Morrow Bank ASA (MOBA) Earnings Call Transcript & Summary

Hello, everyone and welcome to this company presentation of Morrow Bank in connection with the listing of the bank on NASDAQ Stockholm. My name is Oyvind Oanes. I'm the CEO of the bank. And with me here, I have Eirik Holtedahl, the bank's CFO. The agenda today is, we will take you through a few slides about Morrow Bank, what we've done, where we're coming from and where we're heading, obviously. And I'll start by giving you a bit of an overview of who we are. We are a Nordic niche bank, providing financial flexibility to Nordic customers. Our product portfolio consists of flexible consumer loans, credit cards and we also provide savings products. We have developed a very cost-efficient operations over the past few years. It's a, call it, a B2B2C model where over 95% of our origination is through distribution partners. 98% by now of the application is handled automatically by machines and 90% or more than 90% of the customers are using our self-service tools. We are targeting both Norway, Sweden and Finland. It's a roughly SEK 600 billion large market for unsecured credit. The population across these 3 countries are roughly 22 million. So it's a large market. We have moved our headquarters to Stockholm, Sweden but we retain an operations still in Oslo. Talking a little bit about our customers. The typical customer is somewhere between 30 and 50 years old. I know that's a large span but that's kind of reflecting who we're also targeting. It's predominantly male, almost 70% male. They have above-average income, as you can see from this page, around SEK 600,000 a year. Almost 60% of our customers own their own house. To become a customer at Morrow Bank, you need to be a solid payer. That means you can't have any payment remarks. You need to have permanent employment. And if we're looking at sort of the average loan that we give out, it's around SEK 150,000, SEK 160,000. Now a bit of the track record of the bank over the past few years. The bank was established back in 2014. We listed on the stock exchange in Oslo at the end of 2017. And since then, we have had a strong focus on developing a highly scalable platform and positioning the bank for significant value creation over time. By now, 80% of our lending book are -- is outside of Norway. The lending book at the end of Q3 last year stood at SEK 15.6 billion, 45% of that in Finland, around 35% of that in Sweden and roughly 20% of the portfolio now in Norway. We've been working hard and we've talked quite a bit about that on previous calls as well, about -- on moving the bank from Norway to Sweden, a lot of positive opportunities that come with that. We've now conducted that transition. So from 1st of January this year, we are operating as a Swedish bank and that ensures now a level playing field with our Nordic, mostly Swedish peers in the niche bank consumer finance sector in which we operate. What that does in terms of our competitiveness is that we continue to improve our capitalization. We have a strong capital base, as Eirik will talk about in a minute. And by moving the bank now to Sweden, obtaining a Swedish capital requirements, we continue to both grow that excess capital or capital base and also free up capital that comes with the move. We like to consider ourselves as an industry consolidator. As you will see in a few pages, we've delivered superior earnings growth over the past few years. And today, we are, as I said, listing the bank on NASDAQ Stockholm. Now taking a bit of a longer view. As I said, we've been focusing on building a scalable banking platform. Taking a sort of historic view here, looking back to where we come from, you would see that the bank grew rapidly from sort of the inception and from the listing back in 2017 in Norway. But at around the pandemic years, the growth sort of flattened out and the bank went a bit sideways. But back at the end of 2021, starting 2022, we have sort of initiated a -- call the restart of the bank. We brought in new management. We exited unprofitable products. We streamlined and simplified the tech platform, automated a lot of processes and also streamlined the overall organization. And since 2022, we've seen a fantastic growth of the bank. We've more than doubled the lending book while taking out significant cost, as you will see in a few more slides. So again, the growth over the last 3, 4 years, both in terms of volume, in terms of looking at the efficiency and the scalable platform we built and as well as on earnings, as you will see in a couple of pages, is something that we're obviously very, very happy with. In addition to growing organically, we have also proven that we can go out and as part of our strategy to go out and acquire -- do M&A, acquire portfolios when that is accretive to our business case. And over the past 15, 18 months or so, we have acquired portfolios of, in total, around SEK 3 billion. We acquired the lending book from Swedish Qliro back in July of '24, then followed by acquiring Lunar's Swedish lender book. And now last -- in November of 2025, we acquired the lending book of Moank, all Swedish niche banks. And as I said, in total, adding about SEK 3 billion to our portfolio. Now this is part of our strategy, will continue to be a part of our strategy to look for M&A opportunities. In essence, we're looking for loan portfolios similar to what we originate ourselves. So it's a Nordic market. There's a product fit to what we offer at the bank, similar customer profile. And what we've seen that we are able to take on to the platform our portfolios in the size of anything from SEK 0.5 billion to SEK 5 billion. That is what we have -- definitely have capacity for. And we've been developing a very solid thorough playbook of how to take these portfolios onto our own platform. And last but not least, what we've seen when we acquire portfolios and bring those portfolios onto our own platforms, we managed to do that without increasing cost of the bank. So again, proving this scalability that we have developed on our platform. Looking at the earnings growth over that same period, we obviously, with growing significantly the lending book, taking out costs, becoming more efficient, we've also been able to deliver significant improvement on the bottom line. Looking at our profit after tax, you would see that the CAGR growth over the last 3 years is about 55%, which is outperforming any of the peers in the Nordic market. So something that we obviously are very proud of and we continue to strive for delivering superior earnings growth also as we go forward. And with that, I'll hand over to Eirik, who's going to take a little bit of an outlook and talk about where we're heading.

Thank you, Oyvind. Now looking into the outlook, we'll start with the macro picture. And as you are aware of, the outlook is actually quite benign. We've come out of the pandemic now that the inflation rates have started to decrease. They will remain so going forward expectedly. And whereas the -- also the unemployment is stabilizing and also now expected to slightly decline. The figures that you see here is an average of the 3 countries overall. And finally, also the GDP growth is also set to increase in all 3 countries. And in particular, the outlook for Sweden is, as you probably know, quite benign. And this all underpins our -- the value drivers for us to support that in the sense that these will be beneficial for our business model. Now if you look at our performance on the main KPIs, you can see here that we have a good solid track record over the years, something that Oyvind also showed earlier, but here, we're diving a bit into it. And you can see here that the solid color bars, that's the expected end of 2026, that's in line with our previous guiding and also the 2028 that -- those are the ambitions. And as you can see here, starting with the growth of the loan balance, which is the main driver for the bank and its profitability, you'll see that we expect to have a steady development and ending at around approximately SEK 23 billion at the end of 2028. At the same time, we will still continue to gain benefits from scale and we will have a cost/income ratio towards the end of the period and meaning our ambition is that we will be in the very low 20s, around 22% here. At the same time, our loan losses will flatten out and reduce and we're looking to be around 4%, which we expect -- which we consider is a level that is the ones that maximizing our risk/reward picture. And if you combine all those factors together, you can see here that our -- we have a strong development in the return on equity or target equity here. And our ambition here is that at the end of 2028, we should be around 20%. Now jumping over to where does this compare us to our peers because it's important that if you want to invest in Morrow, you should also have a return that is on par with our peers. And here, you can see that we are now at 13% in return on target equity. That is a return on the equity that we need to have plus a small -- plus a buffer. We were there at the end of -- in 2025 at 13%. That was actually on Norwegian requirements. We have a target here of 20% and that means that there is an uplift potential here on 7%. And as you can see that in relation to our peers, none of those were -- are considered to have that same potential or expected to have the same potential uplift in return on target equity. And why is this important? Well, we believe that for the valuation of the bank, the return on equity is the one that is driving it. And as you can see on this graph here, it is an illustration of both placing us historically where we're now and where we expect us to be along with our peers. And the dotted line here is a regression line between return on equity and pricing book. And you can see that there is a strong relationship that when the return on equity increases, so also does the price/book ratio. And you can see here, we started 3 years ago in the lower left corner, meaning that we're quite -- we only had very -- we had poor earnings and we had not -- we weren't that attractively priced. Now we're jumping up. We're in the midst -- approaching the middle of the pack that you can see here. But if you consider that, the measures that we're talking about will increase our return on equity in 20%, you can also see where we expect to be, which is in the upper right corner. And then following that, there should be an ensuing price/book pricing, which reflects that. Of course, this is what the market considers but the -- currently, the relationship between these 2 factors is quite strong. And this also reflects that there is definitely further value-creating potential in our -- in Morrow Bank. Now also the fact that we now have moved to Sweden is that we are unlocking excess -- unlocking capital. The requirements are lower here in Sweden and that means that we will have more capital for growth. And with that, we will deploy this capital to both organic growth as well as accretive M&A if they should -- any opportunities should arise. And as you can see here, we have illustrated this with that, if we now deploy an additional SEK 1 billion, it will come from excess capital now that has been liberated from the transition to Sweden as well as future earnings. We could add another SEK 5 billion on our loan book. So it will go from SEK 23 billion that I discussed earlier, up to SEK 28 billion. And that will also give an further lift in the return on equity -- target equity from 20% to 23%, which also reflects then that there is the -- both the scalability of our model and also which should be representative of the value potential if we grow further. And with that, I'll leave it to Oyvind.

Thank you, Eirik. Hopefully, this was helpful, useful for all of you new to the case. Just to kind of summarize the presentation, Morrow Bank is a pure-play Nordic consumer finance platform now established in Sweden with a Swedish head office and listing today on NASDAQ Stockholm. We've demonstrated that we have built a highly scalable banking platform, both in terms of growing organically but also proving the ability to do M&A, accretive M&A and add that on top of the organic growth. We have, over the past few years, delivered superior earnings growth with a CAGR of 55%, which is basically outperforming everyone else, all the peers in this sector. Going forward, as you saw from the slides that Eirik just took you through, we are targeting a 10% annual organic growth and then looking at also adding M&A on top of that, ultimately delivering returns in the 20% range. We are obviously also, as we come into Sweden, looking at and then freeing up excess capital. We're also obviously open for and looking for structural value creation upsides should that be available and value accretive for the bank. And with that, we would just like to say thank you for listening to us this morning. We believe that the fact that we're now finally, I could say, established in Sweden, listed on NASDAQ, we have a very, very solid scalable platform and clear growth plans. Going forward, we believe that Morrow Bank is definitely something to consider and follow hopefully, when you -- when we go forward. We'll be back in about 5 weeks' time with an updated Q4 presentation, with the Q4 results and the overall total results for 2025. So stay tuned. Thank you.