Hoist Finance AB (publ) ($HOFI)

Welcome to Hoist Finance Q1 Report for 2026. [Operator Instructions] Now, I will hand the conference over to CEO, Harry Vranjes; and CFO, Magnus Soderlund. Please go ahead.

Thank you very much. Good morning, everyone, and welcome to this Hoist Finance earnings call for the first quarter of 2026. I'm Harry Vranjes, CEO of Hoist Finance. And next to me, I have Magnus Soderlund, our CFO; and Karin Tyche, our Chief Investor Relations Officer. Thank you all for logging in and for your interest in Hoist Finance. We'll try to run through this in 30 minutes and try to leave ample room for any questions you may have. Today, with the new year, we're also trying out a new slightly modified format. So please bear with us. Let's see, yes, there. So before we jump into the highlights, I think this quarter will be the first quarter in quite a while where we will actually be comparing apples-to-apples. So in the last 4 quarters, we constantly compared Hoist with SDR costs for the current year with SDR or Hoist without SDR cost in the previous year. And this has sort of clouded the underlying growth. So if we now compare Q1 2025, where Hoist actually had full SDR costs with the current quarter, we see a profit before tax growth of currency adjusted 32% versus the total portfolio growth of 19% -- if we then also adjust for the transaction cost for Azzurro, growth is actually 37%. So I hope this gives an indication of sort of the scale effect of our business model. Now before I go into the highlights, I just want to say a few words about the ongoing acquisition of Azzurro Associates in the U.K. So we are a leading actor in the industry. We're well capitalized. And for that reason, of course, we look at opportunities, M&A opportunities around the industry on a continuous basis. We are, however, a picky buyer. Our core strategy is to become the leading investor and asset manager of NPLs in Europe. So we, therefore, primarily look for companies that have large portfolios that we can add on to the Hoist Finance portfolio. They have to be at attractive returns. And of course, we want to be able to improve our market position in the large economies in Europe. We are also striving to grow our share of SME loans, as we've discussed, which is the largest asset class in Europe, and we have been successful there historically. Now Azzurro Associates ticks all those boxes. We become stronger in the largest credit market in Europe, in the largest asset class of NPLs. We will be allocating the entire purchase price of the circa GBP 200 million, so SEK 2.5 billion-ish to their portfolio, which is a granular SME portfolio with an average ticket size of SEK 120,000, a little bit larger than our consumer average in Hoist. There won't be any goodwill or other intangibles on our balance sheet after the closing. And so far, we have obtained positive responses from 2 of the 4 authorities that need to approve the transaction, and we are hoping that we will be able to close the transaction during the summer. Now over to the highlights. Next slide, please. And this -- here, you see the new format. So strong start of the year. We closed portfolio investments of SEK 2 billion in the quarter at good returns. Combined with what we have signed after the quarter closing and including Azzurro, we have secured SEK 5 billion in volume up until the summer, depending, of course, on the closing of AZUR. The market is active. The investment team is currently fully occupied with 55 transactions. Our portfolio has grown 19% from last year, stands at SEK 34.4 billion. And we are, of course, inching ever closer to our SEK 36 billion volume ambition, where we, by no means, will stop investing. We will continue, obviously, further. Collection performance, again, a strong quarter. The machine is working really nicely. despite geopolitical uncertainties, fluctuating energy prices, interest rates, and it is a pattern we see from previous external shocks. Collections tend to remain stable. Profit before tax, strong SEK 394 million, including the Azzurro transaction costs, compared to SEK 332 million last year, as I said before, currency adjusted growth of 32%. And this is driven by growth of the portfolio, accretive return levels and disciplined cost management. And this also helps us out on the return on equity that came in strong at 19.5%, a solid improvement of almost 3 percentage points compared to last year. And earnings per share, over 50% growth compared to Q1 2025, 53% actually. At the end of the period, we had a CET1 ratio of 13.86%, giving us ample room to maneuver and plenty of firepower for the rest of the year. Next slide, please. So it has been a busy investment quarter. So we've described before, Q1 is seasonally a slow investment quarter. So in January, typically, the market participants, they rest and regroup, not so much Hoist, but the sellers. And after what is usually a super intensive December and when we really had an intensive December in 2025. So this Q1 was no exception. So the transactions that we booked this quarter were primarily transactions that we actually started working on in Q4 or even Q3 last year. We are now a specialized debt restructure and being -- as such, we have started participating in investment processes that we would have skipped last year simply due to the negative backstop impact on our capital. So this is not a problem anymore. And it's still too early to say how successful we'll be on these portfolios. We'll have to come back to you on that in Q2 and Q3. But if you have -- take a look at the bottom right graph, you will also see that we are co-investing less as a result of being an SDR. The co-investments we have now are mainly forward flows that have been signed in previous years. Yes, which basically means that we are landing a higher share of the volume on our own balance sheet. As you can also see in the bottom right graph, investment volumes are lumpy, and that is just the nature of the business. We don't want to stress any transactions to any particular date. It makes us a weaker investor. So the deals come when the deals come. However, internally, we usually assume a split of 40% for the first half year, 60% for the second half. But please don't see that as any guidance. It's sort of a rough rule of thumb. The market trend of NPL volumes moving north, as we've talked about before, continues. Currently, almost half of the EU NPL volumes are on the balance sheets of French and German banks, and these are markets where we have a solid market position. Spain, the exception there to the south moving north rule, maybe Europe's most structured and mature NPL market is also very active. We won 2 secured mortgage portfolios there during the quarter, making Spain our largest market in our geographically very nicely diversified portfolio, overtaking Italy and Germany from Q4. Now if we would pro forma include Azzurro Associates in this graph, the U.K. share of the doughnut would grow to 15%. And although not sort of depicted on this slide, it would also grow our SME share of the total portfolio from today's, let's say, 10%, 10%, 11% to 15%, 16% and as per the end of the quarter, again, the book value, SEK 34.4 million, significant growth compared to last year and an estimated 118-month remaining collections of SEK 58.7 billion. With that, I will hand over to Magnus to take us through the quarter in more detail.

Thank you, Harry. Good morning all, and thank you for calling in. So we are off to a good start of the year. We have a profit before tax at SEK 394 million versus SEK 332 million last year, meaning a 19% increase year-on-year. And as FX is having a fairly material impact in the quarter-to-quarter comparison, the FX adjusted growth is at 32%. We see a net profit of SEK 337 million versus last year's SEK 260 million, which leads up to a 30% growth, 42% adjusted for FX. This SEK 337 million is impacted by transaction costs related to the Azzurro acquisition of some SEK 25 million, and that's reported in the indirect cost line. And on the positive side, we have a SEK 43 million impact in the tax line coming from a provision release. This relates to transfer pricing legacy case going back to 2016, '17. Underlying profit before tax, excluding the SEK 25 million of transaction costs, grows by 25% and 37%, excluding FX. This results in a return on equity of 19.5% versus last year's 16.7%. And adjusting for the 2 mentioned items, the underlying return on equity for the quarter is at 18.4%. And then, if we look at the P&L a bit more in detail, interest income, including the income from co-investments grows by 10% year-on-year compared to a book growth of 19%. The variance in growth mainly comes from FX, where the book value is reported as point in time and interest income is reported on average throughout the quarter, but also from the fact that roughly 80% of the volume in Q1 was implemented in March. So we're not seeing the full quarter impact in the interest income for Q1. Excluding FX, the interest income is at a 15% growth versus the portfolio book value growth of 19%, excluding FX. And then for the net interest expense, we see an increased net cost by some SEK 42 million, driven by the higher portfolio book value and higher NSFR ratio compared to last year. And the increase in NSFR is coming from the fact that we have to hold liquidity for the Azzurro transaction, even though it has not yet been finalized, pending approval from regulatory authorities. And looking at the impairment line, we keep the positive momentum from 2025 and arrive at a 105% collection performance for the quarter compared to 103% last year. And this is very much a tick in the box and confirmation that we have prudently and conservatively managed portfolio. In other income, we have roughly SEK 15 million coming from Spanish real estate sales and the remaining mainly coming from servicing revenues in Germany. And we have a decrease compared to last year, and it's mainly driven by an asset sale conducted in Italy in Q1 of last year. Net result from financial transactions is driven by overperformance and gains coming from the notes held in our co-investment vehicles. Total operating income comes in SEK 138 million higher than last year, leading to a 13% reported growth, which is 20% adjusted for FX impact. So pretty much aligned with the portfolio book value growth. All in all, we see a steady development on the net interest margin with supportive pricing and really good return levels in the closed transactions for the quarter. On the cost side, we are remaining at healthy levels with the direct cost for the quarter at a 15% growth in the reported figure. So that's 20% growth, excluding FX. This could be compared to a collection growth of 12% or 18% excluding FX. To note also in Q1 is that we are doing a small reclassification of certain costs related to the deposit platforms. These were historically considered as indirect costs, but as part of it is directly linked to the portfolio book value growth and size, we will now define them as direct costs moving forward. It relates mainly to personnel and marketing and IT costs and the impact from the reclassification now in Q1 adds roughly SEK 12 million of cost to the direct cost line and therefore, a relief of the same in the indirect cost line. If we look at the indirect costs, we report a 3% increase versus last year, driven by the SEK 25 million transaction costs already mentioned. Looking at the underlying growth adjusted for these costs and FX, the indirect costs are decreasing by 3%. And then on top of that, if we also add back the reclassified deposit costs, they are increasing by 1%. So all in all, we are on flat levels compared to previous quarters. Adjusting for the 2 more significant impacts in Q1, the underlying return on equity for the quarter is, as I said, 18.4%. So all in all, we are very happy with the strong start of the year. We see higher investment volumes in the traditionally slow Q1, also with the material growth reflected more accurately, where we are now like-for-like on the financing side related to the SDR status. So we can go to the next slide. So just to recap, a very good start of the year. Net interest income growth of 15% adjusting for FX, somewhat impaired by the majority of the new volume acquired at the end or towards the end of the quarter. Total operating income boosted by another quarter of strong collection performance. We overperformed by SEK 223 million and adjusted for earlier than planned collections by derisking revaluations of SEK 88 million. And our expenses are at continued controlled and good levels. And the net profit reported at year-on-year 30% growth or 36% adjusting for FX and the 2 significant impacts, the tax provision and the transaction cost. So we can go to the next slide. So if we look at our funding structure, the mix remains fairly similar to prior quarters with the exception that we now also have a Spanish-owned platform up and running. This, in addition to the German platform implemented during Q4 of last year provides a longer-term flexibility and ability to increase NSFR efficiency. We are always competitively priced with a stable funding base, which is and will continue to support our growth ambitions. In Q1, we see a 3.28% average cost of funding, leading us to in relation to the NPL book value of 4.3%. So this level has been very stable throughout 2025 up until now, and this obviously puts us in a very good position versus the competition. And our ambition moving ahead is to try and keep this mix of funding moving forward to support our industry-leading credit rating. We go to next slide. Looking at the direct costs, the cost to collect is roughly at the same level as in Q1 last year, adjusting for the newly reclassified deposit costs of NOK 12 million that I mentioned. But also slightly higher than Q4, where we saw a high earlier-than-planned secured collection, not adding any material costs, and this was particularly driven by France. In general, we had a larger share of the total collection coming from the secured side in Q4, which carries a slightly lower cost to collect compared to unsecured. But overall, the cost to collect is aligning with the growth of the portfolio just as we anticipated. Our indirect costs remain on flat levels compared to prior quarters. If we look at the FTE numbers, we see the shift for the deposit costs reflected in the decrease of indirect FTEs. In the direct FTEs, we see the similar increase of staff, and we're also adding roughly 10 operational staff across the markets in order to manage our growing book. So we can go to the next, and I think last slide, Harry. Thank you. Our capital ratio is now increasing as a consequence of the backstop relief. The impact coming from this is roughly 2.7 percentage points, and this puts us in a very good position to keep growing as per our ambitions. We see LCR remain at very high levels. The liquidity buffer is at SEK 27 billion with a continued lower ratio compared to the portfolio book value. And looking at the NSFR, we see a high 145% for the quarter, and that's fueled by the fact that we have to hold a share of liquidity for the ASR transaction and also be prepared for the immediate closing when the approvals are finalized. So to conclude, very strong start of the year, very healthy growth in earnings and a continued strong collection performance over a very controlled cost base. So with that, I hand back to you, Harry.

Thank you, Magnus. Yes. So an intense start and just some key takeaways before we open up for questions. So we are now an SDR, and this gives us increased flexibility. We have stopped sort of excluding or filtering out deals that we would have done last year or the previous years. And we've also been co-investing a bit less in Q1 compared to previous years, landing a higher share of the source volume on our own balance sheet. Now the market remains active, strong primary market flows, and we expect to see some interesting secondary market opportunities as the year progresses as well. Azzurro Associates, the acquisition will give us a stronger position in the U.K., both for our current consumer business and in the SME asset class. And with the opening up of our Spanish deposit platform, we are further strengthening our platform resilience, basically taking down costs and making sure that we have multiple sources of collecting euros. With that, I'll open up for questions.

[Operator Instructions] The next question comes from Bjorn Olsson from SEB.

First, to follow up where you ended with your excess capital. You're now adding M&A as a bit of a new leg to your story and you're sort of guiding for that to continue ahead. Is this on top of existing investments? Or should we see this as a -- that you're sort of -- that you feel that the ordinary market, the primary and secondary market is sort of limited in terms of additional growth opportunity? So -- or is it because the margins are more attractive?

Bjorn, thank you. Well, I think we have been looking at M&A continuously for the past years. But as we've stated and said also in this call, we are a picky buyer. So the portfolio needs to be valued at a price where we are willing to execute. And yes, if we find those opportunities, we will go for them. And I think doing it on top of or as part of investment volumes, we want to grow the book. We see a fantastic primary market out there. And of course -- but that doesn't sort of exclude any that we also want to take position in certain markets, right? So I think this will add to the size of the book and also a very, very interesting SME asset class. And we will be continuing to look at other options in Europe.

All right. And as you're mentioning, you sort of -- the SDR enables you to broaden scope for primary investments as well. Could you give any quantification of -- in terms of a ballpark percentage figure, how much larger is your addressable market now in terms of investments once you are SDR?

I think looking at 2025, when we were not SDR, I think you could use the sort of co-investment volumes that we saw then, right, as some sort of a proxy. And that would lead you to something where 15%, 20% larger market. Now we will see the outcome of the bids, et cetera, and so on later this year or later -- well, until the end of the summer, most likely, to see how successful we are. But yes, it is an absolute benefit, of course.

Okay. And finally, on just a technical note, you're mentioning that you're wrapping up your deposits due to the Azzurro acquisition. Is that basically just roughly SEK 2 billion of deposits that will go into their books and consequently NSFR to drop by a similar amount once the deal closes? Or how should we view that effect on NSFR and funding in general?

Bjorn, so from a regulatory perspective, we're required to hold 40% of the acquisition price. So that's what we have now that is driving the NSFR ratio. Just to put it in perspective, if we would close the deal today, then the 145% would drop to 140%. So that's the sort of addition we have coming from the reservation for this deal.

The next question comes from Ermin Keric from DNB Carnegie.

So maybe the first question could be, you mentioned that you had a lot of volume coming in late in Q1. How much tailwind should we expect into the coming quarters? And then the second question would be just on investment returns. Are you seeing any kind of incremental upwards, downwards pressure relative to your back book on the front book investments? And then the last one would be on the collection performance, which is obviously solid in Q1. How should we think about that for the coming quarters?

Ermin, so that's 3 questions. The first one was it was....

The tailwind coming from the late investments in Q1, right, Ermin?

Yes, exactly.

Yes. So I don't know. But I mean, I think we had pretty much the same thing happening in Q4, and I think we see the impact of that now in Q1. Now in Q1, we obviously have roughly half of the investments we had in Q4, but I expect like SEK 20 million, SEK 30 million, like if we would have bought everything exactly in the middle of the quarter, that would probably be a sort of spillover or impact in Q2 compared to Q1 coming from the SEK 2 billion we invested of interest income, SEK 20 million to SEK 30 million roughly.

Yes. And the second question was -- sorry, Ermin?

Then it was on the investment returns. If you see the front book deviating upwards, downwards to your back book?

No, I think from the investments we did now in Q4 and Q1, the return levels are very positive. They are very supportive. And I know at some stage, we might run into the contrary. But so far, we're very happy with what we see in the books that we signed -- in the deals that we signed.

Yes. Return levels keeping stable and accretive. And then the third one.

Was collection performance.

Collection performance. Yes. I think we -- I mean, over the years now with the rejuvenation program with various operational excellence initiatives around the group, we see a broad-based improvement in the collection performance across the markets. It's not one single market driving, and it is -- it's really, really good to see. Now we obviously expect those operational excellence initiatives, et cetera, to continue yielding. So I think that's how we should think about that.

The next question comes from Markus Sandgren from Kepler Cheuvreux.

Sorry, it was a bad line. Can you please repeat what you answered on Ermin's last question?

Oh, it was a bad line. On the collection performance?

Yes, please.

Well, Ermin asked, I guess, if it -- well, if the strong performance will continue. Basically, my answer was that we see the effect of many of our initiatives that we have been doing, right, large and small. And I guess, now we are in the continuous improvement phase. So we see a broad-based strengthening of the collection performance across multiple markets, right? So it's not any one market driving this. And we of course...

And since this seems to be a broad-based improvement, why don't you bring up this as NII instead of impairments if it's not just something that fluctuates -- because I would expect it to be closer to 0, but with a higher NII if this is something that would continue.

Well, we do manage the book in accordance with our auditors, right? So to make sure that it has the appropriate value at all times, right? And we do this on a -- we do minor readjustments on a monthly basis, and we do, of course, larger revaluations every quarter. So we believe the book has a fair value, and we see this collection performance as on top of.

Yes, I think fair to say, we're very conservative in the management of the book, and I think that shows now for many quarters in a row.

Yes. Okay. And then secondly, I was thinking about -- you paid a dividend now in -- as you got the SDR status. And it seems like consensus is expecting continuous dividend payments, just disregarding the size of them. But what's your thinking when it comes to capital repatriation versus growth? I mean, is it that you want to pay steady dividends? Or is it what you have capacity to acquire? Or is it the market size that limits growth instead of -- or I mean, if you compare the alternatives to pay dividends and grow? So we believe that the best shareholder value we can give is by buying portfolios at -- certainly at the current return levels that we see in the market. And that remains. So that will be our primary focus or primary use of our ample capital. And for the rest, I would say we have the dividend policy where we are accruing at the top range of that for -- in accordance with the auditors or in accordance with IFRS. And well, we will continue to focus on buying portfolios. And I think in terms of capacity, given the operational model that we have, where we have a mix of in-house collection and outsourced collection, we have the capacity to absorb quite high volumes. And if the return levels stay as they are and we stay competitive, then that's what we're going to go after.

The next question comes from Phillip Moe Molmen from SB1 Markets.

Last year, you sourced around SEK 11.5 billion of portfolio acquisitions if you include co-investments and you communicated that you expect the inflows of portfolios coming for sale to be the same or larger this year. Should we expect your investments or your organic investments, so to speak, to be roughly the same or larger and Azzurro to come on top? Or should we include Azzurro in the portfolio investments rough guidance?

I think what we see in the market is roughly the same amount of portfolios or same amount of deals as last year or more, right? It seems to have been a sort of more active start of the year. We don't have full visibility on Q4 yet. But if the trend holds up, then there might be an increase compared to last year. We will try to capture as much as possible of that and at the stable returns that we're seeing at the moment and pending competition. So that is the target. And then again, similar to, I guess, it was Bjorn's question, if this comes on top or not, we see the M&As, right? We will do M&As primarily when there is a large portfolio. So we see it as a portfolio in a company suit. Then, of course, with the specific case of Azzurro, we get extra capabilities, which we are very, very happy to get, right, and an extra strong position in the U.K. market. So there are many benefits of that M&A. But yes, we will deploy as much as we have capacity to take on depending on return levels.

Yes. And my second question is of the SEK 2 billion closed in Q1, how much represents the settlement of Q4 '25 signed deals versus the Q1 '26 originated transactions? And is the whole SEK 1.4 billion still over from Q4 in this -- is it correct to assume that you source around SEK 600 million acquisitions in the quarter?

The absolute majority is deals that we started working on Q3, Q4 last year simply based on the timing. These are large transactions up to SEK 1 billion a piece. They take a little bit of time to negotiate, sign and close, and that's the nature of the business. The market, let's say, opened up again in February this year with the first investment committees and so on. And so I would say, yes, a minority of what we have booked in Q1 has actually been sourced in Q1. We will see that coming in later.

There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

Thank you very much.

So we have some questions on the chat as well here. Are there any markets or countries of current interest that Hoist is evaluating where it is not yet active, either within Europe or globally?

Thank you. That's a great question. Well, I think we have been vocal before about that we want to expand further in the Nordics. We have about 4% of our book in the Nordics, and we would -- we find it an interesting market. In the previous years, I think the dynamics in the Nordics are a little bit different. The banks typically -- first of all, it's not usually the large banks selling. It's typically smaller institutions selling, and they typically sell earlier. So a lot of the volume has been backstop affected in the Nordics. And now with the SDR, it is a market that we will be focusing more on where the backstop is not a problem for us anymore. And I would say that is the primary markets in Europe that we are looking at. And we are not looking outside of Europe at the moment.

Great. And then there is a question on AI. Are you looking into using new technologies such as voice AI to reduce your direct cost for collections?

Also a great question. We are using AI, and we are using it mostly in the support functions at the moment. We typically have a bit larger ticket collection than many of our peers. And that's typically more complex collections where a senior agent will be sitting with the debtor in one phone, debtors co-debtors representative in another phone, the court on the third phone, et cetera. So quite complex negotiations. So far, we have not seen any AI tool that can help in that respect. But we do see benefits in our head office. We see large benefits in our IT, where we are developing tools together now with Claude and so on. And we've seen some pickup there. And for all these tiny interfaces and small improvements that we do in this continuous improvement base, we are using AI and trying to maximize the benefit of that as much as possible. But so far, we have not deployed it in the collection core conversation with the debtors. But we are looking into it and following the development.

Very good. Then we have a question on return on equity. If we adjust for the SEK 43 million tax reversal, we have an underlying ROE of 18.4%. What's the target ROE range on a normalized basis? And what are the key levers to sustain or improve it further?

Well, if we look at the target ROE range, I mean, we have a target right communicated that will probably be updated at some point in time. But we want to be above 15%. And then when it comes to how to keep this up, I mean, that's basically to keep on doing what we're doing, make great acquisitions and be conservative in our valuation and costs and also to keep the very good level of operational performance that we have now, keep that going. That's basically how we sustain this and make it grow over time, which is obviously our ambition.

Yes. And I think adjusting the underlying ROE down to 17%, I guess, then -- or adjusting for the tax reversal, as Magnus said earlier, then we typically would also adjust for the onetime acquisition costs, and then we come to an underlying ROE of 18.4%.

Great. So that was the final questions on the chat. That leaves us with saying thanks to everyone for listening in to this call.

Yes. Thank you, everyone, and have a continued wonderful day and rest of the week. Thank you.

Thank you.

Bye-bye.