Good morning, and welcome to the Hoist Finance conference call. All participants will be in the listen- only mode. Should you need assistance, please signal your conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then one on your telephone keypad. To withdraw your question, please press Star then two. Please note, this event is being recorded. I would now like to turn the conference over to the CEO, Lars Wollung. Please go ahead, sir.
Thank you. Warm welcome everyone to Hoist Finance Quarter Two report. I will make an introduction and then my colleague, CFO and Deputy CEO, Christian Wallentin, will go through the report. After that, we open up for questions and answers. That's the agenda of the call. If I then go to the. Yeah. We'll go to this first picture. Before we get into the numbers here, just a comment on the non-performing loan market itself. Volumes this quarter two has been better than quarter two a year ago. The IRR level is generally on a higher level this quarter compared to the same quarter a year ago.
All in all, the market is better than a year ago. The competition is intensive, though. That means our win rate during quarter two has decreased. We have evaluated but walked away from many situations. A comment on the macroeconomic situation too. We have not seen the material impact of increased interest rates and higher inflation yet. We follow, of course, the development very carefully. In general, the non-performing loan market is not counter-cyclical, but it's resilient to economic fluctuations.
However, in a very negative scenario where cost inflation is higher than salary inflation, a recession on top of that and increased unemployment, that would likely mean that our customers will be able to pay back less, amortize less of their loans. On the other hand, that's usually a time period when the banks need to sell even more and problem- solve even more, also returns generally go up. Portfolio prices down, in other words, and that's the resilient component of it. So far so good. If we return to the numbers, profit before tax came out at SEK 218 million compared to SEK -13 million a year ago.
A good part of that though is due to financial instrument gains. If we adjust for that and also adjust for the UK business under divestment, the profit before tax this quarter was SEK 111 million compared to SEK 32 million year-on-year comparison. It's clearly better. The underlying result is several times better than a year ago. We are pleased with the development, the direction. We have a way to go to come up to an underlying profitability that we would be satisfied with. The journey continues, but so far so good. What you see here on the picture to the left is the total loan book. We have SEK 19.7 billion.
That excludes the UK portfolio under divestment. The same variable was a year ago 16.6. It's a good growth of the portfolio size in the total business except the divested UK unsecured book. Investments in the quarter came out at SEK 2.5 billion compared to SEK 0.9 billion a year ago. We've been able to invest more than we ever have done in the second quarter. We have invested more the first half year than we ever have done. We are at all-time high investment levels although win rate is down and we've been very disciplined when it comes to pricing. That's on the investment side. Return on equity 19%, that includes the compared to -7%.
So that includes though the gains on financial instruments. Earnings per share, we say the goal for us is on average to grow earnings per share with 15% per year. This is better growth than that, but it's also from a negative and special situation a year ago. The CET1 ratio 9.6%, so roughly the same as a year ago. We can take the next page. We are carrying out the rejuvenation program. It's paying off in all areas. It becomes better and better. The rejuvenation program is divided into funding and capital, investments, collection operations, and indirect costs. I will come back to this point in the next exhibit. I leave it for now.
As I said, all-time high investments, still intensive competition, but the market is better. The second quarter mainly the effect of, you know, improved quality. The portfolio, the total portfolio gets better. The cash flow density of the book becomes better. The second component then is the hedging contracts that work as they should when the currency movements are like it's been in the quarter. The reduced risk weights kicked in from July 11, 2022. That was expected, but now it finally happened. That means that the change a couple of years ago from 100% risk weight for unsecured consumer loans became 150%.
Which means, of course, we need to hold more capital because the risk-weighted investment level then increased. Now that goes back from 150% to 100%. That releases of course then capital that gives us much better flexibility going forward than we've had before. Our ambition is to be an active NPL asset manager. That means we invest in portfolios as we have done before. The new thing is that we monitor them more closely. We work with them more actively. We also divest portfolios, which we think someone else can do a better job and therefore pay a higher price than our own net present value to keep it ourself.
An example of that is the UK situation where we then have a SEK 4 billion portfolio under divestment. That was announced in quarter one. In quarter two, we have invested in other UK portfolios for around SEK 1.2 billion. We are buying portfolios that fits our strategy and where we have a sustainable competitive advantage. If not, we don't mind to sell. With that, I mean, we are becoming a more active non-performing loan asset manager. Let's quickly turn to the first point here, the rejuvenation program.
On the next page, you see the four areas which we are focusing on and on capital and funding, we issued EUR 80 million Tier 2 this autumn to a coupon of 6.6. That was a fortunate timing. The market has, as you know, become worse since that happened. We talked about the UK. We are also working on the funding side to improve, you know, cash levels and improve the funding bit by bit. It's a number of initiatives that is under execution in the funding area to become a bit better every year.
Investments. Yeah, I think I've mentioned it. Investment level is up 137%. Interest income is up 8%. We have invested with a higher risk adjusted return this half year compared to earlier years. The portfolio gets better when we amortize old stuff and buy new stuff, which is better. We become better. It's SEK 3.8 billion of new stuff which we like. That's added to the group portfolio this first half year. At the same time we amortize material amounts. The book gets better and better. Collection performance, that's our loan management business. There is a broad improvement program in that area.
We try to use data in a better way to take better decisions for what to do with each loan at each particular point in time and that drives collection performance a lot. We also work with optimized staffing, so we have the right staffing amount for each situation in each country. Collections is up 23%. So I guess that number shows that we are moving in the right direction. Finally, we have the cost reduction side where number of FTEs is reduced a bit and in total we have reduced indirect costs.
If you divide the cost pie into direct and indirect, we have a special focus on the indirect costs, and we like them to go down and they are down year-on-year 10%. That was a few words about the daily and/or continuous improvements of the business in basically all areas. With that introduction, I think I'll hand over to you, Christian, to take us through the deck.
Very good. Thank you. Can we go to the next page, please? Portfolio acquisitions. This has been a very strong investment quarter for us. We have, as you see on the page here, Q2 2021 to Q2 2022 almost triple the acquired volumes. It's 193% up versus the quarter a year ago. As Lars was mentioning, the returns are improving. We see that we are winning with better returns. That said, we are very disciplined with both the pricing and the valuation. The win rate is down. If you compare that win rate, which we monitor as a KPI to not overprice in the market, it's on the lower end where we normally are and quite significantly lower than, for example, in the bumper years that we had in 2018 and 2019.
The drivers for this growth I would say is that since the autumn we have developed a new investment and sourcing strategy which is paying off. It's much clearer what we are looking for. That is bilateral deals, more complex situations where we can improve pricing and we can bring our skills to the table and add value to our bank partners. This often means that there are larger deals. The deal structuring is more advanced and the common problem solving with our client leads to more value creation for them. Of course, that leads to a better pricing for us as well as we add more value to our clients. Overall, I would say that the market is continuing to improve.
The market opportunity as a whole is of course large and the volumes coming out to the market has been quite low in 2021 and we've seen that it from the lows in 2020 it's been gradually increasing and we're a much healthier market now than we were two years ago. Normally Q4 is the seasonally largest quarter and the sales from the banks are quite lumpy so the quarters can go a little bit up and down. That said, we see a healthy pipeline for the rest of the year and that is promising to us. If we go to the next page please. This is the overall book value of the continuing operations, so excluding the UK divestment that we're doing.
This book, the continuing book has grown well over the last year in a quite difficult market for us. We're up 19% year-over-year compared with a year ago, so Q2 over Q2, 2021 to 2022. It is quite lumpy, the transactions. If we win some large ones that will have a large impact in the quarter. If we lose one, it might be a lower quarter as well. However, that said, over the long term, we see really steady growth in the market. We are at a cyclical downturn if you compare in the NPL market, we believe, and that will over the next few years come back. The goal is, as Lars has been saying a few times, to double the book over five years or so.
We go to the next page, please. This is the portfolio composition of the continuing operations as of the end of Q2. The book we have is developing really favorably in the direction we want. We're growing where we want to and the book is becoming more diversified. Secured is a growth priority to us and as you might remember we were at more or less 20% before, at when we signed the divestment of the UK, and now we're at 75% unsecured and 25% secured. We're growing there. We see a really strong competitive advantage in secured, both because we believe we have a really strong secured organization and also because of the funding side of our business. In the quarter, we've seen that we've managed to invest into one large French secured deal.
That's SEK 700 million on the right. Also, we're building a more balanced collections business and loan management business, so we're outsourcing more than we used to. Building outsourced collections is priority to us to build flexibility and also learn from others to become a better collector ourselves. That's what we're doing in the UK. We're rebuilding our UK operating model from an in-house model to an outsourced model. We have seen that we can invest into this new model in the quarter. We have a few deals that adds up to SEK 1.2 billion. It's one of the larger investment geographies this quarter. If you look on the right, it's an overall well-diversified book. Italy is the largest market, and post the divestment, it, Poland will be the second instead of the UK.
This quarter, we've seen that we invested across geographies, the UK and France being the largest ones. That said, we have a majority of deals in the focus areas across geographies, which is really encouraging to us. If you look at the level we were when we signed the divestment of the UK operations, we are getting back to that same level. In order to close the gap, we're roughly SEK 2 billion behind. We were at more or less SEK 22 billion when we signed the agreement, and now we're at a little bit less than SEK 20 billion. If you put that in context with the Q2 volumes, that is slightly less than what we purchased in Q2. If you go to the next page.
Our capital outlook is strong, giving us both a strategic operational financial flexibility. This is a large part due to the EBA reversal of the RWA, so the risk weights, which was announced by the end of June and now coming to effect 10 days ago or so. We will see that we will have around 260 basis points higher Q1, everything else being equal by the end of Q3, given this development. We also believe that the divestment of our or we know that the divestment of UK unsecured operations will add another 280 basis points. We foresee that transaction will close by the end of Q3 or during Q4. A little bit uncertain as it's a regulatory process.
It's also worthwhile to mention that the current levels supports our ambitions to double the book given the EBA risk reversals. We have more or less SEK 6-7 billion more purchasing capacity, and then the UK divestment will add more than that to the purchasing power as well. That approximately is, of course, depending on which asset class we invest into. The risk rates for the unsecured are higher than for the secured. It depends a bit where we invest. The only uncertainty on the capital side is the Pillar II guidance, which is still outstanding. There's no real update on this process currently. We go to the page with the financial summary. We have overall a really good strong quarter behind us. We had good growth.
The profit before tax is SEK 218 million. The ROE is 19%. This is driven by a few different things. It's a good strong investment quarter and a good half year of investments, which is really great to have that in the beginning of the year. That adds volumes, and we also have had really good IRRs on expanding the IRRs overall in the book. Our interest income has grown with 13%, quarter-over-quarter, compared with the year ago. That's due to the volumes that we spoke about and the IRR expansion and then also some FX impacts. The interest expense is going down at the same time with 9%. This is due to the deposit mix, both which currency and which term, so which period we have these deposits.
The contribution of interest rate part of the hedging contract is also part of this decrease in the interest expense. The growing income and decreasing expense make the net interest income grow with 20% quarter-over-quarter. Below that, we have seen that our collection operations has also performed really well during the second quarter with better quality on the underlying portfolios and a more efficient management. We have SEK 160 million or so positive collection performance, and 110 of these are then revalued, of which 50 is timing differences. Meaning that secured collections that we have ahead of time, and then we take that out from the further in the future in the curve. The rest is de-risking to build a strong and well-performing book going into the future.
You can also see at the bottom of the page that cash EBITDA is up 44%, and that's driven by the underlying growth in collections and also efficiencies, both on the interest expense side and then in operations. We have a positive contribution from hedging and net financial transactions. The macro development has continued to be quite uncertain, and the interest rate levels are moving. That, of course, leaves us with gains in the interest rate swaps, because we have hedged our book, and the operating performance. I'll come back to that in a slide in a few minutes, but that's also developing really well. Total operating expenses are slightly up in the quarter driven by the direct collection expenses, so that's driven by volume.
If you break it down another level, it's the legal collection expense is still catching up after COVID. The second part is, we bought a large Greek portfolio, as you might remember, that closed in Q1 and the outsourced expenses have come into our P&L during Q2. The underlying indirect costs are down more or less 10%. The FTEs are down 5%, depending on which period you look at. We are doing further optimization, and we think that we're well underway, but we're continuing this effort to reduce further our indirect costs, as this is one of the focus areas we have. In summary, it's a very good quarter for us. ROE 19% and growth overall, both in the book and in the financials. We go to the next page.
This page wants to highlight how the discount in the UK business is impacting our business. From the top, the UK business that we are selling now in the quarter, we had net interest income, which are not seen in the continuing business of course, but it's summarized in the discontinued operations. Net interest income of SEK 137 and then net operating income of SEK 128. You can read on the slide here, and the net profit is SEK 40, which you see is in the main P&L as well. One large item which I want to highlight is that all the funding sits on the group level, which is the majority of these net internal transactions. We wouldn't, of course, have this funding if we wouldn't own the UK business.
This is clearly should be carried by the UK business. If you add that on, then the net profit attributed to the discontinued operations is around zero or slightly negative. We go to the next page. This is the underlying results of the continuing operations. We want to just highlight that we are well on the way with our transformation. We're also being helped by our hedging, as we pointed out earlier. This is the underlying operation performance, excluding the divested UK operations. You see that the trend is strong, both in reported profit before tax as well as the underlying profits cleaned out for the hedging contract and also the UK divested operations. This has been happening.
I mean, we started in a really challenging situation last year, and we have been transforming our business which is continuing to make sure that we perform both on ROE level and on growth level. I would say that we are around halfway there. You can see that in these numbers. If you look down a little bit more into the details, the hedging has materially contributed to profit this year and this quarter. The interest rate swaps are protecting us from the interest rate risk in the banking book, and that contributes SEK 131 million this quarter, which is of course highly material. Then if you take out the funding cost in addition to the UK business, which we wouldn't have if we wouldn't own the UK portfolio, then that adds back SEK 44 million.
Then we deduct the central costs that are now carried by the UK operations as they will remain in the group. This leads to the underlying operational development. That's the red or maroon colored bar charts here. So it's been going from 5 Q3 in 2021 until 111 Q2 now 2022. I think the important takeaway on this one is the trend. We have been having contribution from the hedging contracts. However, the underlying operational trend is very strong as well. We are making headway on the transformation that we set out during the autumn last year. We go to the next page, please. It's the balance sheet overview. You can see that the largest changes here are cash going down, and that's to manage the divestment proceeds.
We're taking cash down in the liquidity portfolio because we will have the proceeds from the disposal coming in when we close the UK transaction. We also have been investing into large portfolios in the course. That brings the cash position down. The other part of it is T2. We issued a T2 tier two capital instruments in May and that also adds to the changes to the balance sheet slightly. We go to the next page, please. This is the capital and liquidity position. We've spoken about the capitalization before. The large ones are the EBA risk weights reversals and then the upcoming disposals. Then it's more the operational development, amortization of the book and then profits building the capital. On the right-hand side, we have the liquidity reserve.
You can see what I mentioned before that we've managed this down in awaiting the disposal from the UK divestment. We also used the cash to purchase large portfolios in the quarter. We go to the next page, the funding. The highlights are that we refinanced the Tier 2 in May. We very happy with this. It was very challenging given the process that we have had on the UK divestment. We were in quiet period for a long time during the spring. We were both lucky and skilled, I would argue, in getting the Tier 2 out and refinancing it. We also seen that the continued macro development has made the markets basically close down. If we would have issued today, we would have issued at a higher price as well.
The deposit interest rates are trending upwards, however, they are sticky and we see a favorable contribution from our funding in this developing environment. Meaning that when the interest rates are being higher than what we pay for deposits is not going up in the same way. It's a good arbitrage. It's sticky markets. That said, we are seeing that our funding costs will go up as it is for the industry overall, however less than the industry average, of course, because of the funding primarily that we have in deposits. This is the, of course, flip side of having the interest rate swaps gains that we have in the P&L. With that, I will hand back to Lars to summarize Q2 for us.
Okay. Thank you, Christian. Yes, the portfolio growth 19%, net interest income 20%, pre-tax profits from SEK -13-SEK 218. The underlying pre-tax at the SEK 111 number means an increase of yeah, 247%. We have a strong capital outlook, allowing a doubling of the book and our ambition is to you know, over a number of years, doubling our book. The macroeconomic development includes both challenges and the possibilities. We are taking the current situation very seriously about the possibility of a recession and increased unemployment. At the same time, we see a number of very interesting possibilities for us.
We also differentiate from most of our competitors by being a credit institution, by having another funding model than competition. Typically, when inflation increases, bond interest rates increases more than the interest rate on savings accounts. That would mean that our cost of capital or cost of debt advantage would grow if inflation would stay at higher levels than we've seen the last 10 years. We see both challenges and possibilities going forward. Regardless of what happens externally, we have a lot to do the coming years in improving Hoist Finance and turn it into an excellent non-performing loan asset manager and an excellent loan management company. We will continue to work hard to achieve that.
Thank you very much for listening to our presentation. I think you know, let's turn to questions now.
Thank you very much. We will now begin the question and answer session. To ask a question, you may press star and one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Ermin Kerić with Carnegie. Please go ahead.
Good morning. Thanks for the presentation and taking the question. Perhaps starting on the interest expenses, you mentioned that they are down quarter on quarter, partly because you have more floating rate deposits. Do you expect that mix to continue shifting in that direction or what should we expect from here? Then also. Sorry, my line broke a little bit. But on the internal transaction costs that you mentioned on UK, were you basically saying we should expect interest expenses to fall SEK 44 million all else equal when UK has been disposed of?
I can take that one, Lars. The interest expense, we are optimizing. There's a number of different factors going into this line, and we are optimizing both the deposits over geographies in terms of the business development as rates move around as well. This is a moving target to optimizing any current development. The other one on the funding cost, we are trying to replenish the book as soon as we can with attractive risk-based returns. If we have the same size of the book, then the same size of the funding cost, of course, should be expected as well. However, when we divest that, it will be gradual approach to unwind the funding, of course.
If we wouldn't have those assets in the UK, then we wouldn't have the funding as well. Yes, the answer is in short, yes, but there's a timing difference. Also we're trying to replenish that book, as soon as we can with attractive portfolios as well.
Got it. Thanks. On the underwriting for new portfolios, you mentioned that you see better risk-adjusted returns and so on. Could you just give us some flavor as to how that's actually, if we look at kind of net or gross IRRs, is that also up or is it just that you're getting essentially a lower risk for the same underwriting IRRs?
We are seeing that IRRs are going up overall, and then we are also investing more into the secured gradually. We're looking to have more secured in the mix. We are seeing that the overall IRRs are going up.
Perfect. Thank you. When you mentioned that you're now looking at per se a bit more complex situations, is that primarily that you're doing more secured or is it any difference in the type of unsecured claims you're buying compared to before as well?
I think it's both, I would say. We're looking into the secured transactions tend to be a bit lumpier and larger, and they can be a little bit more difficult or more complex to structure. However, we are also looking to develop a more intimate relationship with the tier two banks, I would call them, that need more help in this structuring exercise. That can include both unsecured and secured portfolios. The structuring and getting the transactions together when it's larger and it's more operational involvement, then that takes more expertise, which the tier two banks often don't have to the same extent as the larger banks.
Thank you. That's very clear. Just one last question on the cost side. I think the collection costs coming up. That's very clear with more activity. Could you just help us on what's driving up the administrative costs quarter-over-quarter?
Let me come one second. The admin costs are a mix of many things. It's both how we use consultants and salaries and then also developing the securitization scheme. It's a mix of different things. Unfortunately, we have moved a few items around during the quarter. It's not quite comparable, but the large part of it is those two buckets. Consultants and then some decommissioning and then also the other yearly Moody's fee, which is allocated in this quarter from treasury and that sort of thing. It's a little more one-off characteristics.
I'll have to ask, is it possible to quantify that in a sense, just understand what run rate to expect from here on the admin costs?
I think we are down 10% if you compare. We have a base quarter, which is Q2 2021, which is the starting point for our indirect costs, and we're down 10%. We want to continue to take that down over the next year.
Yeah. Got it. Thank you.
That is two components. As you can see, we are taking down our indirect costs. However, the business activity is increased. We look at more portfolios. We involve more external lawyers and accountants, both for portfolios that we actually win, but to some extent also for portfolios that we lose. That increased business activity will hopefully stay. Those costs will hopefully stay. They are healthy costs, so to speak, as long as we grow investments the way we have done this first half year.
I can add that we have absolute objectives in the indirect cost base, meaning that we want to take costs down in absolute terms. Now we're down 10% year-over-year in that cost bucket. We also have, of course, a relative efficiency measure. If we grow the book, doubling the book, there's of course large-scale advantages in the indirect cost base, but it wouldn't stick to the same levels that we're taking it down. It's been taken down over the next year, and then if we double the book, it will slightly grow, but it will be much more stable than the direct cost base, which is moving with volumes.
That's very helpful. Thank you.
Thank you. Our next question comes from Robin Rane with Kepler Cheuvreux. Please go ahead.
Yes. Good morning, and thank you for taking the question. So
I guess one of your peers in
That reported this morning as well said that they expect to moderate their investment pace in H2 given the uncertainty that we are seeing in macro and so on. How far and given that also your win rate now is as you say at pretty low levels, how fast do you think you will be able to employ the capital released by the lower risk weights and the UK divestments?
Well, given that we've seen high price aggressiveness lately, it would be natural if we would see some of the colleagues in the industry either buy less or increase their IRRs they are targeting. If you just see the longer term financing costs that they have ahead of them, it's hard to see that some of them could continue for a very long time the way they have acted the last half year. I wouldn't be surprised if other colleagues are indicating that they are less forward leaning in terms of future investments.
As I said, we have a competitive cost of debt and therefore cost of total capital situation that differentiates us. We have worked hard now for almost a year to rejuvenate our investment department, and it's an excellent department I suggest. The quality of the portfolio evaluation and risk assessments that we do is very good and I think very competitive. We hope to be able to just carry on like the way we do. That does not mean that we necessarily will invest for SEK 2.5 billion in a single quarter. A quarter could be we invest very little or very much. As Christian said, it is for sure going to be very lumpy.
If you see this over a longer period, we think our goals are realistic to reach and that is 15% growth of earnings per share per year. We will double the book in 5 years' time, and we will have a return on equity above 15%. That's what we think is realistic, and we will at least work really hard to achieve that. In terms of the replacement, if you think about it, the total loan portfolio was SEK 21.7 billion when we introduced the UK divestment. And now that same number is SEK 19.7 billion. So the delta is like SEK 2 billion only.
We need to buy SEK 2 billion, another SEK 2 billion to be back at the total portfolio level, including UK. The 19.7 is excluding the UK divested book. We sell things for SEK 4 billion. The gap is SEK 2 billion. There is only half of that SEK 4 billion gap that is left to close. And two billion half, you know, if you say how long will that take? Well, we invested SEK 3.8 billion the first half year this year. As you all know, this is a seasonal business. More portfolios are sold in the second half of the year compared to the first half year, especially quarter four is where a lot of portfolios are sold.
I guess it will not be a you know man-year situation until we have closed this final SEK 2 billion gap. It could go quite fast and who knows when we go out of this year where we are. We don't leave any forecasts et cetera, as you know. SEK 2 billion is. I'm suggesting SEK 2 billion is not a big number given that we bought for SEK 3.8 billion in just six months.
Just commenting, Lars Wollung, on the attractiveness of portfolios. I think we see that with both attractive risk level and also attractive returns. It's and we really focused on being disciplined around how we price and value things and taking on the right risk. We won't change that. We were disciplined. If we don't find that sort of volumes, that's not an issue either. We do believe given the outlook that we have a healthy pipeline with the right volumes and the right returns as well.
Okay. Great. Thank you. You have the contribution this quarter from the portfolio or impairment gains. How should we think about this going forward, given where your current forward curves are and what you see in terms of collection activity? Should we expect continuous tailwind from this or could it be that if we see, you know, inflation and interest rates squeezing on households that this could even turn negative?
I think the interest rate environment is very difficult to forecast, and that's clearly why we have these hedges in place to begin with. They are working, they are protecting our asset side. I mean, personally, I have a difficulty forecasting this. One of our objectives is to have this as low as possible because we don't want this to be volatile line. Given the change of framing in the economy during this last six months, it has moved quite significantly in the environment and therefore also the gains on the interest rate swaps.
If I would just look out and, I'm clearly not forecasting anything or guiding you in this, but it's more, okay, will we see a decreasing or increasing interest rate environment between SEK and the other currencies we are? Probably the Riksbank seems to be on a interest rate hiking cycle. If that happens, if interest rates are coming together, then it should be that these interest rate gains are also coming down. We don't forecast it.
Okay.
It's very difficult to guide.
Yeah. No, I understand. Thank you for that. Actually, what I was going after was rather the portfolio impairment gains and losses, which were the SEK 50 million positive.
Oh, okay. Sorry. Yeah. No, I can talk a little bit about that as well. I think we've done an enormous work during the last year to de-risk the overall portfolio. We believe that it's a very good position now. We are. I mentioned it in Q1. We are de-risking instead of only dealing with issues. I mean, we have to deal with all the issues we see in the book, meaning that if something is underperforming or overperforming that is, so risk both on the up and down side, we need to revalue according to the policies and the accountants and the policies that we have. That said, we can also of course take down the risks that we see in the books proactively.
That's where we are now. We're using collection performance to make sure that we get a stronger and stronger book on a continuous basis as well, which I think is a really great position to be in. Then that said, the macro environment is quite difficult to forecast. The risks that Lars was discussing before are real and the opportunities are also real. Where on balance we will be, we will see. I'm quite optimistic myself on the personal end.
Okay. That's all for me. Thank you.
Thank you. Our next question is from Jacob Hesselberg with SEB. Please go ahead.
Hi, good morning. My first question is on your capital situation. The CET1 ratio decreased in the quarter. What's your view on this given the changes in risk rates?
The risk rate effective change is not in Q2, it's actually in Q3. The publishing of the EBA risk reversal was in end of June, but the actual change happened the July 11, 2022 . You will see these 260 basis points in Q3 quarter one numbers.
Oh, okay. That makes more sense. Okay. My second question is then on your savings account. You're currently offering, I think 0.5% rate on HoistSpar, but a competitor is now offering 1%. You said during the call that you see deposit as quite sticky. When do you see an outflow when competitors hike? What rate level do you think we need in order for you to increase offered rates? As I guess having deposit funding is attractive given the current bond market.
It is. We're managing that on an ongoing basis. It's. We see that if we adjust the deposit rates, then we can attract or push out, so to speak, deposits quite flexibly. We have managed down the SEK deposit base slightly and then increased in euro. The term, some term deposits in SEK have come to end, and then we've replaced them with overnight euro because of pricing and hedging considerations. It depends.
Okay.
Is the answer to your question. We manage now, as you might be aware that we have a deposit platform also in the UK, where we're increasing the deposits currently to match more the assets that we're building up as well after the divestment.
Yeah.
It depends a little bit on the asset mix and also the pricing in the different markets because they're slightly different.
Okay, perfect. My last question is on your outlook for purchasers of new portfolios. I mean, how does it compare to, let's say, 90 days ago or 180 days ago, roughly? Are there any changes in the market? As in Q1, you said it was a good volume but very aggressive pricing. Have any things changed?
I think in general, we see a really healthy pipeline. As Lars said, it's often seasonal, so it's Q4, and we already have some insight into that Q4, which looks good. In terms of the pricing, I think we see still a competitive pricing, but it's better than a year ago. I think the funding that Lars was touching on will drive that. The question is more timing because the funding costs are real for the industry. That will drive up return requirements over time. How quick that happens is a little bit depending on the appetite and the need of the industry to replenish the books for all our competitors. The pricing and the volumes are gradually improving.
If you look at volumes, it has increased materially from 2020. It increased in 2021. We're seeing that it's increasing in 2022 as well. The pricing, the more attractive returns is also coming. Particularly for us, the impact is both the market side of things, meaning volumes and at more attractive pricing for us, and then also us focusing on the deals and situations we see that we can add more value, meaning that we can extract more value for ourselves as well through pricing and returns.
All right. Perfect. Thank you so much.
Thank you. This concludes our question and answer session. I would like to turn the conference back over to Lars Wollung for any closing remarks.
Thank you very much, everyone for spending the time with us. I wish all of you a good summer. If nothing else, let's meet up after quarter three. Thank you very much.
Thanks, everyone.
Bye-bye.
Have a good summer. Bye-bye.
Thank you. This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.