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

Good morning, and welcome to the Hoist Finance Conference Call. [Operator Instructions] I would now like to turn the conference over to the CEO, Lars Wollung. Please go ahead, sir.

Thank you. So a warm welcome, everyone, to Hoist Finance quarter 2 report. I will make an introduction and then my colleague, CFO and Deputy CEO, Christian Wallentin, will go through the report. After that, we open up for questions and answers. So that's the agenda of the call. So if I then go to the -- yes, we'll go to the first picture. Before we get into the numbers here, just a comment on the nonperforming loan market itself. Volumes this quarter 2 has been better than quarter 2 a year ago. The IRR level is generally on a higher level this quarter compared to the same quarter a year ago. So all in all, the market is better than a year ago. And the competition is intensive though. So that means our win rate during quarter 2 has decreased. So we have evaluated but walked away from managed iterations. About a comment on the macroeconomic situation too. We have not seen a material impact of increased interest rates and higher inflation yet. We follow, of course, the development very carefully. And in general, the nonperforming loan market is -- it's not countercyclical, but it's resilient to economic fluctuations. However, in a very negative scenario where cost inflation is higher than salary inflation, a recession on top of that and increased unemployment, that would likely mean that our customers will be able to pay back less -- amortize less of their loans. On the other hand, that's usually a time period when the banks need to sell even more and problems solved even more and also returns generally go up. So portfolio price is down in other words. And that's the resilient component of it. But so far, so good. Then if we turn into the numbers then, profit before tax came out at SEK 218 million compared to minus SEK 13 million a year ago. A good part of that, though, is due to financial instrument gains. If we adjust for that and also adjust for the U.K. business under divestment, the profit before tax this quarter was SEK 111 million compared to SEK 32 million year-on-year comparison. So it's clearly better. The underlying result is several times better than a year ago. So we are pleased with the development, the direction. We have a way to go to come up to an underlying profitability that we would be satisfied with. So the journey continues, but so far so good. What you see here on the picture, to the left is the total loan book we have SEK 19.7 billion. That excludes the U.K. portfolio under divestment. The same variable was a year ago, SEK 16.6 million. So it's a good growth of the portfolio size in the total business, except the divested U.K. unsecured book. Investments in the quarter came out at SEK 2.5 billion compared to SEK 0.9 billion a year ago. So we've been able to invest more than we ever have done in the second quarter. And we have invested more in the first half year than we ever have done. So we are at all-time high investment levels. Although win rate is down, and we've been very disciplined when it comes to pricing. So that's on the investment side. Return on equity, 19%, that includes -- compared to minus 7%. So that includes though the gains on financial instruments. Earnings per share, we say the goal for us is in average to grow earnings per share with 15% per year. This is better growth than that, but it's also from a negative and special situation a year ago. The CET1 ratio of 9.6%, so roughly the same as a year ago. So we can take the next page. We are carrying out the rejuvenation program. It's paying off in all areas. It becomes better and better. And the rejuvenation program is divided into funding and capital, investments, collection operations and indirect costs. And I will come back to this point in the next exhibit. So I'll leave it for now. As I said, all-time high investments, still intensive competition, but the market is better. The second quarter, mainly an effect of improved quality, the portfolio, the total portfolio gets better. The cash flow density of the book becomes better. And the second component then is the hedging contracts that work as they should when the currency movements are like it's been in the quarter. And the reduced risk weights kicked in from 11th of July. That was expected, but now it finally happened. That means that the change a couple of years ago from a 100% risk weight for unsecured consumer loans became 150%, which means, of course, we need to hold more capital because the risk-weighted investment level then increased. Now that goes back from 150% to 100%. So that releases, of course, then capital. That gives us much better flexibility going forward than we've had before. Our ambition is to be an active NPL asset manager. That means we invest in portfolios as we have done before. But the new thing is that we monitor them more closely. We work with them more actively. We also divest portfolios, which we think someone else can do a better job and therefore, pay a higher price than our own net present value to keep it ourselves. An example of that is the U.K. situation where we then have a SEK 4 billion portfolio under divestment and that was announced in quarter 1. In quarter 2, we have invested in other U.K. portfolios for around SEK 1.2 billion. So we are buying portfolios that fits our strategy and where we have a sustainable competitive advantage. And if not, we don't mind to sell. And then with that, I mean, we are becoming a more active nonperforming loan asset manager. Then let's quickly turn to the first point here, the rejuvenation program. On the next page, you see the 4 areas which we are focusing on. And on capital and funding, we issued EUR80 million Tier 2, this autumn to a coupon of 6.6%. That was a fortunate timing. The market has, as you know, become worse since that okay -- since that happened. And we talked about the U.K. We are also working on the funding side to improve cash levels and improve the funding bit by bit. So it's a number of initiatives that is under execution in the funding area to become a bit better every year. Investments, yes, I think I've mentioned it. So -- but yes, investment level is up 137%. Interest income is up 8%. We have invested with a higher risk-adjusted return this half year compared to earlier years. So the portfolio gets better when we amortize old stuff and buy new stuff, which is better, we become better. So it's SEK 3.8 billion of new stuff, which we like, that's added to the group portfolio this first half year. And at the same time, we amortize material amounts. So the book gets better and better. Collection performance, that's our loan management business. And there is a broad improvement program in that area. We try to use data in a better way to take better decisions for what to do with each loan at each particular point in time. And that drives collection performance a lot. We also work with optimized staffing. So we have the right staffing amount for each situation in each country. Collections is up 23%. So I guess that number shows that we are moving in the right direction. Finally, we have the cost reduction side, where a number of FTEs is reduced a bit. And in total, have reduced indirect costs. So if you divide the cost tie into direct and indirect, we have a special focus on the indirect costs, and we like them to go down, and they are down year-on-year, minus 10%. That was a few words about the daily or continuous improvements of the business in basically all areas. With that introduction, I think I'll leave over to you, Christian to take us through the deck.

Very good. Thank you. Can we go to the next page, please, portfolio acquisitions. It's just been a very strong investment quarter for us. We have, as you see on the page here, Q2 '21 to Q2 '22, almost tripled the acquired volumes. So it's 193% up versus a year ago, the quarter a year ago. As Lars was mentioning, the returns are improving. So we see that we are winning with better returns. And that said, we are very disciplined with both the pricing and the valuation. So the win rate is down. And if you compare that win rate, which we monitor as a KPI to not over price in the market, it's on the lower end where we normally are and quite significantly lower than, for example, in the bumper years that we had in '18 and '19. And also since the autumn, we have developed and the drivers for this growth, I would say is that since the autumn, we have developed a new investment and sourcing strategy, which is paying off. It's much clearer what we are looking for. So -- and that is bilateral deals, more complex situations where we can improve pricing, and we can bring our skills to the table and add value to our bank partners. And this often means that there are larger deals, the deal structuring is more advanced and the common problem solving with our clients is -- leads to more value creation for them. And of course, that then leads to more -- a better pricing for us as well as we add more value to our clients. Overall, I would say that the market is continuing to improve -- the market opportunity as a whole is, of course, large. And the volumes coming out to the market has been quite low in 2021. And we've seen that from the lows in 2020, it's been gradually increasing, and we have a much healthier market now than we were 2 years ago. Normally, Q4 is the seasonally largest quarter, and the sales from the banks are quite lumpy, so the [ courts ] can go a little bit up and down. But that said, we see a healthy pipeline for the rest of the year and that is promising to us. If we go to the next page, please. So this is the overall book value of the continuing operations, excluding the U.K. divestment that we're doing. This book, the continuing book has grown well over the last year in a quite difficult market for us. We're up 19% compared with a year ago. So Q2 over Q2 '21 to '22. And it is quite lumpy, the transactions. If we win some large ones, that will have a large impact in the quarter, if we lose one, then it might be a lower quarter as well. However, that said, over the long term, we see really steady growth in the market. We're at a downturn cyclical if you compare in the MPL market, we believe. And that will, over the next few years, come back. And the goal is, as Lars has been saying a few times to double the book over 5 years or so. If we go to the next page, please. This is the portfolio composition of the continuing operations as of the end of Q2. And the book we have is developing really favorably in the direction we want. We're growing where we want to, and the book is becoming more diversified. So secured is a growth priority to us. And as you might remember, we were at more or less 20% before the act when we signed the divestment of the U.K. and now we're at 75% unsecured and 25% secured. So we're growing there. We see a really strong competitive advantage in secured, both because we believe we have a really strong secured organization and also because of the funding side of our business. And in the quarter, we've seen that we've managed to invest into one large French secure deal. That's the SEK 700 million on the right. Also, we're building a more balanced collections business, loan management business. So we're outsourcing more than we used to. So building outsource collections is a priority to us to build flexibility and also learn from others to become a better collector ourselves. And that's what we're doing in the U.K. So we're rebuilding our U.K. operating model from an in-house model to a more -- to an outsourced model. And we have seen that we can invest into this new model in the quarter. We had a few deals that adds up to SEK 1.2 billion. So it's one of the larger investment geographies this quarter. If you look on the right, it's an overall well-diversified book. Italy is the largest market and post divestment, Poland will be the second instead of the U.K. And this quarter, we've seen that we invested across geographies, the U.K. and France being the largest ones. And that said, we have a majority of deals in the focus areas across geographies, which is really encouraging to us. If you look at this -- the level we were when we signed the divestment of the U.K. operations, we are getting back to that same level. So in order to close the gap, we're roughly SEK 2 billion behind. And we were more or less SEK 22 billion when signed the agreement, and now we're at a little bit less than SEK 20 billion. And we put that in context with the Q2 volumes, that is slightly less than what we purchased in Q2. If we go to the next page. Our capital outlook is strong, giving us both the strategic operation and financial flexibility, and this is a large part due to the EBA reversal of the RWA to risk weights, which was announced by the end of June and now coming to effect 10 days ago or so. So we will see that we will have around 260 basis points higher core Tier 1 everything else being equal by the end of Q3, given this development. And we also believe that the divestment of our -- or we know that the divestment of U.K. unsecured operations will add another 280 bps. And we foresee that, that transaction will close by the end of Q3 or during Q4, a little bit uncertain as it's a regulatory process. It's also worthwhile to mention that the current levels supports our ambition to double the book. Given DBA risk reversals, we have more or less SEK 6 billion, SEK 7 billion more purchasing capacity and then the U.K. divestment will add more than that to the purchasing power as well. And that approximately is, of course, depending on which asset class we invest into. So the risk weights for the unsecured are higher than the -- for the secured. So it depends where we invest. And the only uncertainty on the capital side is the Pillar II guidance, which is still outstanding. So there's no real update on this process currently. If we go to the page with the financial summary. We have, overall, a really good strong quarter behind us. We had good growth. The profit before tax is SEK 218 million. The ROE is 19%. And this is driven by a few different things. So it's a good strong investment quarter and a good half year of investments, which is clearly great to have that in the beginning of the year. That had volumes, and we also had really good IRRs on expanding the IRRs overall in the book. So our interest income has grown with 13% quarter-on-quarter compared with a year ago. That's due to the volumes that we spoke about on the IRR expansion and then also some FX impacts. Interest expense is going down at the same time with 9%. This is due to the deposit mix, both which currency and which terms, so which period we have these deposits. And the contribution -- the contribution of interest rate part of the hedging contract is also part of this decrease in the interest expense. The growing income and decreasing expense makes the net interest income grow with 20% quarter-over-quarter. And below that, we have seen that our collection operations has also performed really well during the second quarter with better quality of the underlying portfolios and a more efficient management. We have SEK 160 million or so positive collection performance and SEK 110 million are then revalued, which -- of which SEK 50 million is timing differences, so meaning that secured collections that we have ahead of time, and then we take that out from the further -- in the future in the curve. And the rest is de-risking to build a strong and well-performing book going into the future. You can also see at the bottom of the page that cash EBITDA is up 44%, and that's driven by the underlying growth in collections and also efficiencies, both on the interest expense side and then in operations. We had a positive contribution from hedging and net financial transactions. The macro development has continued to be quite uncertain and the interest rate levels are moving. And that, of course, leaves us in a -- with gains in the interest rate swaps because we have hedged our book. And the operating performance, I'll come back to that in a slide in a few minutes, but that's also developing really well. Total operating expenses are slightly up in the quarter driven by the direct collection expenses, so that's driven by volume. And if you break it down another level, if the legal collection expense is still catching up at the COVID. And the second part is, we bought a large big portfolio, as you might remember, that closed in Q1 and the outsourced expenses have come into our P&L during Q2. The underlying indirect costs are down more or less 10%. And the FTEs are down 5%, depending on which period you look at. We are doing further optimization, and we think that we're well underway, but we're continuing this effort to reduce further our indirect costs. This is one of the focus areas we have. So in summary, it's a very good quarter for us, ROE 19% and growth overall, both in the book and in the financials. If we go to the next page. This page wants to highlight how we -- how the discontinued U.K. business is impacting our business. So from the top, the U.K. business that we are selling now in the quarter, we had net interest income, which are not seen in the continuing business, of course, but it's summarized in the discontinued operations. Net interest income of SEK 137 million and then net operating income of SEK 128 million. You can read on the slide here, and the net profit is SEK 40 million, which you see in the main P&L as well. One large item, which I want to highlight is that the -- all the funding sits in the -- on the group level, which is the majority of these net internal transactions. We wouldn't, of course, have this funding if we wouldn't own the U.K. business. So this is clearly should be carried by the U.K. business. So if you add that on, then the net profit attributed to the discontinued operations is around 0 or slightly negative. If you go to the next page. This is the underlying results of the continuing operations. We want to just highlight that we are well underway with our transformation. We're also being helped by our hedging, as we pointed out earlier. So this is the underlying operational performance, excluding the divested U.K. operations. You see that the trend is strong, both in reported profit before tax as well as the underlying profits came out for the hedging contracts and also the U.K. divested operations. And this has been happening. I mean we started in a really challenging situation last year, and we have been transforming our business, which is continuing to make sure that we perform both on ROE level and on growth level. I would say that we are around halfway there. You can see that in these numbers. So if we look down a little bit more into the details, the hedging has materially contributed to profit this year and this quarter. So the interest rate swaps are protecting us from the interest rate risk in the banking book, and that contributes SEK 131 million this quarter, which is, of course, highly material. And then if you take out the funding cost in addition of the U.K. business, which we wouldn't have if we wouldn't own the U.K. portfolio, then that adds back SEK 44 million. And then we deduct the central cost that we are now carried by the U.K. operations as they will remain in the group, and this leads to the underlying operational development. That's the red or maroon colored bar charts here. So it's been going from 5 Q3 in '21 and to 111 Q2 now '22. So I think the important takeaway on this one is the trend. We have been having contribution from the hedging contracts. However, the underlying operational trend is very strong as well. And we are making headway on the transformation that we set out during the autumn last year. If we go to the next page, please. This is the balance sheet overview. You can see that the largest changes here are cash going down, and that's to manage the divestment proceeds. So we're taking cash down in the liquidity portfolio because we will have the proceeds from the disposal coming in when we closed the U.K. transaction. We also have been investing into large portfolios in the quarter. So that brings the cash position down. The other part of it is Tier 2. We issued a Tier 2 capital instruments in May, and that also adds to the changes to the balance sheet slightly. If we go to the next page, please. This is the capital and liquidity position. We've spoken about the capitalization before. The large ones are the EBA risk rates, reversals and then the upcoming disposals. And then it's more the operational development, amortization of the book and the profits building the capital. And on the right-hand side, we have the liquidity reserve. You can see what I mentioned before that we've managed this down in awaiting the disposal from the U.K. divestment and also we use the cash to purchase large portfolios in the quarter. If we go to the next page, the funding. And the highlights are that we refinanced the Tier 2 in May. We're very happy with this. It was very challenging given the process that we have had on the U.K. divestment. We were in a quiet period for a long time during the spring. So we were both lucky and skilled. I would argue getting this Tier 2 out and refinancing it. And we've also seen that the continued macro development has made the market basically closed down. And if we would have issued today, we would have issued at a higher price as well. The deposit interest rates are trending upwards. However, they are sticky, and we see a favorable contribution from our funding in this developing environment. So meaning that when the interest rates are being higher than the -- what we pay for deposits is not going up in the same way. So it's a good arbitrage. It's a sticky market. That said, we are seeing that our funding costs will go up as it is for the industry overall. However, less than the industry average, of course, because of the funding primarily that we have in deposits. And this is the, of course, flip side of having the interest rate swaps gains that we have in the P&L. With that, I will leave back to Lars to summarize Q2 for us.

Okay. Thank you, Christian. So yes, the portfolio growth, 19%. Net interest income, 20% and pretax profit from minus SEK 13 million to SEK 218 million. The underlying pretax at the SEK 111 million number means an increase of 247%. We have a strong capital outlook, allowing a doubling of the book. And our ambition is to over a number of years, doubling our book. The macroeconomic development includes both challenges and possibilities. So we are taking the current situation very seriously about the possibility of a recession and increased unemployment. And at the same time, we see a number of very interesting possibilities for us. We also differentiate from most of our competitors by being a credit institution, by having another funding model than competition. And typically, when inflation increases, bond interest rates increased more than the interest rate on savings accounts. And that would mean that our cost of capital or cost of debt advantage would grow if inflation would stay at higher levels than we've seen in the last 10 years. So we see both challenges and possibilities going forward. Regardless of what happens externally, we have a lot to do in the coming years in improving Hoist Finance and turn it into an excellent nonperforming loan, asset manager and an excellent loan management company. So we will continue to work hard to achieve that. So thank you very much for listening in to our presentation. And I think we -- let's turn to questions now.

[Operator Instructions]. The first question comes from Ermin Keric with Carnegie.

Perhaps starting on the interest expenses. You mentioned that they were down quarter-on-quarter, partly because you have more floating rate deposits. Do you expect that mix to continue shifting in that direction? Or what should we expect from here? And then also, my line broke a little bit, but on the internal transaction costs that you mentioned in U.K., we're basically saying we should expect interest expense to fall SEK 44 million all else equal when U.K. has been disposed of.

So I can take that one, Lars. So the interest expense, we are optimizing -- there's a number of different factors going into this line. And we are optimizing both the deposits over geographies in terms of the business development as rates move around as well. So this is a moving target to optimize in any current development. And the other one on the funding cost, we are trying to replenish the book as soon as we can with attractive risk-based returns. So if we have the same size of the book, then the same size of funding costs, of course, should be expected as well. But however, we -- when we divest that, it will be a gradual approach to unwind the funding, of course. But if we wouldn't have that asset in the U.K., then we wouldn't have the funding as well. So yes, the answer is in short, yes, but there's a timing difference. And also we're trying to replenish that book as soon as we can with attractive portfolios as well.

Got it. And then on the underwriting for new portfolios, you mentioned that you see better risk-adjusted returns and [ something ]. Could you just give us some flavor as to how that's actually -- if we look at kind of net or gross IRRs, is that also up? Or is it just that you're getting essentially a lower risk for the same underwriting IRRs?

We are seeing that IRRs are going up overall. And then we are also investing more into the secured gradually. So we're looking to have more secured in the mix, but we are seeing that the overall IRRs are going up.

Perfect. And when you mentioned that you're now looking at a bit more complex situations, is that primarily that you're doing more secured? Or is it any difference in the type of unsecured claims you're buying compared to before as well?

I think it's both, I would say. So we're looking into -- the secured transactions tends to be a bit lumpier and larger, and they can be a little bit more difficult to know more complex to structure. However, we are also looking to develop more intimate relationship with the Tier 2 banks, I would call them, that need more help in this structuring exercise. So that can include both unsecured and secured portfolios. But the structuring and the -- getting the transactions together when it's larger and it's more operational enrollment, then that takes more expertise with the Tier 2 banks often don't have to the same extent as the larger banks.

That's very clear. And then just one last question on the cost side. I think the collection costs coming up. That's very clear with more activity. But could you just help us on what's driving the administrative costs quarter-on-quarter?

So the admin costs are -- it's a mix of many things. So it's both how we use consultants and salaries and then also developing the securitization scheme. So it's a mix of different things. And unfortunately, that moved a few items around during the quarter. It's not quite comparative. But the large part of it is the -- is those 2 buckets. So consultants and then some decommissioning and then also the yearly Moody fee, which is landed in this quarter from treasury and that sort of thing. So it's a little more one-off characteristics.

I'll have to ask, is it possible to quantify that or any sense just to understand what run rate to expect from here on the admin costs?

I think we are down -- we are down 10% if you compare -- we have a base quarter, which is Q2 of '21, which is the starting point for our indirect costs, and we're down 10%, and we want to continue to take that down over the next year.

So there is 2 components, as Christian says, the -- we are taking down our indirect costs. However, the business activity is increased. So we look at more portfolios. We involve more external lawyers and accountants both for portfolios that we actually win, but to some extent, also for portfolios that we lose. And that increased business activity will hopefully stay. So those costs will hopefully stay. But they are healthy costs, so to speak. As long as we grow investments, the way we have done in first half year.

And I can add that the -- we have absolute objectives in the indirect cost base, meaning that we want to take costs down in absolute terms, and now we're down 10% year-on-year in those -- in that cost bucket. And we also have, of course, a relative efficiency measure. If we grow the book, doubling the book, there's, of course, large scale advantages in the indirect cost base, but it's not -- it wouldn't stick to the same levels that we've taken it down -- taken down over the next year. And then if we double the book, it will slightly grow, but it will be much more stable than the direct cost base, which is moving with volumes.

Our next question comes from Robin Rane with Kepler Chevreux.

So, I guess one of your peers interim that reported this morning as well, so that they expect to moderate their investment pace in H2 given the uncertainty that we are seeing in macro and so on. How far -- and given that also that your win rate now is, as you say, at pretty low levels, how fast do you think you will be able to employ the capital released by the lower risk weights and the U.K. divestments?

Yes. Well, given that we've seen high price aggressiveness lately, it would be natural if we would see some of the colleagues in the industry either buy less or increase their -- the IRRs that they are targeting. If you just see the longer-term financing costs, that they will -- they have ahead of them, it's hard to see that some of them could continue for a very long time, the way they have acted the last half year. So I wouldn't be surprised if other colleagues are indicating that they are less forward-leaning in terms of future investments. We -- as I said, we have a competitive cost of debt and therefore, cost of total capital situation that differentiates us. We have worked hard now for almost a year to rejuvenate our investment department, and it's an excellent department that I suggest. We -- the quality of the portfolio evaluation and risk assessments that we do is very good and I think very competitive. So we hope to be able to carry on like the way we do. That does not mean that we necessarily will invest for SEK 2.5 billion in a single quarter. The quarter could be we invest very, very little or very much. As Christian said, it is, for sure, going to be very lumpy. But if you see this over a longer period, we think our goals are realistic to reach, and that is a 15% growth of earnings per share per year. We will double the book in 5 years' time, and we will have a return on equity above 15%. That's what we think is realistic, and we work -- at least we will work really hard to achieve that. And in terms of the replacement, if you think about it, the total loan portfolio was SEK 21.7 billion when we introduced the U.K. divestment. And now that same number is SEK 19.7 billion. So the delta is like SEK 2 billion only. That -- so we need to buy for SEK 2 billion -- another SEK 2 billion to be back at the total portfolio level, including U.K. So the SEK 19.7 billion is excluding the U.K. divested book. We sell things for SEK 4 billion. The gap is SEK 2 billion. So there is only half of that SEK 4 billion gap that is left to close. And SEK 2 billion -- if you say, how long will that take? Well, we invested for SEK 3.8 billion in the first half year this year. And as you all know, the -- this is a seasonal business. More portfolios are sold in the second half of the year compared to the first half year, especially quarter 4 is where a lot of portfolios are sold. So I guess it will not be a many year situation until we have closed this final SEK 2 billion gap. It could go quite fast. And who knows when we go out of this year where we are, we don't leave any forecasts, et cetera, as you know, but SEK 2 billion is -- I'm suggesting SEK 2 billion is not a big number, given that we bought for SEK 3.8 billion in just 6 months.

And also just commenting, Lars, on the attractiveness of portfolio. So I think we see that we've bought attractive risk level and also attractive returns. So it's -- and we're really focused on being disciplined around how we price and value things and taking on the right risk. So we won't change that. We're very disciplined. So if we don't find that sort of volumes, that's not an issue either, but we do believe, given the outlook that we have a healthy pipeline with the right volumes and the right returns as well.

Okay. Great. And then you had the contribution this quarter from the portfolio or impairment gains. How do you think -- how should we think about this going forward, given where your current forward curves are and what you see in terms of collection activity? Should we expect continuous tailwind from this or as could it be that as we see inflation and interest rate squeezing on households that this could even turn negative?

I think the interest rate environment is very difficult to forecast. And that's clearly why we have these hedges in place to begin with, and they are working, they are protecting our asset side. And I mean, personally, I don't -- I have a difficulty forecasting this. And one of our objectives is to have this as low as possible because we don't want this to be volatile line. But given the change of framing in the economy during this last 6 months, it has moved quite significantly in the environment, and therefore, also the gains on the interest rate swaps. So if you -- if I would just look out, and I'm clearly not forecasting anything or guiding you in this, but it's more, okay, will we see a decreasing or increasing interest rate environment between SEC and the other currencies we are, probably the Riksbank is seems to be on an interest rate hiking cycle. So if that happens, if interest rates are coming together, then it should be that these interest rate gains are also coming down. But we don't forecast it. And then it's very difficult to guide.

Yes. Yes. Now I understand. Thank you for that. Actually, my -- what I was going after was rather the portfolio impairment gains and losses, which were the SEK 50 million positive.

Okay. Sorry. Yes, yes. Now I can talk a little bit about that as well as I think we've done an enormous work during the last year to derisk the overall portfolio. So we believe that it's a very good position now. And we are -- I mentioned it in Q1, we are derisking instead of only dealing with issues. I mean we have to deal with all the issues we see in the book, meaning that if something is underperforming or overperforming that is. So with both on the up and down side, we need to revalue according to the policies and the accountants and the policies that we have. And that said, we can also, of course, take down the risks that we see in the book proactively. And that's where we are now. So we're using collection performance to make sure that we get a stronger and stronger book on a continuous basis as well, which I think is a really great position to be in. And then that said, the macro environment is quite difficult to forecast. So the risk that Lars was discussing before are real and the opportunities are also real. So on balance, we will be, we will see, but I'm quite optimistic myself on the personal line.

Our next question is from Jacob Hatlevik with SEB.

So my first question is on your capital situation. The CET1 ratio decreased in the quarter. So what's your view on this given the changes in risk weights?

The risk-weight effective change is not in Q2. It's actually in Q3. So the publishing of the EBA risk reversal was in end of June, but the actual change happened in the 11th of July. So you will see the 260 basis points in Q3 core Tier 1 numbers.

Okay. That makes more sense. Okay. So my second question is then on your savings account. You're currently offering, I think, 0.5% rate on HoistSpar, but our competitor is now offering 1%. But you said during the call that you see deposit as quite sticky. So when do you see an outflow when competitors hike? And what rate level do you think we need in order for you to increase SEK rate as I guess having deposit funding is attractive given the current bond markets?

It is, and we are managing that on an ongoing basis. So it's -- we see that if we adjust the deposit rates, then we can attract or push out, so to speak, deposits quite flexibly. And we have managed our down the SEK deposit base slightly and then increase in euro. So these are term -- some term deposits in SEK has come to end, and then we replaced them with overnight euro because of pricing and hedging considerations. So it depends, is the answer to your question. So we manage now as you might be aware that we have a deposit platform also in the U.K., where we're increasing the deposit currently to match more of the assets that we are building up as well after the divestment. So it depends a little bit on the asset mix and also the pricing in the different markets because they're slightly different.

Okay. Perfect. And my last question is on your outlook for purchases of new portfolios. I mean, how does it compare to, let's say, 90 days ago or [ 180 ] days ago roughly. Are there any changes in the market? As in Q1, you said it was a good volume but very aggressive pricing. So have anything changed?

I think in general, we see a really healthy pipeline. And as Lars said, it's often seasonal. So it's Q4, and we already have some insight into that Q4, which looks good. And in terms of the pricing, I think we see still a competitive pricing, but it's better than a year ago. And I think the funding that Lars was touching on will drive that. And the question is more timing because the funding costs are real for the industry. So that will drive up return requirements over time. And how quick that happens is a little bit depending on the appetite and the need of the industry to replenish the books for all our competitors. But the pricing and the volumes are gradually improving. So if you look at volumes, it has increased materially from 2020, it increased in '21. We're seeing that it's increasing in '22 as well. And then the pricing, the more attractive returns is also coming. And particularly for us, the impact is both the market side of things, meaning volumes and at more attractive pricing for us and then also us focusing on the deals and the situations, we see that we can add more value, meaning that we can extract more value for ourselves is on through pricing and returns.

This concludes our question-and-answer session. I would like to turn the conference back over to Lars Wollung for any closing remarks.

Thank you very much, everyone, for spending the time with us, and I wish all of you a good summer. And if nothing else, let's meet up after quarter 3. Thank you very much. Bye-bye.

Thank you, everyone. Have a good summer. Bye-bye.

Thank you. This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.