Welcome to Hoist Finance Q3 report for 2024. 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 pound key five on their telephone keypad. Now, I will hand the conference over to CEO Harry Vranjes and CFO Christian Wallentin. Please go ahead.
Thank you very much. Good morning, everyone, and welcome to this Hoist Finance earnings call for the third quarter. I'm Harry Vranjes, the CEO of Hoist Finance, and next to me, I have Christian Wallentin, our CFO. And in the room today, we also have Karin Tyke, our Chief Comms and Investor Relations Officer, who joined us just before the Q2 report. As usual, before we dive into the report, I just want to talk a little bit about who we at Hoist Finance are, and what we are. And I think, in short, we are a performing financial institution working with non-performing loans. We are different, compared to other peers in the industry. Hoist Finance is a regulated credit market institution, supervised by the Swedish FSA.
We therefore have a different regulatory environment than most of our peers, and we also have a different funding model. As you know, our main source of funds, some 75% savings accounts from the public. We have savings accounts in Sweden, Germany, Netherlands, Poland. We recently opened up Austria and Ireland, and in the UK, allowing us to match our currencies between the asset and the liability side. Now, the remaining 30% of our funds comes from bonds of different character that we've balanced and make sure that we have a sort of reliable access to the debt markets. So this gives us a considerable funding cost advantage compared to the industry, and of course, this status also gives us stability and benefits going forward.
Now, many peers in this situation are now going capital lighter, focusing on third-party servicing. We are, and we want to be capital heavy. We have the setup, the access, and the balance sheet for it. Now, as you have all seen, so on the thirtieth of September, the Swedish FSA, Finansinspektionen, published a legal position providing guidance on weights that should be applied to deposits taken in via digital platforms when calculating LCR and NSFR. Now, we use digital platforms for our savings accounts offerings outside Sweden. You can use digital providers in many different ways. We do not use any services that aggregate deposits or broker deposits, and we do individual KYC on each and every one of our savings customers.
So based on how we use our digital platforms, we do not see that we need to make any adjustments to the way we report LCR and NSFR as a result of the legal position. Now, we have initiated a dialogue with the Swedish FSA, and it is, constructive and ongoing. Now, regardless how you count LCR and NSFR, we are above regulatory limits, and we are on a good way to meeting our financial goals, regardless of scenario. We will still target more than 15% ROE, 15% EPS growth, and a CET1 ratio of 2.3 to 3.3 percentage points above regulatory requirements. So with that, now let me take you to the key highlights of the third quarter. So as you've seen, profit before tax came in at SEK 369 million.
We made a larger positive revaluation in Poland, and we've taken costs for a large transaction, but in the end, didn't happen. So if you adjust for those positives and negatives, we think a reasonable representation of the underlying business would be some 314 million SEK for the quarter. Christian will take you through the bridge later in this presentation. Return on equity came in at a strong 16%. Now, driven lower by a high tax rate for the quarter, and as we communicated in Q1, we have restructured some of the daughter companies in the group, and the tax effect has come through now in Q3. On investments, very strong quarter, a record quarter, in fact, for Hoist Finance.
We closed portfolio investments of 4.3 billion SEK with a very good geographical spread. Before the questions come in, no, this is not the new normal level. As we buy larger and larger portfolios, the volumes get lumpy between the quarters, as we've previously communicated. We still see significant activity on the market, as we are now one-third into Q4. Just last night, I had the privilege of signing off our first transaction in Portugal, medium-sized transaction that we are very enthusiastic about. Now, so far during 2024, we've invested 8.7 billion SEK, bringing the total book value to 29.9 billion, just shy of 30, after a growth of 25% quarter on quarter.
We still see fewer participants in the auctions, and we see new consortiums forming around Europe, sometimes opportunistically, deal by deal, and sometimes strategically. Now, we at Hoist, as we previously communicated, are also open to co-investing with partners, especially if it gives us access to new volume or in cases of really large transactions. We have an ambition to grow our portfolio to some SEK 36 billion by the end of 2026. We do that through combining our internal capabilities with outsourcing partners. We expect direct costs to grow in line with portfolio growth and indirect costs to grow slower. This operating leverage, we can see again now in this third quarter, where the portfolio grows 25%, and profit before tax grows 31%.
Now, the operating leverage is less pronounced this quarter as most of the portfolio growth was booked at the end of the quarter, but if you look at this on a year-to-date basis, you'll see the trend more clearly, and Christian will take you through this in more detail later in the presentation. Collection performance, solid at 102. It was, you know, Q3 is always seasonally slower, but this year, it seemed like Europe refused to come back from holidays. It was a slower Q3 than usual. However, this gave our business units time to focus on onboarding this record amount of new portfolios that we acquired, so in the end, it worked out quite well for us.
We expect collection performance to bounce back up in Q4. We got a ratings hike from Moody's, very happy about that, moving us one notch higher up in the investment grade bracket. We see this, of course, as a, you know, great confirmation from an external source of the way we manage our balance sheet, and our risk management in general. We were active in the bond markets during Q3, and we issued a senior unsecured or senior preferred for about SEK 1.45 billion, and then also a senior non-preferred, a first for Hoist Finance, at attractive pricing. Our capital and liquidity position remains strong.
The high investment volume brought the CET1 ratio to more normal levels than before, still well above our internal limits and significantly above regulatory limits. Now, looking at liquidity, that's possibly even stronger. As we are building up to SDR, we're also building up our liquidity reserve, and it is now 15 billion SEK, a little bit more than 15 billion SEK, basically half of our NPL portfolio value. So all in all, very happy with this solid third quarter. And now I will hand over to Christian to take you through the quarter in more detail. Over to you.
Thank you, Harry. Good morning, everyone. Quarter three was a really strong quarter for us, and we had record investments and solid returns on top of that. So we had invested SEK 4.3 billion in the quarter. We saw that ROE was above 16%. The year to date, ROE is above 18%, and we are well on track to beat the financial target that we have for the year on 15% plus. If you look at the P&L overall, we have strong growth across all key metrics. We have 33% interest income, and that's driven by the larger book, so 25%. And given that the interest income is growing quicker than the book growth, that indicates that the pricing that we've done is really supportive.
So we've been seeing higher returns than we did, a year ago and two years ago. So it's highly supportive pricing in the market currently for us. If you look at the collection performance, it's continued to be stable and strong. It's one or two percent for the quarter, and year to date, it's roughly 104%. It was a slight drop over the vacation months, and this is normal. This happened last year as well, and we see, as Harry pointed out, things bouncing back to more of the steady state in Q4 as well. Cost growth has been 14% versus the 25% portfolio growth, and I'll get back to the underlying growth of the book in a later page for earnings before taxes bridge to see the like-for-like growth year over year.
Net profit, SEK 257 million, and that led to the 16% ROE. When we look at for the full year, we expect an effective tax rate of 22%-24%. As mentioned, this was the highest quarterly volumes on record, with SEK 4.3 billion during the quarter, and this is leading to a book value of SEK 29.9 billion, so almost 30 billion. This will likely lead to the highest year on record in Hoist history for the full year, and we have invested across most markets, mostly in Spain, France, and Italy. That's where we've seen the largest volumes, but this has been across many of our geographies in Europe.
The pricing's been really supportive, and, if you look at the last two years', return levels, we haven't seen these returns since pre-two thousand and fifteen levels, which is highly encouraging. During the last three years, two-thirds of the book has been the last two years, two-third of books have been invested. So we have essentially repriced the asset side the last three years, and which is, which is great because we have moved into a new interest in rate environment. We are not deviating from our risk profile that we want, so it's all granular risk. We have no single risk exposure, in which is relevant to the size of the book.
It is still only roughly SEK 20 million, the largest exposure we have in the group, and that's compared with almost SEK 30 billion of total book value. So we've been really disciplined, and this year in Q3, we had a really strong investment quarter. Last year, we had a slightly weaker one when things didn't go fully our way, and this quarter, we've seen that we've been managing to win all of the opportunities that we almost wanted. When we look forward into Q4, we have a strong outlook. We believe that it is continuing to be a really supportive market. And seasonally, Q4 tends to be the strongest of the year. We don't see a level of SEK 4 billion, however, we do see a strong quarter.
The last few years, we've been working very actively to diversify the book across geographies and assets, and now we see that we have a nice mix across geographies. There's no country above 20%. If you look back a few years, we saw that Italy had a weight of 25%. Now we have almost, let's say, four between 15% and 20%, which is exactly where we want to be. And on the secured side, we keep growing the share of the secured book, so now it's 34%. It's been hovering for a while, around 30%. This is not a goal in itself, but we do want the diversification effect between assets as well. We are very pleased that we are now, which is classified under the region.
However, this is not reflected in Q3 numbers because this has happened in Q4. We're really pleased that we have now entered into Portugal as a new market, and we look forward to having a coverage of the full Iberian Peninsula. This is a page that we also presented on our Capital Markets Day, a month or so ago, and it's updated for Q3 numbers. In this, you can see that our growth journey is very well on track, and this is combined with attractive risk and attractive return, which is really, really pleasing. We've been really focused on getting the right returns and almost always looking for this granular risk that we really like, backed by consumer or a clear asset side.
You can see that we wanted to grow, starting end of 2021, with SEK 18 billion to the end of 2026, and we are 66% on the way of that. So 66% of the SEK 18 billion growth we have now achieved in Q3 2024. This is taking us to 83% of the SEK 36 billion overall goal, which is encouraging to us. We are not growing up at the expense of profitability. We are very disciplined, so it is a good situation where we see right risk and return and also very sound and healthy growth. You can also see in the geographies, for example, in Q3 2024. It's a really nice mix between the different markets in Europe. We have now new markets.
If you compare with two years ago, Sweden, Portugal, and a few others, this leads to a larger pool of deals, and we have taken on really strong people that are leading the new markets. We're very pleased with the expansion to new markets in Europe. These are core markets, they're very close to home, and they make a lot of sense to enter. Here, we're trying to give you a view of the underlying profitability in quarter over quarter. We have seen a robust underlying performance, and the key message is at the center of this page, so the 59% underlying earnings before tax growth, and this is the SEK 197-SEK 314. We have on the left and on the right, items that you could call more non-recurring in nature.
Starting from the left, last year, we had SEK 282 million EBT, and we had a joint venture income, which we do not have anymore. We don't have that joint venture anymore. And then we also had non-financial transactions in the P&L. And clearly, we did revaluation, which ended last year at this time. And that led us to, if you will, normalize for these numbers, 197 million underlying EBT in Q3 2023. The book has grown, and also the profitability of the book has grown, and that leads to the growth to 314 million. And then we have a positive revaluation in Q3. I think we're slightly unfair to ourselves. This is part of the core business.
We do see that our healthy book will lead to, or potentially could lead to, revaluations as well, and this is what we see here as well. This is a Polish revaluation. It's one of our best performing markets currently. When we have such strong collection performance, it's also necessary at some point to take positive revaluations. We don't see that this will impact collection performance in any way. We see that this will continue very strongly. So this is a really strong addition from the healthy book. And then the minus 22 is a project cost that we had for a investment project that we canceled during the quarter. So we take that as well, in this quarter. And that leads to the reported number of SEK 369 for the quarter.
Now, zooming out slightly to year to date, so January to the end of September. The year to date numbers look equally strong in our view, so we've been growing the portfolio book value by 25% year over year. That has led to operating income growing by 27%, is driven by repricing, growth of the book, and also the underlying health of the book, which adds collection performance above management expectations, so management forecasts. We are continuously incredibly focused on cost discipline, and that has resulted in that the underlying indirect costs, so the central cost, the asset management team, IT, has been very stable year over year, so we're not growing that in any significant manner.
If you look at the numbers, we have some slight growth, but that's largely driven by this SEK 22 million of project costs that I pointed out on the previous page. Direct cost, on the other hand, grows with the book, and this is where we get the operating leverage. The total cost base is not growing in line with the book. It's only the direct cost base that does that. Total cost grows slower than operating income, and that gives operating leverage and a profit growth of 37% year over year in the reported numbers. Looking at the capital, we have clearly deployed capital in new investments during the quarter. It's a record investment quarter. That said, we still have a very strong capital position.
We're significantly above regulatory requirements and also above our own target range that we have set out, and this enables continued high investment capacity, which we intend to use. It is a really attractive investment market currently, and we see a lot of attractive investment opportunities going forward as well. An update on the SDR and liquidity. We have a strong buildup of liquidity, and so NSFR is long-term liquidity, and LCR is short-term liquidity. The buildup of liquidity overall to qualify to become a Specialized Debt Restructurer is ongoing. We see that the liquidity portfolio have more than doubled last twelve months, which is 7-15 billion SEK, and this is in relation to the NPL portfolio of 29.9 billion SEK. It's a exceptionally strong liquidity position that we have currently.
This is exactly in line with our role in society, that we should be very stable and predictable in terms of being there in ups and downs in the economic cycles. The Net Stable Funding Ratio is increasing in line with the plan to meet SDR requirements of 130%. So now we're at 128%, and we see that we are increasing steadily and in line with what we wanted and thought. The Liquidity Coverage Ratio is exceptionally strong. You don't see really how strong in the 750%. It's already there strong, but that's an average of the last year on LCR. NSFR is more of a quarterly spot rate because it's long term, but the short term we use, as per the template from EBA, a yearly average.
So if you only look at the Q3 number, we have almost 1,200% LCR, which is incredibly strong if you compare that with 100% regulatory requirements. We're really pleased to note during the quarter that Moody's upgraded us to Baa2, so one notch up in the investment grade bracket. We are the only investment grade rated company in the industry. We were also very active issuing market funding in the quarter, so 1.65 billion SEK. We have a very stable funding base. It now consists of 77% of the funding overall. And we are in the market, as some of you might have noted this morning, with a four-year floating rate note, senior non-preferred 500 million SEK.
We're testing that market now after the Q3 report. Now I'm handing back to Harry again, to sum things up before we go into Q&A.
Thank you very much, Christian. Thank you all for listening in today. Before we open up for questions, let me add some final commentaries. Now, our goal is to become the leading investor and manager of non-performing loans to consumers and SMEs. This is not some lofty goal or a vision statement on a PowerPoint, this is our sincere ambition, and we are working very, very hard to make that happen. Now, with the whole industry repositioning, substantial changes are happening across Europe. Actors are trying to find their optimal positions. We have found our position, a capital-heavy institution with solid industry experience and track record. Now, investing in NPLs is a long-term business.
Portfolios generate cash flows for 10, 15, 20 years, and this is also the way we are building up Hoist Finance. We will gradually grow our portfolio, from a quarter to quarter it can be a bit lumpy, but we will constantly keep looking at the returns so that the back book will support us in good times and in bad, going forward, with sensible investments, solid loan management, and an iron grip on the balance sheet. We strive to deliver increasing shareholder value for many years to come, and with that, thank you for listening, and let's open up for 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 Ermin Keric from Carnegie. Please go ahead.
Good morning. Thanks for the presentation and for taking my questions. Maybe the first one would be on this kind of clarification from the FSA. Thanks for the color you gave initially, but just how confident do you feel about your kind of interpretation that it's only if you have kind of aggregation or brokerage by a platform that you should have an impact?
Well, thank you, Ermin, for the question. Well, we feel very confident about that interpretation.
Okay. That's super clear. Thanks. Then, could you give us any indication to how much you've signed so far in Q4? You've done that in the last few quarters. And so continuation on that a little bit, I mean, if you have such a high win ratio currently, do you consider it to be even more opportunistic and increase the return requirements further when you're pricing? And maybe lastly, given the very strong market activity, very attractive returns, why do a dividend deduction at all? Why not say, we'll wait for dividends until the market stabilizes at a lower level? Because currently, this is a land grab, which Hoist is very well positioned to benefit from.
Yes. So, well, if we start with the dividend decision, I think, well, it is a board decision. And of course, we have a policy that we are sticking to. Any decision on that will, of course, be communicated later. With regards to Q4, yes, we usually. Well, the activity is very high. Typically, what we communicate is sort of signed deals. So we have a number of transactions that are won, but not signed yet, and that's why we haven't given out the numbers. So the number of signed deals is, like, SEK 500 million or something like that. But we expect that to tick up as the quarter passes.
And in terms of investment strategy, yes, we had a high win rate in Q3. And if we compare it to last year, we had a almost similar pipeline, a little bit, maybe a little bit smaller, but a very large pipeline in the quarter. We placed bids on IRRs that are lower than the IRRs that we bid on this quarter. Last year, we walked away with very little. This year, even on higher IRRs, we landed a number of deals. So I think for quarter four, I mean, we will always be looking at the returns. We will be. We are always selecting in our investments.
We don't go sort of shooting with a shotgun. It's more pinpoint, so we'll see what comes out of Q4, but the activity is out there, and we are selective and very disciplined going through here.
And I can just add, too, on the returns, I mean, that we are seeing very attractive returns. So we want to invest steadily, and I think given that there's such a strong market, we do expect that it will be a record year in terms of volumes. And also, with that said, it's not at the expense... On the contrary, it's actually higher than what we expected for the year in terms of returns. So we're very happy to deploy more capital than what we initially might have thought this year, because of both the granular risk that we're bringing on and also the higher returns than expected.
Excellent. Then if I may, just one last question. On the collection performance, have you seen any uptick, you know, now, early October?
... or so that, that's giving you confidence that it would step up, even though Q3 was still on a good level, but that it would step up as you expect for Q4?
The short answer is, yes, we have seen an uptick. We haven't finalized the number. Well, October is not over yet, but yes, we have seen an uptick.
And also to add to that, we have a central team that is doing a fantastic job of, of, creating transparency on both the health, so the quality of the book, and also the collection performance. And, and we, we track this with, quite, both details, so meaning bottom-up models, and also, from different perspectives. It's the classical way of, of Excel and, and, now I forget the, the name of the, the system that we use, but Tableau, Tableau-based, and then also more machine learning and AI, and Risk does their own analysis from a second line perspective.
And all of these point to both collection performance as we see it in October, and also these models are indicating that we will get back on what we see as a more ongoing basis and not during vacation time, so to speak.
Okay, that's great. Thank you very much.
Thank you.
The next question comes from Gustav Larsson, from Arctic Securities. Please go ahead.
Good morning, and thank you for taking my question. And just a follow-up there from Ermin on portfolio pricing and competition. Do you see less competition in auctions in the sheer number of bidders this year compared to last? And in relation to this, and peers going for capital light business models, is this a structural shift that leads to higher competition on servicing as well, and that would potentially make a use of third parties in servicing more attractive for you?
Thank you, Gustav, for the question. Yes, I think we do see fewer bidders per auction typically, and we do see this combination of new consortiums being formed with, let's say, industry player plus financial player. We see the American funds actively entering Europe and then typically together with an industry player. Now, from our point of view, from a seller's point of view, it is typically easier to sell to a single bidder than to a consortium, especially if you have consortiums that are regulated by both European and U.S., regulations, so for us, we think this is a sort of positive development.
Where this leads on the capital light side, going forward, I guess we'll just have to see. We see that there is a strong interest, of course, from our peers around Europe to collaborate with us on servicing. You know, it's a great setup for us to be able to either combine that with our internal capabilities or fully outsource to one or more players in the market. Basically, we use these options differently in different markets, depending on what we feel is the best mix.
We also see when more financially driven players are entering back into the purchasing together with the industrial players, that the financial discipline tends to be higher. So they have more outspoken hurdle rates when it comes to returns, which we think is beneficial for the market overall.
Okay, thank you very much. One question on operating leverage. Thank you for the time you spent on this. But how should we think about operating leverage as you grow the book towards your target of thirty-six billion? If we look at profit before tax adjusted for one-offs in this quarter and adjust for the revaluation program last year, the portfolio is growing more than profit, underlying. Is the operating leverage we should expect based on fixed cost? Can you improve collection efficiency, or do you see any other benefits just from sheer scale?
I think the profit is increasing higher, quicker than the book. I mean, given that we are repricing and. Well, we'll start by simply growing the book, and then on top of it, we are repricing, so we have better returns now than what we used to have, so that's driving the net or the interest income. Then, we're also working very actively with the funding mix, and that is more or less as expected, I would say. The collection performance of the health of the book adds then to operating income, which tends to grow quicker as well over time. The cost, we are very focused on keeping those down.
And those two combination, meaning costs growing slower than the top line, leads to the profit is then being levered up by this as well. We see that this will continue, and clearly as we grow, then we won't be able to keep the indirect cost flat forever, but we do try to do that as long as we can. We see that the underlying indirect cost currently is flat. We have a lot of costs in Europe, where we only have 70 people here in Sweden, and the rest is sitting out in Europe, so mostly in Euro, and the SEK has been depreciating against the Euro over the last few years.
So, FX is not favoring that comparison as we are booking all our report in SEK. So, overall, we see that the operating leverage is playing to our favor, meaning that the profits will grow quicker than the book.
I can just do a short follow-up on that. So as we communicated before, I mean, we insourced our IT, which is part of the indirect central cost, and at a saving about SEK 40 million a year on that. This has basically enabled us to finance a growth in the investment team, considering, I mean, with all this activity out in the market and new markets coming in, et cetera. Basically, the insourcing of the IT maintenance has basically financed the opportunity to address more portfolios, which is, you know, a great way of allocating the internal costs.
And also, I would add to that, actually, that we believe that having it insourced is the right way of doing it, and also the cheaper way of doing it. So we're doing, trying to do things in the right way, with high quality, clearly, and the right cost level.
Okay, thank you. One last from me then. I read in the report here that for every SEK 1 billion added to the portfolio, now you're adding SEK 500 million to the liquidity portfolio. Is this the current level you are doing to reach net stable funding of 130% in the short term here? Or is this the sustained level we should expect going forward in relation to NSFR and the SDR designation?
I think if you do the math, then, the 50% liquidity buffer versus the NPL portfolio is roughly right. That's where we land in the new world as SDR, so to speak. So it is an incredibly stable entity, and I think there's some. Now, with the risk of coming slightly technical, we call our assets NPLs. They're very different NPLs than what the originating banks have on their balance sheets. So we buy them at a massive discount, so on average, more than 90%. So it's not the same risk profile, NPLs over NPLs. And in NSFR, you have a weighting on NPLs, which is more correlated to the original risk, not the risk that we carry.
So we believe that we are both having a really stable and predictable asset side because this credit risk has been materialized, and that's not reflected in the NSFR measure. So, we do believe that we're having a really, really high liquidity, and probably if you would ask us for the true underlying risk, it's probably too high, I would say. But that is the price of becoming an SDR, and it is a really supportive way of dealing with the banking regulation and serving the banks we in the role that we have.
Thank you very much. That was all from me.
Excellent. Thanks.
The next question comes from Markus Sandgren, from Kepler Cheuvreux. Please go ahead.
Yeah, thanks. Morning, everyone, and congrats to a good result. Now, I was just thinking, and coming back to Ermin's question: so when you talk about portfolio growth, what is the... Are you limited by capital, or is it more internal, what you can chew, basically? Is that what makes you not increasing your portfolio growth target? And yeah, I had a couple of more questions, but if you start with that, please.
Good morning, Marcus, and thank you for the question. So we've just deployed SEK 4.3 billion.
Yeah.
No, I think there is a market out there. The market is very strong, so there is a lot for sale. We are addressing that market to the best of our abilities at the right return levels. You know, buying portfolios at the wrong price is not difficult. But getting them at the right return so that they will support you for the next fifteen years, I think that is the trick, and that is what we are very, very disciplined looking at. So, I think we will continue to deploy roughly around the pace we're at at the moment, we think, depending on market conditions and what is out there.
But we have no target to deploy for deployment's sake. So, I think that's.
Okay
... the general position here.
I think that-
Good, I get the message. Yeah. Okay.
On the operational side, we clearly make sure that what we buy, we can onboard in orderly and in a good way. And having a mixed loan management model, so to speak, with having the strategic loan management internally and being able to, if relevant, leverage partners, that makes us more nimble and agile in this as well.
Yeah.
Which is one of the key points by setting this operating model up.
... Okay, thanks. And then secondly, I was thinking about the impairment gains you're making. It seems like you, you're making, I mean, they come in steadily, basically, in 2023 and 2024, while before it was much lower or even negative. Is that because you're being more prudent now when you book portfolios, or is it just coincidences that it has happened on the portfolios that you have acquired?
I would say that it's absolutely no coincidence. That's the starting point. I think there's two things to this, right? So, when we buy portfolios, since inception, we have an expectation of the cash that will come in through repayments. And that expectations, on average, since inception, we have beaten by 8%. So we believe that we are very strong at evaluating and forecasting the cash flows that we see coming in from the portfolios that we buy. So that's the starting point. And then, clearly, things change, and we get better, market change, regulation change, et cetera. So you need to take a look at the current performance in all of those portfolios as well. And that's the management of the book.
And we've been really carefully managing the book the last three years to make sure that we have a higher degree of overperforming portfolios than underperforming portfolios. And given that we have more overperforming portfolios in the book than underperforming, that's what we call the positive tilt, and what I tend to call a healthy book, that gives us a stable and predictable collection performance, which statistically should lead to that people beat our management forecast because we have a larger share of overperforming books. So I think this is the work that has been ongoing, and we've been very actively both investing at the right price levels and the right risk, cleaning out the risk that we don't want in the balance sheet. So we've gotten rid of... We had a few slightly larger exposures.
Those we have sold, 'cause we're not really focused on those. We wanna have granular statistical risk in the book, which is exactly what we have now. And then at the right times, right returns, we buy. And then we try to manage that very conservatively, which leads to a really long-term and healthy performance in our view.
Okay, very good. Then lastly, is there any Basel IV effects we would be aware of coming in Q1 next quarter or next year?
No, I think, I mean, the regulation clearly changing, and we're adapting. The largest impact will clearly be from SDR, so that's the major driver of how regulation is impacting us.
Yeah. Okay. Thank you.
Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
So, thank you all very much. Now we see we have questions also coming in via text or via the screen, and I don't think you can see those, right? So,
Let's read them up, yeah.
So, from Robert Dinic, we have, do you have any guidance regarding the timeline for the NSFR discussion with the FSA? No. This is an ongoing dialogue, and it is, you know, as we say, it is constructive. And I think that's it is a dialogue, so we'll keep it that way simply. Should we move to the next one?
There was a question also around if we done scenarios and if we would apply this capital planning target or the legal opinion, if we would still be above 100%? Yes, we would absolutely be above 100%. We would also meet our financial target of 15% plus in all the scenarios that we have run.
And then there is a question from Thor: What is the rationale behind issuing Senior Non-Preferred Bonds compared to what you have issued in the past? I will hand this one over to Christian.
Yes. And, the rationale is that we want... I mean, starting from the top, we want a well-diversified and balanced funding mix, and this is one way of working with the capital stack, which we think is productive. It's not many smaller banks that does this, but we believe that it's the right way forward for us to have this part of the funding mix.
Great. What else do we have there? Anything there at the bottom? No. Okay, that's the moderator.
I think we have covered most of the questions that we can see. It's slightly difficult to follow on the screen, actually, but I think we answered all of the questions that I can see.
Yeah. And to Per, thank you for a great quarter. That's all I have to say. Thank you very much. We will keep working hard. And thank you all for listening. We wish you a lovely rest of the Friday and great weekend when it comes.
Thanks so much for calling in, and have a great weekend.
Thank you. Bye-bye.