Welcome to Hoist Finance Q2 Report 2023. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now, I will hand the conference over to the speakers, CEO Harry Vranjes and CFO Christian Wallentin. Please go ahead. Thank you. Good morning, everyone. I'm Harry Vranjes, the CEO of Hoist Finance. I'm here today with our CFO, Christian Wallentin, to take you through our Q2 results, and describe what we are busy with at Hoist Finance. We have about 30 minutes of presentation in front of us, then we open up for questions. I will start by taking you through the highlights of the quarter, and then Christian will take over and go deeper. In general, it is a very interesting time for the credit management industry at the moment. The activity across Europe is very high, both on the primary and the secondary market. We see deals in, in all asset classes coming to market. We have unsecured, secured, individuals, SME, virtually across all markets from, from both primary and secondary sellers. We also see an industry in, in a lot of change, right? New gulf co-investment partnerships are formed, and with our funding cost advantage, we are very well positioned for this, for this change, for this development. We are happy with the second quarter. We see strong collections, a good investment level, and I think good results on, on all our, our main KPIs. We see increases in deposit rates to our deposit customers, but they are offset by... well, partly be- by the returns on the liquidity portfolio, and also by us investing at, at better returns. We see, uh, the repricing that we have been looking for, um, for, um, I would say we have been talking about, the industry has been talking about for, for a year. Uh, we see signs of that now coming through slowly. Now, and internally, we are addressing our cost base, uh, especially on the indirect, uh, costs during this quarter, and we will continue that, uh, program, uh, well, into Q3, and, and by the end of Q3, we will, we will close it. Looking at the highlights, well, we landed at an adjusted EBT of SEK 253 million after adjusting for the SEK 75 million rejuvenation cost, the one-off cost for the redundancies. Our ROE target, return on equity, reported at 10%, and normalized of 19%. Normalized, basically adjusting for the one-off cost of the Rejuvenation and the excess capital. On the investment side, we closed SEK 1.1 billion worth of portfolios in the quarter, and a lot of deals that sort of continued into July. We signed an additional SEK 1.3 billion after closing off the quarter. The pipeline, as I mentioned, remains strong. We had a very good collection performance. There is, of course, an uncertain macro situation and so on, and we still do not see that in our in our collections, collection results. We had an impact on the Spanish court strike, both for Q1 and partly in Q2, that is included in these 108%. We are very, very happy with the performance of the units. Our funding base continues to remain stable and increasingly competitive in this environment. Our capital and liquidity positions are robust, materially above our our regulatory requirements, and our CET1 ratio ends at 14.75% for the at the end of the quarter. We will continue... Well, we have continued to execute on the Rejuvenation program during the quarter, focusing on indirect and central costs. We have reorganized our IT, Data and Central Operations functions, and then found savings of about SEK 85 million there in this run. We will continue the program into Q3, and at the end of Q3, we will close the Rejuvenation program and go into a continuous improvement mode. Internally, we have also reorganized our executive management team to now include the market heads to reflect our more decentralized approach, and we've also brought in-... Oh, did we lose connection? We've also brought in compliance and risk into the executive team to reflect our status as a credit market institution, regulated by the Swedish FSA. Sorry, we lost the presentation or our slide now. Now we're back. During the quarter, and we talked about this in Q1 as well, we divested our French unsecured legacy portfolio at a premium to book value. And just to be clear, France remains a prioritized market for Hoist, and we are active in sourcing new deals there. Yeah, and with that, actually, I'll hand over to you, Christian. Thank you, Harry. Good morning, everyone, and thank you for joining during the summer. I'll kick off with, with the overview of our portfolio acquisitions. It's been high, high, high market activity during the year and in the last quarter. As you know, we, we are focusing on slightly larger deals than historically and often bilateral, so it can be slightly lumpy between the quarters, which you can see on this page. We have managed to, in 2021 and 2022, invest almost SEK 10 billion, and now in 2023, we are invested SEK 3 billion up to the end of Q2. We can also say that we have signed another SEK 1.3 billion up to date in Q3, which in total in 2022, 2023, that adds up to over SEK 10 billion, or over SEK 11 billion. In 2023, that would be SEK 4.3 billion. We're now becoming we have now larger, have a larger book than the before the UK divestment, which is, which is great. We're really back on track in terms of size again. If you look forward, then Q4 is our seasonally strongest investment quarter, and it looks like that will be the same in this year. We have a strong focus on, on repricing and high returns in all our bids, so that's pushing returns up to, to counteract the higher funding costs. Overall, the pipeline looks remains healthy with an overall strong outlook for the year. This is a strong quarter for Hoist, so it's characterized by high level of market activity, as I mentioned. It's also solid collection performance. Costs are in line, adjusted for the rejuvenation costs that we are taking this quarter, and the execution of the final push of the Rejuvenation program has been a real focus this, this quarter. Before I jump in, I will remind you how we adjusted the numbers to show the fair underlying performance of the remaining business. Q2 2022, we have adjusted out the U.K. divestment, and that means that we have taken out the interest expense related to the U.K. divested book, and also added in the retained UK Group staff. You can see the details in the footnotes on this page and also in the reports. We have also taken out the gains from the interest rate swap hedging in Q2 2022 for comparative purposes, as we were introducing hedge accounting in the middle of last year. In Q2 2023, we are adjusting for two things, as Harry mentioned, so the rejuvenation costs and then the normalised equity. We, we go for a normalised equity, which is the, in the middle of our target range for CET1, and that's the underlying equity position that we, we used in the normalised return on equity. Overall, earnings before tax, adjusted for rejuvenation one-off costs of SEK 75 million, was SEK 253 million in the second quarter, and this is a growth of more than 100%, 117%, quarter-over-quarter, excluding the interest rate swap that I mentioned in the benefit in Q2 2022. The key drivers were growth of the book. We grew 21% year-over-year, the strong collection performance of 108%. We also divested our own secured legacy French back book in the quarter, and that's adding a one-off gain during the quarter. If you look at the bottom line, net profit for the quarter was SEK 161, which is 10% ROE on reported basis, versus reported of 19% last year. If you look at the adjusted normalized numbers, it was SEK 92 million in Q2 2022, an ROE of 19%. However, only in this quarter, in 2023. That's driven by collection performance. It's also a low effective tax rate for the quarter. Year-to-date, we're around 20%, which is more or less in line with what we think is normal for us. It's the net profit is also impacted positively by the divested French unsecured legacy portfolio. We go back to the top. Net interest income is growing slightly quicker than the book. This is a mix of three variables, I would say. It's pricing discipline, which remains strong overall. We are saying no to, to certain portfolios because we're pricing at the right level, we think, with the right risk and return equation. It's also due to increased funding costs, and then we have gone from a negatively yielding liquidity buffer to a positively yielding liquidity buffer. All of this results in a growing net interest income of 22%. As I mentioned, collection performance has been very strong at 108% for Q2, and this is 8% higher than our own management forecasts. This is despite the lower unsecured collections in Spain, which are mainly driven by the strike that Harry mentioned, which was ending in May. Overall, operating income, including both the net interest in margin and then the collection performance, has grown 38%, and this is driven by the increase of the book, our ability to withstand a higher interest rate costs, and also strong collection performance. The cost grew with almost half the growth of the operating income, 38% operating income versus 22% of the underlying total operational costs. This is two dynamics, which I will come back to. The direct costs growing with the book and slightly more in the quarter, and then the underlying indirect cost going down. We have continued the Rejuvenation, as we said in the Q1 presentation in Q2. We have some savings driven primarily from almost 100 FTEs exiting during the quarter, this leads to SEK 75 million of rejuvenation cost, and we see SEK 85 million benefit of this, and we're looking for more now in Q3. Before the Rejuvenation ends by the end of Q3, we expect to find more benefits, which will then come with some, some costs to execute this as well. Also worthwhile mentioning, in Q2, we issued a new AT1 instruments of SEK 700 million, which we think is a strong, strong, a proof of strong confidence from our investors. It was a very difficult market to, to issue AT1, and subsequently, we have also called our previous AT1 bonds at the first call dates in June and the one that is coming up in September as well. If we look at the direct cost development, this is driven primarily by high activity in the quarters. We have a 21% growth of the book, which is driving higher collection costs. Year to date, direct costs is growing in line with the book. In this quarter, it is slightly higher at 32%, and it's driven by one-off items. We have set up a secured business in Spain during the quarter, which drove some costs. We also have the last, I would expect, normalization of legal collection fees after COVID. During COVID, the legal systems closed down to a large degree, so there was underspend of legal collection fees, and that's now back to normal. However, in this quarter, compared with the same quarter in 2022, there's a slight increase back to that normal level. The underlying costs are up 20% if you take those out, the secured setup and the normalization of legal collection fees. That's driven by collection costs of SEK 27 million, then FX of SEK 26 million, and then inflation, in the salary, primarily in the underlying direct costs. As you can see here, the currency impact in our numbers in this quarter is pretty high, and as the SEK has been weakening versus more our main currencies. What's clearly really encouraging is that these higher direct costs are driving an even higher operating income of 38%. Overall cost increase is 22%, with operating income up 38%. We're getting, and that's of course, the result of taking down indirect costs and then seeing some leverage from the more fixed cost base. We grow quicker income than we grow costs. If we look at the indirect cost base, we are continuing Rejuvenation throughout Q3, Q3, and we're looking to take out more or save more indirect costs, which will come at an expense. This slide is showing the indirect cost base since the start of Rejuvenation. We used the Q2 2021 as the first comparative quarter for the cost savings. If you look at the, a constant currency basis, we're down 14% to date. In this indirect cost base, there are three buckets of, of costs, you can say. One is central costs, which is primarily in Sweden, and then you have indirect costs in the loan management platforms in the markets. That's support functions in the markets. You have the asset management business, which is the investment team and the associated, for example, due diligence costs in those investment processes. Of that 14%, save that you see on the page, central costs are driving the cost decrease, and the platforms are down mainly because we have sold our UK platform, which was part of this cost optimization work. Then we have invested into the asset management side, so the investment team and related activities. If, if we go to the next page, we wanted to show you a page which we've, which is a powerful statistics in our mind on what we have, what has been achieved in Rejuvenation without the noise from inflation and currency movements. These are direct FTEs on the left and indirect FTEs on the right, so the development since Q2 2021, the start of the Rejuvenation. Overall, on the direct FT side, we have much less people manning, managing an equal-sized book. You see that the direct, divested UK FTS, those are in the dark gray box on the direct FTS. That's going down, and then we are basically flat with a, less platforms managing an equal-sized book. We're getting scale on our, on our direct FTS as well. This, of course, includes the book in the U.K., so we changed the operating model in the U.K., divested the legacy UK platform. However, we are investing in the U.K., as you know, still, so it's an active and prioritized market for us too. In the indirect FTEs, the trend is clear. We're overall down 39% since the start of Rejuvenation, and we have invested into the asset management platform. You can see that we've gone from 24- 37 FTEs in that area. We have the 39% is compared with what we communicated in terms of executor Rejuvenation efforts. That's the post-Rejuvenation once it's executed what we have now done in Q2. It's a gradual implementation, clearly, over Q3 as well. The UK divestment and other saves, you can see in loan management platforms, so the top, top two boxes. Then in the central FTEs, you can see that we're down 56% from 262 FTEs to 114 FTEs from the start of the Rejuvenation. I have to say that in the central layers, where we've, we've reorganized a lot, it's still a incredibly strong engagement and I think a, a improving and then better quality than what we started. A lot of these central posts are a result of doing things differently and better, I would argue. We have changed the, the, in the last push, we've, we've decentralized plenty of process into the markets, where we see the potential of, of having much more ownership and, and better drive and quality in those processes. The asset class mix, we have as our investment strategy, is aiming for increased our secured book value. It's 20% a year ago, and that's now 28%. We're seeing that in the quarter, we have a more of a 50/50 split between new investments. That will, if that continues, this will continue to increase that portion of the book, which is what we want. We can also see an improved geographical and asset class diversification, which is really beneficial for us. We're not depending on one market. We're both investing and collecting in our markets across Europe. Also worth to say again, we have an active pipeline with a continued high share of secured portfolios and also larger bilateral portfolios that we like the risk in returning. Capital and liquidity position. We have a strong capital position, given last year's developments, and this enables us to be really picky about the investments we want to do. We have a real focus on the risk and return in the portfolios. We're looking at larger portfolios, and we can clearly grow quickly with this capital base. We are very disciplined, so we'll be quite lumpy in the quarters. If you look over time, since the beginning of 2022, we are growing very much and using the capital base that we have at our disposal. Look at the liquidity, it's down over the last few quarters. It was unusually high post the UK divestment, and we have invested during these periods, clearly, that we've tied up cash in that. We also repaid our senior unsecured and issued a smaller replacement during the spring. We have repaid the AT one as well. That's key drivers of the liquidity. I will have, oh, yeah, there's one was that, sorry. Funding. We have the funding, stable funding base, and it's becoming increasingly competitive despite the environment, which is highly volatile and unsure where we're heading. We see that in the process we are participating in, we're always competitive, even if we are pricing very attractively from our point of view. You can also say that this is impacting clearly the funding cost on the lines. You can see that the average funding costs is going up. We're now at 3.22%. However, the net income interest margin is stable, and that's because what I mentioned, pricing discipline, yield on liquidity buffer, and then the cost of the funding going up. That, all of those together is, is resulting in a stable net interest margin. We've also, increased the deposit part of our overall funding, that's the result of the replacing the senior unsecured with a slightly smaller on senior unsecured as well. I will lead back to Harry to summarize before we will start to take questions. Yes. Thank you, Christian. Yes, so in summary, a strong second quarter, adjusted for the rejuvenation costs, and on a comparative basis to last year, we've almost, or we have more than doubled the result. Our return on equity, our key target, which is to be at 15%. For the quarter, we were at 19%, so we think we are doing really good progress towards that towards that goal. And on the investment side, as we said, the pipeline is healthy and there is a lot of activity out there, and it is evenly spread, I would say, across Europe. There's not one market sticking out. It's, it is, there is high activity both on primary and secondary. The strong collection performance of 108%, we're extremely happy with during this in this macro environment. We will continue to work on our loan management units to ensure that we, that we are top at collections. As Christian just brought you through, the funding base remains stable and increasingly competitive as we see industry peers refinancing themselves at completely different rates. We continue to have a robust capital and liquidity position well above both regulatory requirements and our own internal limits. With that, I think we're ready to open up for questions. Thank you. If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Ermin Keric from Carnegie. Please go ahead. Good morning. Thanks for the presentation. A few questions on cost, maybe to start with. The SEK 16 million secured setup costs that you had in Q2, did I understand it correct, that that's a one-off, but it's not included in the SEK 75 million of costs that you've highlighted as one-offs, because those were all related to the Rejuvenation program? That's correct. We tried to be very restrictive around classifying things as items affecting comparability. However, we do want to highlight when we think this is not recurrent cost, like the secured setup. Perfect, thanks. On the FTEs, I think it was 75 and 20 consultants that you said that you've been able to reduce. They're still part of the Q2 base, right? They are going out through the door in Q3. Maybe just, I can do the follow-ups on that one directly as well. Like, will we need to have any external suppliers for their services, or will we kind of do all of that just locally on, on the existing resources you have? They are, people have, exited during Q2, and then, if not already, then in, in early Q3. The, the replacement of these services is being taken care of locally. There's a marginal replacing of FTEs, and that's included in our forecast. Great. Thank you. Exactly. Actually, there's more, more people have left, but net, it is 75 plus 20, so the local replacements are in there. Got it. Maybe strategically then on, on this kind of reorganization with doing more locally instead, do you see that there's a risk of kind of duplication of work in every local market instead of doing it centrally? Or how have you reasoned when you decided to take this approach instead? There is a, there is a, a risk of suboptimization, obviously, when, when, when we do similar processes in, in, in different markets. However, in terms of control and in terms of quality, of the processes and of the, of the, of the job done, as Christian mentioned earlier, we, we believe that the benefits outweigh the drawbacks there. If we look at the, the central, execution of these processes, it, typically costs a lot and takes a long time, and, and, and, when we onboard new portfolios at the rate that that is happening at the moment, we, we are typically too slow. The real benefit that we see is, is, is driven by that the people that execute are also fully accountable for this. It's, it's both a, a quality and, and speed, and nimbleness in this. As, as Harry was alluding to, we're, we're introducing clearly checks and controls and on a higher level to make sure that everybody's living the policies and the instructions that we have. We, we steer much more through principles, meaning policies and, and, and the instructions, how things will be doing. Then the people locally that are best suited to do the actual activities are also accountable for them. They don't have any duplicates on, on central level, which was actually the case before. The resources we had on central level were not optimally used because they were not sitting locally. Therefore, we see that this is absolutely the right way to go. Okay, got it. Thank you. Then on the execution cost, you previously, I think last quarter, you talked about SEK 100 million in execution cost for 2023. What do you expect that to be now? Because it sounds like we could have some additional costs coming through in, in Q3 as well. Have you changed the ambition for savings? Can you quantify anything? I think before it was SEK 85 million per annum. Yeah, we'll be taking a last real run through our, our cost, cost base, currently, and, and really thinking through how we want to run the business. The, the... Svea, can you open the computer? The, the implications of that are coming through gradually. We've done the things that we knew we wanted to do now in, in Q2, and we've seen a, a number of new things that we're looking into and are planning to implement during Q3. We're seeing that we will have more benefits than SEK 85 million. We don't know exactly where we will land, so we'll report back on, on that in the end, by the end of Q3. Clearly more, this will come at the cost, these benefits, but the ratio, we're, we're making sure that it's, it's the right one. Meaning, bang for the buck kind of thinking. We don't want to guide- But would it be- Currently on, on how much, but, it, it's more than the SEK 85. That's, that's what we are looking to, to achieve. Understood. But would it be fair to say then that the, the initiatives you've already executed, you feel confident that they will give you SEK 85 million as is, if you just stop executing from here on? Yes. Great. Leaving the cost behind, collection performance, we actually saw an acceleration now in Q2, which is a little bit surprising given where macro is developing and seeing what your peers are reporting. Is there any special lever that you've been able to pull to drive that collection outperformance? Well, I, I think one of the issues that we. Or, one of the levers we have seen is what Christian alluded to previously, the local accountability. As we have given a stronger mandate to locally adapt processes and so on, we've seen some early really good results in terms of adapting collection strategies and so on. I think that, that is one, and then the disciplined investments we have done during Q4 last year, Q1 this year, and so on, I think they are also paying off. I can add two things to that. As you might remember, we changed our performance management, i.e., that is how we steer the business completely, some two years ago. We're running the business on a ROE basis. The local markets are run on that basis, so they are rewarded and followed up diligently on a return basis, ROE. That's really paying off in the long term. We're all strong believers of that, and that's also helping this clearly because we are measuring what we want them to deliver, and they know it, and they are acting accordingly as well. Then also, I would add to what Harry was saying, that we have been diligent in working through the book. We had a completely different revaluation process two years ago, which was more top-down, and now we do it bottom-up, centrally. This is one of the central checks and processes that we strongly believe in, having control of the quality of the book, and that is also yielding results in terms of collection performance. Excellent. Then one last question, if I may just. You, you did allude to that pricing has changed as well. Is there any, anywhere you can kinda quantify? How much have prices actually come down, given that it's compensating both for higher funding costs, inflation, and expenses? I'm just thinking, how much are banks actually willing to stomach in, in lower prices paid to them? I think it's, I mean, as in any market, sellers are slower to, to change expectations on price. It has taken some time. However, we see that this, this is ongoing and has been ongoing for a while now. Certain processes, both bilateral and in more tenders, meaning more competitors being in that process, we see that it has happened that a price has not been accepted, so they've closed down the sale, and then a month or two later, they've come back to market. It is a process that takes some time. However, we are very disciplined in this, and we see that the pricing is going down, returns going up. I think we are in the, the fortunate situation to be to have this stable funding base, as we call it, meaning large part of, of deposit funding, which has not seen a equal increase as the market funding, as the rest of the industry is, is mostly funding itself on. We're clearly in a better position to compensate the increased funding costs. I think the, the liquidity portfolio also helps. We're working on all sides to, to make sure that our margins are being protected, and, and in the end, we aim to expand them clearly, but we're not there yet, but we're working very diligently to do that. That's very helpful. Thanks for taking all my questions, and have a nice summer, both of you. Thank you. Bye-bye. Thank you. You too. As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. There are no more questions at this time. I hand the conference back to the speakers for any closing comments. Okay, well, thank you everyone for, for joining this call. As, as we mentioned a couple of times here, it was the Q2 was a strong quarter for Hoist. We, of course, will continue our journey improving the company from the inside as much as we possibly can, both in terms of performance and in cost efficiency. I think looking outside of the company, the market is strong and the pipeline is healthy, and we are very much looking forward to an exciting autumn. I think with that, I'm just gonna wish you all a enjoyable summer, and hope that everyone gets a bit of holidays. Wishing you a great summer, hope you will enjoy your vacations if you're there or if you are going soon. Thank you very much. Thank you.