Interim report Q1 2017 Hoist Finance

January – March 2017

•  Total revenue increased 13 per cent to SEK 719m (636).
•  EBIT increased 19 per cent amounting to SEK 273m (231) and the EBIT margin was 38 per cent (36). 
•  Profit before tax increased 50 per cent and totalled SEK 185m (123).
•  Return on equity was 21 per cent (18). 
•  Diluted earnings per share increased 46 per cent to SEK 1.66 (1.14).
•  Carrying value on acquired loan portfolios totalled SEK 12,783m (12,658).
•  The total capital ratio was 16.79 per cent (16.76) and the CET1 capital ratio was 12.51 per cent (12.46). 

Figures in brackets refer to the first quarter 2016 for profit comparisons and to 31 December 2016 closing balance
for balance sheet items.  

Events during the quarter

•  Hoist Finance AB (publ) was granted a license by the Swedish Financial Supervisory Authority to conduct financing operations. 
•  Hoist Finance strengthened its position in the Italian small- and medium-sized enterprise market. This is the fourth SME portfolio acquired by Hoist Finance from the seller. 

Statement by the CEO

Yet another strong quarter 

2017 started off with another strong quarter for Hoist Finance. Total revenues increased 13 per cent and profit before tax was up 50 per cent compared to the same period last year. 

The improvement is an effect of last year’s strong portfolio growth, profitability improvements in the UK and France, and the fact that our new markets – Spain and Greece – are now contributing to profit.

Return on equity  also exceeds our target level for the first time and totalled 21 per cent during the quarter – a year-on-year increase of 3 percentage points.

Quarter after quarter, we continue to generate profitable growth. This shows that our business model and disciplined investment strategy provide stability and reliability. 

Trends in Europe and the cost of capital 

Europe’s economic recovery is expected to continue, and central banks are starting to see brighter times ahead. Sustained recovery means higher inflation expectations and, hopefully, a movement away from the current low interest rate environment to a more normalised environment. 

As an entrepreneur, I would really like to see this happen. When a company is penalised for maintaining a sound financial position with a solid liquidity buffer, something is wrong with the macroeconomic incentive structure.

In the low interest rate setting, new and previously unknown investors have moved out on the risk curve in search of returns. While some have been successful, I’m afraid most will come to realise that structured, systematic work with non-performing loans is something that requires specialisation – and this has been Hoist Finance’s sole focus for over two decades. We (and probably many of our well-established competitors) view with confidence a situation where liquidity portfolios yield interest and that there is a cost of capital.  

Regional development 

Region West Europe continues to improve its profitability and accounts for the Group’s second highest portfolio growth over the past twelve months (17 per cent). The UK is Europe’s largest market and represents around one-third of total transaction volumes. 

During the quarter, UK Prime Minister Theresa May decided to submit a formal application to withdraw from the European Union. In all of the uncertainty associated with Brexit, our current assessment is that it will have only a marginal impact on Hoist Finance as a company and on our operations in the country. As part of our risk strategy we are hedging our currency and interest rate positions on an ongoing basis to protect ourselves against short-term FX and interest rate fluctuations. Our operations in the UK are run locally (i.e., without imports or exports), which reduces our dependence on the country’s access to the EU’s internal market. Even in the event Brexit leads to an economic recession, our business model of long-term, sustainable payment plans has proven to be resilient – not least during the 2007–08 financial crisis. 

The market in Region Mid Europe continues to show a strong growth – particularly in Italy, where the share of non-performing loans in relation to banks’ total loan stock is among the highest in Europe. Increasingly more Italian banks are realising the importance of focusing on their core competencies and deciding to transfer non-performing loan management to specialised companies like Hoist Finance.

In Region Central East Europe we are seeing the same trends as in the Italian market, albeit at a slower pace. The work done last year to streamline and improve our procedures and systems will continue in 2017. In order to be a long-term player in our market, we need to make regular investments in systems and infrastructure. The management of non-performing loans has traditionally been characterised by contact with customers via telephone or letter. This will in large part continue to be our working practice, but our success also requires investments in solutions that allow customers to interact with us in channels of their choosing: by phone, in writing, via text message, online or via live chat. We are therefore in the process of developing our systems, starting in Germany – and we will expand this into our other markets during the next stage.  

Well positioned to be a leading partner to banks 

We have built a strong balance sheet over the past few years. A healthy capital structure with balanced leverage is a key element in our long-term focus. As part of this process, the Board has clarified the definition of our CET1 ratio target: under normal conditions, it should be between 2.5 and 4.5 percentage points above Swedish FSA requirements. This gives us more flexibility, while also allowing us to maintain a healthy buffer that exceeds regulatory requirements.

Our long-term perspective also needs to be balanced with short-term growth, and we will be taking additional steps towards our medium-term profitability targets during the year. Our market continues to grow steadily and we are strengthening our relationships with European banks. Our growth forecast for the year remains in place, and we see continued positive growth opportunities in the years ahead.  

Jörgen Olsson

CEO

Hoist Finance AB (publ)

Hoist Finance AB (publ) (the “Company” or the “Parent ”) is the parent company of the Hoist Finance group of companies (“Hoist Finance”). The Company’s wholly owned subsidiary, Hoist Kredit AB (publ) (“Hoist Kredit ”) is a regulated credit market company. Hence, Hoist Finance produces financial statements in accordance with the Swedish Annual Accounts Act for Credit Institutions and Securities Companies. In order to assess the operational performance of the debt purchasing and collection operations and to facilitate comparison with our competitors, Hoist Finance supplements its statutory financial statements with an operating income statement. The operating income statement is prepared based on the accounting and valuation principles used in the statutory financial statements, with no amendments or adjustments thereto. 

The information in this interim report has been published pursuant to the EU’s Financial Instruments Trading Act and Securities Market Act. This information was submitted for publication on 27 April 2017 at 8:00 AM CET. 

Michel Jonson

Group Head of Investor Relations

Tel: 46 8 555 177 19

About Hoist Finance

Hoist Finance is a trusted debt restructuring partner to international banks and financial institutions. We are specialised in serving banks in handling non-performing loans, and supporting individuals in becoming debt free. Through expertise and rigorous compliance we earn the banks’ trust. Through respect, honesty and fairness we earn the trust of our customers.

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