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

Welcome to Hoist Finance Q2 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. Good morning, everyone, and welcome to this Hoist Finance earnings call for the second quarter of 2026. I am Harry Vranjes and next to me, I have Magnus Soderlund, our CFO; and Karin Tyche, our Chief Investor Relations Officer. Thank you all for logging in today and for showing interest in Hoist Finance. We'll try to run you through this quite action-packed quarter in about 30 minutes and try to leave as much room for questions as possible. There's a lot to cover. We have also understood some of you are looking for some more color on the Azzurro acquisition. So we have added a slide about that later in the pack. And -- but in general, we are very pleased that we managed to close that transaction already in Q1. But as Magnus will talk to you about later, they are not in the P&L yet, right? So we have the company, the people and the assets on the balance sheet, but revenues and costs will only be visible from July onwards. We are, however, already operating on the market, and we've been able to win a number of smaller portfolios since closing. Now Hoist Finance is a growth company operating in a growing market although the stock of NPLs on the balance sheets of the European banks is growing or growing at a relatively modest pace. The stock today generates more NPL sales than it did in the past as sellers sell earlier. Now this change in behavior is driven by a combination of factors, but certainly, regulation is one of them. The European regulators are still laser-focused on the NPL topic and we expect them to be so for the foreseeable future. And all in all, we assess that we will have favorite market conditions for the foreseeable future. There are many things to highlight this quarter. I think 1 of the highlights is, of course, also this Moody's rating hike. It will make our market financing marginally cheaper, and we also see it as a recognition of our rigorous risk management. And with this rating, we believe we have the highest credit rating in the industry. Now over to the highlights. Yes. It has been a record quarter. We closed portfolio investments of some SEK 3.5 billion in the quarter. at good returns. That is our highest Q2 ever. Now combined with the SRO portfolio of SEK 2.6 billion, that means we added about SEK 6.1 billion to the total portfolio in the quarter, another record. The market is active. The pipeline is healthy, and our investment team is fully occupied for the second half of the year. Currently, our portfolio stands at SEK 39.2 billion, up 26% from last year. And of course, with that, we have reached and surpassed our volume ambition of SEK 36 billion by the end of 2026. That doesn't mean that we will be pausing acquisitions in any way. We will, of course, continue to invest and build scale on this platform that we have. And when it comes to new volume ambitions, we'll get back to you with that Capital Markets Day in September. Very strong collection performance this quarter, 108% broad-based. And I just want to thank all our operational teams for this delivery, really great work. Profit before tax came in at a strong SEK 632 million compared to SEK 310 million last year. Now we did get the VAT refund and adjusting for that and the transaction costs, the last batch of transaction costs, I should say, for Azzurro. We end up at an underlying earnings before tax of SEK 501 million, another record. And I think we continue to see the benefits of the scale that we are now reaching. Return on equity, our core target came in at 27.5%. And of course, if you then make the same adjustments as on the EBT, we end up with an underlying 21.6% return on equity, above the 20%. Now earnings per share doubled or more than double, I should say, to SEK 5.15 per share. And at the end of the period, we had a CET1 ratio of just over 13%, very strong capital position. Moving over to the portfolio and the investment. So it has been a busy quarter. And as we have highlighted before, to be the leading investor and manager of NPLs in Europe, you need to have significant presence in the 6 largest European economies. That is simply where the bulk of the NPLs are. We now have about 80% of our portfolio diversified over those 6 markets, Germany, France, Italy, Spain, Poland and now the U.K. During the quarter, main investments were in France, Poland, Italy, and we're happy to also have closed a larger portfolio in Sweden. It's been mostly unsecured this quarter. And then combined with the Azzurro portfolio, which is also unsecured, the share of unsecured -- of the portfolio went up with a few percentage points, but this will fluctuate quarter-by-quarter. IRRs are holding up. We have seen selective aggressiveness around certain transactions. But if returns drop below our hurdles, we walk away. Discipline is key, and the pipeline is healthy. So far, in July, we've signed transactions for about SEK 1 billion. We expect to close those transactions during the second half of the year. I think the market trend of NPL volumes moving north continues. At present, almost half of the EU NPL volumes are on the balance sheet of French and German banks. And if you then add U.K. there, it's -- they have NPL stock similar to Germany but a slightly more active NPL market. And let's say, before Azzurro, we had strong market positions in 2 of these 3 markets. And now we have it in all 3. So very happy about that. And then as per the end of the second quarter, the total portfolio now stands at SEK 39.2 billion book value with an estimated remaining collections of SEK 66.9 billion. With that, I will hand over to Magnus to take you through the quarter in more detail.

Thank you, Harry. Good morning all, and thank you for calling in. So if we look at the quarter, we see a continued strong delivery during a rather busy quarter with a record investment volume and the final implementation of the Azzurro acquisition, amongst other things. Profit before tax at SEK 632 million versus SEK 310 million last year, meaning a 103% growth year-on-year, 105%, excluding the FX impact. As we have communicated during the quarter, we have received a VAT refund from the Swedish tax authorities after a mutually concluded agreement with a one-off P&L impact of SEK 164 million which impacts this quarter. We also saw the last bit of the transaction costs related to the Azzurro acquisition, SEK 33 million. If we exclude for these one-off items, we have an underlying profit before tax of SEK 501 million to be compared to last year's underlying SEK 335 million. Last year, we had a negative VAT court ruling in the Netherlands. So the underlying growth ends at 49%. We have a net profit of SEK 474 million to be compared to last year's SEK 234 million, rolling up in the same growth percentages as for pre-tax earnings. Excluding the mentioned one-off items, we see an underlying SEK 376 million of net profit for the quarter to be compared to SEK 254 million last year. this leads up to a 48% growth in the underlying net profit, a really strong number. So in the reported figures, we arrived at an ROE of 27.5%, which adjusted for the one-off items becomes 21.6% to be compared to last year's underlying 16.1%. Then if we look at the P&L in a bit more detail. Interest income, including the income from co-investments at a combined SEK 1.46 billion, leading up to a 19% growth compared to last year. This to be compared to a book value growth of 26%. and then obviously, as Harry said, the 1 thing to keep in mind for the second quarter is that we see the SEK 2.6 billion investment of Azzurro in the reported closing portfolio book value, but we don't see any P&L contribution. Since we closed the deal at the very end of June. So adjusting for this, the book value growth is at 18% and in line with the interest income development. In the net interest expenses, we see an increased cost of SEK 20 million year-on-year, so a 6% increase. This is a result of a more favorable interest rate environment, combined with the lower NSFR for the quarter. We reported 138% compared to SEK 143 million last year. and the fact that we are becoming more an efficient in our deposit composition. We continue to see a steady net interest margin in line with previous quarters and also last year. In the impairment line, we see a continued strong performance coming from our collection activities. We closed the quarter with 108% compared to forecast and compared to last year's 104%. We have collected a total SEK 3.1 billion in the quarter. And as per normal, we have adjusted for timing for the majority of the secured or performance and we also see a strong overperformance in the unsecured collection. We had a total overperformance of SEK 447 million, where we did timing adjustments for SEK 218 million. We also saw some performance related net negative write-downs in the quarter of roughly SEK 50 million. All part of our intention to manage our book, our portfolio in a prudent and responsible manner. And we also made an ECL adjustment related to the German performing portfolio of minus SEK 53 million. So all of this leads up to the SEK 135 million we see in the impairment line. Looking at other income. This is where we have booked the refunded VAT of SEK 164 million and on top of that, we have contributions from the real estate sales in Spain and servicing revenue in Germany that we normally see every quarter. Net result of financial transactions is mainly driven by our performance and gains coming from the notes held in our co-investment vehicles. So this all leads up to a total operating income of SEK 1.4 billion. which is a 38% growth compared to last year and a 23% growth excluding the VAT refund. On the cost side, the direct costs are growing by 15% compared to last year to be compared to the portfolio book value growth of 18%. So we're continuing to demonstrate a controlled and healthy cost level. And if we look at the indirect costs, we see a reported 4% increase compared to last year. In the second quarter, the costs also include the last bit of transaction cost from the Azzurro transaction. So if we exclude this, the underlying indirect costs are on flat levels compared to last year where we also had the aforementioned SEK 25 million impact coming from the VAT case. So to conclude, adjusting for the one-off events in the quarter, we are at 21.6% ROE to be compared to last year's underlying 16.1%. So we're very happy with the continued strong performance in 2026. We have a record high investment volumes. We have good cost control and a very strong operational performance. So we can move to the next slide. This is basically a recap. So just a short one. Net interest income, 19% growth year-on-year compared to a portfolio book value growth of 18% if we exclude the Azzurro portfolio book value. And we see a net interest income growth of 23% further adding the increased liquidity efficiency where we have an NSFR materially lower than last year, 138% compared to last year's 143%. We see another quarter of very strong operational performance. Our costs are at continued good and controlled levels, and the net profit reported at year-on-year 103% growth or 4% to 5% growth in the underlying results adjusting for the one-off items. We can move to the next one. Looking at the 5-quarter trend, we see that the direct costs are developing at a somewhat lower rate compared to collections in the second quarter, further illustrating our cost control and strong operational performance. The collection figures in the second quarter is, however, positively impacted to some extent as we had 2 significant payments totaling roughly SEK 180 million, which were timing related. So if we adjust for those 2, we see a quarterly collection of roughly SEK 2.9 billion in total and this pretty much leads up to the underlying stable ratio that we now see on a regular basis. Our indirect costs adjusting for the last piece of Azzurro transaction costs remain on flat levels compared to previous quarters. And for the FTE numbers, we see a rather static level for the total business. And here, we also illustrate the immediate size of the organization post acquisition. So we have a total of 197 FTEs coming in, where the split of direct, indirect is fairly similar to our existing business. We can go to the next slide. Looking at our funding structure, the mix of sources is pretty much identical to Q1. We see a further improvement of the overall cost of funding down to 3.23%, and we remain competitively priced to further support our growth ambitions. And looking at the funding cost in relation to our portfolio book value, we land at 4.1% for the second quarter. This is a further improvement from the first quarter, where we saw 4.3%. So we're maintaining our strong position from a funding perspective. We do have a lower NSFR ratio in the second quarter, which helps us. And on top of that, we are currently whether NSFR efficient in our deposit pool. We issued an AT1 during the quarter at very favorable market terms to manage our capital position in this period of strong growth. And we also did a total SEK 500 million tap into our senior preferred instruments, SEK 350 million of that at STIBOR plus 125 bps and SEK 150 million at STIBOR plus 100 bps. So all in all, we're maintaining and improving our competitive match on the funding side. If you move to the next slide. Our CET1 ratio comes in just above 13%, down from 13.9% in Q1, and this is mainly driven by the record quarter investments, leaving us a continued strong capital position moving forward. LCR remains a continued high levels and looking at our liquidity reserve, it remains at around SEK 27 billion. So we're becoming more efficient in the deposit structure. And if we look at the ratio between our liquidity portfolio and our NPL portfolio, it comes in at 70% which is a significant tightening from previous quarters. And we also have a slightly lower NSFR ratio, as I mentioned. So to conclude, a very strong continuation of the year with record investment volumes, continued great operational performance and the costs at control levels, this to achieve increased earnings and increased profitability moving forward. So I think with that, I will hand back to you, Harry.

Thank you, Magnus. Yes. So on Azzurro, so we closed the acquisition in the last days of June. And we're, of course, very happy about that. And with this acquisition, we doubled our portfolio in the U.K. And as you can see, the U.K. now is by portfolio book value, our second largest market. We now have a larger presence in a very interesting market and in a very interesting segment, the SME segment in the U.K. And up until now, as those of you who have been following us know, we have been handling the U.K. in a 100% outsourced model. But of course, now going forward, we'll have greater optionality when it comes to servicing also our consumer debt portfolios, which we will continue to invest in. And with this acquisition, we now have solid presence on the ground in all the 6 largest economies in Europe, where the bulk of the NPLs are. U.K. represents -- they don't report statistics through Euro stat anymore since Brexit, unfortunately, but it represents circa GBP 30 billion to GBP 35 billion of NPLs which we see at similar levels as Germany, but with maybe a slightly more active portfolio market. Now the team for the combined unit is up and running, and we expect to be fully integrated by the end of the year. This is not a heavy integration. These teams are highly complementary. Yes. And since closing this transaction in the last days of June, we have already won a few smaller SME portfolios, and we are looking forward to the autumn pipeline. And then to close off before we open up for questions. Obviously, a strong quarter. We were happy with that. But our business model on the surface is quite simple. So we invest in portfolios at good risk-adjusted returns. We then collect at or above 100% on the pricing curves of those purchases on those portfolios. And we ensure that we at all times have capital and liquidity to do so. And I think as you can see from this report in Q2, we have done well and even very well in all of these areas. And of course, this builds a larger portfolio over time and that generates more interest income. So the scale has its benefits, right? So obviously, we're covering our fixed costs and growing the operational leverage, but also in terms of single risk exposure as the portfolio becomes larger, any incremental new investment that we make will add proportionately less risk. So we think we've come a long way or come some way towards becoming the leading investor and manager of nonperforming loans in Europe, but there is still a lot more to do. On the ninth of ninth, we will hold the Capital Markets Day here in Stockholm to lay out our plans for the future. And we hope to see as many of you as possible there. And with that, I think we thank you for the attention, and it's time to open up for questions.

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

Good morning. First, perhaps a technical question to you, Magnus. You're mentioning that you're increasing your NSFR efficiency. And I guess this is that you're migrating deposits to your own platforms also explained by the sort of improving ratio versus your book. Could you give any guidance on, I guess, A, inflows into your own deposit platforms? And b, if we can expect this migration to add additional improvements in terms of margins.

I think our own platforms is 1 part of the story, but then we're also becoming more efficient in the stuff we get through raising, right? So we did the change from overnight a little over a year ago. And now we are actively moving more of the deposits into longer-term tenures on raising, and that's obviously helping us because as you know, during the last 12 months of the tenure or the run time, the NSFR efficiency drop. So where we are today, we're at a really good place where we have a lot of our raising longer tenures on racing. And then on top of that, we obviously have our own platforms where we have seen a relatively good inflow since we opened up Germany and now we also have Spain. I think we can guide a bit about -- we have roughly SEK 3 billion received on our own platforms in Germany and Spain now as of today.

And then on the Azzurro acquisition. I guess, first, it sounds on you, Harry, that you're not only buying the company and its book, but rather you buy a platform to grow a bit more in the U.K., how does the U.K. stand out in terms of, I guess, return metrics and attractiveness versus your other, I guess, euro area and is correctly interpreted that this is sort of a company for you as well to grow further in the U.K.

Thank you, Bjorn. Yes, I mean, this is going to be a platform for further growth in the U.K. I think we are happy with the returns on the consumer side. I think what we can say is that the returns on the SME side are slightly better. So we will continue to grow in both those segments. But we believe the U.K. market is in an interesting moment right now, and we believe there will be volume to pick up there. Have good returns.

Okay. And just finally, Azzurro itself, as of today, in terms of cost/income, row, et cetera, how does it perform versus you? And if weaker, can we expect you to do, I guess, just to have some redundancy costs and sort of rightsizing one-off costs come in this year as well, if you want to slim it and improve it.

I think Azzurro is performing very nicely. We will not be giving you any ROE or earnings numbers on the call today. We'll see it baked in, in the Q3 report. But -- and I think, as I mentioned before, I think the integration and so on, this is highly complementary, right? These are teams doing legal collection on SME cases and our existing or former U.K. organization was mainly doing consumer through outsourced operations. So this will be a fairly light integration going forward. So we don't expect any major integration costs. Obviously, they need to come over into our IT cloud and all of this but those are fairly light touch activities.

The next question comes from Ermin Keric from DNB Carnegie.

Maybe first, just to check, Magnus, you're right that you said you had 2 larger collections of SEK 180 million. And what was that? It sounds very high given that you have such a granular book .

Yes, we do have a granular book. One of them originates from an indemnity payment, basically, so it sort of put back where we have claims that are going to fulfill the contractual obligations for the seller. So we, on a yearly basis, identify which cases should be sent back and then we receive the cash back for that. So that's 1 part of it. And then we had a larger investment in 1 of our markets where the interim collection piece was significant but also built into the collection forecast. So it doesn't impact collection performance per se, but it obviously drives the total gross collection, which we are looking at, at that particular graph. So it's just a coincidence that they both happened in Q2, and they were of such a size that I think it's worthwhile highlighting that. And then looking at the gross collection versus direct costs sort of make sense again in relation to our sort of previous performance?

Got it. And then on the NSFR, you already touched upon it a bit, but I suppose you'll look to further increase the efficiency but how about the actual kind of NSFR percentage, would you want to come further down than 138%? Or is that a satisfactory level going forward?

We're always looking to optimize our deposit structure, of course, and I think we have done a really good job with that, which is now becoming sort of bearing fruit now in Q2. When it comes to the actual percentage, we obviously want to stay well above the 130% regulatory level. I'm not going to guide for an exact number, but if we would sort of start closing in on 135%, I would become a bit more active. But we are actively on a daily basis and monitoring and forecasting this. So I feel very comfortable that we are in a good place to sort of remain at a reasonable gap above the regulatory limits. I have no concerns about that.

Great. And then the last question would be more on the investment pipeline. How far out do you have visibility and it sounds like banks have started to sell a bit earlier, I suppose that's part of the backup, but do you see that there's anything kind of temporary that's getting banks to accelerate now that wouldn't be sustainable over the the long term in terms of the activity you're seeing in the market?

Yes, I think it's difficult to say. I think we have typically, I would say, 9 months concrete, let's say, view -- and then we have through our relationships with the banks, we can sort of assume what happens after that and some banks are very, very structured and very scheduled in their offloading of NPLs. So we have -- but I think, sort of concrete visibility sort of 9 months. And we don't really see any that this is some sort of a bump or temporary push. This has been, I would say, growing gradually over the last 2, 3 years, the pipeline.

Got it. That's all for me impressive results, and have a nice summer.

The next question comes from Markus Sandgren from Kepler Cheuvreux.

I was -- 2 for me, please. The first one was the credit loss that you reported. How much of that portfolio that is performing is provisioned including this -- the cost you took for this quarter? That's the first one. And secondly, the coming on the impairment, it seems like you're surprising the market quarter after quarter. If you look at consensus numbers, is there anything you think the market is not quite understanding rightly -- or you think those forecasts seems reasonable?