Time for the next speaker. My name is Patrik Brattelius, I'm an equity analyst here at ABG covering Enity. Without further ado, I'd like to hand the floor to Pontus Sardal, who is the CFO of Enity. Take it away.
Hi, good to see everyone. Pontus Sardal, as mentioned, CFO. I've been with Enity Bank for five years. We, as most of you might know, we are a fairly newly listed company since June last year. I'll tell a little bit about us. We're a specialist mortgage bank with operations in three of the Nordic countries, Sweden, Norway, and Finland, where we operate under the umbrella name Enity, and we have a number of consumer brands as well. The maybe more well-known Bluestep Bank, that's been a brand for many years. In Norway, a bank that we acquired, Bank2. Since five years back, we've also launched what's called 60plusbanken, which as the name indicates, is a product targeted to people 60 years and above.
We also have ownership in two loan brokers in Norway called Eiendomsfinans and Uno Finans, who broker loans in general but also secured loans. I think where we, a specialist mortgage bank, where we stick out in comparison to a regular bank offering mortgages is that we target segments of the mortgage markets that are typically excluded from the large traditional banks for a number of reasons. It could be that you have limited credit history, it could be that you're self-employed, et cetera. It's a small segment of the total mortgage market where we operate and are able to convert that business and enable home ownership, basically. We strive for financial inclusion and making home ownership and affordable finance available to more people that for one or another reason are rejected by traditional banks.
We operate a very lean model, which is established where a Swedish bank where we passport our license out in the jurisdictions Norway and Finland under the Swedish regulator. We operate to the greatest extent, one organization, one technical platform, front and back end, and only you could say run front office and customer-facing activities in the markets. Even if Enity as a brand and Enity as a listed company is fairly new, we've been around for many years. The business was initially launched back in 2004, over 20 years in Sweden, and with basically exactly the same idea and what we're still doing. It's always been around specialty mortgages. It's always been around customers that are excluded for one or another reason from traditional mortgage banks.
In 2010, we embarked on another venture, moving into Norway with exactly the same offering, exactly the same segment, and been building out that business since. EQT came in as owner of the bank, 2017, and you could say took us to further expansion, product diversification, and also a lot of the things around consolidating the platform and the organization. Following that, we launched activity in Finland, greenfield. We launched then again, 60plusbanken or Equity Release as the product is called, and drove quite a lot of investments into technology and organization to build a robust, scalable platform. In late 2023, we acquired Bank2, which was a peer in the Norwegian market. Consolidating the Norwegian market and ran a very tight process in consolidating and taking the synergies out of that acquisition, which obviously further boosted the growth of the business then.
Today we have SEK 32 billion in outstanding loans across the three markets, which is equivalent of a, since EQT ownership is equivalent to 11% compounded annual growth rates down a little bit less if you exclude the acquisition of Bank2, that was inorganic then. Moving back to the specialist mortgage market, which is an under-penetrated niche of the total mortgage market. Looking across the three countries where we operate is SEK 9.1 trillion is the outstanding mortgage market, which is huge, obviously. The segment that we service represents approximately SEK 68 billion, and we hold approximately half of that segment. We're by far the leader in the specialist mortgage segment in the three Nordic countries where we operate.
I think what we've typically seen over the years is that this segment is growing faster than the overall market, and the penetration of the segment is also increasing, which is a combination of a lot of things. Obviously, awareness is one of the matters. There are more players doing it these days. We are, of course, developing our skill sets as well and can support and enable home ownership for more people. We've also expanded the products, like with the Equity Release loan of 60plusbanken. All these things adds up to a higher growth rate than you typically see in the overall mortgage market. Again, it's still a small part of the market that is serviced. Out of the SEK 68 billion that is currently being served, we estimate that market to be somewhere in the range of SEK 370 billion-SEK 390 billion.
Still quite low penetration out of that market. Looking on the, again, what is the specialist mortgage segment? It's things that I've mentioned, but it's typically you have a modern employment form, you're self-employed, you have a limited company history, et cetera. It's a typical criteria for not being approved or appreciated by a traditional bank. You might have high amounts of unsecured debt, typically a criteria for rejection, or it could be even to the level where you have a credit remark for one or another reason that it still sits with you and then you're typically rejected. You're a retiree, or you have a limited credit history. I think these are the segments that we target, and we try to obviously understand the circumstances around the customers, understand the affordability, et cetera.
In some sense, you could say we're willing to do that job then basically. If you're a prime lender, you target the SEK 9.1 tr illion, then of course you're more driven by efficiency, et cetera, then you set strict criteria. I think to keep in mind is that out of loans that are being rejected, basically, I think it's still important to keep in mind that it's a smaller share of that that is being converted, so it's somewhere in the range of 10%-15% of that population. Also we need to be very skilled in our underwriting and ensure that we engage in the things that make sense and matter. Then if you look at the risk profile of Enity in comparison to lending in general, I guess you'd say we're a mortgage bank, which means it's secured lending.
We take collateral in the property or the home of the customer, where the customer lives as well. You typically expose yourself to a very low credit risk or risk of credit losses. It's not government debt, but it's clearly much closer to what you see for prime mortgages or large corporate loans, et cetera. It's been ranging in the 10 basis points-30 basis points range. That's the amount of losses that we record. When you move along this ladder, then of course you have small and medium-sized companies, you have auto loans, and then at the bottom in the chart, you see typically credit cards, unsecured loan, where you're obviously exposed to a higher risk and higher risk of default and losses as well because there is no collateral.
I think in that context, if you think of Enity as one amongst many niche banks, we're quite unique in that sense that we are only focused on mortgages and secured lending. Whereas you see in the niche bank landscape, we're all different, but typically what you find at other niche banks is that they're partly doing mortgages, but they're doing more of, you could say, credit cards, unsecured lending, and then you typically will see higher credit losses. You'll see higher margins as well, but typically higher credit losses and higher volatility also in credit losses. A few words. We released our quarterly report a while back. A few words on that. I think the first one is it was a very eventful quarter for a number of reasons. Not the least driven by increased geopolitical uncertainty.
I think we left 2025 in a way where the outlook was, and still is to some extent, quite good. What we saw there in the first quarter was a lot of, and especially at the latter part of the quarter, we saw a lot of movements in the market. Rates started going up quite a lot. We have huge operations in Norway. The Norwegian krone, probably driven by the oil prices, strengthened a lot. It went from 0.9 to 1 at the end of the quarter. Of course, there was a lot of uncertainty, and we had a lot of things going on in the Swedish market, where you have new mortgage regulations that came in place the 1st of April. That also created some activity in the market. I think there is clearly impact in our numbers for the first quarters around that.
I think if we start first, we had a good lending growth, 9.5%. That is partly boosted by a stronger Norwegian krone. Even if you adjust for that, overall it was a healthy kind of lending growth for us. We had a lot of one-off related items also in the first quarter. We acquired a remaining share in one of the loan brokers during the quarter, which meant that we had a revaluation gain of SEK 160 million. That was quite very supportive to the P&L then. Then we had commission income that was strengthened as a function of that acquisition, also OpEx that increased due to that acquisition when we consolidated the company. A lot of moving pieces.
It also had impacts in terms of our capital ratio that was a bit suppressed during the quarter or temporarily, and that will restore as we go along for the remaining of the year. That put a little bit pressure on the CET1 ratio and the buffer below, basically, our financial targets then. Then again, going back to the geopolitical theme, we had net interest income that had a lot of impact on timing effects from this, where we saw typically we were picking up higher rates to a greater extent than we had passed on to our customers during the quarter, and that was driven out of the capital markets and hedging instruments, and some of these kind of changes has been passed on and will impact the second quarter positively. A lot of kind of suppressed.
It was a shorter quarter in number of calendar days, and when you look at the net interest margin, it also has an impact of a Norwegian krone that did strengthen a lot at the end. The balance sheet increased, you could say, more than the P&L did compared to the fourth quarter. Now we're in a different place when we're moving into the second quarter. Again, OpEx scalability is basically flat cost to the previous quarter if you adjust for the consolidation effect of brokers or actually a little down. Again, good continuous scalability of the operations.
We did see a slight uptick in actually in credit losses during the first quarter compared to the fourth quarter, which are partly seasonally driven and partly also driven by that, I think in provision build up in the Norwegian business due to rates remaining elevated and now kind of post a quarter even Norwegian Bank has increased the rate further. There is still an element of provision build up there. Then we also had more of a kind of non-recurring item of SEK 4 million, which was in relation to the acquisition of Bank2, where we had certain portfolios and run off that's been cleaned up now. Some kind of non-recurring items there as well. Then again, finally, our Finnish operations continue to deliver good results.
They're in black numbers now and continue to build both from a growth perspective, but also now from a P&L perspective. A few short words on our funding model. In a sense, we're a miniature mortgage lender where we have the different sources of funding that you typically want to have as a mortgage bank and primarily have covered bonds. We are issuing senior bonds in the market, and we have deposit taking in all the currencies both under our own brand and also through a platform called Raisin where we raise euro deposit. An efficient, resilient, and scalable funding model with good programs in place. Then on top of that, we also issue so-called Tier 2 bonds and AT1 bonds, which is for capital efficiency purposes. A lot of these things has also been put in place in last five years.
I think we're an appreciated issuer in the capital markets. We are of course continuing to think of how we can diversify our funding model even further. An obvious next step will be to set up a covered pool or issue covered bonds in Norwegian krone, which we currently only do in Swedish krona. I think if you wrap up Enity in one picture or one triangle, as in this case, so we're a good return business. We deliver a return on tangible equity around 20%, 19.2% for the last 12 months period. We have a strong balance sheet and good credit quality. We posted 24 basis points in credit losses, and then keeping in mind that we have a margin around 400 basis points.
We're very kind of loss absorption and resilient in that way, and we had a growth of 8%. It's a unique combination where you can achieve good growth at good quality with a very good return as well, niching into this market. Our growth strategy is really to continue to do what we do and what we've done for many years to grow out our operations in Sweden and Norway and continue to scale out Finland and also the Equity Release product, which clearly has accelerated growth compared to Sweden and Norway, maintain and strengthen our position basically across the markets.
Of course, as we communicated in the IPO as well, we assess opportunities if there are other markets that you could enter with the model we operate, which is scalable, efficient, et cetera, where criteria are similar to what we have in the Nordic countries then. I think we've demonstrated this successfully in Finland. We demonstrated it in Norway and been able to kind of build out the offering to more market. We've done a lot of investments, as I mentioned, to scale out and build a scalable platform. It doesn't mean that we're not investing into technology as we go. We're reinvesting in what we're amortizing, but it's more tailored around improving digitalization, improving customer journey, and making things more efficient. Of course, AI is for everyone a theme now.
Whatever we can do to be more efficient and improve the customer experience, that we will continue to do. Then again, finally, we now have ownership or we own Uno Finans and that is also interesting for us to continue to explore how we can strengthen our distribution basically of acquiring customers and loans and possibly do so in an additional market as well. There I stop. Questions?
Perfect. Thank you so much. I think we can start off with the last bullet on the previous slide. You have done basically two acquisitions since last year within the broker channel.
Could you elaborate a little bit on the potential you see there? What should we think about this broker channel in Enity going forward? How do you want to build it? How can you, as a bank, draw synergies from the brokers that you now have? I see you write Swedish market, it is regulation. Can you elaborate a little bit on potential here?
Yeah. I can. Firstly, there's different dynamics in how you acquire customers across the markets where we're operating, where Norway and Uno Finans, Uno, they're Norwegian players. It's a much higher share that's being acquired through broker channels, basically, than what we typically Definitely what we see in Finland also in Sweden then. We believe that the landscape is changing in that direction, i.e., you will be acquiring customers to a great extent through the broker channel. With Uno Finans as an example, we've taken that to Finland since a few years back as well to try to establish that as a good channel to acquire customers. We believe that there might be opportunities in the Swedish market, we're trying to stay close to that. There is things happening in the Swedish market in terms of these players are coming under bank regulation, basically.
In a sense, you're pushing loan brokers into a banking environment, and there might be opportunities for us to look at things there in the Swedish market. It's nothing that's concrete or around the corner. As an overall theme, we do believe that this channel is going to continue to be of importance for us and probably for customer acquisition in general as we go forward, and efficient as well.
With that said, one could expect that this is not the last acquisition we have seen in terms of brokers for Enity the coming years.
I think it's hard to comment on that for now. Again, I think we've taken Uno to Finland. We're trying to stay close to the situation. I think we have to get back to that if that would be the case then.
Thank you. We have had two regulatory changes in the Swedish market with unsecured lending and also increased LTV cap.
Yeah.
Could you elaborate a little bit what you have seen so far, or what you expect if this effect is expected to come sooner?
What you're currently seeing on the market, if there are any shifts.
Yeah. It's a good question. I think what we saw during the first quarter in Sweden was that it was fairly high activity in terms of refinancing and the loans that are being refinanced, or if you do top ups, that's what's being limited from 85% to 80% loan to value. Quite a lot of activity and probably quite a lot of media attention on that. There was a lot of awareness. We saw actually more customers, I guess you could say, than normal that refinanced and in our case, actually redeemed as well earlier. They moved on to prime bank. We had that experience during the first quarter, but on the other hand, we also saw demand for new loans increasing as well. We had a bit of both, but the net of that was slightly negative.
We didn't really have any growth in the Swedish operation. The other thing that we saw was that it was quite low activity on the purchase market. We had a lot of requests coming in for purchase, but that probably awaited the new regulations where you were able to borrow up to 90%. We've seen an increasing trend in purchase applications, basically, which is yet to materialize to some extent. People are applying for a loan, they're looking for a property, et cetera. I think that has really played out in the way we anticipated, so higher demand for purchase business. Then, of course, there's probably an element of geopolitical uncertainty that came late in the quarter as well then. Yeah.
What about the competition? Because in connection to you got listed, we have a key peer of you that also got listed, and they have highlighted how this is an area where they want to grow. They are more diversified while you are more focused.
Yeah.
Can you talk about if you see any change in the competitive landscape, perhaps also with the change of regulation, that this niche that you operate in becomes more attractive if the competition has changed due to that, or what you're seeing?
It's a bit of both, I would say. Again, going back to distribution and brokers in Sweden, we do In Norway, it's very much broker driven, so maybe to some extent that's more transparent. Sweden is a bit of a more mixed picture. I think if we've seen competition, it's more in the broker channel, and it's probably more what you would call closer to prime customers, whereas we haven't really experienced that in our own channel, so to say. I think we've seen a little bit of that. But I think we still feel that we can underwrite business at sustainable returns and sustainable margins. We don't believe that you should go into an environment where you're not doing that because that's not going to be very helpful going forward. Some elements of tighter competition on the near prime customers in the broker channel.
Speaking of margins, the share has been a little bit volatile since listing. We saw a volatile movement in connection with the Q1, where the margins, net interest margin, has been very stable historically. Now it was a little bit down. Can you talk a little bit of the drivers that we can expect going forward because you talked about that you have raised prices?
Yeah
reduced margins. Can we expect that to come back to more historical levels going forward, or how should we think about that?
Yeah. That is exactly how you should think about this. A lot of the timing effects that I mentioned was negative in the first quarter. We expect to reverse as we go forward now. It was driven by a lot of partly technical things around the strengthening NOK, et cetera, and also timing effects on the funding. That is what we believe basically, that big part of that should reverse as we go forward. Then long term, as we've always been communicating, long term as we become better and more efficient, we believe that there is probably some trend and you increase the share of prime customers, et cetera. There is some trend downwards on the net interest margin, not necessarily on the returns, but on the margin. That's also part of tapping into a greater market.
Time flies when we have fun. Unfortunately, the time is up and it's time for next speaker. With that, I'd like to thank Pontus and also IR Sofia for joining us today. Thank you so much.
Thank you.