även olika alternativ för att hantera effekterna av detta regelverk. I det korta perspektivet ser jag dock att ökningen av avdragskapitalbasen blir något mindre kommande kvartal. I would also like to mention that after we have previously had emissions of primary capital and supplementary capital instruments during 2023, we have a relatively optimized capital situation. During the third quarter, however, we plan to solve the supplementary capital instrument of 100 million, and in connection with this, also emit new instruments of somewhere between 2 to 250 million. With that, I will leave it back to you, Joakim. Thank you.

When we now look forward, I can sum up a little bit of what we have already mentioned. We continue the transformation of the bank, where credit cards and e-commerce are increasingly dominant business branches. After we have now launched credit cards in Spain, we look forward to testing the market in Italy and also to really launching Avarda in Germany. Thus, there is also a geographical change in the bank, where a large part of the business takes place in countries outside the Nordic countries. TF Bank is today much more of a European credit card and payment platform and much less of a Nordic consumer loan institute. And we are also continuing to develop our European loan platform. In the second half of the year, we can see that 2024 has started strong. We now see a tendency to a stabilization or even an improvement in credit quality. We also see a previous tendency to a stronger growth rate and what we are well prepared for. Som Mikael nämnde har TF Bank's kapitalrelationer varit stabila och som han också nämnde så arbetar vi med olika lösningar för att dämpa de framtida negativa effekterna av det så kallade backstop-regelverket. Bland annat ser vi på möjlighet att etablera en så kallad specialized debt restructurer i enlighet med det ändrade kapitaltekniske regelverket som träder i kraft 1 januari nästa år. Finally, I would like to mention that the volume in credit cards has been strong since the start of the third quarter and the loan portfolio is expected to pass our financial goal of 20 billion in a short time. We therefore plan to launch new financial goals during the second half of 2024. With that said, we can move on to Q&A.

Thank you very much for the presentation. And as I said, it's time for Q&A. Call in and ask a question. Then press star 9 to raise your hand and then star 6 when you get the word to activate the microphone. And the first to get the word here is Emil Jonsson from DNB. Hello, good morning.

I was going to start by asking in Germany and the Baltic states. Is there any change in the competition from the other credit board players? Do you advance anything in particular to the big banks?

No, I would say that we are such a small part of that market and based on that the potential is large. So if the others do something, it does not affect us in a large extent in that way. We are quite stable with a constant influx of new applications and Vi har till och med kunnat dra ner takten på vår marknadsföring och ändå så har vi en stabil ström av nya ansökningar. Ur det perspektivet så är det ingenting direkt som vi ser som påverkar vår affärsaktivitet.

Intressant. I Consumer Lending så var det en liten minskning på kreditförlust-ratio om man jämför med Q1. Var det något specifikt land som råkade gå bättre i det segmentet?

Jag skulle säga att det är över hela fältet. En stabilisering och en förbättring i Baltikum har vi sett under en längre tid. Vi har i Norge också varit relativt stabilt. Där ser vi en förbättring. Likadant i Sverige och Finland ser vi förbättringar. Jag skulle säga att det är över alla länder så ser vi förbättringar faktiskt. Sen så har de kommit lite olika i tid.

If we stay a little bit on credit losses and think a little bit about how they will develop in the future, just to understand the moving parts, if we were to assume that loan growth on credit cards would be halved in the future, if we think everything else in the same way, what should happen with the credit loss ratio? Should it also be halved or is it something else that you should have in mind?

I can answer that, Emil. Initially, the ratio will go down because a large part of the net long loss rate today consists of IFRS 9 effects, which you should reserve for future credit losses. But that's actually temporary. Then it should now reasonably come up to these normalized levels, which is somewhere around 5.5-6% as we have said for a longer time from a unit of economics. So you get a short-term effect, of course.

And what does the German regulator say about the consumer crisis right now? Do they have any views on interest rates or how much or little of a secured loan the population has?

What I know is that there is no such discussion at all. You should know that Germany is a market that is 20 years after Sweden when it comes to credit cards and generally compensation as well. So it is not a dominant entry in the social economy as it is especially in the USA and UK and has also become more and more in the north. So they are not really there, I would say, here and now. There are a lot of discussions, however, in Germany related to digital onboarding and digitization of society that affect our business. I would say that Germany is fighting to get other countries in Europe in the cap because they notice that foreign banks are relatively better off than German ones. They have a competitive advantage, and they need to stimulate society to become more digitalized. We see that as a relatively positive digital uptick. Interesting.

I understand that it's very early, but how is the credit card launch in Denmark and Spain going so far?

In Denmark, we don't have any credit card launches, but in Spain, it's very, very early. We have incredibly few cards on the market. And you should know that the first half of the year when we work with a card company, it's to calibrate our business case and fine-calibrate our whole process. So we have less than 1,000 cards out in the market. So it's not possible to read anything out of it so far. On the other hand, it confirms a lot of the parameters we have put into our business case. Then we have to do a little calibration and so on. You have to remember that it was in 2018 that we launched a credit card in Germany. And that took three or four years later. So we are incredibly long-term in what we do.

Okay, that's great. If you look at capital generation in the future, do you see that there will be enough growth opportunities to be able to reinvest all the capital that you generate? Or do you think that it will soon be appropriate to reinvest spending to handle the capital budget?

Over our planning horizon now, as I said earlier, we are very small in the German market, but we are growing fast there. So we see that we will be able to continue in the near future. However, when we establish a business in Spain and test in Italy, then we think of 2027, 2028, 2029. And that is to be able to maintain a high growth rate over time. Then you have to be able to fill in. So the HF Bank has always worked. So that we do nothing different than what we did before. And that is also the way of working that ensures that we can maintain a high salary and a high growth rate over time. But over the next few years, we don't see any problems. But on the other hand, we need to make investments for the future, which I am also doing now in the new market.

Okay, I understand. One last question. You also talked a little about how you should handle the NPL growth rules. What alternatives do you see, apart from the one mentioned in the report? There are several alternatives.

We see an expectation that the interest rate market will increase, which means that the normal activity in the market will recover. We also see on the buyers' side that there is an intensive restructuring. Which is necessary. But when it's done, there will be completely different parameters. Then there will be such SDRs on the court that have a completely different funding level than existing players. Which also means that the market will change fundamentally. And that takes force. Next year, and there are some players who already have that type of business, Hoyst is one of them, who can be in the starting groups, there will be new ones with all probability. Then there are solutions to create so-called SPVs that you can do. Så det är väl allt ifrån raka försäljningar till SPV-er till de här nya och sen så att marknaden kommer till liv igen. Jag har nästan goda förhoppningar om att det kommer att finna till rejält på den här marknaden under den kommande tvåårsperioden. Därför är det så bra att vi har legat länge och kunnat solgt av allting så att våra negativa effekter ligger längre fram i tiden.

Det besvarar alla frågor som jag hade. Stort tack. Tackar.

Tack så mycket för frågorna och nästa frågeställare som får ordet är Rickard Strand från Nordea. Varsågod.

Hallå, kan du höra mig?

Tack så mycket. Kom in lite sent på callet så jag ber om ursäkt om det är någonting jag frågar som du redan har svarat på. Jag tänkte om vi fortsätter att prata om kreditkort. 63% during the year or the past year and now accounts for 38% of the total loan stock. How can you say anything about how you think about either loan growth in relative numbers or in absolute numbers in the coming years? Do you see that there is more plateauing or should we continue to use expect a higher relative growth in the future?

First of all, we follow where the risk-based marginals lead us. We allocate capital twice a week. It has been so for many years that we see high potential in the credit card business. Then you can also note that a quarter ago I said that the number of cards had grown by 50% in Germany. This quarter I think it was 56 or 57% in Germany. And that gives some sort of indication that we rather increase our growth rate in the number of cards in Germany than the opposite. Then there should be a connection between the number of cards out in the market and volume growth over time. But it can take a while because we are working with low and low.

more or less slumped a couple of years earlier. How do you see the potential for growth there?

What we see in the Norwegian market is that we've really become upsticking cards, and that's because we have Apple and Google Pay. which all large banks do not have. And then you become the preferred card. And then the spending on our card goes up, and in Norway you are a little more greedy than in other Nordic markets when it comes to credit cards. So it drives volume growth. We also see that these solutions we have that we are launching now, which is no rocket science, but we have not had it before as a cash flow account, that it will drive Yeah. Yeah.

Thank you very much. And then if we switch over to consumer loans. You have been cautious for quite a long time now in several markets, but do you begin to understand more optimism given that interest rates are starting to drop and that consumers may get less pressure from inflation and so on?

From that perspective, there is hope that the market will return to reasonable risk-based margins, but we allocate our capital based on what we see as the best potential. And that makes it a tough competition for TF Bank. You have to be over 20-22% to be able to compete. The Nordic markets may not always exist. We'll see when we can start again. It depends on how things develop.

Yes, but there are no major changes in the last quarter, if I may say so.

No, we see that the macro has improved, so it is no longer far away, but it is approaching, but it is a question of when it will be. Yes, then a final question from my side regarding OPEX.

You have many interesting growth opportunities in other European countries. Do you see any need for an investment hub driven by any of these geographical expansions in the future?

No, we are working with our revenue to grow faster than the costs and to have scalability in our business. And it is the growth journey with wages that is the focus that gives us our investment opportunities. So from that perspective, TF Bank has so far been recognized by scalability. and that we have run a business where we use our existing revenue to reinvest in the business without making the shareholders disappointed. And we are going to continue with that. It is clear that our investment rate can increase over time in nominal terms, but that is due to the fact that it will be a larger bank.

Thank you very much, that was all from me.

Thank you very much for the questions. We have received a written question here as well. How do you see the distribution of the loan book when you are done with the transformation, both in terms of volume and income?

It is impossible to answer. This transformation occurs every quarter all the time and in that way it never ends. We only follow where the risk-based margin leads us. But of course, if you look structurally at the market, you can believe that That there will be a higher profitability in markets outside of the Nordic countries over time. And also that there will be a higher profitability in credit cards and other segments over time. And with that, this development will continue. But who knows how the development will look in one to two years. Then maybe it will turn around and then we will continue to follow the risk-adjusted margin. There is no end to it. It is a ongoing process. It is about delivering as high a risk as possible to our shareholders and to ensure a good growth. So that the crown and the ear will grow for them over time.

I understand. Thank you very much. That was all the questions we had for today. I leave the floor to your final comments.

Jag vill önska alla som har lyssnat in en glad sommar och förhoppningsvis så blir det både lite sol och glass till det där ihop. Och på återhörande hoppas jag under vår nästa kvartalsrapport i september, per september i oktober.