Welcome to the Enity Q2 2025 report presentation. For the first part of the conference call, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing #5 on their telephone keypad. Now, I will hand the conference over to CEO Björn Lander and CFO Pontus Sardal. Please go ahead.
Good morning everyone, and welcome to Enity Holding and this presentation of the second quarter 2025. My name is Björn Lander, I am the CEO of Enity. I'm here today together with our CFO, Pontus Sardal. We'll start with a short introduction to Enity. We are the leading Nordic pure play specialist mortgage bank with operations across the Nordics. We launched in Sweden more than 20 years ago and took the concept to Norway in 2010. Finally, we launched our Finnish operations almost five years ago. The purpose and the vision is to make the mortgage market accessible to more people. We typically help customers rejected by the traditional banks for various reasons. It could be that they have a non-traditional type of employment, or they are self-employed, or they have a short credit history, or even retirees.
Today, we operate through three consumer brands: 60plusbanken in Sweden, Bluestep Bank, present in all three markets, and Bank2, a company we acquired in October 2023. Bank2 is now fully incorporated and integrated into Enity. We decided to keep the consumer brand Bank2. We also have investments in two loan brokers in Norway called Eiendomsfinans and UNO Finans. Key highlights for the second quarter: a very strong quarter. I'm very pleased to see the development of the bank. We saw a loan book growth of 9.3% organically. If we adjust for a weak Norwegian krona, that's absolutely great to see. We have seen a very strong adjusted operating profit, up significantly from the same quarter last year. Very low and stable net credit losses. We posted 24 basis points in terms of net credit losses for the last 12 months.
We have improved the cost-to-income ratio also quite significantly in Q2 2025 compared to the same quarter last year, thanks to the transformation that has been ongoing for quite some time in the company, consolidating tech platforms, working with automation initiatives, and so forth. Solid capitalization in place, CET1 ratio at 14.7%, and an adjusted return on tangible equity in the quarter of 23.9%. A couple of other key highlights in the quarter. Of course, we completed the IPO mid-June. Worth highlighting again, a very good step for the bank, taking the step now to becoming a public company, broadening the kind of shareholder base. We get access to the capital market, and we also get the chance to continue to build the Enity brand. We also acquired the remaining shares in Eiendomsfinans, the Norwegian broker I mentioned.
The last thing to highlight here is that we have optimized the capital structure during the second quarter and ahead of the IPO. We issued an 8 to 1 bond of SEK 250 million, paid the same amount in dividend pre-IPO. Enity has a very strong value proposition. We are operating in an unpenetrated high-growth segment driven by secular trends. We work for financial and social inclusion, which gives us a strong kind of proposition out there. We generate high returns, which give us then firepower to both grow organically as well as pay dividend. We offer mortgages only, 100% secured, which give us low and predictable credit losses. We have a diversified and very flexible funding model in place, which we will get back to later on.
We have a very modern, scalable, and cloud-based tech platform, which is also then part of the explanation to why we have seen such a good development in terms of cost-to-income ratio. Last but not least, a very, very strong management team and a very strong organization within Enity Bank. As you can see on the right-hand side, clearer than again, strong organic growth, high returns in combination with very low cost of risk. That's the key differentiator to most banks in this region. Short about the loan book development, again, high level at group level, we are growing more than 9% organically, which I think is great. It's a very, very good sign given that we are still a bit still in the kind of the old macro with kind of weaker markets across.
If you zoom in at the different markets, starting with Finland, we performed very well in the second quarter and grew strongly. If you look at the Finnish market, I would say there are still weak markets. House prices have continued down during the first half of 2025. We can see early signs of recovery where activities and number of transactions have picked up. That's good to see. There are still quite far away from the kind of the pre-crisis level. If we look at Sweden, we have also performed good in Sweden. We are growing the book in Sweden. House prices have had a flat development during this year. We can see that on the activity side that we are picking up a bit, but there are still quite far from the kind of the pre-crisis level in Sweden as well.
Norway is, I think, where we see the biggest momentum in terms of macro and market. Stable mortgage market, increased house prices in 2025, and activities at a very good level. We have also seen a good performance in Norway from a growth perspective. By that, I hand over to Pontus.
Thank you, Björn. Let's walk through the financials. Again, lending to public reached SEK 29.6 billion, which is 9.3% last 12 months growth. Net interest margins have remained stable to last year and stable to the first quarter, 4.2% posted in Q2, which is a slight improvement to the same period last year. Strong adjusted operating profit, SEK 177 million, and also adjusted operating profit less tax, SEK 141 million, both up 38% year on year. This is driven from strong growth, loan book growth of 9.3% and stable margins.
We've seen a development with flat OpEx and stable credit losses. Also in the second quarter, we had a favorable outcome of net financial transactions as well, which are marked to market items. They supported roughly SEK 15 million positive to the operating result. We also had a negative item that relates to the acquisition of the remaining shares in Eiendomsfinans, where we made a small impairment of SEK 4.5 million in the second quarter. Credit losses have remained stable and low. They came down in the second quarter, posted SEK 11 million, 24 basis points in credit loss level last 12 months. Again, from the first quarter where we had some one-off items relating to the Bank2 portfolio that was acquired, which amounted to SEK 12 million in the first quarter. We've seen the cost-to-income ratio improve to 44%. We're very pleased with that.
Again, good growth, stable margins, and flat OpEx is obviously the main driver behind that. I think also worth to notice is that the consolidation or the acquisition of the remaining shares in Eiendomsfinans means that it's now a wholly owned company that is consolidated. This impacts on a line-per-line basis. It inflates OpEx as well as revenue, whereas the bottom line is only marginally impacted. Again, strong return on tangible equity, almost 24% in the quarter and 21% for the first six months this year, driven by two factors. One, obviously the strong result, and secondly also that the capital structure that was put in place just ahead of the IPO, where we issued SEK 81 million bonds and paid a dividend of SEK 250 million, has also been supportive to the return metric. If we go to the three markets, let's start with Sweden.
The economic recovery in Sweden is clearly slow and more dragged out following the crisis. Though we are seeing early signs of increased activities on the housing market, prices are stabilizing, but definitely transaction volumes are almost returning to kind of pre-crisis levels, which is good to see. For that, we've seen a new lending increase, so we've seen the activity increase as well. New lending is up 24% year on year. We saw the loan book increase by 4% last 12 months in Sweden. Margins have remained stable around 4% in Sweden, and OpEx is actually down to last year 2%, which means that we have improved the cost-to-income ratio to 50% on the Swedish market. In the quarter, we do have positive credit losses, which is due to the release of provisions of approximately SEK 10 million following improved quality and model recalibrations also.
This brings us down to the bottom line, SEK 74 million, which is up 2% to the same period last year. Very strong performance in the Swedish market in spite of the slower economic recovery. If we go to Norway, again, strong economy, definitely Norway. The housing market has been very strong. House prices are up 7% year on year. We believe that the lift of the loan-to-value cap from 85% - 90% is supportive to that. Norges Bank have also now delivered their first rate cut in June, which all else equals, should be supportive to continuous growth in the Norwegian market. Loan book reached NOK 15.7 billion, which is 11% up in local currency year on year. We've seen the net interest margin stable or slightly improving compared to last year, where net interest income is up 16%.
This also means that we've improved the cost-to-income ratio to 46%, which is driven by strong growth, but also from the full takeout of synergies from the acquisition of Bank2 in early 2025. Also, we run a very efficient model in terms of customer acquisition in Norway with a broad broker network. The net credit losses in Norway are up, and the share of stage three loans remain elevated. It did even come up a little bit in the second quarter compared to the first quarter, which is what affects the credit loss line. We have made additional provisions for the Norwegian book. In spite of that, the bottom line or adjusted operating profit, NOK 69 million, is up 21% compared to the same period last year. If we go to Finland, clearly recession is gradually receding, but there are early signs from improved activity on the housing market.
That is from extremely suppressed levels, one should say. We've seen a continuous very strong growth on the Finnish market. New lending is up 27% year on year, and the loan book growth to SEK 1.6 billion, which is 57% in local currency. OpEx is actually down to last year, and the cost-to-income ratio has therefore improved. It now sits at roughly 100% for the second quarter, and we are approaching a break-even point, as we have communicated earlier. On the credit loss side, starting in the upper left-hand corner, generally what we're seeing is that write-offs are increasing following previous year's provisions, which is, again, as expected. We had SEK 38.5 million in write-offs in the first half of the year 2025. Keeping in mind that SEK 12 million out of those SEK 38 million are of more one-off character stemming from the acquisition of Bank2.
If you adjust for that, it sits on a similar level as we saw in 2024. Again, we did increase provisions a little bit this year, primarily driven by adverse trend on stage three loans and then quite concentrated to the Norwegian market as well, a small uptick in provision, SEK 8.7 million, whereas recoveries remain relatively stable to what we've seen over the years. Again, stage three loans a little bit further up, 7.3% closing June. On the other hand, we have seen stage two loans decrease, so they're just under 10% now. This is primarily concentrated to the Swedish market, where we're seeing positive stage migrations. Credit loss level, again, remains stable, 24 basis points over the last 12 months, comparing to the same period last year, 22 basis points.
Sweden, again, zero due to the fact that we did have provision releases of circa SEK 10 million in the second quarter this year. The coverage ratios remain also stable, actually a little bit up. We have 4.5% coverage ratio on the stage three loans and then a little bit up on the stage two loans and combined 3.3% for stage two and stage three. Let's talk about the funding side. A very stable liability side of the balance sheet. We have funded the growth of the balance sheet by deposits, which have been pricing very efficiently or effectively in the market. We raised deposits in all three currencies. Capital markets are stable and well-functioning. We haven't done anything in the last 12 months on the capital markets.
We expect to return to the markets again now during autumn as we have a covered bond maturity in the fourth quarter this year of SEK 2 billion. As we have previously announced, Moody's issued or revised their rating to be A1 with a stable outlook, which we expected to happen as well following two things basically. Putting a new capital structure in place as well as a slightly adverse trend on the stage three loans. We haven't noted anything that's been negative on that in terms of markets and pricing, etc., nor has it impacted our covered bond rating. That remains one notch down to AAA. In terms of regulatory ratios, we comply well, obviously, with LCR and NSR, so we're well above the regulatory required levels.
Finally, on the capital ratio side, we did put an optimized capital structure in place ahead of the IPO where we issued SEK 250 million in AT1 bonds. We paid a dividend of SEK 250 million, which reduced the CET1 ratio. In the second quarter or end of June, we posted 14.7% in CET1 ratio, which is in the upper band of the target range, 200 - 300 basis points above the regulatory level. Also, on the total capital ratio side, 18.2%, also that 220 basis points above regulatory required level. Early June, we received a permission or a decision from the SFSA where we can include additional FX risk under the exemption due to its strategic nature, which will have a positive impact on the ratios and the risk exposure amount as we go forward.
We expect that to reduce risk exposure amount with circa SEK 500 million, which will improve the CET1 efficiency with approximately 40 basis points. With that, I hand back to Björn.
Thank you, Pontus. We talk a bit about the financial targets, which also was communicated during the spring. We have three targets. They are equally important. The first one is about the loan book, and we have a target to grow the loan book by approximately 8%- 10% over a business cycle. We can clearly see in the second quarter it sits where it should, so 9.3% adjusted for currency. The second one is about the adjusted return on tangible equity, and we have a target to be at and around approximately 20%. We have delivered a little bit more than that during the first half of 2025, as well as the second quarter.
Almost 24% in the second quarter and 21% for the first half. The last target is about capitalization and having a strong CET1 ratio. We have a target to have a 200 - 300 basis points above the regulatory levels. At the end of June, we are at 14.7%, which means we are 270 basis points above the regulatory requirements. All in all, very, very good to see that we deliver in line with targets or slightly ahead. Final remarks here. Short summary, I'm very pleased with the development of Enity Holding AB, Enity Bank. We have seen a very solid loan book growth driven by all markets, I would say, which is very good to see. We should keep in mind that we still believe that we have relatively weak mortgage markets, especially in Finland and Sweden. Very strong adjusted operating profit, very good to see.
That's partly thanks to the improved cost-to-income ratio coming from the transformation that has been ongoing for quite some time. Again, financial targets met. If we look a little bit ahead, what's going to happen? We are keen to grow the company. We will continue to focus on growing the loan book organically. We continue to see good momentum across all markets. A key focus for us is to continue to drive efficiency, continue to work hard with automation, improving the customer experience to make it easier for our customers. That will help us to convert more in the future. Of course, adapt to new technology, AI, and what have you. I think we have proven that our model and business is resilient. Despite ongoing geopolitical conflicts and macroeconomic challenges, we have performed very strongly.
We also think that the recent regulatory proposal will have a very positive effect for Enity, particularly those supporting first-time buyers, including easing of amortization requirements and also the higher loan-to-value cap proposed in Sweden. All in all, well positioned for the future. By that, we open up for any questions.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Patrik Brattelius from ABG. Please go ahead.
Good morning. Thank you for the presentation. I'm going to start off where you ended on financial targets. Since this is your first quarterly report and you're already at all of your financial targets, how is your view on raising your target to raise the ambition bar?
Hello, good morning. I think we will stick to our target. As I said, we delivered well in line for the second quarter. I think we remain at the same targets for now. We'll continue to develop the bank and expect to continue to deliver in line with the targets in the near to midterm.
Okay, fair enough. Shortly after the IPO, Sweden put forward some new proposals for amortization requirements and increased loan-to-value cap. Can you talk about how you expect this will impact you?
Yeah, I mean, if it will go all the way and come into force next year, we believe it will have a positive impact on Enity in Sweden, particularly for first-time buyers since they propose to increase the loan-to-value from 85% - 90%. Similar to what happened in Norway in the beginning of this year. As Pontus mentioned, we believe that that has had also a positive impact on the Norwegian market as well as Enity in Norway. Overall, we are positive to the proposed changes.
Okay, fair enough. Thank you. There was a one-off in this quarter, naturally, following the IPO. Should we think that that is one thing for the past, or is it something that will also continue in the coming quarter that has not been taken already that you already now know, or how should we think about that?
Yeah, like noted, we had SEK 63 million of one-off or adjusted expenses or IACs in the quarter that is relating to the IPO process. We had already SEK 180 million for the full year. I think, touching to that, what we have going forward, which is also disclosed in the report, is that there are certain incentives that were put in place as part of the IPO process, and those will have an impact on the P&L as we go forward, most likely. That can be seen in the notes to the financial statements. Besides that, we don't expect to have any adjusting items for any restructurings or anything like that. I think those are all behind ourselves.
Okay, that is fair. My last question is given that NII is the majority of the income side here, in connection to the IPO and in your perspectives, you discussed a net interest margin between 3.5% and 4%. You're now at like 4.1%. Can you talk a little bit when do you expect to arrive at the middle of this range, and do you expect to see stable margins going forward in the coming quarters, or how should we think about that?
I think for the kind of the medium-term guidance, we remain what we communicated earlier, like you pointed out. I think in terms of rate environment and rate cut, we've had most of that in terms of second euro that is behind us. There might come another rate cut, but it's not material. In terms of liquidity positions, et cetera, that shouldn't be very, you know, very kind of compressing the margins going forward. Obviously, Norway, we expect to see rates come down, but it will probably take some time before they're down to normalized levels. That can put some pressure on the name going forward. I think overall, we remain with the guidance that we expect it maybe to be in the middle of the range over the, say, the coming three years.
Okay, fair enough. Thank you. That was all for me.
Thank you.
The next question comes from Andreas Håkansson from SEB. Please go ahead.
Morning everyone, and I guess I should say congratulations on a good start of your life as a listed company. Could we just go back a little bit to the NII? A few smaller questions. One is that you say that you were able to offset the falling interest rates by repricing both assets and liabilities. That is then more related, I guess, in SEK and ECB rates. Would you expect that to be tougher in Norway? Is that what I should read into your reply just now?
I think not necessarily, but there's obviously some parts of the liquidity, et cetera, that will come under pressure on a lower rate level. That's the part that you should read into it. I think we have generally, over the years and also now, we are generally seeing a trend where we're underwriting, if you like, the nearer prime type of loans, which has a slightly lower margin than what the back book is. I think there is an element of margin compression there as well.
Okay, not competition, but mix, that's fine. Also on the NII, on the funding side, you write that there are SEK 2 billion of covered bonds maturing in Q4. Two questions related to that. One is, will that be replaced with new issues? If not, given that you have a high NSR and LCR, could you actually live without that and use your deposits? That should then be quite an improvement in your funding costs and also uncover any news on potentially issuing in Norway.
Yeah, no, I think we, I mean, in terms of refinancing, we'll probably use multiple sources as we normally do on the diversified. I mean, elements of it will clearly be that we want to return to the capital markets with that, and we don't think that that should be kind of negative overall for the net interest income. In terms of the covered in Norway, that is not part of what will happen at least this year as we've communicated earlier on. I think that's more for 2026 and onwards. Clearly, something that we focus on is continuing to diversify the funding base.
Perfect. Just one small technical question. You had a very high tax rate, and I understand it's related to Norway and FX. Could you tell us what should we be looking at going forward as a more normal tax rate?
I think you should, I mean, normal tax rate would obviously be the blend of the profit across the markets. Finland is loss-making, so that's not, I mean, 20% tax rate in Sweden and then 25% in Norway and the blend of that. Roughly the profits are split equally. I think what impacts the, or I think what is the impact is kind of tax and timing on how you can remove Norwegian taxes in Sweden. I think that is the one that puts some upward pressure on the effective tax rate as we do not recognize that as a deferred tax asset.
Okay, okay, thanks. That's it for me.
Thank you.
As a reminder, if you wish to ask a question, please dial the pound key five on your telephone keypad. The next question comes from Emre Prinzell from Nordea. Please go ahead.
Hi, thank you for taking my question. I have a question in terms of loan loss ratios and credit losses. How much of the loan losses in Norway can be traced back to the Bank2 acquisition? Like how much is from their balance sheet, if I may put it like that?
Yeah, I think it's a good question. Like mentioned, there's SEK 12 million in write-offs this year that stems back from the acquisition of Bank2 then. Those are more of kind of one-off character as we reported in the first quarter. I think we've seen a similar trend, I would say, on the Bank2 or the previous Bank2 portfolio as well as the Enity portfolio. It's kind of split as the portfolio is split, I guess you could say. There's like SEK 4 billion out of the total book in Norway relates to Bank2 and the remainder. In terms of stage migrations, et cetera, it's a similar pattern between the two in terms of movement.
Thank you. How much did Eiendomsfinans weigh down the cost-to-income ratio? Would you say, I mean, on bottom line, I understand it's marginal, but just to have a certain understanding on the adjusted cost-to-income.
No, I think it's around one percentage point in the quarter. I think if you annualize, I mean, on a fully annualized basis, we expect it to weigh down at approximately 4% as it is an EBITDA business, basically. It naturally has a much higher cost-to-income ratio. That, I think, is the impact we expect to see from it.
Thank you. Lastly, I guess this is difficult to say, but do you know approximately how large is your exposure to the north parts of Sweden where some large companies such as Northvolt have had defaults and there are some assets there?
I can't answer that right off. We'll have to come back on that one. I think generally.
That was a long shot for me.
As a general comment, I guess you could say, I mean, like I think we're typically concentrated in the greater kind of in the greater city areas, like but not the real center part, Stockholm, Gothenburg, and Malmö, and then kind of, if you like, university cities around Sweden. We're typically, I mean, it's low, I mean, it's low density in the north of Sweden as a general note. It's nothing that we've noted that it should have had a major negative impact or anything like that.
Fantastic. That's all for me. Thank you a lot.
Thank you.
The next question comes from Patrik Brattelius from ABG. Please go ahead.
Thank you. Yes, one follow-up question for me again. On the loan loss side, some banks usually talk about seasonality on the loan loss line, where Q1 and Q4 are seasonally higher while Q2 and Q3 are seasonally lower. Can you talk about any seasonality on your loan loss slide? What should we expect there?
I think generally, I mean, there's obviously some elements of seasonality in terms of arrears and things like that, that are typically concentrated around the major weekends like Christmas, Easter, and so on. I wouldn't say that we see a huge kind of swing in loss levels over the quarter. Arrears definitely can vary, but normally it's quite stable over the year.
Okay, fair enough. Thank you again.
There are no more phone questions at this time. I hand the conference back to the speakers for any written questions or closing comments.
All right, there are no other questions, what I have noticed. Again, thank you for participating during this Q2 earning call and see you soon again.