Hoist Finance AB (publ) (HOFI) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Hoist Finance Q3 Report 2020. [Operator Instructions] Today, I'm pleased to present CEO, Klaus-Anders Nysteen; and CFO, Christer Johansson. Please go ahead with your meeting.

Thank you, and a warm welcome to this third quarter presentation for Hoist Finance. Together with me, as the operator said, is Christer Johansson, our CFO.

Good morning.

And also our Head of Investor Relations, Andreas Lindblom.

Good morning.

So this is a quarter with the robust performance, where Hoist Finance shows resilience through the pandemic. I am happy with our collection performance in the quarter and also with our cost savings. Our messaging around the cost-savings program has been consistent. And of course, it is good to see that the effects are now showing as we expected. So with that introduction, let's move to Page #4. Again, it's good to see significantly improved financial performance. Happy with the collection performance number of 180%. The strong cash flow generation in the quarter and hence, the strengthening of the core capital ratio which ended at 10.4%. Profit before tax is back to a level that we're used to seeing at SEK 140 million. I already mentioned the cost-savings program. And as you can see, costs are down 8% quarter-on-quarter. As we expected, the Swedish FSA has concluded that in our securitization, significant risk transfer, the so-called SRT, is achieved. That's, of course, the positive as we are progressing our securitization program. And last, but not least, I'm very happy to announce that Jarkko Heinonen will join Hoist as our new Chief Digital Officer from January next year. Moving on to Slide #5. I think this picture is really clear and shows the financial consequence of COVID-19 in the first and second quarter of the year. Given the collection performance in the third quarter, I believe that our write-downs in the first half of the year were about light. As you can see to the right on that slide, profit before tax was SEK 140 million in the quarter, which is more or less in line to what they have seen before. And this represents an annualized return on equity of 9%. We are satisfied with the improvement, and I'm particularly proud to have been able to help our customers deal with their challenges through the pandemic. Moving on then to Slide #6. We put forward here 3 graphs, which we hope are helpful. And again, our business has proven to be resilient through the financial turmoil. And we haven't, of course, been completely insulated from the pandemic. But as these 3 graphs are showing, the performance is recovering in unsecured NPLS, that's to the left. In the middle, our secured NPLs haven't seen too much of a negative impact. Actually, it's been better than we expected in the spring when we revised our curves. And to the very right, you see the performing loans and how they are performing. And we don't see higher default rates in the performing loans through the pandemic. If we then go to the next page, Page #7. First, some background. I have stated before that our business, in many ways, is rather old fashioned. And as you all know, the basic concept is that as we have acquired a portfolio of nonperforming loans, the customer first receives a letter from Hoist, so-called hello letter. And then we try to engage the customers through the phone. And the target of this is to establish a payment plan with the customer and help the customers stick to that plan and repay the debt. In short, this is a pretty slow and manual process that hasn't really changed much over time. If you go back 30, 40 years, it's basically the same process. So even though the industry, as a whole, is using sophisticated tools to predict payment patterns and establish collection curves, their collection approach, or what you can call the customer journey, is still rather basic and traditional. It is very much centered around the contact center and its people rather than technology intensive. So what we are doing in Hoist is redesigning this so that the customers can do the work themselves. This will, of course, give a lot of added value for the customer, but also for us. We can engage digitally, process changes and requests directly in the systems and only when needed, will there be human interactions. I think this is very similar to what has happened in retail banking, where bank -- branch offices have been replaced by online solutions. I find this transformation very encouraging. And digital processing is both efficient, scalable and gives us a chance to industrialize our operations across markets. And at the same time, we will be able to help and support our customers in a better way, becoming self-serviced. And the slide on Page 7 tries to capture all of this. So if you go from left to right, we are concentrating our efforts where the potential is the biggest and where we have most of our cost base, namely for amicable collections of unsecured NPLs. That's why we have labeled in the slide, current scope. And 2 years ago, we had basically no self-service and now on average is 19%. And our most advanced country has above a 30% self-service. And we believe that we can move average for Hoist Finance up to that level by the end of 2021. And this will help push our cost down even further in the future. So I think it's important to make a distinction between self-service and how we actually receive money from customers. All our payments are digital. That's 100%. But the self-service ratio is around 19% at the moment and increasing. Before I hand over to Christer, some comments on Page #8, which is our progress towards an IRB application. And as you all will remember, one of the negative regulatory changes that impacted us in December 28 was the new risk weights. We had to change from 100% risk weight for unsecured NPLs to 150% risk weight. And obviously, this change increased the need to hold a lot more equity. And our CET1 was reduced from 13.1% to 9.7%. And one of our mitigating actions to deal with this change in risk weight is to introduce more sophisticated risk modeling and to move from using the standard method, to becoming an IRB Bank. And let me assure you that the work is progressing according to plan. The key success criteria is that Hoist risk profile is noncyclical. I think you can clearly see that in the slide through the financial crisis. We get to 2018 in the middle there. And having more than 12 million LGD observations over 30 years is unique. And this gives us confidence in the process going forward. And we have recruited and built an excellent team, and the Swedish FSA is informed about our plans. So with that, I'm happy to hand over to Christer, who will take us through some of the details.

Good morning. So in our Q3 financials on Page 10, 2 things stand out: first, collection performance is back on track, and we've not done any further net impairments of the loan book; secondly, structural cost savings are starting to bite, bringing total expenses down to SEK 549 million. So on the back of this, we see a swift return to profitability, and we see cash flows at pre-COVID levels. The SEK 264 million in portfolio investment for the quarter is below replacement rate, which means that we see a slight reduction in the size of our book and top line income. This is a reflection of us having prioritized to strengthen capital ratios, which are now in the middle of our target range. All in all, profit before tax for the third quarter ended at SEK 140 million, bringing the year-to-date figure back into positive territory. And as Klaus-Anders said, the quarterly run rate corresponds to return on equity to 9%. On Page 11, we have, as always, included the P&L adjusted for items affecting comparability. And looking back at the previous quarter, we have had a few of those items. For example, in Q3 '19, we had both restructuring charges and effects from interest rate hedging, as listed in the back book. Looking at this quarter, the only item is SEK 9 million and severance charge, which relate to cost savings in Italy and the U.K. Adjusting for that, the cost income is 78%. Turning to Page 12. Cost is certainly an important topic for us. And on the following couple of slides, I will give an update on where we are in the cost program and how that relates to the other parts of our strategy. But before we go there, just a few quick comments on the Q3 cost level on itself. The reduction we see is primarily relating to administrative and personnel costs. As you can see, cost is down, as expected. The quarterly level will always vary with activity. And for Q4, I expect legal collection expenses to pick up a bit. But the overall trend is clear. Turning to Page 13. Of course, now the absolute cost level in Q3, that's a very narrow snapshot of things. It's worthwhile to zoom out a bit. We have clear financial targets. They include return on equity exceeding 15%, cost-to-income hitting 65% and EPS growth of 15%. So there's been no change in those and neither is there any change in the strategy to get us there. The 4 strategic pillars include market leadership. This is about growth across asset classes. Digital leadership is about transforming how we interact with customers. The banking platform is about leveraging the license to help customers in new ways. Last but not least, effective and efficient, this is where our cost-savings program fit. And that, in turn, includes OneHoist operating model, which is about standardization and industrialization, it also includes the shared service center, IT outsourcing, simplifying the legal structure and many other things. So cost savings is part of the strategy that it's not the only part. Now despite COVID, this strategy remains in place. And 2020 may not offer much growth, but we are making good progress on the cost-savings program. To be a bit more specific on that, we have, on Page 14, included a new tracker that we will use going forward and let me just explain the format briefing. So on line one, this is our leading indicator. On this line, we add up the cumulative impact of the efforts completed up to that point, regardless if they can be seen in the P&L or not at that time. So for future periods, the number illustrates how we expect the saving program to progress, hitting the SEK 400 million by end of 2022. On line 2, we specified a part of that cumulative saving, which is actually hitting the P&L for that particular reporting period. On line 3, we have estimated the implementation costs which have hit the P&L for that same period. And this could, for example, be restructuring charges or other one-offs related to the savings program. Finally, then, on line 4, we've just added up line 2 and 3, which means that line 4 is a net impact from the savings program as seen in the books for that period. The certain numbers then they described the current status by end of Q3 2020, we have completed actions, which will bring cost run rate down by SEK 197 million. Those savings have generated a SEK 74 million benefit in the P&L for the 9 months of 2020. At the same time, the savings program have come with SEK 30 million in one-off implementation costs for that same period, and this leaves the 2020 at the base figure with SEK 44 million, net benefit from the savings program. And this 9-month figure can be compared with 2019, which saw a SEK 34 million net benefit for the full year. Key achievements in Q3 include the further expansion of our shared service center and nearshoring sites, which currently employs around 190 employees. Other achievements include a number of simplifications to the legal structure, which come with real cost savings. So these are things which are implemented. They are included in the SEK 197 million on line one, and they will, of course, also come through on line 4, the bottom line. To illustrate the magnitude of this change, I picked out 2 data sets on Page 15. And actually both of them related to our operating model and efficiency brings because in this industry, you can do a lot by leveraging scale and skills. As you know on the left-hand side, we have been able to reduce the number of FTEs needed to service SEK 1 billion NPL portfolio from SEK 80 million to around SEK 65 million. And obviously, it's been a bit more difficult in 2020 with a shrinking book, but that it temporary. Separate from the number of FTE, our operating model is also about centralizing certain tasks to lower-cost locations. As you can see on the right-hand side, we're moving fast on this front. We have currently 12% of staff in such nearshoring and shared service centers. As a result of this, our average salary cost per person has actually come down to 6% from 2018 to 2020, inflation included. So obviously, these are permanent changes, and they are providing a lasting reduction in run rate cost. Moving to Page 16. I started off with repeating our financial targets, and I stress that it's about both, cost and growth. And on Page 16, we illustrate the blend of those 2 things. Starting from the left-hand side, our 2018 baseline came with reported costs of SEK 21.6 million and that is, you should remember, a level that reflected almost exclusively unsecured business. Since then, we have realized cost savings, but we've also grown the book roughly 15% from end of '18 to end of 2020. This growth has been mostly in secured and performing, and we brought in a whole new skill set to manage this. Now 2020 is soon over. And as we look forward into 2021 and '22, we will reap further benefits from the savings program, as I outlined. And those savings relate, you should remember, to the cost we had in our 2018 baseline and should be measured against that. We certainly also target further growth. And with an assumed growth of, say, 15% from end of 2020 to end of 2022, we would expect the absolute cost level to stay relatively unchanged. Now in reality, growth may, of course, be a bit stronger, and absolute cost is not the target in itself, our target is 65% cost-to-income. Turning to funding on Page 18. As you can see, we have managed the deposit base slightly downwards, and this is a testament to the flexibility of our deposit funding. That flexibility is even great that when you combine it with other funding tools, like the EMTN program and RCF. All in all, average funding cost remains at around 1.7% or 2.5% when compared to the full book value. And as I have noted before, this is rather competitive which we've illustrated on the next page, Page 19. This graph, I believe, speaks for itself. Our relative position is outstanding. And while times have been tough in the bond market, on deposits, things have actually not changed much. So the relative position is even stronger than it was a year ago. I'm very happy with that. Finally, then on Page 20. A quick word on capital and liquidity. So with profitability restored and acquisition has been limited, it's no surprise to see even stronger capital ratios. We are now in the middle of our target range, and that's a position that opens up for increased portfolio investments in Q4. Things are lined up also from a liquidity perspective at SEK 7.6 billion. The position is not quite as excessive as it was in Q2, but we still have all the dry powder we may need and comfortable margin towards all liquidity requirements. So with that said, back to you, Klaus-Anders.

Thank you, Christer. We are then at Page #22, the key takeaways after the quarter. And just to reiterate, financial performance is solid, and we are pleased to deliver 108% collection performance and real cost savings. I hope you found the disclosure on costs useful. We are committed to our cost-saving program and will reduce our cost by SEK 400 million, measured against the baseline from 2018. We are well capitalized, as Christer just pointed out, ahead though up typically, it's a strong Q4 in terms of transactions. But on this note, I think it is important to say that the current second wave of the pandemic may lead to some volumes being pushed into 2021. Our ambition for 2020 was always to maintain the size of the book, and we are ready to do so. But at the end of the day, the size of the deal flow matters. So we'll see what happens in Q4. Our work is certainly important for our clients, the banks in Europe, but perhaps most importantly, for our customers. And we are really, really proud of the work that we're doing despite the pandemic and working from home, and we are receiving a strong and positive feedback on the work that we are performing. And you can see some of the comments, some of the feedback that we have received recently on the right-hand side of the slide. So with that wrap up, I hand over to the operator for the Q&A session.

[Operator Instructions] So our first questions come from Ramil Koria from SEB.

Thanks, guys, for the presentation. Indeed, there are a lot of very interesting charts and points here that will surely take some time to digest. But let me try to formulate some questions at least. So starting off on the sort of move towards digital, can you just provide us some flavor on what differs on the current scope versus out-of-scope unsecured assets that you can penetrate here with self-service?

Yes. Thanks, Ramil. Of course, what we're trying to say here that the classic core of Hoist is unsecured consumer NPLs, right, unsecured NPLs. And although we have grown into secured and performing loans, et cetera, our focus is to go for the biggest potential. And the biggest potential is to take the big cost base that we have for interacting with customers for amicable on unsecured NPLs and convert that and to form that into a digital customer journey. We replace contact center people with digital solutions. And this is why I try to bring out as an example then, that we are almost going from having branch offices with people interacting with customers, so having self-service functionality through portals. And that means that we can take away a lot of, I'll call it, a manual and even intensive work and replace that with digital solutions. So when people are talking about very high percentages in how they collect digitally, I think there was some misunderstanding because in reality, you're replacing contact center employees and back-office employees with self-service functionality. So -- and I think this is a huge impact. I think it's going to be very, very important. It will be a lot of benefits for our customers when they can self-service themselves. So we're really optimistic about the prospects.

Right. That's very clear. And then just a few sort of clarification questions here. Christer, you mentioned, first off, sort of the time frame for the financial targets. But is it for 2021 or 2022 that you expect to reach the 15% EPS growth, cost-to-income and ROE targets?

Ramil, that's a good question. Well, I guess it's fair to say that when we set these targets, we did not expect 2020 to turn out the way it has done so far. So clearly, those targets have been a bit more difficult to achieve than we anticipated. We're still doing our very best, pushing as hard as we can to get there. And I'm sure we will get to that level eventually. The exact timing of that, right now, I think it's difficult to say.

That's understood. And another clarification here on Page 16, which I find very, very helpful. But -- you alluded to it, but is it fair to assume that cost levels in nominal terms will remain flattish 2022 versus 2020, of course, subject to portfolio or book value deviations, et cetera? Is that the way we should read it here?

Yes, correct. So we are -- I mean, clearly, we're pursuing growth and exactly that's going to be 15% or 20% or 25%. I guess, we'll find out. But clearly, with the cost savings that we have in slide, we would expect to offset, if not all, then most of that. So that would leave absolute costs on a sort of relatively unchanged basis then basically absorbing all of that growth.

Right. That's understood. And then on the interest expense side, just noticing that German customers have extended or increased their usage of longer-duration accounts with you. Is that on the back of you raising interest rates? Or is it solely consumption behavior, so to say?

Yes. So we do see a bit of inflow and outflows, and it's also dependent on what our competitors do. So there's been a little bit of movement. Then if you compare average Q2 position versus average Q3 position, it's not something that you should sort of extend into the future necessarily.

So should I extrapolate the interest expense in this quarter for the foreseeable future? Or is there anything changing within that you think?

Yes. So my point is that the movement from Q2 to Q3 is reflecting a little bit of change in the stock. And in that sense, you could look at Q3 and say, okay, that's the normal level, but it's not something that you should extrapolate and say that it's going to increase into the future and quarters as well from this level.

All right. That's very clear. And then on the gross IRR side, which we quite rarely talk about, but seemingly, there is a pickup in IRR levels on sort of -- on the entry-level book value, if you will. Is that reflecting something in terms of sort of improved pricing on the market? Or is that due to seasonality? Or is there anything in that, that shouldn't lead to extrapolate the Q3 number here?

Yes. So I think what we've said is that we're quite optimistic about the opportunities in the market. And as you saw on the slide with funding cost, there's been quite a change in the average funding cost for the industry. We're 100% convinced that, that's going to come through also in the pricing and that this will support margins on the front book for the long term. Now in this quarter, in particular, we haven't acquired much. So it doesn't change things as of now. But it will support us going into 2021.

Yes. I just want to add one or two comments to what Christer just said, I would say that we see some competitors that are prioritizing deleveraging, which, of course, will impact their investment levels shortly. And we do see that the IRRs are coming up and that's a positive.

That's very clear. Two final ones for me, if I may, guys. First off, given the approval from the FSA now on the securitization, should we expect more securitizations to be made in the shorter term? Or sort of should we expect it to come a year or 2 out and stop? And then my second question is related to the second wave here, if you've seen any impact so far in the last few weeks from the second wave?

Yes. So starting off with securitization, so we are launching that program, and we will do more securitization. Exactly which quarter? I will refrain from commenting on, but this is in the pipeline. This is coming. So that's clear. On the other topic on the second wave, it's interesting to follow, right? It's new developments almost every day. The good thing is in a way that I think society at large is much better prepared now. We will know how things will play out. We know what kind of measures -- countermeasures that different governments will put in place. So we have lived through that once already. So that's positive. We are not moving into unknown territory. We have had a 70%, 80% working from home anyway through the fall. If that goes from 70%, 80% to 80% to 90%, it doesn't really matter so much for us. And I think -- I don't expect significant impact on the collections either. The one sort of unknown, I guess, would be courts and court systems. So far, it's been holding up reasonably well. In most markets, that's good. But that could be a little bit of uncertainty, I would like to flag.

Our next question comes from Ermin Keric from Carnegie.

If I could start maybe with going back to the interest expense. I don't know if it's me missing something here, but when you're talking about sort of movement in the stock and of your deposits, wasn't your interest expense from actual deposit accounts down quarter-on-quarter? While it's other interest is picking up? And could you please explain what's driving that? And also when I see to the prices you're actually giving to your deposit customers, those seem to be down quarter-on-quarter. So could we expect an advantage from that in coming quarters?

Ermin, yes, let me try to explain that once again in a better way. So if you look on Page 18, you will see that the average cost of our funding is around 1.7%. And if you compare it to the book size, it's 2.5%. And that is a level which reflects the current situation of our funding. So it's a combination of all the components of our funding, the margins on the deposits, the composition of deposits, et cetera. We're not really expecting this to move much in any particular direction. We have the liquidity available to finance near-term acquisitions. So there's no need to sort of attract deposits from here. So in that sense, you can look at the Q3 figure, and that would give you a very good understanding of the current cost of our funding.

Okay. Just to understand, what's the other interest expense that's up SEK 8 million this quarter?

Yes. So as part of our interest expense, there is also commissions paid to our partner in Germany, raising, and those commissions will vary a little bit over time. So maybe that's the missing link in your spreadsheets.

Okay. Perfect. Then on your -- the bridge you're giving us with the costs you expect going forward, and it seems like you're expecting to reach a 65% cost-to-income. Do you expect it to be enough with 15% portfolio growth from here and flat cost to reach 65% of income, are you assuming any other -- contribution from other income lines that you're currently sort of looking at venturing into?

Yes. So I think we're pursuing a long list of projects. Some of those projects will support collection performance. And I think we -- there's a great potential there. Some of the projects we are pursuing are meant to find the right deals at the right price, so supporting margins on the front book, that would also be helpful. And then finally, it's about growth and cost savings, of course. So maybe don't read too much into that. But clearly, with the good traction that we see on cost savings, we will be able to absorb growth without growing the absolute cost. And that will be very helpful for the cost-to-income.

But I don't think you should use 15% that I can guide you on growth, right, Christer?

I'm hoping for more.

Exactly. That was one more.

Okay. Great. Then just a final question on the secured side. Your performance is quite a bit ahead of your expectations. It's quite a contrast to what most of your peers are seeing, which are maybe seeing more impact on secured side relative to the unsecured side. What's standing out here and explaining your solid performance on the secured collections?

Yes, that's a good question. So in Q1, we took a view on the secured collections. And we accounted for significant delays based on the information we have at that time. Actually, it's turned out that those delays have not been so significant. So you could say that we were overly pessimistic in the beginning of the year and then we've been positively surprised as a result of that. Of course, if there's a secured asset, and if it's being sold, it cannot be sold twice. So that means we're also then revising projections for the future periods on those assets. So there's sort of a negative revaluation, then you can say on that asset as a result of the strong performance in the period.

I think it's fair to say that we have a very prudent approach to how we value secured NPLs. I mean, with overperformance we have seen in the portfolios is not being extrapolated into the future of these assets. So we're having a very cautious approach to how we look at the future for secured NPLs.

Our next question comes from Borja Ramirez from Citi.

I have 2 quick questions. Firstly, on the revenues, thank you very much for providing details on the cost guidance for 2022. Based on the cost target of SEK 2.4 billion to SEK 2.5 billion -- sorry, SEK 2.3 billion to SEK 2.4 billion and the cost-to-income target of 65%, if I were to imply the potential revenues, there seems to be some upside compared to consensus expectations for revenues. In your view, what could be consensus missing? Maybe it's that you could get better IRRs on acquired portfolios, given that your competitors could be maybe a bit more challenged? And second, on capital, on the Swedish FSA announcement on significant risk transfer. Is there any positive read across for future securitizations? And also, on capital, you indicated the IRB application would be submitted in 2022 -- sorry, 2021. Could you provide any details on the potential impact and the potential timing?

Why don't you start Christer with the first question then?

Absolutely. Thanks for your question. So maybe repeating a little bit of what I said earlier on. So the reason why we're optimistic on revenues is because we see growth opportunities. We see opportunities to improve performance on the back book, and we see opportunities to improve margins. And those 3 components combined will drive the top line. In addition to that, we note that there is good traction in cost savings, and that will come through an even greater extent than you have seen so far. So then that makes 4 components combined. We're confident that those would get us to 65% cost-to-income. Exactly how it will turn out in time and which components will contribute to what, that's difficult to guide on, and it's not perhaps meaningful even to give sort of a complete breakdown of that.

Yes. And then the question on SRT. Yes, we believe this is a positive and expected step, and we see that good support to further securitization issuance from Hoist. And on IRB, I'm really happy with the work that the team is doing, and we have been able to attract very qualified, very experienced experts to the team that they're all very enthusiastic about the prospects of getting approval for IRB. I'm not going to issue any guarantees, but it looks very promising, I would say. And our expectation is to send the application, let's say, second half of next year. And then I think it could be 6 to 12 months before we get an approval, hopefully, from the Swedish FSA. So it's a lengthy process, but one which is important for us, of course. And I think the magnitude, I will not speculate too much on, that you saw the impact where from the change in 2018. And if we can implement more sophisticated models to counter most of that, I think you have a good way of looking at the value of that project.

Our next question comes from Rickard Hellman from Nordea Credit Research.

Two questions. First of all, how much of these cost improvements are related to the lower legal collections, if you have made any estimate on that?

Yes. So as I said initially, the activity level on legal collection will vary a bit up and down by quarter. And in that sense, Q3 was a bit lower than average. So I would expect Q4 to be a bit higher than average. I'd say that the expected pickup in legal collections from Q3 to Q4 is around SEK 30 million. So that would give you a bit of understanding there. That said, our intent is not to save by not doing the legal collections, that would be a really stupid thing. Our intent is to save by changing the structure of our business, the operating model. And then legal collection expenses will vary a bit up and down.

Yes. And they are what they are.

Exactly.

Second, coming -- with your low-investment level, do you experience any kind of perhaps issues with your customers that you are not investing? Or is it just some kind of mirror over the market being very slow or cold at the moment?

Yes, the market is fine. But we signed -- yes, I think we signed 2 deals yesterday, which was great to see. But it is more difficult with COVID-19 restrictions to meet, to sign, to engage with lawyers. We're doing most of the work on Teams. Of course, that's possible. But the market is going to be there. The market opportunity is growing by the minute. So from that perspective, we are going to be very relevant in the years to come. I'm not sure if the total volume of NPLs is going to be as high as it was after the financial crisis and we reached all the way up to EUR 1.3 trillion. I read a report this week from EBA that talked about EUR 1.4 trillion of the ports, I'm saying at least above EUR 1 trillion. So I think it's going to be a significant market. So the outlook from that point of view is very good. And I think we can expect margins at a higher level than what we have seen at the peak of the cycle from our point of -- from our industry's point of view. So I think competitors will be rational. They need to be cautious about their own cost of funding and leverage ratios. So I think the outlook is very healthy at the moment.

And if -- perhaps on a follow-up on that, with your low level seen in Q2 and Q3, is that more of a sign of you being hesitant of investing due to liquidity and capital ratios? Or is it that you are awaiting for higher hours?

Well, we -- in Q2, we wanted to protect our CET1. We felt that was really, really important. So then we prioritized holding back. In Q3, we've been more active in the market, doing a little bit more, but not a whole lot. And kind of, say, saving up for Q4, which normally is a very important quarter for us. So we'll see what happens in Q4. I was hoping to do CapEx, so the replacement CapEx levels for the year and keeping the book flat throughout 2020. That's still the ambition. I'm just trying to add a pinch of salt because with the COVID-19 second wave, we might see that some of that volume is being pushed into Q1 next year, which is fine by us, right? The market doesn't go away. The market is building. So that market opportunity is going to come back. But we are ready, and we are engaged with clients. We're having good discussions on a number of transactions at the moment in all our markets. So I think it looks very good.

We've done more in October than we did in Q3.

That's great. And please remind me what's your replacement CapEx level?

So that -- for the full year, that would be around SEK 3.5 billion.

[Operator Instructions] Okay. It seems we don't have any more questions at this point. Speakers, please go ahead with your closing comments.

Well, thanks again for spending this time with us today, and I appreciate your support. And I wish you a great Friday. I think it's a half day in Sweden today, so have a great Friday and a great weekend, and talk to you soon. Bye.

Thank you.