Hoist Finance AB reported strong financial results for the fourth quarter of 2024, with a significant increase in profit before tax to SEK 281 million. Despite this positive performance, the company’s stock experienced a notable decline, dropping by 17.01% to 81.5 SEK in early trading. The earnings per share (EPS) for the quarter reached SEK 10, and a proposed dividend of SEK 2 per share was announced. According to InvestingPro data, the company has shown remarkable performance with a 139.8% price return over the past year, while maintaining a modest P/E ratio of 8.41.
Key Takeaways
- Hoist Finance’s Q4 profit before tax increased to SEK 281 million.
- The company reported a 53% growth in net earnings for the full year 2024.
- Stock price fell by 17.01% following the earnings announcement.
- Expansion into the Portuguese market and IT insourcing were key operational highlights.
Company Performance
Hoist Finance demonstrated robust financial performance in Q4 2024, with a substantial increase in profit before tax and a 53% growth in net earnings for the full year. The company continued to strengthen its position in the European non-performing loan (NPL) market, expanding its operations into Portugal and completing strategic IT insourcing. This insourcing initiative is expected to yield annual savings of SEK 40 million.
Financial Highlights
- Revenue: Not specified
- Earnings per share (EPS): SEK 10
- Profit before tax: SEK 281 million
- Net earnings growth: 53% for the full year 2024
- Return on Equity (ROE): 16.8%
- Total (EPA:TTEF) income growth: 26%
- Investment portfolio growth: 26%
- Net interest income growth: 36%
- Cost growth: 19%
- Proposed dividend: SEK 2 per share
Market Reaction
Despite the positive earnings report, Hoist Finance’s stock price dropped by 17.01%, closing at 81.5 SEK. This decline contrasts with the company’s strong financial performance and may reflect investor concerns over broader market trends or specific company challenges. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading near its fair value, with analysts setting an optimistic target range between USD 11.00 and USD 11.64. The stock’s beta of 1.37 indicates higher volatility compared to the market, while maintaining a healthy Altman Z-Score of 4.38, suggesting strong financial stability.
Outlook & Guidance
Hoist Finance remains optimistic about its future prospects, targeting a portfolio size of SEK 36 billion by 2026. The company plans to maintain its growth strategy, focusing on co-investments and securitizations. With a market capitalization of USD 665.62 million and a strong gross profit margin of 71.1%, the company appears well-positioned for future growth. While the delay in achieving SDR status due to regulatory interpretations persists, Hoist Finance expects to achieve this status between 2025 and 2027. Discover more detailed analysis and financial metrics with a subscription to InvestingPro, which offers comprehensive research reports and real-time financial data for over 1,400 companies.
Executive Commentary
Christian Wallentin, CFO, emphasized the company’s growth trajectory, stating, "We are a growing company." CEO Harry Vranjes highlighted the company’s investment strategy, noting, "We will invest what we find on the market at attractive returns." Wallentin also underscored the business’s resilience, declaring, "We have a really resilient business."
Risks and Challenges
- Regulatory uncertainty regarding SDR status could impact future growth.
- Market volatility may affect stock performance despite strong earnings.
- Economic conditions in Europe could influence the NPL market dynamics.
- Potential operational risks associated with IT insourcing and market expansion.
- Competitive pressures in the European financial services sector.
Q&A
During the earnings call, analysts inquired about the delay in achieving SDR status, with management attributing it to regulatory interpretations. The company reiterated its commitment to its growth strategy through co-investments and securitizations, while maintaining strong collection performance at 105%.
Full transcript - Hoist Finance AB (HOFI) Q4 2024:
Conference Operator: Welcome to Hoist Finance q ’4 report for 2024. For the first part of the conference call, the participants will be in listen only mode. During the questions and answers session, participants are able to ask questions by pound key five on their telephone keypad. Now I will hand the conference over to CEO Harry Vranjes and CFO Christian Wallentin. Please go ahead.
Harry Vranjes, CEO, Hoist Finance: Thank you very much. Good morning, everyone, and welcome to this Hoist Finance earnings call for the fourth quarter and full year of 2024. I’m Hari Vranjes, CEO of Voice Finance. And next to me, I have Christian Valentin, our CFO and Karim Tietje, our Chief Investor Relations and Comms Officer. So thank you all very much for calling in and for your interest in OIST Finance.
We will try to run through the presentation today in thirty minutes to leave ample room for any questions you may have. And before we dive into the material, let me just take you through a little bit where we are and what the market is looking like. So the NPL market in Europe is still very active and there is still quite some movement also in the industry as a whole. So many players are finding their strategies and strategic positions in this new landscape. And just to reiterate, Hoist Finance has found its position and it is and will continue to be a capital heavy player in this industry.
And of course, we strive to becoming the leading investor and asset manager of consumer and SME nonperforming loans. And we think that the 2024 has been a year where we have made great advancements on that strategy or on that goal, both commercially and in terms of implementing our strategy on the ground, so to say. So, during 2024, we invested a record SEK10.8 billion billion after a very strong second half of the year. Repricing in the market has continued. Christian will take you through that in a few minutes.
When we closed the rejuvenation program in ’23, you know, that program mainly focused on getting the the right steering model in place and setting the right mix of central local execution capability and accountability around the group. We addressed a lot of indirect cost. Now in 2024, I know we’ve said that that these reports will be easier to to track. But in 2024, we have continued to addressing with addressing profitability and local return on equity, which is our core target for every single manager in hoist in every market, while at the same time in sourcing our our our IT maintenance and also expanding into new markets. So this is sort of continuous improvement, and and this will continue forever and ever.
However, in ’24, let’s call it continuous improvement plus. So, I think the tempo has been has been very high this year. Now, as you know, in the last days of the year, we issued a statement that we are delaying our notification of the SDR status due to the regulatory uncertainty. We’ll talk about that later in the material as well. But regardless of regulatory status, we will continue executing on our strategy with the aim to becoming the leading investor and asset manager of consumer and SME nonperforming loans.
And our financial goals remain in place as well as our growth ambitions. So now let’s dive into the material, if I can flip the slide there. Yes. Key highlights of q four. So, profit before tax came in at SEK $2.84 SEK 2 80 1 million.
We have taken about SEK 56,000,000 in one of cost during the quarter relating to restructuring in Spain and and divestment in Italy. And I think adjusting for those, we would be at the earnings before tax of SEK $336,000,000 for the quarter. Christian will take you through the bridge there later in the presentation. Return on equity came in at a strong 15.5%. And I think the key thing here is that this is now driven by the core business.
It is less much less impact of sort of positive one off effects that we have been fortunate to be able to land during 2022 and 2023. Now in 2024, it is the core business that is delivering this return. In terms of investments, we closed portfolio investments of SEK1.9 billion in the quarter following our record third quarter. And as you can see now in the material for the first time, we’ve started growing our co investments as well. Now this will develop over the year, and will separate out those numbers for you even when that becomes material.
Now volumes and pricing in the market are still attractive. The Portuguese portfolio that I just signed in time for the Q3 earnings call for those of you who participated there is now closed and we are very happy with our market entry into Portugal. Now investments going forward will continue to be lumpy as our average size in terms of portfolio purchases keeps going up. So on the full year, this takes us to $10.10.0.8 invested, 10,800,000,000.0 invested, basically 50% increase from from ’23, which gives a book growth of 26% even after the relatively large portfolio sale we did now in Q4 in Spain. This gives down a net interest income growth of 36% and with a cost growth of 19% and adjusted for these one offs, This contributes to strengthening our, what we call, the operating leverage, basically, where where income and cost grow into income and direct cost grows with the with the book growth and indirect costs track with inflation.
Collection performance came back came in at 106%. We did expect to bounce back from the 102 in Q3, and we saw that directly in October. The month of December was also very strong, and we see no signs of any adverse macro effects or anything like that in our collections. And now with with the sale of
: our unsecured book in Spain, we are now shifting our
Harry Vranjes, CEO, Hoist Finance: operating model for unsecured both the unsecured and the secured asset classes are attractive for us, and we will continue to pursue and invest in both of those asset classes going forward, but in a new setup. During the quarter, we also sold our servicing unit in Spoleto. This is something that we acquired in 02/2018. And, basically, we don’t the strategy these days doesn’t include any any third party servicing. So we don’t sell third party services.
And now we have managed to divest that to a Italian outsourcing specialist, and, we’re very happy about this. This gives us more this gives management more, you know, time to focus on on our core business investment and asset management. We have been very active in the Swedish bond market during the year, and Q4 was no exception. We issued SEK1 billion in Q4, And for the first time, we issued a senior non preferred bond at good pricing. And our capital and position capital liquidity position remains strong and we have ample purchasing power still.
With this report, also the Board of Directors proposed a dividend of SEK2 per share And I think that should be viewed also in the light of share repurchase during 2024, which we did two rounds of. Full year. I’m gonna try not to be too repetitive here. Yes. So internally here at Hoist, we’ve we’ve had an inofficial target of of becoming a 1,000,000,000 net profit company by by 2025.
And so with the closing of ’24 now, we’re happy to see and happy to announce that that we’ve reached that goal a year in advance, despite taking 140, 1 hundred and 50 million SEK of of one off indirect costs over the P and L and then an additional 30,000,000 direct costs. So very strong result in which we are very, very happy with. The return on equity for the year, a strong 16.8%. And as I mentioned earlier, this is driven by the core business primarily and to a very to a lesser extent than before than of sort of one off activities and very, very happy about that. Investment volume, we’ve covered record year, and, you know, 50% up from previous year, which was also a record.
We have great geographical spread on the portfolios and good diversification between asset classes. And basically, our 45 man strong investment team together with the countries has analyzed and priced hundreds of portfolios this year. And we believe we have had a balanced win ratio. You don’t wanna win everything, but you want to win the just right amount of deals. And we believe we have found that balance for this year.
Now collection performance, 5% for the year, strong. And then, you know, despite the insourcing IT and and doing a lot of work on the operational units in Belgium, Netherlands, Germany, UK, Spain, and and Italy. So despite that, we are we are still delivering really solid collection forms. Now the total income, 4.4 for the year versus 3.5 last year. So that’s 26% increase.
I mentioned the IT in sourcing that is completed, has been completed, I think, since q three, and will give us a saving of some sec 40 million per year going forward. Late or in q three, we got an upgrade from Moody’s (NYSE:MCO) from our previous BAA three to a BAA two. So mid range investment grade, and we’re very, very happy about that. And as I mentioned, we were very active in the Swedish market, on the bond market this year, 1,000,000,000 in q four and 04/2002 for for the for the year as a whole. We did some two rounds of share repurchases once after the Q4 report and ’23 and once after the Q2.
And our earnings per share has grown to 10, basically SEK 10 per share now, which we are also very happy with. Definitely living up to our target of growing more than 15% per year. Now, our capital and liquidity position, as we said, is very strong and the liquidity reserve, as you can see, is large. We have built it up in order to qualify for the SDR. And by the end of twenty four, we were at 154%, so ample ample room to the regulatory limits.
Now, with that, I will hand over to Christian to take us deeper into the numbers.
Christian Wallentin, CFO, Hoist Finance: Thank you very much, Harry. Good morning, everyone, and thank you for joining this call. So Q4, we saw a strong continued portfolio growth resulting in a total investment portfolio of SEC, thirty, almost 31,000,000,000, so 30,700,000,000.0 at the end of the quarter. This is a net 26% growth, and we say net because we divested our Spanish unsecured book during the quarter. So if you would if we wouldn’t have done that, then we would almost have been up 30% year over year.
We have done slightly more strategic co investments in this quarter and then that’s likely to grow in importance. And as Harry mentioned, if and when this happens, then we’ll take you through a little bit more in detail how we account and how we think about that in the numbers. Overall, the market is supporting higher RRs together with the larger investment portfolio that is driving our net interest income higher. So you see that we’ve grown the book by 26% year over year and we’ve grown net interest income with 36%. So we have a NIM expansion here.
We’ve gone from more or less 12% to 13% last quarter two last quarter four to this quarter four. And then that be done despite having tripled the liquidity buffer over the year to prepare for for SDR status. So we had a liquidity buffer of 8,000,000,000 a year ago, and now it’s it’s roughly 24 around 24,000,000,000 SEK. When it comes to collection performance, we had continued strong collection performance. It was 106% across the market, so above our management forecast.
That’s comparing to 105% the same quarter last year. And we are having a granular risk collection device for now over 13 markets. So we entered Portugal in Q3, Q4. And this collection performance and the top line development is supported by stable underlying costs. However, these costs include one time items due to primarily the sale of the Spanish unsecured book, which deserves the comparison quarter over quarter.
So two points that we want to make, we are not making any formal adjustments for these one time costs. We want to take them on the chin, so to speak. And that said, we want to be open with the underlying cost development as well. So if you would isolate the one time cost that we see will not happen again, then the underlying profit growth is really strong, the PBT. So it’s two thirty seven to three thirty seven, an increase of 42% if we adjust for these items.
And in ’twenty three dollars that would be currency gains of $40,000,000 We didn’t have hedge accounting at that point. So that came in over the P and L. Then also we had other one time costs of $20,000,000 in ’twenty three And in ’24 now, q four, we had Spain divestment, which was 42,000,000 and also a VAT accruals that we didn’t we don’t think will is part of business as usual. So that’s the 56,000,000 and that leads to an underlying growth of 42% of profits. So despite taking this one off as business as usual, we delivered a ROE of 15.5% in the quarter compared with 11.2% a year ago.
And we believe now that we have a really resilient business and the underlying business is delivering really well. So I’ll take you through the ROE development over the year, but we have now an underlying business that is delivering our financial objectives. And we are not depending on as we were in the past of one time initiatives to to reach our targets. Next (LON:NXT) slide, please. 2024 was a really outstanding year for us.
We, our firm, delivered a record setting investment year in ’24. It was almost $11,000,000,000 which is the highest in our history. It’s also proving to us and I hope to the external world that we have an industry leading investment capacity and the potential to grow. And also, which I think is a really strong point for us, while accelerating our investment pace, we also managed to expand our return levels, which is speaking to that we are in a supportive market for VOIST. So we’re investing at twenty fourteen IRR levels currently, which is very attractive.
We’re also very disciplined in investing. So while you see blow up quarters like Q3, our average is around the 2,000,000,000 if you take a look over two years. That’s providing the growth long term for us. So in our valuations, we are very data driven and look at granular cash forecasts. So we minimize assumptions in these valuation portfolios.
So we price in disciplined way both the return levels and also using minimal amount of assumptions. So it’s very much data driven granular approach to this. So we think the risk level in the book is very good. We have now also developed strategic partnerships to expand our sourcing network and work together with key partners. We’ve done that over the last few years.
We include servicers that we work with on the servicing side. They help us to source volumes from the industries of the banking industry. We also work with industry and financial peers to source and co invest. This is part of our strategy going forward. And in Q4, it was slightly less than 20% of volumes or so.
And this is when we present the coinvestments, this will always only be our share of the coinvestments. So when we talk about coinvestments, it’s important to say that, okay, so the rest of the coinvestments, so to speak, that belongs to the partners, we will never show in our numbers. This is only our part. And again, we will detail this going forward in future reports when this part of the business grows. Next page, please.
On this page, we want to take a step back and look at the bigger picture. You might remember this page from the Capital Markets Day we had during the autumn. So we want to show that we are on that our growth is on track to achieve our long term target. We set out the target in 2021 to double the book, ’21 to ’26. So with five years, we wanted to go from 18 to 36,000,000,000.
And as you can see on this picture, we’re 85% in achievement of that goal today. And if you take, roughly 8% growth over the next two years versus if you compare that and that and then we will get to the 36,000,000,000. You can compare that average growth of 8% with the last year’s growth of 26%, which was also including a divestment of volumes. Or if you’d like to look at the overall level, 31 to 36, then it’s clearly slightly less than 20% growth to reach our target. And as we have grown, we also expanded our servicing network, as I mentioned, and also the number of markets.
So we have services helping us to source. We have strategic co investors. We have covering now 13 markets and counting. We’re looking into markets close at home, I would call them. So very the same asset classes and the similar markets.
So, for example, Portugal is a great example of that. We know Spain very well, and now we have expanded into Portugal on the Iberian Peninsula. We also see a strategic shift in the market to more capital like business models, which will create a vacuum to fill. So we believe that the market will and is supporting growth at attractive risks and returns. And on top of this, it would be that we have a really fit for purpose business model.
So our funding model continues to be competitive edge, particularly in today’s environment and when we are becoming a stronger operational operator overall as well. So to conclude on this page, I believe we are on track to achieve our growth ambitions by end of ’twenty six. And we have a strong operating backdrop in market, and we are working collaborative with our partners and the co investors, we are expecting to continue to beat our return targets while we continue to grow.
: Next page, please. Thank you. Here you
Christian Wallentin, CFO, Hoist Finance: can see the asset mix and the diversification of the book. We believe we have a very nice diversification in the book. It’s, as you know by now, a very granular risk in the underlying portfolios, very low single risk exposure. So it’s a data driven model that we’re running. And on top of it, we are across now 13 markets.
So we have a really solid pan European geographical diversification. And then we are investing into two asset classes, secured and unsecured on the high level. And then clearly, there’s many sub asset classes below these two levels. And we’re also having a really sound and healthy risk profile in the book. And you can see that the results from that risk profile in collection performance that we’re generating.
So the stable 105. Next slide, please. We continue to see really nice operating leverage and scale effects in the business. We’ve grown the book by the investment volume by 26% and underlying profit adjusting for the one time items that I’ve laid out on the prior page. And we’ve grown 42% in profit before tax.
And the onetime items, as mentioned, is mostly the Spanish restructuring cost in Q4.
: Next page, please.
Christian Wallentin, CFO, Hoist Finance: And now to the full year 2024. We delivered a strong performance in Q4 and for the full year 2024. Overall, we achieved all our targets and more and delivered an investment portfolio growth of 26%, interest income growth of 30%, operating income growth of 26%, net earnings growth of 53% and then an ROE of almost 17% for the year. This is a result we are really proud of. We were aiming high risk for 24% and we beat our targets.
We invested a record amount of $11,000,000,000 almost. We continue to reprice and expand our margins. We also continue to maintain a sound risk profile in the book and delivering strong collection performance of 105% for the full year. And then as Harry said, we had we had a really high focus on continuous improvements and restructuring across several markets. We sold our third party servicing business.
We sold our Spanish unsecured operations. We changed our model. We sold portfolios in Germany and Italy. So it’s a really high pace of change to improve the business. And we see that this is going slightly down over the next year, but this has been a really beneficial change for us during the year.
So we’ve been enjoying both material benefits and then also some one off costs. And this has not taken away from the overriding result of the year, which is the 16.8% or 17% ROE. So all in all and also the underlying indirect costs have been stable, so this provides a nice operating leverage when we grow. So all in all, we beat our return target in ’24 by delivering almost 70% ROE, and we grew up booked 26%. So we are in reach of reaching the ’26 growth target of 36 figures.
: Next page, please. And this is
Christian Wallentin, CFO, Hoist Finance: the same trends for ’24. So strong growth at right risk and right price and risk, healthy portfolio driving operating income, and then costs control and scale benefits, boosting profits in the end. And then on the following pages, we’ll unpack this slightly for you. So we can go to page 12, please. Here you see the material net interest margin expansion that I was referring to before.
So we are enjoying strong growth at the right prices. And this is despite us building up a large liquidity portfolio. Next page. So here we started to see the scale effects also in direct costs. We have a higher growth in investment portfolio than the direct costs.
You can see the 26% compared with the 20% growth in direct cost, which is great. This is what we’ve been aiming for, and we hope to achieve this going forward as well. This is hard work, clearly, but it is something that is really on our radar. On next page, please. Oh, okay.
Before we move on, so the go back. So just comment on the direct FTEs. So if you take really the longer term perspective, we have we had almost 1,100 direct FTEs, and today we’re seven thirty seven. And this is the result of continuous improvements and restructuring of the business. So we’ve done that across a number of markets and then the model.
So so this is a real benefit of what we’ve been doing. Next slide, please. So this is the ongoing improvement focus in in, in the indirect cost. You see that we’ve been growing the portfolio since and this is including before we divested the The UK books of the ’21. We’ve grown the book 46% while we’ve taken down the indirect cost 16%.
And this is an ongoing focus. So you can see year over year, we are flat in essence in a really high inflation environment. And this is very much driven by prior year work. And then in this year, the insourcing of the strategic capabilities in IT, which we absolutely do want to have in. And then that also yields cost reductions.
Next page, please. And here you can see the development of ROE during the year. So we had reported ROE, which is the light bar, so eighteen, seventeen, 16, and 15 and a half. And then the underlying ROI, which if you try to clean out one time items. We have not done this because we we don’t want to to we wanted to have simple numbers.
So that said, you can see the underlying ROI coming more coming higher and higher during the year. So the Q4 levels are very, very attractive. So this is due to sourcing and disciplined pricing and also cost control and scale benefits coming in. This is the capital position. We have a strong capital position.
It’s it’s materially above regulatory requirement, and we are now within the the target range. We see that we will continue to generate strong capital and have a continued high investment capacity. In 2024, we have distributed significant capital repatriation to shareholders. So 200,000,000 of share repurchase during 2024 and then now SEK2 per share proposed by the board. And this is in total almost 40% of the ’24 profit.
Page 17. So on this, we see our liquidity position. We have an extraordinarily strong liquidity position and overall resilience as an institution. I think this is I can’t think of any other institution that show these numbers. So we built up the NSFR ratio gradually over the year, and we overshot to ensure that we meet the STR until end of of q four.
And that has tripled the liquidity portfolio, the liquidity reserve year over year. And we have an extraordinarily high LCR that was 1000%. And by the end of Q4, it is 1,400. So the 1,000 there is average over a few quarters. And then if you take a moment in time, it’s over 1400%, which is incredibly resilient, I would say.
Next, ladies. If you look at the funding, it’s the same funding mix as always. We’ve grown the deposit slightly. So it’s a diversified, stable and really competitively priced funding base, which is supporting our growth. We see that the average cost is going down from Q3 to Q4.
So now it’s the average is 3.7% or so. We’ve also issued material market issuance in Q4 and during the year. So 1,700,000,000.0 in Q4 and then around 4,000,000,000 in in ’24. And overall, the senior unsecured debt is around 10% and then deposits 82% of the overall funding. And this will vary slightly up and down over quarters, but give or take, this is where we will be.
: Next page, please. Harry?
Harry Vranjes, CEO, Hoist Finance: Yes. Thank you, Christian. So on the SDR, as you know and as we have communicated, we have postponed our notification until there is more regulatory certainty or less uncertainty. And we are, in the meantime, of course, in communication with both the SFSA and and, and EBA. And we are comfortable with our interpretations of these criteria, but we are running a business and we we cannot simply wait until EBA’s ruling or interpretation comes back.
So therefore, we are now also taking steps to sort of harmonize our setup with, with the with the interpretation of the SFSA. And this status, basically, you will see, for instance, if you go into our deposit platforms that we have opened up three months and six months deposit products, which we believe will be very attractive. And so we are taking steps here. The SDR status is in our hands, and we can meet all these criteria. So right now, it is a question of time.
If we if we would get a positive feedback from, Eva, which we, of course, hope for, then we are still in SDR. Then we will, of course, immediately notify as an SDR in 2025. Now if both questions would come back negative, then we still have it in our hands to be an SDR from first to first, 01/01/2027. And if it’s combination of one positive, one negative, it could be 2026. But basically, the the message is that this is in our hands.
Long term, we still think this is a very attractive status to reach. However, we, we are not in SDR today. We weren’t in SDR the previous year. The growth that we have, that we have achieved in the last few years, we have achieved as a as a non non SDR, utilizing our existing tools, right, securitizations and strategic, coinvesting. And we will continue to work on with these tools during 2025, ’20 ’20 ’6 as well if necessary.
Our growth ambitions, 36,000,000,000, etcetera, are unchanged. Our financial targets remain in place. And as it happens, this is my last slide. So let’s follow-up on those financial targets. We have mentioned it a couple of times in the presentation, so I will not dwell on it.
But the return on equity, so we have delivered what we think are great results also in 2022 and 2023. However, that has been driven to a a larger extent by by one of items. If we take out those one of items, then then, it would look less attractive in in ’22 and ’23. However, this year, now we see with the growth of the book, with the restructured organization, trimmed organization, etcetera, target setting that that steers the company towards return on equity and profitability all the way from from external targets to CEO to to operations team leader in in Spain. This has delivered the 15% ROE.
If we look at the the the CT one ratio target, yes, we are now within the range. We have been significantly above after selling, selling The UK book back in ’22. And we have managed to re deploy that capital into, well, high yielding portfolios. So very happy about that. Now we intend to stay within this band here going forward.
Now the earnings per share growth, our target is at least 15% growth per year. Obviously, with the results we see over the past years here, we are crushing that and we expect to continue to deliver above the 15% EPS growth. Now in terms of the dividend, so this year or for 2024, the board proposes a two second dividend. It is, I would say, around 20% of net profit. So it is a start, but it should also be seen in conjunction with the share buybacks that have happened in 2024.
So, with that, I think we are opening up for Yes. Questions.
: Handing over.
Conference Operator: If you wish to ask a question, please dial key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial key 6 on your telephone keypad. The next question comes from Marcus Sandgren from Kepler Cheuvreux. Please go ahead.
Marcus Sandgren, Analyst, Kepler Cheuvreux: Yes, good morning, everyone. So if we first move into costs. So it seems like you have a lot of extraordinary costs. I mean, out of the last eight quarters, you had extraordinary costs, six of them. What should we expect going forward?
It seems almost like a normal part of the business. And also underlying cost is also up sharply. What can you give us some help for the future in terms of cost development, please?
Christian Wallentin, CFO, Hoist Finance: The I think if you look at the underlying growth of the book, that drives the cost growth. So we are a growing company. So we’ve been growing year over year 26% in the portfolio, and that will drive direct cost growth. And and this year, it was 20% or so, below the growth of the book. So when we grow business, there will always be cost growth.
And then if you look at the underlying indirect cost, that is basically flat. So we’ve grown that with 3%. That is basically inflation, and we’ve taken it down to combat. We have certain geographies where we have much higher inflation. So we’re dealing with the high inflation environment the last few years by really having a high cost focus.
So we have very stable indirect costs, and we see that that will continue. And then direct costs will clearly continue to grow as we grow, which is natural, I think. Then when it comes to this extraordinary cost, as you can see on the last few years, we’ve taken cost when it delivers real value, and that we will continue to do. So if we have larger items that we wanna do or small items that we do, that will need cost that we don’t see as business as usual, that will generate benefits, then we will clearly do this because it’s the right thing to do. However, that said, we are now moving into more of an environment where we dealt with, I would say, the large, large majority of issues that we’ve wanted to to address over the last few years.
So I think you can expect a lower amount of of change, but still a high improvement focus. But as everything in life, you start on the top, you deal with the really high priority items, and then you move down the chain to deal with the smaller stuff as you move on and dealt with the big things. And that is exactly where we are now. We have dealt with the big things and we will continue to improve and look around and always have high focus on improvement.
Marcus Sandgren, Analyst, Kepler Cheuvreux: Okay. Thanks. So the cost growth this quarter excluding the one offs, is that on the back of your high portfolio acquisitions last quarter since it’s more or less stable this quarter?
Christian Wallentin, CFO, Hoist Finance: I think the what we call one time items in this quarter, so Q4, we have this 56,000,000, which is a restructuring of the of the Spanish business when we sold the the unsecured book down there. So that’s 42 of those 56,000,000. And then we have a VAT accrual, which we don’t see recurring again either. So that’s the that’s the 56. And then we also sold our Moran business.
So in the direct cost, we have roughly 30,000,000. So the three third party business third party servicing business we called Moran internally, that we sold that. And that’s also a 30,000,000 1 time item, so to speak, indirect costs. So we see the trend is growth, slightly lower growth direct for the book over time and then stable indirect.
Harry Vranjes, CEO, Hoist Finance: And I can just echo that.
Marcus Sandgren, Analyst, Kepler Cheuvreux: But out of the isn’t roughly half of
Harry Vranjes, CEO, Hoist Finance: the Sorry. No, no. Markus, please go ahead.
Marcus Sandgren, Analyst, Kepler Cheuvreux: Sorry?
Harry Vranjes, CEO, Hoist Finance: Please go ahead.
Marcus Sandgren, Analyst, Kepler Cheuvreux: No, I was just asking. So out of the I mean, it’s close to 20% cost growth this quarter. Isn’t half of that one offs? Or are you saying it’s more or?
Christian Wallentin, CFO, Hoist Finance: I’m not sure exactly which numbers you’re referring to, but we have in indirect costs, we have these 56 that we would call one time items and then we have 31 in indirect costs as well.
: Yeah.
Christian Wallentin, CFO, Hoist Finance: So, and that said, I think our overall objective to not classify these as items affecting comparability is to keep the numbers clean. And we want to be transparent with the underlying cost development. That’s it.
Marcus Sandgren, Analyst, Kepler Cheuvreux: Okay. Thank you.
Conference Operator: The next question comes from Erman Karriq from Carnegie. Please go ahead.
: Good morning. Thanks for taking my questions. So just to understand then, so to clarify maybe, SEK 87,000,000 is actual total one offs, SEK 56,000,000 indirect and SEK 31,000,000 is direct, so that’s some collection costs, right, on the P and L?
Christian Wallentin, CFO, Hoist Finance: Yes, it’s indirect costs, yes.
: If I’m just looking, still, I mean, the collection costs, even if I adjust for the $31,000,000 in collection costs, the collection cost in relation to the kind of PD book is up a bit in Q4. Is there any effect of, as Marcus alluded to, that you had a lot of acquisitions in Q3 and you had to onboard those during Q4, so it kind of becomes a sequential impact on the following quarter? Or is this level in relation to collections kind of a normalized level as well?
Christian Wallentin, CFO, Hoist Finance: Yes, I would say so. I mean, there’s a we onboard and then we clearly start to work with the portfolios more in earnest with a slight delay.
: Great. Thank you. And then continuing on the one off theme actually. You mentioned something in the report about that you’ve done accruals for your partners on the SDV side in the wrong way before. So I think you mentioned something like $16,000,000 for SPVs.
Christian Wallentin, CFO, Hoist Finance: Okay. No worries.
: You mentioned that that’s been accrued in the wrong way before and that’s not been adjusted. So, is that SEK 16,000,000 that impacts the Q4 result and which line item in the P and L is that then?
Christian Wallentin, CFO, Hoist Finance: No, it’s we set up in 2018, ’20 ’19 ’2 SPVs in Italy. So when we’re reviewing the accounting model, we realized that there was a mistake in the timing of those accruals for the co investors variable return. And that we have now corrected. So that impacts prior years to the largest degree.
: Okay. And then just more generally speaking, how have you and the board kind of discussed when you concluded to pay dividend? I mean, you are still awaiting clarity on the SDR status. You seem to be increasing your efforts on the co investment side as opposed to that’s giving away part of the upside. So why not keep the capital internally and have it for more direct investments instead?
Harry Vranjes, CEO, Hoist Finance: We can’t really comment on that.
: This
Harry Vranjes, CEO, Hoist Finance: is a board decision. So we cannot really comment on the dividend. However, I think management and board alike feel that the company is in a very strong position. And regardless of SDR status in 2526, we will continue to meet our financial targets.
Christian Wallentin, CFO, Hoist Finance: And to add to that, I think
: If I put it this way, I said, I mean,
Christian Wallentin, CFO, Hoist Finance: Go ahead, Narmin.
: Okay, sir. So what I wanted to ask, I mean, you showed the graph of how you’ve been growing the portfolio in recent years and you have your $36,000,000,000 target for 2026. If you would keep the same investment pace as in 2024, you would be there basically in 2025. Is there anything that you can share with us about the plan to kind of reduce the investment pace until you have clarity on the SDR? Or do you think you have sufficient capital to keep on investing or deploying at the same pace as you have recently?
Harry Vranjes, CEO, Hoist Finance: So thank you, Erwin. No. So we have a growth ambition, right? So we don’t have any financial targets pointing to the ’36. We still aim to get there.
And, you know, we the market is what the market is. We will invest what we find on the market at attractive returns. In 2024, it was exceptional. We expect the market to be there also 2025. And if it is, we will invest.
Christian Wallentin, CFO, Hoist Finance: So, I mean, to add to Harry’s point, we are in a very supportive and accommodative market. And as long as we can invest at these levels, we will continue to invest. And then over the long term, that means growth to the SEK 36,000,000,000. And in the short term, it might be lumpy between quarters as you can see when you look back over the last two years as well.
: That’s very clear. Thank you. Last question, if I may, just on the NIM expansion you’ve seen. Now when you’ve come above the NSFR requirements for the SDR, you’ve scaled the liquidity portfolio. Do you expect that NIM expansion to continue given that you’re still buying, as it sounds, a front book with higher returns to the back book?
Christian Wallentin, CFO, Hoist Finance: It’s slightly difficult to say. I mean, it’s a mix of different things. I mean, we clearly and so far, we overshot into Q4 because we want to be really certain that we hit the NSFR target. So we will likely manage that slightly lower than what it is now. So that will take out some cost.
And then interest rates, I think, is anyone’s inflation and interest. I think we all have our personal views, but it is slightly difficult to forecast and that clearly plays a lot into that as well. And then the market prices, we are always hoping to expand NIM, but we’re not always counting on it. Let’s put it like
: that. Great. Thank you very much.
Conference Operator: The next question comes from Bjorn Olsen from SEB. Please go ahead.
Bjorn Olsen, Analyst, SEB: Good morning, guys. A few questions and my first on the SDR. You’re now guiding that it’s possible that you reach it not until 2027 referring to the EBA interpretation issue. But this question was known already in November when you press released. What new and back then you said that you were planning to get the status by 2025.
So what new information have you received since last autumn that has changed your guidance?
Harry Vranjes, CEO, Hoist Finance: I think since the SFSA came out with their position and made that clear, we we had internal discussions of how to handle this and concluded that notifying without actually being fully able to to act as an as an SDR would would not be the right thing to do. So therefore, we thought that we we just simply postponed the notification and and send out communication about that.
: So we have not received any new information, John?
: Okay. So so
Christian Wallentin, CFO, Hoist Finance: We can add to this. I mean, the the timing is, it’s a notification. So if we would want to, we could notify now. However, we want to have a really strong dialogue with Kelly, with the Swedish FSA, and that’s why we’re postponing this. And we have no, we will just continue as normal.
So this presents no issue to us operationally. So I think that’s really important to understand that we want to remain an SDR as we see it, and then we’re building some flexibility to cater for this phase more conservative, I would say, interpretations of the criteria. So that we’re working on as well to ensure that it’s we can meet both as soon as possible. Then if we’re lucky, that’s in ’25. And if if we’re slightly less lucky, then we’ll need to manage slightly longer.
But again, it doesn’t impact the our growth ambitions or view on meeting return targets.
Bjorn Olsen, Analyst, SEB: And in terms then for your sort of mitigating actions with sort of securitizations and co investment structures, etcetera, could you give any guidance on the sort of negative margin impact that could have compared to having the portfolio on your own book?
Harry Vranjes, CEO, Hoist Finance: I think there’s with co investment and the partnerships that we set up, we also get access to volume that we would not have access to, right? So this actually brings volume as well. So from that point of view, we don’t expect there to be any negative impact on that. So I think that’s the main answer to that one.
Bjorn Olsen, Analyst, SEB: And on securitization?
Christian Wallentin, CFO, Hoist Finance: Well, securitization is more of a funding product because in that one you would invite an investor to take a the highest risk in your portfolio. So it’s a slightly more expensive equity, but it doesn’t impact the overall profitability of the company. And so if we would go for a securitization at one point, as you’ve seen historically, then it’s very small volumes that needs to be put in because as backstop impacted claims have grown over the since ’nineteen when the backstop was introduced. It is still quite small volumes that can be dealt with in this and then have a large impact.
Bjorn Olsen, Analyst, SEB: And as for the NSFR, have you received any approval from the Swedish FSA to sort of go ahead with your interpretation of their interpretation, given that, you know, Avan signed other Swedish sort of points have been going with the Swedish position?
Christian Wallentin, CFO, Hoist Finance: The Swedish FSA doesn’t give approvals normally. So you have a dialogue. Normally, this is where it works. You have a dialogue and you do your interpretation of legal text and then you’re very clear how you’ve done things and then that’s about it.
Harry Vranjes, CEO, Hoist Finance: Yeah. So we have heard that and we have presented
Bjorn Olsen, Analyst, SEB: I mean, since yeah.
Harry Vranjes, CEO, Hoist Finance: Excuse me. No. So we have presented our how we interpret this and the legal text behind that. And, and, this we have communicated clearly to the SSA, and we will be reporting on the February 11 for the first time.
Bjorn Olsen, Analyst, SEB: Okay. So then if they would sort of disagree with how you interpret, it’s at that point they will notify you that it was that’s or how would that work? And if so, have you I mean, since basically everyone else has been sort of changing the way they calculate NSFR except for you, do you have a pro form a
Harry Vranjes, CEO, Hoist Finance: NSFR? Regardless of which interpretation you choose, we are above regulatory limits, well above regulatory limits.
Christian Wallentin, CFO, Hoist Finance: And I think it’s also important to note And what about various banks have different ways of using these platforms. So it’s very different how different entities use them.
Bjorn Olsen, Analyst, SEB: Could you to repeat, could you give a guidance if your pro form a figure is above or below 130%?
Harry Vranjes, CEO, Hoist Finance: No, we cannot give out that number.
Bjorn Olsen, Analyst, SEB: Okay.
Harry Vranjes, CEO, Hoist Finance: No. But as Christian said, there are
Bjorn Olsen, Analyst, SEB: Just one last technical question.
Harry Vranjes, CEO, Hoist Finance: Sure, please.
Bjorn Olsen, Analyst, SEB: No. Go ahead first. Sorry.
Harry Vranjes, CEO, Hoist Finance: I was just gonna reinforce the point from Christian. Right? This is about whether or not your deposit broker and whether or not that should be sort of the ASF factor should be 50% or 100%. And depending on how you work with these platforms, they are either a customer or or or not a customer of of the the institution, Hoist in this case. And then so our view is that clearly the way we use this and others might be using it in a different way, the the the the interpretation is clear.
Over back to the technical question.
Bjorn Olsen, Analyst, SEB: Okay. Yeah. The funniest question, I guess. On Page 30, you correct your retained earnings in 2023 by reducing it by SEK $430,000,000. Could you just tell us what happened there?
Christian Wallentin, CFO, Hoist Finance: So in node 11, you mean? Or which, which node are you looking into?
Bjorn Olsen, Analyst, SEB: Yes. Exactly. Exactly.
Christian Wallentin, CFO, Hoist Finance: Yeah. This is what I referred to before. So, we were looking at the SPV models. So, in prior years, it’s a 72,000,000 for all prior years adjustments. And then for details, so deferred tax liabilities, it’s 54 in prior years.
So it’s those two together, the 126 that hits the prior years. It’s important to note that this is a accounting adjustment, so there’s no cash impacts. And it’s also a timing. So there’s no additional cost. It’s just a matter of adjusting the timing of those costs.
Bjorn Olsen, Analyst, SEB: Okay. Clear. Thank you very much.
Harry Vranjes, CEO, Hoist Finance: Great. Thank you.
Conference Operator: As a reminder, if you wish to ask a question, please dial 5 on your telephone keypad.
Harry Vranjes, CEO, Hoist Finance: Okay. It doesn’t seem to
: be The next
Conference Operator: question comes from Markus Sandgren from Kepler Cheuvreux. Please go ahead.
Marcus Sandgren, Analyst, Kepler Cheuvreux: Yes, hi again. I was just thinking the portfolio you sold in Spain, what how I mean, what’s your thinking behind it? When do you sell portfolios basically?
Harry Vranjes, CEO, Hoist Finance: We and we have sold, right? We sold in France last year. We sold in Italy earlier this year. We sold in Germany. Now we sold in Spain.
So typically, we sell if we believe that that our setup is not living up to to to the return targets we have. Not necessarily just at this moment, but it’s basically about our competitiveness on the market as well. So if we assume that we will continue to win at attractive returns, then then, then we love having internal platforms. If we are if we are not able to do that, then after some time and after trying operational excellence initiatives, obviously, then then we look at this option. So that’s in general how we think about sales.
Marcus Sandgren, Analyst, Kepler Cheuvreux: Okay. Thanks. And then, yes, okay. And then secondly, it seems like we or at least I and I guess several of my colleagues are underestimating the impairment income that you’re having and you have had a good income from that line for many quarters now. Can you just help us to be better at predicting it?
Christian Wallentin, CFO, Hoist Finance: I think the way we think about it internally is that we have a large number of portfolios across many markets. So there’s a larger number of overperforming portfolios than underperforming by definition if you have collection performance because you beat your expectations. And that has been the case for the last few years. So we call it a healthy book. And that has generated in in ’23 and ’20 ’4, ’1 hundred and ’5 percent collection performance.
And I think we we aim to to have that healthy tilt in the book, so a healthy book. So I think we expect that this will continue. And clearly, that also provides a buffer for if anything would happen in the environment, anything like that as well. So it’s been pretty stable over the last two years at the 105%.
Marcus Sandgren, Analyst, Kepler Cheuvreux: Okay. Thanks.
Christian Wallentin, CFO, Hoist Finance: And this clearly can be up and down during courses as well.
Bjorn Olsen, Analyst, SEB: But a lot of
Christian Wallentin, CFO, Hoist Finance: times, that’s the time. Very good. We have a few written questions as well. So one is, you are sorry.
Harry Vranjes, CEO, Hoist Finance: Markus, did you have any more questions? No more questions for Markus. Okay.
: Are there any other questions on the call?
Bjorn Olsen, Analyst, SEB: No. No.
: All Alright. So let’s have a
: look at the written questions on the chat then. I think most of them have been answered. But there is one here. You are at your targets or even beating them. Will you set new targets?
Harry Vranjes, CEO, Hoist Finance: I think we got that question after the Capital Markets Day as well, and I think we will give the same answer. Obviously, it is a board question to set the financial targets. We are happy with the targets we have at the moment, and they will remain until they are changed is the is the is the boring answer. Obviously, we intend to continue beating them. And if we do so for a longer period of time, then I’m sure they will be adjusted upwards.
: Very good.
: So we have one final question then around we had share buybacks last year, and now we have a dividend. So how do you guys think about the split between dividends and buybacks going forward?
Harry Vranjes, CEO, Hoist Finance: Again, this is a topic for the board, but I think what we what we normally, you know, in our policy, we say that it is profitable growth or or or repatriation. And as long as as, and we’re going to keep a healthy mix of of both, obviously, right, as as we did during 2024. The the dividends are are are more long term, whereas the the buybacks are a little bit more flexible. So we will just try to work with a a healthy mix of of both, basically.
: Good. And that’s all the questions we had.
Harry Vranjes, CEO, Hoist Finance: And we are four minutes over time. Then, thank you all very, very much for for calling in today and listening and thank you for great questions. We will speak to you soon.
Christian Wallentin, CFO, Hoist Finance: Thank you, everyone. Thank you for joining.
Harry Vranjes, CEO, Hoist Finance: Thank you very much.
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