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

Welcome to Hoist Finance Capital Markets Day 2026. I am Björn Olsson. I'm a research analyst with -- at SEB covering Hoist, and I will be moderating today's event. For those of you participating online, each session will be ended with a Q&A session. [Operator Instructions] Let me then start today by introducing CEO, Harry Vranjes.

Thank you very much, Björn. and thank you, everyone, for joining us both here physically in the room. And of course, I heard that there's significantly more online. So to all a massive welcome as well. I'm Harry Vranjes, I've been CEO of Hoist Finance now for about a little bit more than 3.5 years. Originally, computer science student, but stumbled into this industry in 2001 on an IT assignment. And I haven't left since. I had various roles in IT operations, country management in these 25 years in the industry, pretty much all over Europe. And it is an incredibly interesting industry. There is so much happening here at all times, right? There have been -- we had the global financial crisis and everything that happened in the South of Europe after that and so on, which has always created sort of a new activities in the industry. So we have a lot of -- a wide range of Hoist Finance experience here in the room from people who are new to the company. And then, of course, from, I think, the oldest employee or not the oldest, one of our younger, but the most senior employees is Fabien Klecha with 15 years in the company. So he will know a little bit more details. We will try to balance this message. Now as you saw in the press release last evening, we have updated our external financial targets, and we also published our new volume ambition. We will take you through them in a few minutes, but let's start with an introduction, and also let's see what we are going to be talking about today. So we'll start with me here, an interaction to the company. Talk a little bit about what we set out to do. Some of you maybe were here for the 2024 Capital Markets Day, what has happened since then. And then we will go straight into the financial targets. Then Fabien will take us through our investment strategy, what the market looks like out there and why we believe we are the ones who will win this game. After that, Magnus had so many topics. We couldn't really find a good headline for the section. So -- but it is around how we handle -- we manage the portfolio, how we manage our funding and capital and how we manage our costs and how we extract the operational leverage in a little bit more detail than I will be talking about. Then we will have our country managers for the 6 ones in the executive management team going through their countries with some tough questions, and let's see how they answer. And then we end up with a wrap-up. So again, welcome. So -- Hoist Finance, we are a specialized debt restructure. This is basically an asset manager of nonreforming loans, we have been doing this for 30-plus years now. We operate in 15 markets. We're about 1,200 employees is now, used to be 1,000 and with the acquisition of Azzurro that closed just at the last days of Q2, we became 1,200. Now the return on equity numbers, the profit numbers, et cetera, come from an exceptionally strong start of 2026. So we've had a really good start of this year also on the deployment side, of course, with let's say, 6.1 deployed -- no, actually 5.5 deployed organically and then 2.6 with -- including Azzurro. We received our second credit rating hike since the last Capital Markets Day. So we are now BAA1 or BBB+, if you go by the Standard & Poor terms. So what is it we do then? This slide was actually in the deck from 2024. It was way in the back. It was called -- I think the title was Active Risk Management. And actually, this is the perfect title for this slide because that is what we actually do every day. So we buy performing loans from leading banks around Europe or some nonperforming loans from leading banks around Europe. What we have in our book right now in our total portfolio has had an original loan value of about EUR 60 billion. We have paid EUR 6 billion for that, right? So we have bought them at a 90% discount. Basically, so $0.10 on the dollar is what we pay or EUR 0.10 on the euro, most likely, is what we pay for these debts. With that the credit risk per individual loan is basically taken care of, right? This is bought in competitive auctions typically where the market value is set by the professionals in the market. To then reach our financial targets, the previous ones as well as the new ones, we then need to, let's call it, double that, right? We need to collect almost twice that amount. That will then amortize the portfolio, generate revenue, and we will reach our targets. And we have been doing so for the last 30 years. And we've been doing it through the Lehman crash, through COVID, through Silicon Valley Bank and Crisis, through Trump Independence Day -- liberation Day or what unclear, et cetera, right, then even Iran. Collections are very, very stable. So we have dug through our data lake many times to try to find correlations of sort of macro events, et cetera, and what links to payment behavior of our borrowers. And there is very little sort of direct correlation to anything. We can see a weak correlation to unemployment, which would kind of make sense. So basically, we have some sort of an amateur psychology assessment on this that basically when times are tough or bad, people look after their own house, basically. That is the best we can come up with in addition to our regression studies. So -- credit. So it is an essential driver of economic growth, of course. People can invest in housing, they can renovate. Renovate kitchens popular in Stockholm. Buy a car, lend borrow money for an education companies invest in research, in automation, heavy machinery, lots of investment in AI these days. It creates jobs and growth, right? In society, as we know it would, of course, not function without access to credit. But as with every good thing, too much of it usually ends up in tiers, right? And we can see here the credit expansion basically in Europe towards households and small companies during -- since the early 2000s, right? Expansion up until the financial crisis hit, then actually contraction. And then as we thought we were sort of done with corrections, we had the Ukraine and the high cost of living crisis, et cetera, right? And if you look at what NPLs have been generated during this time, so already here before the recognized NPLs, we should say, because they were probably already being built up there, we had an NPL ratio of about 2% in the banking system. It then peaked up to some 8% during the crisis, right? And then it's slowly been working way down. So -- if we go to looking at what is out there today. So I think the gray line, you will see that is the NPL ratio. This is now quarter-by-quarter. So it starts 2019. You will see that we have the remains of the crisis years, slowly working itself out, and we've come to a new level here, right, where we're at about 2%, but 2% of $16 trillion stock price. So what we see here as well, right? So we have about $400 billion-ish stock of NPLs. This range here, consumer and consumer mortgages is basically 90% of Hoist Finance's book or used to be before Azzurro now, it's 83% of Hoist Finance portfolio. What we are looking at going forward as well and what we have been developing in the last years is the light blue bar, the SMEs. And with SMEs, we look at the smaller companies in that range, right? So NPLs have been generated. What options do the banks have for handling these? Well, the primary activity is to work it out in-house is one of the core activities of the bank. They have been doing so for many, many years. And as long as volumes are very small, that could work. Increasingly, they have outsourced to specialized services, right? I think when you do that, then you get the specialization. There are specific systems linked, the court systems linked to bailiffs, et cetera. All of this, there is, let's say, predictive dialing. There's all of these types of operational capabilities that a normal bank does not have. Now if we look at these two options, while you're doing this, the NPL is still on your balance sheet, right? So it's still on your balance sheet, contributing to our PL ratio and costing capital. Now if you have a lot of NPLs that you need to do something about, then securitization has been a very, very popular solution, especially for the enormous volumes that came out during the peak of the crisis. So here, you would set up a structure where you transfer the risk basically to a co-investor. So somebody takes 20% of this co-investment, you keep exposure to the 80%. The person taking the 20% we usually want -- is also the one taking the first loss. So that person will usually request quite a high return on that tranche of the notes. This basically means that you will get rid of it from your balance sheet. You will get some exposure to your NPLs, the economics of the NPLs from before. But it's quite complex. And you -- there are a lot of risks associated with it, regulatory in different markets and so on, and there's a flowback risk. What happens to what remains in the securitization when the 7, 8 years have expired. Or you can choose our favorite option, sell to a specialized NPL investor and, of course, preferably to a specialized debt restructure like us. You will then reduce your NPL ratio. The book will -- the portfolio will leave your balance sheet. You will release capital and you will be able to focus on issuing new loans. And with new regulation, we see that banks are now selling more. So out of a fairly flat stock, sales are going up. So another way of saying, it is basically despite increasing sales, the stock is staying flat-ish, meaning that it's being replenished faster, right? So there are NPLs coming in. This year is now still on original loan value. But I think since the financial crisis, the European regulators have done a lot. NPLs have been in absolute core focus. There has been the banking package after banking package with activities and the regulation aimed to making sure that this crisis doesn't happen again. Now one of the key regulations and the one that we see the effects of now is the so-called backstop regulation, basically to make sure that banks don't keep the NPLs on their balance sheet, value them at 90% or something like that, despite not a euro or cent has come in, in amortization payments or interest rate -- interest payments. To make sure that, that doesn't happen again, so you create this awful bubble, the regulators set up a calendar provisioning scheme saying, if it's an unsecured loan, 3 years after default, it's written down to 0. And if it's a loan with collateral, a secured loan, as we call them in this presentation, it's 7 years. No exceptions. There's been -- the banks have been opposing this regulation quite a lot in the beginning, and they wrote all sorts of memos and so on to introduce exceptions and so on. None of them have been approved. And this is valid for all loans that are issued after 2019, 26th of April 2019 to be exact. Now -- so -- and that means basically that the impact of that regulation, of course, you will not eat in 2019, somebody would have to take a loan default immediately and then sell it, right? So it has gradually been growing over the years. And I think this is -- this slide is my idea. I need to apologize. But we try to illustrate how we are doing this. Basically, how we see this not just in sort of rumors or prices on the market, but actually in our own data. So we see that this cost. You -- basically, you need to hold 100% equity against your NPLs, right, once they are written down if you don't get them off your balance sheet. So if we look at what -- since the last Capital Markets Day, so Hoist would buy portfolios that were sold on average 55 months after default. So what happens until then? Well, the bank -- the loan will default. The bank would work it out by themselves, maybe contact a servicing partner. Here's a 3-year agreement, collect as much as you can, we will eventually sell the tail. So that generated that blue level of expected collections going forward. And of course, that is what Hoist would be pricing and paying for. So this leaves -- not so much collection, still enough collections to invest the way we did in '24, right? We still deployed SEK 10 billion that year. But per portfolio, less collections, less cost -- or basically a lower investment. What we see now, same metrics, now it's 38 months. And that's basically exactly 2 years later. So -- and we are buying portfolios all over Europe, as you well know, right? And we have been deploying serious amounts. So -- so this is not one data point, right? This is -- these are many, many cases. Now it's 38 months, meaning that what we buy is a lot bigger. This means larger investment, fresher portfolio. Fresher in a way that means that we -- fewer debtors have moved, fewer have changed phone numbers. So increases contactability, increases the possibility of amicable resolutions, which typically go faster than spending money on legal processes through bailiffs, et cetera, right? So -- and this basically means larger portfolios from the same original debt at the same return. So yes, we pay more because we get more, but our return hurdle still the same. So basically, that means if you look back at the previous slide of $75 billion in original value, that growth between 73 and 75, this effect is much bigger than that's low growth. So we believe that this trend will continue. We don't have any numbers to prove it yet, we'll get back to you for the next Capital Markets Day. But we believe this trend will continue, and it kind of makes sense. It is expensive to hold these NPLs with the new regulation. And other dynamics there as well is that basically the banks have become more prudent in their provisioning. Fabien will go through the coverage levels at the moment. But basically, the gap between seller and buyer has shrunk, which means that basically bank will do less of a loss. And as we've seen, in some cases, even a profit selling the bank -- selling these NPLs. In the past, if they had it valued at 90 and somebody bids 5, yes, it's a tough sell. So strategic update. So we basically, we're 250 portfolios a year, 50-man strong team. Fabien will speak -- there's probably some 400 people in the group to be able to bring in that kind of level of portfolio. It's legal, it's compliance, it's risk. It's the local management team, the local operations, lots of people in 250 different projects during a year. It's an amazing machine. And once we have bought the portfolios and they end up on our balance sheet, these guys will also monitor the performance and monitor their assumptions and feedback loops, right? We assume this did it happen 6 months later, 9 months later, 12 months later, yes or no, update the model. Capital and funding. I guess this is the area where most people say, yes, you are banking regulated, you have access to the deposit savings accounts, and that is a huge, a huge competitive advantage. Yes, it is. We have some 125,000 savers around Europe, saving in euros, saving in SEC, saving in slot -- trying to match our asset side as well as we can on currency. And -- yes, as we mentioned before, the Moody's rating has come in basically two hikes since the last Capital Markets Day. Now loan management. This is where the actual collections happen. Also here, we have a different strategy than most of our peers in the industry. We are -- we basically split it into two. There is strategic loan management, which means you are a servicing partner, you follow up. You gather all the data you can from every successful action, every failed action, every half part payment, full payment, all of that data goes back into our data lake to the investment team, right? We are the largest in Europe at the moment. We have the largest portfolio in Europe at the moment. You can only be one of the largest, if you're large in the 6 large economies of Europe. So we have the U.K. We have France. We have Italy, we have Spain, we have Germany, we have Poland, excuse me, if I got them in the wrong order, I did. But in those markets where we see a steady flow of NPLs, we are super happy to have our own internal platforms. If we -- as we have done now lately, right, grow a market from a EUR 3 billion book value to a EUR 5 billion book value doesn't mean that we grow the operations to the same size, right, with the same ratio. We are very careful with growing our sort of fixed cost base. So we outsource overflow. Then we have all the complementary markets, the markets that are sort of outside of these 6. And there, of course, the majority is 9 of these -- 9 of our markets are in that category. Where maybe the portfolio flow is a little bit more irregular, where we don't want to have a fixed platform that costs money regardless if we win or lose a portfolio, right? Because we become a worse investor and something you can become a forced investor, something you absolutely do not want to be. So there, we work sometimes fully with outsourcing and sometimes with multiple partners, benchmarking them against each other. I think in the industry so far, people have been -- it's been a very much do-it-yourself industry. We build our own IT systems. We employ our own people. We're going to be 800 people in this market now go get the volume. In an investment business, we believe that is not the right structure. So what did we do? Those of you who have been with us for a while know that we had the rejuvenation years between late '21 and '23 -- see here. And what -- during this period, the changes that I just described or this model that I just described was invented and set here, right? So we reviewed the full organization, rightsized the cost base in all areas. We review the full portfolio to make sure that are there any underperforming segments? Are we married to them? Is there a market for this? If so, let's sell it. If somebody else thinks they can do better and are willing to pay higher than our book value. Let's sell it and again, rightsize the organization. Some quite tough unsentimental years. But I think it brought us into the phase we have been now in the last 3 years, right? And the thinking here because we used to say here that we have a volume ambition of 36 x 26. Sounds great. But it's not the only reason we said that. There is -- there are scale benefits, obviously, to a platform like this, running a specialized debt restructure, running a regulated bank is expensive. It requires fixed cost. With a small portfolio, it's going to be difficult to reach the level of profitability that where we want to be. We want to deliver 15%, then we wanted to deliver at least 15% return on equity and a continuous 15% EPS growth. You need the scale. So now we have reached all those targets. And it's time for the next phase in Hoist's development. And that is actually use this scale that we have now achieved, right? So we have the platform in place. We have become an STR. We have regulatory stability, which we have not had before, right? It's been -- now it's very clear. So obviously, on the scale, you will see operational leverage. We have always talked about operational leverage in keeping our indirect costs flat while we grow the book and grow the direct costs in line with the income. This has been successful throughout '24, '25, '26. But of course, you would also want to see some operational leverage on -- also on the direct cost surely -- surely, if you collect more with the same amount of people, et cetera, you should be able to get some leverage there. And yes, we are starting to see that, and Magnus will go through that in his CFO update later. And basically, with this the percentage difference is going to be smaller there. But the amount of costs we're talking about the absolute amount is, of course, much larger in the direct part than indirect. So this is something we will be working hard on to deliver going forward. We will leverage this sourcing capacity. When we rightsized the organization, we were quite tough on many things. But we did had -- we doubled the investment team. We increased the funding team a lot. And to be able to source what it is we want to deploy. And this is in place for every portfolio, we become better and better. every portfolio that has lived for a while and fed back all that information, we become better and better. So this, we will leverage also going forward. And then it's the risk side of things. So now with a larger portfolio, let's call it, EUR 40 billion or EUR 39.2 billion. We are every new additional investment that we put on top of that should something go wrong in that investment. It is a smaller impact on the total portfolio compared to if we would be at 18%, right, and by a portfolio that goes the wrong way. And -- so this -- the size here increases stability and resilience and also on the funding side. The liability side is much more stable. And then finally, the growth ambition, portfolio size growth ambition. And this is an ambition. I want to be very clear with that. Just like the EUR 36 billion in the past period was an ambition. We have grown in absolute term book value from end of '21 after selling the U.K., which we actually sold it here. We were at EUR 18 billion, up to EUR 39 billion, so EUR 21 billion. Coincidentally, there is exactly EUR 21 billion missing to get to EUR 60 million by the end of 2030. Now this here represents a CAGR growth of 15%. Now the additional 50% growth, let's say, represents, let's say, EUR 10 billion, if we start -- if we count from half year. And this is an ambition. But -- if it ends up at 57 or 63 is not the point here. This is the direction for us internally and that we communicate out to the market that this is the growth we believe is possible and that we will go after. But we will, as always, do it at the right returns. Nobody in Hoist is measured on volume acquisitions, not even the sourcing teams. It is return on equity across the board. And if you start buying aggressive volume at low IRRs, you will fail that target. So how will we get here? Fabien will take you through the details, but basically, we have 4 pillars of growth. What is it today -- grow what you know, increase market share in current asset classes in current markets. We believe we can expand our market share in the markets that we are in. Some of them are quite newly entered where we expect to do more. Geographical expansion, there are still white spots in Europe. We will stay in Europe for the foreseeable future. And then, of course, the SME segment. This is 30%, the light blue part of the seventh slide, I think it was, 30% of the NPLs in Europe. We are focusing on the granular part of that, which is roughly the same ticket size as our secured consumer mortgages, for instance, right? So we are not looking for half finished golf courses or things like this. Small granular -- in line with our current risk appetite. We'll continue to work that. This is a market in a couple of our jurisdictions, France, Italy, to some extent, Spain, very big. U.K., of course, now with the acquisition of Azzurro, who are specializing on only this. And then we see a lot of it on the balance sheet of the banks in more rest of Europe, we need to unlock that volume. Sorry, and there's one more. Selective M&A. When we look at companies, we look at companies for the assets for the portfolio. That is what we want in our book and we will continue to view it that way. We are a picky buyer. Many processes fail because basically, we want to make sure that the portfolio that we are getting with the acquisition is valued in such a way that it will be accretive to Hoist from day 1. And we will continue to reason in that way. And like I said, that is a source of growth if we find it. So with that, going into the financial targets. So without further ado, let's dive into them. So I've gotten a few questions already this morning. Isn't this a bit too conservative? You're already at 27.5% ROE or something like that. And for Q2, that is correct. You see here the red line is the reported figures, so basically what we put in our quarterly report. The blue line, which I think is the most relevant one is the underlying core business delivery. And you will see that it has grown, right, especially after the rejuvenation years when we had sort of adjusted the cost base, then it started taking off, and we also managed to grow the portfolio. We believe that 20% with a growth rate of 15% EPS per year is a very ambitious target. I don't -- I think most companies would agree. So we have set that as a new floor level. And I think we will see here going forward as the portfolio grows, as we continue our investment strategy as we stay focused on the returns, we expect that to rise. But during the next strategic period, the floor is 20. Earnings per share, again, should be viewed in combination with the return on equity target. So obviously, great growth here, especially if you look at sort of the underlying. So the [ 395 ] you see here is the profit from selling the U.K. platform in 2022. Yes. And so if you would draw the line there, then it's even more impressive. But -- so we've delivered 16% per annum on average, including the one-off. And we want to continue that growth rate. We are still a growth company, and we will remain a growth company. Looking at the capital levels, we have a corridor today which says we should be 2.3 to 3.3 above regulatory CET1 limits requirements. We are comfortably above that at the moment as we are 4.2 over. You could say, why don't you run the capital tighter and distribute more? I think we want to be able to deploy. We want to be able to be engaged in a number of larger transactions at the same time and be resistant to external shocks. We have been fine through all these Trump things, 5 years is a long time. Lots of things will happen in the world. We will keep this buffer. And then on the dividends and share buybacks. Also quite common question. So obviously, during these rejuvenation years, nothing was repatriated to the shareholders. We started in 2024, paid out in '25 with a small dividend of SEK 2 per share, basically launching our dividend payout program. But we actually also did a SEK 200 million share buyback during that year. So total repatriation, let's say, 37%. Looking at '25, the one of the things -- the ones that got paid out now in May in '26, we had a base ordinary dividend of 25% at the lower range of our previous range. And then we had an extraordinary dividend on top of that as we released the backstop capital that we were holding until we became an SDR. So we are now increasing this to EUR 30 million to EUR 40 million. And our priorities are, as always, portfolio investments at attractive or accretive IRRs. That is number one, two and three, really. Then comes the dividend policy. And of course, any excess capital after that will be redistributed to shareholders through either extra dividend or share buybacks. That is the new range and target. So summarizing these goals, we will end up -- we will continue to be a more profitable growth company than we are today. We will continue to invest at accretive returns. We are hiking our ROE floor by 5 percentage points, while at the same time, keeping the earnings per share growth target and increasing the repatriation. So with that, that is my intro over to Björn for Q&A.

Thank you. And the floor is now open for questions.

[Operator Instructions] We can, in the meantime, take a question from online. What characterizes your investment strategy versus your competitors? And do you have a competitive edge in choosing the right portfolio at the right time? Yes, let's start there.

Maybe it's good for the people in the room. No. So I think I think the main characteristical difference between what we do and our peers do, is that we cover consumer and SME, so borrower types, right? Either you're a company, small company or you're a private individual most focused on the private individuals. We can handle loans with collateral, loans without collaterals. And it doesn't sound like a huge difference. But basically, it's -- the one kind is statistical underwriting, right? You see the cash flows coming in from tens of thousands of borrowers over a 10-, 15-year period, and you statistically model that with the reference curve and so on. That skill we have and we master, I would say, but then to, at the same time, be able to do line by line, and that's basically what you do when it's mortgages and when it's SMEs, right? You take a pack of 100 pages, nowadays, we also use AI for this as a support and go through, right, line by line. What is this there's a real estate as collateral there. There's a co-owner of the debt, there's a co-debtor, there's a guarantee here and so on. And after that, basically, we value the claim -- we reset our purchase price for this individual plan. Those are two very, very different underwriting techniques and to have a team that can handle both of that and have local teams that can handle both of that, which I think both -- and Andrea here from France and Italy will talk to you about later on, is, I think, one of our absolute competitive edges.

All right. Now ...

Ermin Keric from DNB Carnegie. So maybe the first question would be, you showed how the seasoning of loans you're buying is much fresher now than 2024. Is that anything to do that you try to avoid backstop loans as well at that point? Or is it just that the banks are actually selling much fresher claims?

It is a general trend. We looked at that as well because, of course, we -- when we were not in SDR, we did try to find the older portfolios. But basically, the trend is if we would go back '22, '23, '24, '25, '26, the trend is clear. So maybe there's 2 or 3 months on the 55 that you can shave off, but that's it.

Fair enough. And then just -- just on -- that you're not buying fresher claims, does that entail you need any kind of different digital tools to be faster on collecting anything like that, that's changing the skills that you need?

I would say we have always been strong on the fresher claims in Hoist. So I think this actually -- this development helps us. If you want to be really, really strong on the nonpayers, basically, the really old difficult ones where maybe you don't even find the borrower, then you need maybe a 700-person call center, et cetera. We don't have that. So we typically outsource those claims, right? So what this development means is basically we can bring more on our own platforms.

A question on SME. You're highlighting SME as a potential growth market for you as well. In the same time, you say that you want to grow where you -- on what you know. Do you see an operational risk there entering and growing into a market that you don't have the same sort of experience in?

There is an operational, let's say, challenge, obviously, in starting something new. But I think we have proven that now as we move into new markets, how we take -- it's not a complete black box for us when we enter, right? We investigate the market. We make sure that we have the right people on the ground, but we also bring from our other markets and central teams -- a team to sort of help deploy. We did similar when we started with the secured underwriting back in 2019 -- '18, sorry, there, we basically set up a multi sort of disciplinary team that had experience from this who had worked in the banks in the mortgage departments of the banks and could sort of travel around or make sure that this was set up correctly. We use the same methodology now. So basically, the skills we have in France, the skills we have in Italy, the skills we now have in the U.K., we put those together, we see -- then we go analyze the next market, and we see how we can handle it.

Fair enough. And one question I've gotten this morning on your new target is, you're targeting in a row way above 20%. my colleagues expect you -- with such high returns at such an attractive market situation, no market is static from competitor -- so I guess increasing for years to come on the investing side. And I don't know, maybe while we're at it, could you give sort of a brief historic backdrop as well on how the dynamics has changed under your tenure.

Absolutely. Thank you for the great question. No. I think we're all aware that there's been a lot of change in the industry lately, right, the last, let's say, 4 years. As interest rates started going up, or actually, we should probably start earlier. '18, '19, there was a big push for M&A, right? Everyone wanted to be bigger. We had mergers between Lean North and Utica. We had becoming larger, et cetera. I think those situations built up a lot of goodwill on the balance sheet, goodwill needs to be financed on the liability side. So bonds were issued. And then interest rates go up. And of course, we have benefited from that, right? So as the industrial players scaled back, let's say, '23, '24, '25, the competition from the industrial players was less. There were still successful industrial players out there buying, right, competing with us, but they were fewer. Then the investment funds saw the same opportunity. Okay, here's a market that is underserviced. Let's get in there and try to buy portfolios. So basically, I would say the competition was sort of flat, but it came -- but the actors were replaced, right? What we see now is that many of the investment funds, they had higher return expectations or no local expertise, but potentially, right, out in the markets. So they didn't deploy as much as they had hoped. We see some of them now scaling back, whereas we do now see that the industrial players are getting into better shape, most of them, right? So they will be -- at least they are announcing that they will be increasing their purchases. But they still have a funding side that Magnus has a slide on, now and running that too, about basically twice our funding cost, right? So one would hope that the return levels are adjusted to that. Otherwise, we will end up in new trouble. So I think that's on the, let's say, investment funds and the industrial players. Then we have, of course, people who look at Hoist and see this SDR thing seems to be working out. Let's try to copy that. We know that there is already another SDR in Sweden, too. They're already active. And I think they became SDR actually 2 weeks before us. And we know that there are players trying to qualify to become an SDR, maybe next year or '28. How they will deploy, what they will deploy is a little bit difficult to say right now. But from one point of view, we are -- from the regulatory side, then how they will act once they are live, let's see. But a little bit when I talked about the model earlier, right, it is not just the funding cost. Many of the investment funds could source money at similar levels and still didn't make it, right? So -- or still didn't manage to deploy the amounts they had hoped for. So I think you need a little bit of everything to -- everything in our recipe to copy it, not just the funding.

Fair enough. We have another question online. The EBA will review the SDR frame work no later than end of 2028. Have you been in dialogue with EBA on this? And what's your view on the SDR structure relative to the regulators' expectations?

Yes, that is a common misunderstanding. I think if you read the text, it says that Erba will review if the criteria for qualifying as an SDR are sufficiently risk-based to further a secondary market of NPLs in Europe roughly. And so they are looking at the criteria. And of course, that is something -- it is an expensive status to get, right? As you all remember from us, 2025. We had to hold all that extra funding without the benefits for a full year, right? And then you actually -- you need to start building it up, let's say, 3 months before that. So 15 months, we have a lot of costs for a little benefit, right? So we're actually -- I'm going to Brussels on Monday, actually, to discuss just this. So -- but we are in constant dialogue with the regulators here in Sweden. We speak to Riksbank in Rexel and the SFSA and to make sure that everyone is on the same page here.

All right. You've been teasing for the next speaker throughout your known presentation. So let's not wait anymore. The next speaker, Fabien Klecha.

All right. Welcome, everyone. Yes. So we're going to talk, as you have understood, investment strategy. And I think we've come a very long way. The past 2 years, we've increased our deployment, as you have seen in two steps. I'm going to go through it. We had the ambition to have a book of EUR 36 billion by the end of the year. We're already at EUR 39.2 billion. We had the target to deliver 15% ROE. We are beating that target by a margin. So this came with a very disciplined approach to our investments. And what I'm going to go through now is how we choose our investments as the first section. I think there were a lot of questions on this. So that will be of interest, hopefully. Second part is the market development. We will go through the stock of NPL, the primary market, the secondary market but as well as the competition, how each of our competitors is structured compared to us and why. And the last part will be why we are well positioned to take on this market. Now I want to stress something throughout the 30 minutes, I'm going to be talking about investment. Our target is returns, its profitability. It's not growth -- in this market, our level of deployment given our geographic spread, et cetera. And the growth that -- I mean, at the current rate, we will grow anyways, but we think we will be able to grow further. So starting with how we invest. I think this is not something new, but I want to reiterate. We have five pillars in how we invest. Number one is our geographical spread. We are covering 15 markets in Europe. The six biggest being the ones mentioned by Harry earlier. It's mainly the largest economies in the Eurozone where we have the biggest NPL stock as well. And those markets, they are making the 3/4 of our NPL book currently. On top of that, in the past couple of years, we've actually expanded into new markets where we could see better returns that is -- that are accretive to our margins. But also where we could find good partners to manage our book. So that geographical spread, where actually we have good geographical diversification means that there's no one single change in regulation on the -- or macro that can move the needle on the whole book or the whole company. We are not concentrated into any of those markets. Then talking about the loan exposures, we focus on banking assets. our DNA since the very beginning is that we are here to serve banks. So we are mirroring the bank's needs. And we are constructing solutions, whether it's structuring, whether it's operational solutions to be able to accommodate those NPL loans that they are getting out of their system really. So we are setting up an organizational structure to be able to accommodate those loans and manage them. And one trend we've been seeing actually in the past years is that there's more and more of mixed portfolios, where the SMEs and the individual segments are sold altogether. So if you're not able to operationally handle that you put yourself out of the market at least for a part of it. So you need to have that ability and that capability to do. Now if you look at how historically this market has grown, I mean -- and I'll go to that afterwards. I mean there are a lot of specialists, so the main big services, they are focused on consumer secured because this is what was typically outsourced what the banks didn't want to manage. Now the banks, they are also selling a little bit more complex scale, still granular because the average loan on our book is SEK 105,000, so less than EUR 10,000, right? But a little bit more complex to handle, meaning -- I mean, in terms of complexity, actually for us, it's a benefit because it means you have more sources of collection. So it's -- you have to go after the real estate collateral. You have to go after the financial guarantees, you have to go after the personal guarantees, all in one claim. So that's different workout situations. Then talking about the proactive management. This has been a difference compared to a big change for us. We are an investor, and we are holding the asset, of course. But when it's necessary, we divest. And we happen to do this in several instances where the market was not attractive to us, we just exited the market. And that's -- I think that's also an answer to a question that was asked. I mean when we see that the market is not attractive, for example, for a very long time, the unsecured consumer market in Spain was not attractive to us, we just disposed the whole portfolio and refocused our deployment to the secured assets, which are yielding very well performing extremely well, actually right now. So we can make these kind of decisions, and allocate the capital where it best fits our requirement, our return requirement primarily. And finally, the sourcing. I think we said 2 years ago, in the room. We're going to source from the primary market, but we are going to source from the secondary market as well. And we did. 23% of what we deployed since the next day after the CMD in '24 is from the secondary market. So we deployed EUR 21 billion exactly since that day. And 22% of that has been acquired from funds or from industrial players that were in the course of refinancing or repositioning. And I think a point I can add, given there was a question on -- now that you're an SDR, maybe that's the reason why you're buying fresher. Well, actually, as Harry said, no. And a proof of that is our co-investment structures. So we have put in place 3 co-investment structures for the exact reason of accommodating the backstop topic. And we have been able to deploy EUR 5 billion with 3 different investment structures and 2 different counterparties. One is a fund and one is an industrial player in the market. So we are very proactive in our sourcing as well, and we see, we think, a big chunk of the pipeline. So this strategy, when applied to the market, you see a first step up in '22, '23. Well, that corresponds to when the industrial players had an increase in the yields of their bonds and then the step-up was at EUR 7 billion. Then we had another step-up starting '24, '25, and that does not include the co-investment volume, right? Because if we put the share of our co-investor, it would be rather EUR 12 billion for both those years, exactly the same, actually EUR 11.8 billion and EUR 11.8 year. And so far this year, it's EUR 8 billion for the first half year. So our deployment has stepped up, and it's a combination of those new markets. We are seeing more volume in general in the market, and I'll come to that after. But basically, we're going from one-off disposal strategy from the banks to a recurring sale. o we are seeing more recurring smaller tickets, which is suiting our model very well and which doesn't suit other type of players who need to put an SPV in place, a refinancing together, et cetera. So we have that model that fits that constant flow of business. So as of now, so 50% -- 53% of our book has been deployed in the past 2 years. As you can see, it's performing well. But most importantly, a few characteristics about that flow of new acquisitions. Number one, we have acquired close to 80% on our -- from our top markets, right? So we are mirroring what we see in the pipeline in general in Europe. So we represent the flow that is coming to the market. Number two, we have 29% of forward flows. So it's recurring business that we will see year-on-year-on-year. And number three, we've seen a change in the mix of our pipeline towards SME. And this is why our SME share came from below 5% to 17%, also explained by the acquisition of Azzurro, but we are seeing more SMEs on the pipeline. And this is suiting us because it's typically a good performance for us, and it's typically better margin as well because not all the competitors are looking after this. So this strategy has led to this book. As you can see, this book is very diversified. There's no one jurisdiction here that is making more than 15% of our total book. So 15% in Italy, then the U.K., Poland, Spain, Germany are making between 14% and 15% each. And then it's France, 10%. So altogether, it's a very big part of our book with those markets. That said, the additional markets, they are very important for us because they give us that flexibility to be able to deploy when it suits us and to switch asset class when we see that there is a competitive tension. And as I said, with the example of Spain, this is a practical example of what happened. I could tell you other examples of that. The share of secured has not changed. It was, I think, 29%, it's 30%, so pretty stable. And then the borrower type, I talked about it already, 17%. Now this is a very big large table, but you might wonder, okay, so maybe they are mixing the average claim within the asset classes. Well, actually, consumer unsecured, it's SEK 83,000. SME unsecured, SEK 285,000, so a little bit more, but still very granular. And then on the secured side, whether it's consumer secured or SME secured, this is the same ticket. It's SEK 100,000 or SEK 1 million. on average. So it's -- that's what we mean by granular. So now if you look at -- instead of going through each asset class, I think from the simplest where you have one counterparty, it's an individual debtor, you try to find an amicable agreement or you have to go legal through a network of Valiff, which is the simplest part to SME secured. SME secured, it's mostly secured by residential real estate. So we are explicitly out of any commercial real estate or corporate loans. It's the S of SMEs that we are targeting. So the small ones, not the large exposures. And on those assets, what's interesting is the multiple source of collection that we find. We have real estate collaterals. We have financial guarantees, we have personal guarantees, and we have proceeds from liquidation. The underwriting is slightly different. We have a mix of statistical pricing and line-by-line reviews that we need to perform. And that requires senior loan asset managers who have a good understanding of execution law of real estate valuation and who are sophisticated enough to negotiate with sophisticated counterparties basically. So -- and we have those skills. So that is helping in this. Now this has led to this performance. So the left part of the graph, the performance is our ability to underwrite and our ability to operationally deliver our promises, right? So this has nothing to do with the market. This is us. Did we do better or worse than we promised. Well, if you look at since '21, this has been constantly above 100% of our management targets and by a margin. So we are very confident in our ability to price and our ability to deliver operationally. I think you don't have a better proof than this looking at those numbers. The second part, this is actually the margins. So this is the net 10-year unlevered IRR. Sorry for the wording, but this is basically without any effect of leverage, right? So no cost of funding and no leverage. And what does it mean? It means that the margins came up starting '22, you see this is slightly coming up. Why? Because a number of the players of the market, they have seen their rates hiking up, and it's very healthy then to see the margin increasing in the same -- at the same pace, right? So that means that if you're squeezed by your cost of funding, then the margins on the market increase. The only difference with us is that we are an SDR, and therefore, we are financed with deposits, and we didn't see that hike. So our own margins increased. So our own margin increased and our performance increased as well. So we had the benefit of both those impacts in our book. So now talking about the market opportunity. There have been many changes. I've been, as Harry said, 15 years at Hoist. So I've seen a few cycles, the mergers and all the things that happened with the regulation as well. And I think what we can say throughout those years, starting with the global financial crisis is that the regulator who has taken many steps to create a secondary market has made it more difficult for the banks to keep their NPLs on their balance sheet every time. So it started with the supervision of the systematic banks to start with. And then with the EU NPL action plan to make sure they have the proper provisioning and reform in the insolvency system. Then the one single piece of regulation that has really unlocked the market is the prudential backstop. This prudential backstop, this has triggered more recurrent sale and that has pushed the banks to have a faster provisioning and find other solution than keeping the claims on balance sheet. And finally, the NPL directive that has licensed the manager of those NPLs. So past 10 years, big changes, structural changes, I would say, into our market. When the U.S. in the space of 2, 3 years after the global financial crisis completely absorbed the NPL stock, it took more than 10 years in Europe to go from EUR 1.3 trillion to EUR 400 billion today. So it took a long time. And you can see that here, now we are starting 2019. The peak was in '13. So the disposal happened up until 2022, and now we are flattish. Does it mean that the supply is reducing? Absolutely not. Actually, we have a deep stock of EUR 400 billion still, number one. Number two, the banks are better provisioned because they have the same coverage ratio, but they are selling earlier. So they are taking less of a loss when they sell. They still take a loss on average. And we see that this market here, this was a lot of funds buying portfolios for from EUR 100 million to EUR 1 billion purchase price, this is gone. Now the average ticket we buy a portfolio at is EUR 20 million, right? So when you're a fund, you don't set up an SPV and take a financing from the bank for EUR 20 million portfolio. It doesn't make sense. You need a different model. This is our model. And the market is going in our direction because we have this machine that can price, that can onboard and then can manage those portfolios any kind. So now looking at maybe focus a little bit on the various markets. If you see that table, you see really 2 trends. Number one is the concentration. It used to be that the stock was in the South, what I call the South, I'm French, and now it's going to the north. North means France and Germany. It's probably south of Sweden. But it's going north at least directionally. And you can see that as the German NPLs are going plus 12% almost, the French NPLs plus 7%, whilst Spain and Italy, they are still reducing minus 9% for Spain, minus 12% for Italy. So there's a clear change in direction. And that's why our flexibility, our footprint makes a lot of sense. We've been -- just taking an example, we've been many years in France since 2001, and it's a country I know well, as you can imagine. It's been a very difficult market for many years. The supply was very, very low, but we have always been there. And this is really appreciated by the banks, the fact that we have always been in those markets in Germany, in France, we've been constantly present, buying the little they were selling. The past 3 years, we've been seeing that our pipeline tilted a lot towards those jurisdictions, France, Germany, et cetera. So asking this question, how do you think your book will look like, there's a big chance that those markets, which currently represent 1/4 of our book will take some size -- or will increase in size, sorry. Talking about the various players. So I said it throughout. So you historically had the funds. Now I would say the funds, they are more partners or partners in the sense that we co-invest sometimes or they can be also clients of ours in the sense that we buy from them rather than competition. There are competition for the big portfolios. It happens a lot of times, but less -- we don't see them as much as we did before. And they have a different DNA. They come and go depending on when the market is attractive to them. And one of the criteria for them is the size of the investment. That size, yes, average size is going down. Number two, we have the industrial players. The industrial players, they've had higher funding costs since '22. Again, we've been partnering with some of them to acquire because they have platform. So it was important and interesting to co-invest with us. We'll continue to look after those opportunities. And we also buy from them. And we are a good buyer of those portfolios because we know how to price and they are happy to have a fair price for their portfolios rather than dealing with the funds most of the time. And we can even leave the portfolio with them for them to continue collecting, which is moving from a capital heavy to capital-light model for some of them are trying to do. Finally, we have our model, deposit based, constant capital. So a big benefit for the -- for our counterparties is that they know we can close. We are buying from balance sheet. So they have certainty of closing, not only because they've seen us for the past 30 years, and they know that we can price and deliver on operationally, but also because we have the funding on the balance sheet. And when we handle nonbinding offer already then, they know what they can expect to -- for their binding and for the closing of the portfolio. And this has a tremendous value for our counterparties. So now you'd wonder, so what sets us apart in the industry. Well, you've heard there are more SDR coming. So you would say, okay, so you're not that special. Actually, what makes us special is the combination of a number of things. It's not one thing. It's the deposit base that we have together with our geographical footprint, the data we have for the past 30 years. I mean, we've been deploying, I mean, billions of euros in the market in the past 30 years. So we have data which are commensurate to that deployment and our ability to manage different type of portfolios. And finally, and I would not underestimate that, I mean, both the regulator and the banks, they value a lot our regulatory status. The fact that we are regulated the same way they are gives them a lot of comfort in handling their customers because they are still customers and there's a reputation topic there. So this is quite important, too. So the combination of that is very, very important. Now in terms of the sourcing of growth, we still intend to have a granular portfolio. We still intend to have a diversified portfolio. That said, there will be a few areas where we think there will be more growth. And the #1 is the SME. Remember, the S of the SME. This is SEK 1 million on average, what we are buying. And this is 1/3 of the NPL stock right now, 1/3. So this is a large growing pool for us potentially. And when we set our strategy, we look at our coverage in terms of markets, we look at our coverage in terms of asset class. One smart move, I think, that was made was to acquire Azzurro. Azzurro is covering both the U.K. and the SME asset class. And this is really supportive of our strategy, the fact that we have been stepping -- stepping up on the U.K. So this -- the U.K. is a mature market, and we cover both relevant asset class, consumer and SMEs. France and Germany, again, not only we see that the stock of NPLs is big, but also we see that the risk on the balance sheet in general is big just looking at the Stage 2 loans, which is an early indicator. It doesn't tell us how much will go to NPL, doesn't tell us when it's going to go to NPL. It just tell us that there is some risk there that should be taken care of at some point. And finally, new geographies. I mean, we don't cover the full Europe. We don't intend to do so. But there are a few selected geographies where we think if we can get the right setup that would be both accretive to our book and helping our growth. So again, the target is profitability. the target is not the size of the book. It's the ambition. We think we can get there, and this is basically a 10% growth since now. So we think it's something that is at least credible. So I talked about the how. I talked about the what. I guess now it's about why we are well positioned. Well, this could be interesting to -- for you to see. I don't think we've ever shown that before. This is our sourcing. So 80% of the market, we think we are seeing 80% of the volume in Europe, I think we think we are covering for. And that represents around SEK 70 billion of deals. We have the list of 160 different -- 16 different originators, right, so counterparties that we are dealing with. And this SEK 70 billion that we are looking at every year, it's 250 investment case, 250 different portfolios that our team, our investment team, our local teams together, actually, our legal teams are working on. So I mean, the investment team is 50 people. But if you add to that the local teams, if you add to that the legal team, this is 200 people looking at 250 investment case, hard to replicate in the space of a couple of years. If you ask why is different about Hoist? Well, good luck starting this from scratch. And out of those 250, so you could say, well, you've grown a lot. So maybe you're buying everything you see. Well, we're bringing to IC 120 investment case out of those 250. So we're actually pretty selective, right? And that's both based on how competitive we feel we are or our view about the market or our view about the asset class, the origination, it's a mix of factor. There are different reasons. Bid-ask spreads too high. Don't waste our time. Let's focus on what we think we can win. And we deployed this then around EUR 10 billion last year. median portfolio size is EUR 20 million, I said it before. So it's a lot of work to be deploying close to EUR 1 billion, right? It's -- then it requires onboarding after you've done all the work on the investment case, then you need to onboard it, you need to prepare your team, et cetera, et cetera, to deliver on the targets that you've seen before, the performance target. And where does that volume come from? It comes from Tier 1 banks, primarily 52%. So around half of the volume is coming from Tier 1 banks. Then it's Tier 2 banks. So regionally important banks, it's another 22%. And then a relevant part is also the secondary market. And then we have also some local banks. So that was sourcing. Now what do we do concretely? Well, when we receive an e-mail saying, would you be interested in that portfolio? What do we do? We -- obviously, we start with the NDA, et cetera. We look at the data. And for each jurisdiction and each asset class, there are different underwriting models. They are locally adapted models. So there's no one model that fits all the jurisdictions, not at all. We have tens of different type of models. And our team the team of 50 of the investment team, they are not based out of London or Stockholm. They are actually spread in 10 different jurisdictions. They are sitting next to our local teams. So they understand very well the operational aspects as well as the quantitative aspects, and they link the 2. And that's what makes the value of the underwriting team that they are able to transform operational inputs, historical data into relevant underwriting assumptions for our portfolios, right? Now what is consistent though across our investment is the way we look at returns, and that's the right-hand side. here. What do we look at? We look at a few aspects, but there's one in particular that is important. So I'll go through them. When you look at the portfolio, you have a cash flow curve, right? And the cash flow curves compares to your investment. So if you buy a portfolio at 100 and you expect 101, you have a multiple of 1.01. We typically don't buy that, don't worry. If you have a super high IRR because the cash is coming very early, well, the slightest mistake in your forecast and you lose your money. So we look at the net money multiple because this is a relevant item, of course. So that gives you an idea of how commensurate is your margin compared to your risk. So how much of drop in collection you can absorb before you make a loss, number one. Number two, the unlevered IRR. We look at it for various reasons. First of all, obviously, it takes into account the time value of money. But more importantly, it gives us a sense of how we compare with competition as well because everyone is looking at this metric. We look at it over 10 years. We know that there are different way of doing in the industry further away. We look at it over 10 years. And then the average life -- weighted average life, which is, let's say, a way to apprehend the risk of the timing of our cash flows. But one metric is actually making all those investments comparable with one another, and it is the return on equity. And this is how we steer the whole company anyways. So for every single portfolio we look at, we look at the return on equity to be able to see where it's best to allocate our capital. Now talking about our governance. Well, this work that I talked about, we do it centrally. It's owned centrally by the investment team, but it is done jointly with the input of the local team. It's very important. We have a very strong tight collaborations with our local team. to capture all the aspects of the deal and to have also some intelligence on the deal in the sense that we know what happens in the market at every point in time. And then we have a number of committees. Every deal is governed by this. So there's no one deal that is not approved by the committees. So whether it's the Management Investment Committee, the Board Investment Committee of the full Board depending on the size of the deal, this is going to a committee. And there are some checks as well at the deal level. So every deal, there's an independent quality review for the deal. as well as a nice feedback loop. What does it mean? It means that 6 months, 9 months, 12 months after we acquire a portfolio, we review all of our underwriting assumptions, and we check. So how did we do on this? How did we do on that? And then we learn and we constantly learn. And this is what makes our model work so well. And obviously, the risk functions are involved in every deal as well. So the risk gives also their view. And on top of that, we have the internal and external audits. So finally, so maybe worth reiterating, SEK 60 billion achievable. That's an ambition. That's not a target. We think there's room to deliver this. But what you should take away from this presentation is that it's still going to be accretive portfolios with the same underwriting discipline, highly granular, geographically diversified. There will be probably a higher share of SMEs in that mix, and we will continue to actively manage our book. That is where we see there's no market and we don't have the scale, we will dispose. So we will do some disposal. And we actually did dispose EUR 1 billion in the past 2 years since the last Capital Markets Day every time we sold at a premium. So conservatively managed as well. Maybe time for questions now.

Okay. While we wait for the audience to find your energy, I have a few for you. If we start with the SME segment, it's a bit alluding to my question to Harry as well. It's a bit of a new market for you still. How is the -- when you're bidding and investing, how is the market different from the consumer market? And are the competitive dynamics different? Are there different types of competitors? Or -- and how are you preparing for this sort of new market as well?

Well, it's a sweet spot for us really because, as I said, we have the DNA of mirroring what the banks are needing on the NPL side. So yes, we see slightly less competition. You need to have the know-how to onboard, price, manage those portfolios. So we -- every jurisdiction I look at Italy, France, we have some in Spain or the U.K., it's usually better margins. better performance as well. So we really like that asset class because that's not an easy thing to step in that. Now I don't want to oversell it. I want everyone to start looking at this. But it requires some special skill set to be able to do that. And we've started maybe longer than what you think because, I mean, 5% of our book -- total book was SMEs before. But in Italy, for example, we have a very long experience with SMEs. I mean it's been more than 10 years since we buy SMEs. In France, it's a little bit new to the whole market because France was very quiet for a very long time. Now all of a sudden, we see very big portfolios coming up. So you have a lot of I would say, commonalities with the secured workout that we've been building. It's actually the same team managing both. So it's -- and we started in 2018, the secured. So it's been a while now.

Okay. The second market you highlight as a growth market is Germany and France. One thing I noted was that the coverage ratio in Germany is much lower than in the other market. And you previously said that the higher coverage ratio means that banks are more willing to sell portfolios. Is this a factor that limits the sort of near-term growth potential of portfolios in Germany? Or how is this market playing out?

No. What I said is that the coverage ratios are stable, and we see the banks selling earlier, right? So that means that given your coverage ratio is the same and you have fresher portfolios, you're selling earlier. Now the coverage ratio in itself doesn't mean much because the counterpart -- I mean, it depends what kind of security you have against your loans, right? So typically, in Germany, they have a lot of commercial real estate. So they have big buildings behind those loans, and that could very well be justified that they have a very -- I mean, a much lower coverage ratio. So the point was more to say everything being equal in terms of coverage, they are selling earlier and therefore -- and this is complemented by the fact that we speak to the banks. So we know. They're telling us, yes, okay, I'm making a loss, but this is okay. A few years back, they would have withdrawn the portfolio as simple as that. So we see that. I would say the best indicator is more of on-the-ground experience than just a very high-level ratio that makes a lot of different things.

And given your sort of first-mover advantage in France and Germany, how big of a market share do you currently have in those markets?

Not sure if I can comment on the market share, but no.

You rank yourself. Are you top 5?

Yes. We are definitely -- I would say, in all of our key jurisdictions, we are always top 3 or better. So we are at least top 3.

Okay. We'll discuss it during the coffee break. A question from the audience.

Yes. Phillip Molmen from SB1. Just while some industrial players see their balance sheets shaping up and new SDRs are expected to come in, do you see a risk that your IRRs on employment can come down to the early levels compared to like 2022 or 2023?

I see that -- I mean, if the market keeps on being rational, which is our expectation, and we've seen the market has been rational, right? I mean we have this slide here that is, I think, reflecting pretty well the timing when the rates increased, right? We see them flat now. We don't see them increasing, right? It might increase. If the rates increase, hopefully, the market will reflect that, right? We definitely don't see them decreasing, okay? So there's obviously pressure in certain markets. In certain markets, yes, definitely, there's more pressure, but then we just reallocate our capital elsewhere. This is what we do. So we try to adjust the whole time. We will not participate into that game of increasing price to increase volume. We need to keep our book healthy and this is our primary target.

Can we get the microphone here?

So what is the bottleneck both on the investment side and the operational side when you're growing so much and taking on new volumes?

Yes. I mean good question. I mean we are seeing most of the volume, right? I think the bottleneck is localized in some areas, right? And this changes in the sense that there are some parts of the market where we decide not to participate at a certain point in time, and that's taking off opportunities for us. But that's a little bit our decision in a sense. Then we had some part of Europe that we did not cover. We're trying to remediate that with AU. It was a bottleneck for us. That was removing a growth potential for us. But in reality, I think we have a very good setup now when you look at our ability to deploy the capital, our ability to underwrite our ability to manage with a very good mix between in-house and outsourced. So it's really difficult to see what will limit us. I think what will limit us is localized in some areas at a certain point in time. We see that kind of behavior that someone wants to get into a market and therefore, is pushing, knocking on the door, we then try to step away, wait and come back.

Can I also ask your win ratio? Has that changed anything over the recent years when you're bidding?

Can I talk about the win ratios? It's around 40% on the ones that we bring to IC, right, on the ones that we bring to IC. So we have a pretty good sense of what we can win before we even start. and how to win it, meaning that it's a combination, of course, the price matters, and that's the single most important aspect, but there are other aspects as well. Sometimes it's the SPA. I have seen a few competitors being kicked out of process because the SPA was not aligned with what the sellers need. One thing I did not mention, which I think is worth knowing, the Tier 1, 52% of our sourcing. We have 8-plus years relationship with each one of those banks. We know them very well. We know the person who's selling. We know their organization. We know their data. We know how to onboard their portfolios. So this is giving us a big head start and advantage when we want to build a long-term relationship.

And can I also just ask, you didn't talk so much about the securitization. There was a big part of offloading all the NPLs. Do you see that being a big upside if you see HAPS transactions, et cetera?

Yes. We are seeing such transactions, and that's a source of our deployment, in particular in Greece. We bought from those vehicles, and there will be more opportunities going forward. Obviously, the EUR 1.3 trillion to the EUR 400 million, they have not all been collected on. They are on the secondary market now, right? And we see regular sales happening, and this is part of the secondary market we have been talking about. So there are disposals happening from those big securitizations in Italy and Greece in particular.

A question from online. How much do you need to invest annually to reach your SEK 60 billion target by 2030, given amortizations, et cetera? I think all of me and my colleagues can give the answer as well, but I'll let you do it.

Well, first of all, it's a target in 2030. So there will be difference by quarter, by year. On average, it's 14. But yes, it's around 14%, the answer.

Great. Time flies. All right. So now we take a -- let's make it an 18-minute coffee break. So we restart at 3:00 sharp. [Break]

Welcome back for the next speaker is Magnus Söderlund, CFO.

Thank you, Björn. Is the sound working?

Yes.

Yes. So as Harry concluded, I didn't get a very snappy headline, but hopefully, this will be interesting anyways. So my name is Magnus Söderlund. I've been the CFO for the company since 2025 last year. Before that, 20 years of experience all over Europe in the NPL and debt collection industry basically. So that's me. And the plan today is to cover the management of our NPL portfolio. So how we deal with the risks attached to it and how we sort of manage it to maintain a healthy return level. I will also talk a bit about the other risks associated with our business and how we deal with those. Then we will look at the funding side of our business. So I think it's no surprise to anyone that we have a very competitive funding cost, but we will look at that in a bit more detail. And the last piece we will focus a bit on our operational leverage, basically what we have achieved so far and what we believe moving ahead. And you will probably hear the word diversification a lot during my presentation simply because we have an ambition to be just that. We want to be diversified. We want to be diversified both in our NPL investment portfolio, but also in our funding structure. But to pick up where Fabien left off. So this is a high-level overview of our centralized governance structure around our NPL portfolio. So we conduct quarterly reviews for all individual portfolios from the time of acquisition until the cash curve has expired. So basically throughout the full lifetime of the book or the portfolio. And we apply a 15-year collection curve, just to be clear. We focus on the outliers, both the positives and the negatives to decide on what valuations needs to be actioned at all times, and this we do every quarter. We're data-driven in everything we do. And for every negative outlier, we assess whether something can be improved operationally or if a revaluation is necessary and appropriate. We always take a prudent approach. If we see a need for a write-down, we will do it immediately and deal with a negative P&L impact that comes with that immediately as well. When we revalue positively, we take a more conservative stance. We only assume our performance for the sort of period of time where we are absolutely certain that this will happen. And this assessment is based on the actual performance up until that moment and then by what we believe with sort of our more conservative glasses on. And what we don't want to do is to overestimate the future collection and thereby pushing more risk into the future performance. This is key for us. And this is all a very centralized process. The decisions are taken by our management revaluation committee, which is run by me. And for every individual portfolio where the adjustment is above EUR 2 million, we also required -- and we also need an approval from the Board as well. And obviously, our external auditors also review and approve our decisions. And then we also apply something we call derisking for the secured part of the portfolio, but I will come back to this in a bit. And by this process, we are basically maintaining an active risk management of the portfolio. And by addressing the problems immediately, we build performance for tomorrow. And we, of course, want to have a positive over performance which is stable and predictable. And then we feed back the findings to the investment side of the business and the operational side of the business. For every portfolio we buy, the more data we get and the more we learn for the next acquisition. So if we look at our performance over the last years, this is sort of the proof that our centralized portfolio monitoring works. We are at around 105% over time. This means that we are collecting 5% more than what we -- what the management collection curve predicts. So -- and that curve is not to be confused with the original cash curve that is established at the time of the acquisition. The management curve is a living forecast, so to speak, and reflects all of the revaluations that has happened in the past for any given portfolio. So it's a current best estimate and the driver of the portfolio book value at any given time. And looking at the graph, you could say it feels a bit boring. Nothing really happens. But in this case, boring is extremely positive and exactly what we want. We want a steady and consistent overperformance. And as you can see, we call this net performance. So the graph shows the combined performance of the total book, both the secured part as well as the unsecured part. And this brings me back to the secured collection performance. So I will just briefly highlight the difference of the unsecured and secured collection forecast. So for unsecured, we normally have a portfolio of many, many similar individual loans. We know based on our data and statistical models that a portion of these loans will be paid at a certain point in time, and this becomes the forecasted cash curve. And then we get over an underperformance based on the deviations that materialize over time, and this we book to the P&L on a regular basis. So it's a very statistical approach. For secure, it works a bit differently. secured portfolio is forecasted on a line-by-line basis as we call it. So as an example, let's say, we have a portfolio with 100 houses in them, just to keep it simple. We then make an assessment of when each house will be sold and paid. And based on that, we get our collection curve for that portfolio. And then let's assume we have a house we expect to be sold in September of next year, 1 year from now. But when closing September now, we realized that it went much faster. We sold it already now. That means we have a positive deviation from the cash curve, and we could potentially book this as a performance for the month. But of course, we don't do that because that would create a problem in September of next year. And we can't sell the same house twice. So what we instead do is we derisk the curve of the secured assets. So we booked the collection, but we also conduct a negative revaluation of the book value to reflect that the expected cash in September next year is no longer there. And that's what we call derisking the curve. We remove the risk in the future. And on occasion, we may receive more cash than the curve predicted and then we may up with a small piece of overperformance. But in most cases, we would use that excess cash to derisk the future curve even more. So that's why we refer to this as net collection. And the performance outcome we see in this graph includes the derisked cases as well or the secured side as well. So I think the key message here, if we collect something prematurely, we're not going to add that to the collection over performance. So on the example I just mentioned on the house, that would do nothing for this curve. This is just pure performance and nothing else. That's sort of the key takeaway from this. And then to illustrate the risk profile of our portfolio, we have this comparison against an average of our competitors. And it's based on data from 5 of the biggest industry players. And it's based on 2025 figures because those are the latest we have available to make a relevant comparison. So this is the cash curve projected from the current valuation of the NPL portfolio. This is sort of what and when we expect to collect. So the blue line is us and the orange is the peer average basically. And to come back to what I said previously, we do not want to push risk into the future. Like with the positive revaluation that I talked about, we're prudent when assessing future overperformance. We don't assume that an overperforming portfolio will continue to overperform for 10 years because that would be to push risk into the future. We expect a bigger portion of the cash flow to come in the beginning of the curve, which is clear in the graph. So our sort of proof in the pudding moment comes much faster. We are very conservative in adding value to the tail. We are more conservative than the average of our competitors, which is clearly shown in this graph. And then when comparing to other players, you need to remember that there are other factors in play here as well. It could be a different mix of assets, difference in geographies, et cetera. But the conclusion is still that we have less risk in the tail of the portfolio compared to our biggest peers. So the key message again is that we are prudent in the way that we manage the book, and we are prudent and disciplined in how we price new acquisitions. And I think that also becomes very clear when looking at the performance and profile of this collection curve. And then moving on to the overall risk assessment or risk overview of the company. So we are a banking regulated institution, which means 3 lines of defense. It means operational risk controls, risk assessments. We need to have ready-made plans in case something happens. So it's all very diligent and very detailed. So overall, our assessment is that we have a low to stable risk profile, and we are very active in managing it. So we just covered the credit risk related to the NPL portfolio, and we feel we are very much in control in that area. We also have a liquidity portfolio consisting of high-quality liquid papers, government bonds, regional government bonds, so very low risk in this. Operational risk. We have a continued improvement process built into monthly reviews and other benchmarks we do on a market-to-market level. So we focus on continuous improvement, and I feel our numbers and performance shows this to a very large extent. And then for cyber risk, we obviously have the same risk as any other company on the planet, basically. We have a dedicated team for dealing with this. And like any other bank, we have regular trainings and controls in place as well. And then on the market risks. So we're a pan-European company with many investments in other currencies made out of Sweden and SEK. So this carries FX risk and a built-in currency mismatch. We manage this by natural hedging to a certain extent. We have deposits in SEK, euro and Polish zloty. And then we also have our liquidity portfolio that we can use to steer the exposures. And for the part, we cannot sort of fix ourselves, we hedge with FX derivatives basically. And on the interest risk side, we have a maturity mismatch. We have a longer asset side and a shorter liability side. We try to naturally drive this mismatch down by increasing the length of the funding. But for the part we cannot mitigate, we also hedge this as well with interest rate swaps. So the liquidity risk, we assess as very low. We have a material liquidity portfolio with the papers that we can sell off very easily. And then we have the regulatory risk. So since the last Capital Markets Day, we have now notified and become an SDR, and we feel stable in this role, especially since we are aligned with the intent of the regulators. Our role is deemed necessary from the regulator's perspective, and we are now filling it. So from that perspective, we feel we're in a good place. And then we obviously have a fairly complex organization. We have different subsidiaries, et cetera. So there's a portion of structural risk built in, but I feel like we are managing this very carefully as well. So we have an overall assessment that our risk profile is low to medium. And I mean, all of these areas are something we constantly monitor and work with on an ongoing basis. So let's move into the funding part. And we'll start by looking at the very high-level breakdown of our balance sheet and sort of the big blocks it consists of. So we are a capital-heavy NPL specialized debt restructure basically. And in order to be successful at that, you need an efficient balance sheet and one that is sort of fit for purpose, and we believe we have this. So if we start by looking on the asset side, we have a highly diversified and granular NPL portfolio. We buy portfolios from the biggest bank in 15 European markets, and we have no single risk exposures. So this means we are extremely diversified with low risk. And then we have the liquidity portfolio that has grown from the last Capital Markets Day. This is obviously a consequence of the SDR requirements, where we're obliged to hold a lot more capital, but it consists of high-quality liquid papers, which are easy to dispose at any given time. And then on the liability side, we have our deposit base. So this is basically 125,000 individual customers from 7 different markets. All guaranteed by the Swedish deposit guarantee scheme. So we're diversified also here. And then we have our bonds. And they have also been diversified over time, because we've done a lot of smaller but frequent issuances. And we have improved the maturity profile very much compared to 3 to 4 years ago. So in total, we have a very strong and diversified balance sheet. Which really is fit for the purpose. And this all leads up to this sustainable low-cost and diversified funding platform. So the deposits makes up 80% of our total funding base. And this is obviously a very good thing. We want to keep this level high because it's very cost efficient. And this is the driver of our low funding costs and the competitive edge it creates. And then we had the wholesale market funding side, representing the remaining 20%. So we want to keep this mix to maintain our investment grade and also to have a greater extent of flexibility in our funding base. So if we take a look at our deposit platforms a bit more in detail. So we are, as I said, currently present in 7 markets, and we offer attractive savings accounts in SEK, Euro and zloty in tenors ranging from 3 months to 5 years. And at the end of last year, we launched our own platform in Germany to complement the third-party platform we already have. And in this year, we opened up our own platform in Spain. So we have decided to go to very deep markets with our own platforms. And everything is covered by the Swedish deposit guarantee scheme, as I mentioned. No one can deposit more than the guaranteed limit of EUR 100,000. So not only if it's a source of low funding cost, it's also a very attractive customer offering. So people will sign up for this. which we can clearly see in the graph because this has not been ongoing for quite some time. And if we look at the market like Germany, the savings through deposits is one of the most common saving forms for the general public. And the benefit for us is it's always on it provides great flexibility for us, and we were able to steer the flows very effectively. And as I said, we have approximately 125,000 customers with a total deposit of SEK 49 billion. So this averaged roughly SEK 400 per customer, EUR 400 per customer. So this is also quite diversified. And then in 2024, we moved away from the overnight or flex deposits in order to become an SDR. We have to do that. So we have effectively and, over time, replace those with longer tenors, which is good because this obviously adds stability and stickiness in the deposit base, and it also helps to mitigate the maturity mismatch I mentioned before. So it does sort of 2 things for us. And here is the comparison, I think you referred to in the intro, Harry. So to sort of further illustrate our competitive advantage looking at our average cost of funding in comparison with some of our peers. And this for us the 3.5% that we see includes the AT1s we have. So it's a mix of our deposit interest rates, combined with the cost of the wholesale funding and the AT1s. And this leads up to 3.5% for us. So we have a funding cost that is less than half of the average peer rate. So we do have a leading funding cost in the industry, and this is obviously one of our most important competitive upsides. And if we look at the development in our wholesale funding costs, we see a material improvement as well. And we illustrate this with an example here, if we compare a senior preferred 3-year tenor in 2023 compared to now, we are at significantly lower levels. So that's roughly 350 basis points. This improvement is obviously also driven by other factors outside of our control, but we are happy with the achievements we have made to get us to where we are today, being frequent in the market and with 3 upgrades from Moody's over the past 2 years. And we also feel a lot of support in the market and by being frequent. We have improved our maturity profile significantly. And then if we look a bit closer into NSFR, net stable funding ratio. Now being an SDR, we have to remain above 130% ratio. And as you can see, we have stayed above that level with some margin. We deliberately want to leave a prudent buffer here. But as this obviously comes with the cost, we're actively working on the NSFR efficiency of our deposit pool. So in the middle graph, we see the development over the last couple of years post and pre SDR. So what we are focused on is to optimize the as of our efficiency in the deposits we take in for everything that is sourced through our own platform, this remains 100% efficient for the entire lifetime of the deposit. And for everything works through a third party, this is a different schedule. For the last 12 months of any term base deposit NSFR efficiency or the available stable funding ratio goes to 50%. So third quarter platform deposit is less efficient over the last 12 months of the total tenure. So we are now obviously working to increase the share of our own platforms, but also to taking longer-term deposits in our third-party platforms and shorter ones in our own platforms. And moving into the graph to the far right. The way we measure our efficiency is by the size of the liquidity portfolio in comparison to the NPL portfolio. And as you can see, we're improving in 2026. So our directed efforts are starting to pay off. And then you might wonder what is the optimal percentage in that metric? I wouldn't want to speculate too much around sort of a target or a perfect number here. as we get a bigger share of deposits on the own platform, this will help us improve this even more, but this is a gradual process. We have initiated it for sure, and we can see the impact on 2026, but it is a gradual process, and it will take some time. That takes us to the last piece, the operational leverage -- and this is a slide I like very much. So this is basically illustrating our cost-to-income ratio from 2021 up until now. And as you can see, we come from sort of darker place, at least with the 93% ratio to 62% that we see now. And this improvement is driven partially by better returns from our acquisitions, as Fabien showed, but the majority of the improvement is coming from strong cost control in all areas, basically. The biggest driver of the improvement is coming from the indirect costs coming from 45% to 20% over the period. So we have managed to keep them flat. At the same time as we have grown the portfolio size significantly. We have basically more than doubled the book. And to achieve this, we have restructured both central areas and improved efficiencies in the market. Whilst adding cost in value-adding areas of our business were basically replaced costs. and added more people into the investment side of the business and to the treasury side. And basically, we have swapped cost where we see a better outcome. But we have also seen leverage coming from the direct cost side as well in terms of scale benefits, and we expect this to continue with the growing book and obviously a continued tight cost control. This is key for us. But we have come from a 47% rate to 42% over the period. So this is obviously a development we're very happy with. And as I said, we expect it to continue because this shows that what we're doing works, right? And then the question becomes how much more can you achieve? And I don't -- I want to refrain from guiding with any specific numbers. But what I can say is we expect the leverage to increase with the growing book. This is our absolute conviction and ambition. And then to close off A quick look at our 2 previous periods. So during the rejuvenation years, as Harry concluded, we saw fairly flat growth of the NPL portfolio but a rapid growth of ROE, and this was obviously driven by our cost cleanup. And then we moved into the profitable growth phase with the bigger portfolio growth, but we still manage to sustain and improve the growth in profitability as well. And this clearly shows that several years of much effort and successful work has paid off over time. And now we are well suited and prepared to go into the next phase of the company. And that was it almost some time.

I guess being on time is -- we would expect nothing else from a CFO. If we don't have any questions from the room, we have one from the viewers online, and it's a very straight question. How will head count develop from now to 2030?

2030. Yes, we have an ambition. We're very convinced that we have a very clear ambition to keep the indirect costs flat. So far, we have been able to do this. I think I'm convinced we will continue to do this. But at some stage, they probably will improve with the growing book, and now we have a really forward-leaning ambition, I would say. And then regarding the direct costs and more on the operational side, as I said, I expect and we will make sure that the leverage continue to grow. So I wouldn't expect to see the same rate of inflation in number of FTEs compared to collection and book size.

Just a follow-up then. At what level of book will you need to increase direct costs like what capacity?

We'll see. But I think where we are today, this is working fine. We have a great output from the whole box, and I expect us to remain at sort of flattish levels well into the future. But with 60 billion book, it's slightly different from where we are today. And I don't really want to speculate, but it's going to be slightly bigger.

Yes. Thank you. So maybe on the direct cost to get leverage there, how much AI do you assume to drive that?

I want to say nothing because people discuss our line of business. I've been in the industry for a very long time. I think certain companies with certain, that have a sort of different set of cases than we do. There I definitely see a potential upside I think probably is one for us as well in the future, but the sort of claims we have are more complex than your average sort of service, I would say. So but to get to your question, I mean, the leverage will come regardless of AI or not. That's clear. So we're not betting on any AI initiatives to get there. This we will deliver without AI.

And can I also ask now when rates are starting to come up again, it seems like how do you see the impact on underwriting returns, et cetera, I mean more tied into duration as opposed with you having the deposit funding?