Good morning and welcome to the Q3 presentation for B2Holding . I'm Erik Johnsen, and with me today I have André Adolfsen, CFO of B2Holding . The third quarter was another good quarter where our operations and show positive development and the market started to pick up. Let's go straight to the highlights for Q3. Our unsecured collections remained solid in the quarter and secured recoveries also performed above our forecasts, including successful repossession of real estate collateral, which is a crucial part of our collection processes. The positive trend for REO continue with sales of REO well above our book value. On the operational side, we continue to see the operational improvements we have done in the past quarters is showing effect. A tangible example is Poland, where we have lower legal expenses as a result of AI efficiency initiatives that has increased the share of amicable collection.
On the investment side, market activity is picking up and the pipeline is improving. We are, however, maintaining a disciplined and selective approach to investment. André will get back closer to this later. With improving markets ahead of us, I'm pleased to have Endre Solvin-Witzø on board as Chief Investment Officer from October. Furthermore, B2Holding is currently in advanced discussions with reputable investment partners. The partnership discussions include both back book and front book in B2Holding secured markets. This is in line with previous strategy that has been communicated to the market, and I will elaborate a bit on this later. On capital and funding, it's worth highlighting that we have repaid our second bond just after the quarter end, and that we have solid funding base to support future growth.
Finally, based on good cash flow and financial position, the board has approved a dividend of NOK 0.15 per share and initiated a share buyback program for up to NOK 90 million. Now, moving to the key figures for the quarter. We see that gross collection is nearly NOK 1.27 billion, a solid for a third quarter. Taking into consideration also last year, we had a large repossession that was included in that number. The cash EBITDA remains strong and has ended at NOK 934 million. The leverage ratio was down to 2.38 and still trending downwards. Net profit is NOK 162 million, corresponding to an earnings per share of NOK 0.40 for the quarter. Book value of equity per share is close to NOK 12.3 per share.
The portfolio purchases of NOK 237 million is lower than what we aimed for. We have maintained, as I said, a disciplined approach. The pipeline is growing and we also foresee that the number of portfolios transacted will increase in the future. We expect therefore also the number of portfolio purchased will increase. André will share more details about the financial performance with you later. Moving to the business update. As mentioned, we have seen the market activity starting to pick up in the third quarter, indicating that 2022 will become more normalized year. Thus, we expect more activity going into Q4, but also observes that capital overhang from period with very low NPL investments has increased the competition.
We also still observe financial institution being less active than normal in several of the markets, partly due to governmental schemes still being in place. As the market improves, we will maintain a disciplined and selective approach and believe that we will benefit for this in the long run. With reference to previous communication regarding partnership discussions, B2Holding is currently in advanced discussions with reputable institutional investors, investment partners, where the aim is to establish a deconsolidated co-investment partnership predominantly for B2Holding 's back book secured markets. The finance provided will be at no recourse to B2Holding also. The partnership discussion will also include future co-investment in B2Holding secured markets. This is, as I said, in line with previous quarters communication. This will enable us to grow and take a larger portfolio share and also investing in larger portfolio going forward. ESG focus showing result.
This quarter, I also want to highlight our internal work on ESG issues. Since 2019, we are focused on addressing and managing ESG issues that are most material for the group. That captures our impact on society and that are highest importance to our internal and external stakeholders. Now it's encouraging to see that our ESG focus has been acknowledged by external experts. As a result of actions implemented and increased transparency and disclosures, we have substantially improved the ESG risk rating for Sustainalytics, ranking us the top of the industry and within the top 1% of rated companies globally. Furthermore, we have improved a rating from E to C in the Governance Group ESG 100 report on the largest companies in Oslo Stock Exchange.
With strong ESG program in place, we will continue to work to make a part of internal DNA and build resilient business that creates long-term value for all our stakeholders by focusing on material issues, engaging and communicating with stakeholders, as well as protecting human and social capital. With that, I will hand over to you, André, to present the financials.
Thanks, Erik.
There we go.
Thank you. Let me just flip the slides. Once again, we are very happy to present yet another very solid quarter for the group, building on the positive momentum that we have seen over the last quarters. Our cash position remains very strong. We have also seen during the quarter that we have improved collection performance driving the results for Q3. Going a bit more into the details, gross collections, total gross collections, including joint ventures, were down 22%. However, if we adjust for some of the larger repossessions that Erik mentioned, we had last year, and also in constant currency, the total cash collections is down only 2% compared to last year. In terms of unsecured collections, unsecured has seen a very strong quarter, and we've seen a good trend over the last quarters.
In Q3, the performance came in at 103.3% of the latest forecast, which is 7% up in constant currency. Secured recoveries came in at NOK 232 million, of which NOK 93 million were repossessions. In terms of REOs, we saw REOs sold 40 million in Q3. This is at a 51% premium to our book value. Now, Q3 is normally one of the, you know, seasonally not the strongest quarter for our secured markets, given that it's the vacation period. We have seen a high activity level, and we have signed agreements for sale of REOs, which we currently expect that the fourth quarter will be the strongest quarter this year for REO sales. Cash EBITDA was flat during the quarter, but up 5% in constant currency.
Adjusted EBIT is up 4% and 9% in constant currency. Despite a modest investment level, the adjusted EBIT has increased, driven by, as mentioned, the improved collection performance we've seen on unsecured, as well as a good underlying cost control across the group. On the investment level, investments came in at NOK 237 million. This is only slightly up compared to the previous quarter. As mentioned, we have seen an uptick in number of portfolios coming to market, but we have maintained a selective investment approach, which we believe will benefit us in the longer run. Cash generation, as mentioned, remained very strong, and we have taken leverage down to 2.38, down from 3.23 in the same quarter of last year.
Following the strong cash position, the board has approved a distribution of dividend of NOK 0.15 per share to be paid out in November. Moving to the next slide, we elaborate a bit more on the collection performance in the quarter. As mentioned, we continue to see a positive trend in the unsecured collections, coming in more than 3% above our forecast and up more than 7% in constant currency year-over-year. On the secured collections also came in above the latest forecast, but down year-over-year, mainly driven by some large repossessions in the third quarter of last year. In terms of REO sales, REO sales came in at NOK 40 million, as mentioned. This is down from the second quarter, but up from the first quarter this year.
We do have a high activity level, and we have signed agreements, which we currently then expect the fourth quarter to be the strongest quarter in terms of REO sales. We consequently expect an uptick in total secured cash collections for the fourth quarter. Moving to slide nine, we elaborate a bit more on the cash position. As you can see on the left-hand side, you can see the development from cash EBITDA to cash earnings. Cash earnings then adjusted for investments and financial obligations. Cash earnings was NOK 503 million in the quarter. As you can see on the top right, it has been very stable over the last quarters.
We also want to highlight that the collection level in the third quarter was slightly below the second quarter, but due to the underlying efficiency improvements that we have achieved, we have a stronger cash earnings after or before investments in the third quarter. A consequence of this is that the leverage has now been taken down to 2.38, coming down sequentially from 2.52, and down from 3.23 in the third quarter of last year. Moving to slide 10, a bit more on the cost position. We are very happy to see that the cost initiatives that we made during the first part of 2020 has proven to be sustainable despite a higher collection activity in the group.
We are also very happy to see that some of the initiatives within data analytics and machine learning now is starting to show results. You know, Erik mentioned the improved amicable solutions we've seen in Poland and also some other markets has led to lower legal expenses, but still a higher collection level. Moving to slide 11, some more details on the portfolio of investments. As mentioned, the investments came in at NOK 237 million, only slightly up from Q2 and also from Q1. That said, activity level is increasing, and we expect that to continue and have seen that also in the fourth quarter, and we'll expect that to continue into next year.
In terms of investments, we're seeing now a slightly more balanced mix with investments also coming in outside of Northern Europe, as well as also a small investment in secured in the quarter. On the ERC split, the split remains the same. If we include REOs, secured is 25% and unsecured is 75% of estimated remaining collections. Moving to slide 12, some more details on the leverage position. As you can see, the net interest-bearing debt has been reduced by close to NOK 3 billion over the last 12 months, which is close to NOK 2 billion, adjusted for FX. This has obviously led to a much lower interest expense, compared to last year, coming down more than NOK 25 million year-over-year.
As Erik already mentioned, post the quarter in October, we repaid bond number two, which was done via a combination of the RCF and utilizing 75 million of the 100 million bridge facility. At the end of the quarter, the liquidity reserve stood at EUR 458 million. Post the repayment of bond number two and also reducing the bridge facility with 25 million, it stood at EUR 258 million at the beginning of October. We currently have a very good position in terms of liquidity, and we're very happy to see that we've been able to pay down two of our bonds, mainly driven by the underlying collection level we and cash position we have. With that, Erik, I think I'll leave the word back to you.
Okay, thank you. I think we would do the summary. We have seen that we have been given an ESG rating among the top 1% globally. We have seen improved efficiency in collection through artificial intelligence initiatives. We continue our strong cash generation and continue to deliver in the quarter. We are in advanced discussions with reputable institutional and co-investment partners, which is what we have been also promoting over the last quarters. This is very good. Due to the good cash flow and the financial position of B2, the board has given a dividend of NOK 0.15 for the year of 2020, and we have initiated a share buyback program. We expect higher market activity going forward, and B2Holding, as we can see it, is well-positioned to take advantage of the market going forward.
With that, we open for Q&A. Rasmus.
Thank you. We will start with the Q&A. The first question comes from Rickard Hellman from Nordea. The first question is, what is the book value of secured claims, and will the REOs be included in the partnership setup?
Very good. Thank you.
The REOs will be included in the partnerships set up for sure. Just to clarify, we're talking about the markets where we have secured, so it includes the unsecured portfolios in those markets. As Erik said, we are currently in advanced discussions, and as we progress in those discussions, we will come back to the market as soon as we have more information.
A follow-up question from Rickard Hellman. Can you give any update of the price development for the NPL portfolios in the market?
Should I take it or should you take it, André Adolfsen?
No, I can take it.
Go ahead.
As you can see from our investment level, we have been selective. It definitely reflects the price level. The portfolios that we have acquired have been at the level that we are happy with. We have actually acquired portfolios at the gross IRR above what we have in our back book. We're very happy with what we have acquired. We believe that as the volume starts to pick up and the market normalizes, prices will come back to a level that will satisfy B2 Holding's requirements, and we will increase the levels going forward. Price level wise, currently we don't see a level which allows us to deploy more than the capital we have deployed in the quarter.
We move on to Håkon Astrup from DNB. He has three questions. We will start with the first one. One of your peers have reported a negative impact on collections driven by the reopening of societies as debtors are more inclined to spend than repay debt. Have you experienced any similar behavior?
We cannot say that we have experienced similar behavior. Unsecured collection has been 3% over our curves and in most of the market with the things has been going very well for B2Holding . We cannot say that, no.
Good answer, Erik. Expected collections next 12 months are up 7.5% quarter-over-quarter despite a drop in total ERC. What is driving the development?
Well, it's the secured portfolios are driving that development. We expect to monetize the secured book over the next 12 months. We also expect to increase REO sales over the next 12 months. Unsecured wise, we continue to see a decline, but we're monetizing the secured book based on the way we have worked the book over the last two years. Consequently, we expect to monetize more next year than we do on secured. Oh, sorry, on unsecured.
We move on to Ulrik Årdal Zürcher from Nordea. Sorry, this is actually the same question as his colleague, so we've already answered that. Let's move on then. You've also answered that the partnership discussions include collateral assets. Any price indication from potential partners compared to book values?
We will transact that book value. That is what the intention is.
We move on to Joakim Svingen from Arctic. Three questions. The first one, deconsolidated secured assets, when do you expect to close an agreement?
I think as André said, we will release information as things progress. We will get the market back to market at once when we have any more information to come to the market with.
Second question, in which markets are the transaction markets still subdued? Slower pace in NPL transactions, I assume.
Yeah. As mentioned, it's very much more balanced today than we saw two, three quarters ago. We have deployed most of our capital in the Nordics.
We also in Poland, and we've also seen high activity in some of those markets over the last six to nine months. Over the last two quarters, activity level has also picked up in more of our markets, including Southeastern Europe and Central Europe. As you saw in the quarter, we had a small investment in secured, but we also had a larger proportion of our investments coming from, in particular, Southeastern Europe. It is definitely more balanced today than we saw a couple of quarters ago.
Final question from Joakim. Could you comment on the split between cash dividend and the buybacks you ended up with?
Well, the cash dividend is NOK 60 million, and a buyback is up to NOK 90 million. That is the program. NOK 150 million altogether.
We have some questions from Robin Rane from Kepler. REO sales expected in Q4 on similar premium levels as in Q3?
Well, what we have said on REOs is that over time we expect a 15%-20% margin. We have outperformed that, so you can say that 15%-20% is probably on the conservative side short-term. We do expect a volume level which is going to be the strongest level of the quarters in this year. Meaning, the NOK 17 million plus we had in the second quarter was the strongest. Volume-wise we expect a pickup. I think you can expect that when the volume picks up, the margin will not be as high as we saw in the third quarter.
A question to the market, I guess you have at least partly addressed this. What are you seeing on pricing of NPL portfolios? You mentioned increased competition.
Competition has always been there. I think the challenge now is that supply is on its way up. We haven't met the equilibrium in terms of price yet, at least for our requirements.
Another question, what is the reasonable level of investments to expect in 2022?
Yeah. It's too early to guide on 2022 levels, so we will not do that. The only thing we have guided or said is that we expect that we have to invest for the second half of this year in the area slightly below NOK 1 billion to maintain earnings in the first half of 2022. That's the only guidance we can give as of now.
One final question from Robin. Are buybacks a tool that you will prefer to use as an alternative to dividend going forward?
I think both tools are there and that's why we also get an improvement on the general assembly that we both could give dividend. We have a dividend policy, but also buy back of shares is definitely one tool that we see as good for the company.
Ulrik from Nordea has a few more questions. I guess we have time for that. This also goes to the investments. Do you expect or any indication you can give on investment levels in Q4 2021 and in 2022? 2022 has already been answered, but he is asking, for example, is a higher level of investments in 2022 than 2019 likely?
Again, we will not guide on 2022 as of now, other than that we clearly expect volumes to come up s ignificantly during the year. We can say that for the fourth quarter we do expect to invest more than we did in the third quarter.
Another question regarding the partnership discussions. What is the book value of secured, unsecured in scope for the partnership discussions?
I think we have answered that.
Yeah.
I'm not sure if it's a distribution or if it's the total.
No, I mean, if you want to have some indications, obviously, we have secured in some of our Southeastern European markets, Central Europe and in Western Europe. It is the markets where we have secured, and it's including the unsecured book. We expect to co-invest in a deconsolidated setup. We will definitely still be a major or an investor into our back book in those markets. We will not sell 100%, but w e expect to do a partnership and to utilize that partnership to also invest in new portfolios in those markets together going forward.
Very good. That concludes the Q&A. Of course, you are more than welcome to contact us, and you will find our contact details in the release of our Q3 numbers. Thank you, Erik. Thank you, André.
Thank you very much.
Thank you all.
Thank you. Bye.