Morrow Bank AB ($MORROW)

Hello, and welcome to this market update. Today, we're focusing on a major piece of news from the Nordic banking sector. Morrow Bank has announced that it is acquiring MedMera Bank from Kooperativa Förbundet for close to SEK 2 billion. To discuss this, I'm pleased to be joined by Oyvind Oanes, CEO of Morrow Bank; and Eirik Holtedahl, CFO. A warm welcome to both of you.

Thank you.

Thank you so much.

It's clearly a big day for the company. What's your overall feeling right now?

It feels extremely good to stand here and announce this transaction today. This is something that we've been working towards as a goal to find a major, strong acquisition target like this. And we've been working, as you can imagine, for quite some time to secure this. So today, to be able to announce it feels definitely very good.

And just to mention to the viewers, we are live. So if you have any questions while watching, you can just send them in the chat. And with that, we're going to start off with a presentation to give us a little clearer picture of the deal and what it means going forward. So I'll hand it over to you. Please go ahead.

Thank you. Yes. Yes, we will go through a few slides here first to kind of frame what we announced this morning. And then as we heard, we'll open up for some questions at the end. So again, what we -- I'll just click through, I think I'll just jump into introducing the transaction. And as you would have seen this morning with our Press Release, we announced that we will -- have entered into an agreement with Kooperativa Förbundet to acquire 100% of the shares in MedMera Bank, which is a Swedish consumer-finance niche banks, not too unlike what we are ourselves. As we heard already, the transaction amounts to close to SEK 2 billion for, again, 100% of the share capital in MedMera Bank. The transaction is expected to be financed through a combination of excess capital that we talked about quite a few times earlier that we have generated now that we have moved the bank from Norway to Sweden. We will be issuing shares to Kooperativa Förbundet, who will continue to be a shareholder in the bank. And then a little later in the spring, we will conduct an equity-issue of around SEK 600 million, along with issuance of AT1 and Tier 2 bonds in the amount of around SEK 500 million to fund the transaction. Closing is expected to happen early Q3 2026, so later in the summer. And this is obviously conditional upon one that our Annual General Meeting approves the transaction at this scheduled meeting on the 28th of April, as well as the Swedish FSA approval as well that we have already actually applied for. Now a few words on MedMera Bank, who this transaction obviously is about. MedMera Bank is a Swedish consumer-finance bank established some 20 years ago. It has a strong Swedish presence with all its lending in Sweden. It amounts to about SEK 11 billion today. So significantly larger exposure in Sweden than what Morrow Bank has had up until now. It provides unsecured private loans, savings accounts, both through the MedMera brand in direct-channels as well as with the Coop Bank brand through Coop's own channels and targeting, then offering the products to Coop's many members through their membership and loyalty program, which amounts to about 4 million members across Sweden. MedMera Bank is a very well-run bank. You can see some of the key metrics here to the right of this page. You see cost-income ratio of 31.5%, which is very strong for the sector, as well as a strong return on equity of close to 14% on the 2025 numbers. So overall, a strong bank -- a significant sized bank for the Swedish market with obviously also a very attractive distribution model with the partnership agreement with Coop's distribution and Coop's membership base. Now, Eirik will say a few things about the -- how we're building scale through M&A.

Thank you, Oyvind. Yes, growth is, as we have previously communicated, key to Morrow Bank. And this is -- can either happen through organic-growth or through M&A. In the past, as you can see here, we have concluded 3 acquisitions in less than 20 months, namely Qliro, Lunar, and Morrow Bank. And what these banks have in common is that portfolios that we acquired have in common is that these are all Swedish consumer-loan portfolios, just like MedMera's main product as well as they are consumer loans that are structured in a way that resembles us. And that is also the case with MedMera. And that is why the acquisition of MedMera Bank is a logical rationale. We're getting an SEK 11 billion consumer-loan portfolio here with the sales channel, as well as also we're getting a bank with the according possibilities and that it entails. Now, if we just look at the key figures of this as of end-2025, you can see that this is -- will bring us to a sizable bank. Now combining Morrow and MedMera from SEK 17 billion and SEK 11 billion to SEK 28 billion, that would have been the balance -- the combined balance sheet at the end of 2025. We would have an equivalent amount of deposits together, again, to fund these operations of SEK 26 billion. And finally, the profit before tax on 2025 would have been SEK 560 million combined pre-tax. By this acquisition, we're growing our total loan-portfolio by 65%. And that means that also that Sweden is by far becoming our largest market in Morrow Bank. Now going forward, as Oyvind mentioned here, we are doing -- we are now going into a quite hectic-period towards summer. We're making the announcement today. We will have the AGM on the 28th of April, where we're seeking the approval of the shareholders. During spring and into summer, we're expecting -- we will -- expecting the regulatory approval by SFSA and Konkurransetilsynet. And based on that acceptance, we foresee to make the equity-issue of SEK 600 million, as well as also the debt issues. And then we foresee to close this in early Q3. That means basically at the entrance of summer if things go to plan. And then in the second-half of 2026, we will start the integration of MedMera Bank and Morrow Bank going forward. Thank you.

All right. So, we'll come towards the end here. Just summing up a little bit what we announced this morning and why we actually believe this is a transformational step for Morrow Bank. We have been quite clear about our focus on scale and building scale, and how that drives value for Morrow Bank. Over the last 18 months, we've also shown that inorganic-growth by buying portfolios and now acquiring a bank is very accretive to the value creation of the bank. So gaining scale through organic-growth and also through M&A is definitely something that we have proven that we have done with success in the past. And now with this acquisition, we make a leap-step in terms of gaining scale, as Eirik said, 65% growth of the lending portfolio through this acquisition. We're also solidifying Morrow Bank's Swedish presence. We became a Swedish bank in the beginning of January. We listed on NASDAQ Stockholm also in January. And as we heard here, we're bringing on SEK 11 billion of Swedish loans to our existing loan books. Morrow Bank has been in the Swedish market for quite some years, about 8 years already. We have a Swedish business about half the size of what MedMera has today. Combining this together will actually solidify and make us a significant and sizable bank in the consumer finance space also in Sweden. It is an excellent strategic fit with Morrow Bank's pure-play Nordic consumer finance focus. Again, we have positioned Morrow Bank as a product specialist within consumer finance and also a consolidator within consumer finance. And obviously, this acquisition meets both those criteria. MedMera Bank is a well-run, strong consumer finance bank. It adds to Morrow Bank's focus on consumer lending across the Nordics. And as I said, grows our banking business, or banking book, to close to SEK 30 billion. As we also said, it also established a long-term relationship then with one of Sweden's biggest retail brands, Coop. MedMera Bank was initially set up to be the bank of the retail chain. And we will, with the acquisition, also acquire, so to speak, the partnership setup with Coop and the exclusive right to also distribute consumer loans and savings products to the membership-base of Coop, which amounts to, as I said, 4 million members. So that's also a very important part of the acquisition. And then over time, we believe that there are significant synergies as well to be realized. Synergies both in terms of scale and size, processes, improvements and potentially also some -- or naturally also some synergies around cost as we start integrating and looking at how we structure the ownership of MedMera Bank within the Morrow Bank Group that it now becomes. Last but not least, again, what we have shown with our strategy over the last few years at Morrow Bank is that we create value by growing the bank and creating that scalable-banking platform. We have seen that scalability and growth drives profitability over time that also converts into shareholder value. With the acquisition, we kind of accelerate -- we accelerate the ambitions that we also just recently communicated when we issued our Q4 report and also in connection with our listing on NASDAQ, where we believe that by growing the bank -- by now taking advantage of our Swedish-banking-license, the scalable platform, we will be able to deliver stronger returns, continue our earnings growth journey, and ultimately then deliver more shareholder value. So overall, we are very happy with the forthcoming transaction. We are very much looking forward to start the discussions with MedMera and the management there and basically lay a common-strategy for our 2 banks as we move forward.

All right. Thank you very much for that presentation. Let's open it up for a few questions, and we'll also bring in any questions from the viewers, of course. To start with the big picture, what does this transaction mean for Morrow Bank? And why is this such an important step for the company...

I think I've -- we both alluded to that quite a bit through the presentation today. But definitely, as we're saying, and you would see it on this screen as well, it is a very strong strategic-fit. It is another well-run consumer-lending business in the region. It solidifies our Swedish presence. It accelerates our growth and then also accelerates our value creation by creating this larger-play. It also takes us quicker to our ambition of becoming a top 3 player in consumer finance in the region. So with all those things in combined, it definitely made a lot of sense to do this transaction.

And from a shareholder perspective, what are the main value drivers in this deal? Where will the value creation come from?

Right. Basically, again, it's a bit of the same thing. The value creation would be by combining the strengths of these 2 banks, for sure. It will come also from creating a larger bank. We've shown and demonstrated and so has actually also made MedMera Bank over the last few years that scale and size drives profitability. Now we'll have a bank that is significantly larger. We'll be able to take out synergies and also leverage the scalability much more, which again will drive up our value creation and profitability of the combined-play then.

And looking at Morrow Bank's position in the Nordic market going forward, how does this transaction change the position?

Basically, what it does is, as we said, it solidifies our Swedish presence, we have become a Swedish-bank. This is a sizable Swedish acquisition of around SEK 11 billion in lending. It drives the scale. It gives us access to the Coop distribution-network. So that's kind of how it potentially changes a bit the balance between the 3 countries in which we operate, and obviously also adding that additional distribution channel with the Coop-membership-base.

Yes. And looking at the customers, what does this mean for your and MedMera's customers? Would they notice any changes or new opportunities, maybe?

Ultimately, we will continue to operate Morrow Bank and MedMera Bank the way they operate today. I think we both have strong value-propositions. MedMera Bank obviously have the product proposition through the core-channels, but also with MedMera brand through direct-channels. We potentially positioned slightly different in terms of segments. You would see that when you look at the average-ticket of the loans, the credit-profile. So I think there are synergies, and we are complementary there. But ultimately, for the customers, they will continue to enjoy the same service as they've enjoyed from MedMera Bank. What you could see over-time is that we potentially would bring in additional products. We have a credit-card product. There are different insurance-products that we offer that they also could be made available then to the MedMera customers over-time.

And you've been clear that M&A is an important part of your strategy. How should we think about further acquisitions opportunities after this transaction?

Well, obviously, we will be quite busy in the coming-months with this acquisition, because there is some work ahead, definitely. But that being said, it does not preclude us from looking at other opportunities should they arise. And if you look at them, that could be that if they are -- that depends on the proposition of that could arise, the size, and also the timing. And that being said, that means that we also should -- cannot rule out that, that could be of interest. And in the near to future term and definitely in the longer-term, we will be looking at this further.

All right. And looking at your longer-term financial ambitions and growth strategy in general, how does this transaction support that?

It fits very well in. This gives us a large boost. It lifts us by over 60%, as we said. We plan to use this to grow further from the channels -- the sales channels that we get through MedMera and also how they operate. And that is, in a way, just delivering us in the direction that we want to go.

Right. We've also received some questions from the viewers. So here's the first one. If all this consolidation is so value-creating for shareholders, why aren't banks with higher valuation like NOBA or TF Bank, doing these deals instead? They would benefit from a multiple arbitrage? Or are there some soft-values why these deals match Morrow better than others?

I guess, ultimately, you'll have to ask the other banks that question, but I won't answer for them. But what we can say again is, for us, this was a very attractive bank that we were looking at a very attractive target and transaction in terms of the strategic-fit with Morrow Bank. We've been out talking about our strategy around becoming a product-specialist and potentially the best-in-class around consumer finance. Other banks might have different strategies. So, acquiring a pure-play consumer-finance bank like MedMera fitted very well to our strategy and what we've been working on over the past few years. That might be different for others, some of the other names. But for us, which is obviously the most important thing to answer here, this has been a perfect-fit from a product-point-of-view, from a distribution-point-of-view, and also from an operational-point-of-view because, again, we are buying a well-run bank that we will easily be able to include into the overall Morrow Bank umbrella.

Next question is from Fredrik. Can you share some details on the synergy-takeout-plan and when we should expect the synergies to be realized?

There are clear synergies here. But initially, sometime into the future, we will be operating both banks separately. But in the longer-run, we see that we have some plans for going forward, and these are actually a couple of different plans. But they all have in place that there will be clear synergies coming out of this, and they should be achieved by 2028, then we should have everything achieved one way or the other.

Are you still in the market for similar-sized portfolios?

Yes, it was, I guess, a question that we had earlier. But if the opportunity is there, yes, and if it fits and definitely in the long-run.

Yes. How will the partnership with Coop be structured? Are there any guarantees in terms of how long this partnership will last?

Yes, there is actually a cooperation-agreement that we will step into or take over with the acquisition, and that is a 5-year plan or a 5-year contract, I would say, a partnership-contract. So that is secured over the next 5 years, and that contract is part of what we acquire, so to speak.

Do you maintain your organic-growth expectations? You would need to grow significantly just to maintain your current size given the higher churn?

Yes. It's a good question. And we often get that when we've acquired portfolios. When we acquired portfolio, we take it onto our lending-book or our operating-platform. And obviously, that creates some challenge in terms of stepping up as well our organic-growth engine. What we have here is basically 2 well-run banks that have shown that it can -- that they both can grow independently. And as Eirik said and we alluded to earlier, we will let these 2 banks operate separately as well from a market-perspective for quite some time. And then we will see how we balance that over-time. So I don't expect that our own sales or MedMera sales, in this case, organically will be impacted in any significant way.

What is the status of the 20% plus ROE on the combined book?

Obviously, there are benefits here in the future. But now as we become a larger-bank, we will also require more capital. That being said, there are synergies here that will come, and that will translate into a higher return on equity going forward. So we maintain our guiding that on a return on target equity that it will be at 20%. And now we say definitely above 20% in the future. That means as of 2028 and forward.

We have a question about what about the ongoing-SFSA-investigation?

There is just a regular-SFSA-project ongoing with MedMera Bank and a few other retail banks at the moment. We're obviously aware of that. We've had a good dialogue with the seller and the bank around that. This is a regular-review that the regulator does with regular intervals, and we don't see any specific sort of concerns around that at all.

And you touched upon this a little bit earlier, but will MedMera Bank continue to operate as a stand-alone entity after the acquisition?

That is the plan that they will, yes, at least in the near-term and into the mid-term. And then we will engage into a dialogue with the MedMera management and see, sort of, how we can optimize our strengths going forward.

And will MedMera Bank customers get the Morrow Bank app and the other customer-services and credit cards?

I think that's a little-early to answer, but -- so we'll have to come back to that type of question when we get a bit closer to actually taking over the bank and having built a plan together with MedMera.

We have -- there's a lot of questions with good activity. A bit surprising, the low number of customers, 100,000, giving the 4 million Coop membership. What will you do differently compared to previous owners?

Again, it's a little-early to answer those kind of more operational-questions. I think Coop relationship and partnership between the bank and Coop has been strong in the past. We will obviously work with both the Coop side and MedMera to see if we can help or support strengthening of that channel. But again, one more operational-question that I believe we will come back to once we get this a bit, sort of, more into our hands.

Yes. How will rising inflation expectations affect communicated loan loss ratio?

That's a good question, and nobody likes inflation, neither do we. But what we've seen is that, yes, it's uncertainty now about inflation, one could say. Also, if inflation increases, it will also mean that there is a potential that there's a lag here that people may have been in more financial distress because the income lags behind the cost increases. But that is a normal part of business cycle. What's attractive around the MedMera loan book is that the loan losses are higher than ours. And from that perspective, it creates a broader diversification and, hence, should make us less prone to credit-risk-driven by increased inflation.

Lower than ours.

Yes, correct.

Okay. Great. Fun to see so much activity in the chat. But that is all we have time for today. So I want to thank you, Oyvind and Eirik, for joining us. And thanks to you all for watching this market-update.