Hoist Finance AB (publ) (STO:HOFI)

CMD 2021

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Feb 25, 2021

Ladies and gentlemen, a very warm welcome to Hoist Finance Capital Markets Day 2021. We're standing live from a studio here in Stockholm. And of course, we would have loved for all of you to be with us in the studio. But for obvious reasons, that can't happen, as we all know. However, we're delighted that you've chosen to spend the afternoon together with us online. For the same reason, we don't have all the speakers in the studio here in Stockholm either. But don't worry, what I can promise you is that we have some great content for you this afternoon. The afternoon is divided into 2 parts. In the first part, we will first Hear from our CEO, who will reflect back on what has happened in the last two, two and a half years since we last had a Capital Markets Day. We will then dig deeper into the business lines, the 4 brand new business lines that we have created and how they work together in order to create a seamless omnichannel customer experience. Then there will be a short break around 15 minutes before we hear a market outlook and what That means for investments. And finally, our CFO will round off the day by providing some projections for the financials. All in all, we believe that this will take around 3 hours and 15 minutes. At all times during the show. You can ask questions. There is a Q and A field below the presentation, a little chat window. And we urge you, of course, to send questions. And we will have 2 Q and A sessions, 1 in the end of Section 1 and 1 in the end of Section 2. And finally, I'm very happy to For you, a small surprise. You will today have the chance to experience what our customers experience because you can Actually, set up your own payment plan online today live in our self-service portals. In order to do so, If you want to participate, you need to send us your mobile phone numbers and you can do that again in the chat field below the presentation. Then we can send you some personal login details and during the break, you can try out the self-service portal. So don't forget to send us your telephone numbers and I promise we won't share them with anyone else. So you will hear from the Hi, your executive management team today, but only a few of them are here in Stockholm. We have in Stockholm Julia Erhardt, our Chief Retail Banking and Business Development Officer and Christer Johansson, our Chief Financial Officer. Then on Teams from various countries around Europe, we have Julian Winfield, our Chief Market Execution Officer Fabian Klechard, our Chief Secured Assets Officer Jelle Dekes, our Chief Contact Center Operations Officer, Jarko Heynonen, our Chief Digital Officer, Stefan Uhlmeier, our Chief Investment Officer and Melanie Foster, our Chief of Staff. So, you will hear from all of these participants over the course of the afternoon. But as is customary, we will start to speak with our CEO, Claus Anders Knudstein. Welcome, Claus Anders. Thank Thank you, Inger. Good to be here and good to see you. Good to see you too. And good to see you in person, finally. That's been a while. I wanted to I remember that the last time you were in a Capital Markets Day, that was about two and a half years ago, you presented yourself as having been CFO for 10 years, CEO for 15 years at that time. And the only thing that was constant in your professional life had been change. I guess that didn't change in the last two and a half years, did it? No, it didn't change at all. I think actually the last few years have been Marked by massive change, I think it's fair to say that change is actually the only constant. So also from me to you and on behalf of the whole executive management team, a warm welcome To this Capital Markets Day, a day that we really have been looking forward to because I think we have A lot of interesting things to reflect on and to share with you today. So I am Claus Anders Nystern. I am CEO in Hoist Finance. I've been CEO now for the last 3 years. Prior to joining Hoist, I was also CEO then for Lindorff, one of the largest companies in the industry that happened to merge with Interim. And as a good Norwegian, I've been working in multiple industries and sectors over the years ranging from fish farming, banking, distribution, Retail and of course, that connections. And I do think that one of the common denominators between my Jobs in these industries have been that change is the only constant. Before I Go deeper into the presentation. I really want to leave you with 2 thoughts. And the first one is that we are now transforming Hoist into a much stronger and much better company. And the second thought reflection is that in my 7 years in the industry, I have never seen a more positive outlook. So I believe that today's messages are very clear. So first of all, we always put customers first. And the reason for this is that the real value creation In the debt collection industry is engaging with the customers, trying to find The affordability and the willingness to pay and establish great payment plans that are sustainable over time. The second piece is that we have made significant progress despite having had 2 very Challenging years delivering on our agenda, implementing our strategy. The third point is related to the market opportunity, which I just mentioned. And in this market, I truly believe That Hoist Finance is really well positioned and our strategy is fit for purpose. But before talking about strategy, let me share some thoughts on our customers. And I try to listen in to customer conversations as often as I can, And I'm really pleased with our approach to finding good solutions for our customers. So I take a lot of pride in this. And I think basically anyone can fall into debt. And I'm pretty sure that you, As I can name 1 or 2 people that I know that has been under financial stress at one point in time in their lives. So for us, it is very relevant and very meaningful to support people Back to financial inclusion. And our promise to our customers is that we are going to be there By your side every step of the way. And Not only do I listen to customer conversations, I also try to read up on customer feedback and I wanted to share one that I think was Extremely powerful. It was a lady in Germany who wrote to us and said where there used to be only darkness, now there is light. And of course, our work, when our work is so meaningful, that gives us a lot of encouragement. So we are not only helping customers and the families and communities and society at large. We also feel very much that we are part in the roadmap to achieving a better and more sustainable future for all, which happens to be the goal for United Nations. Let me then move on to strategy. And as this picture clearly describes, We have 4 distinct pillars in our strategy. The first one is market leadership. And we know from what we see and from our experience that size matters In our industry, there are distinct benefits of scale. That's also why we in 2018 Decided to embark on a journey of growth, even moving away from only investing In the classic core, which happened to be unsecured NPLs, we wanted to start investing in secured NPLs, but even performing loan, which happens to fit perfect when we have a banking license. But size matters, but so does Focus. So we strongly believe that it's important to be in some jurisdictions, not all jurisdictions. And we are in the most important markets in Europe today, and we do compete for At least 80% of the market opportunity. The second piece of the strategy or the second pillar It's effective and efficient. And Hoist used to be like, I guess, most of international or pan European companies, Slightly fragmented and scattered, but we embarked on a journey of industrialization, harmonization and standardization. And we will see evidence today that we have brought we have made enormous strides in that direction. The digital transformation is happening. And I sometimes say that our industry It's fairly old fashioned, relying on letters, contact centers technology, But also to some degree, text messaging. But we should have in mind that a lot of the non performing loans that we are working on now, They were originated online, basically without any human interaction. So there's absolutely no reason Why our customers cannot be self served. The last cornerstone or the last pillar in our strategy It's our banking license. And the banking license has served us really well for a number of years, actually since 1996. And let me make it very clear. We still believe that a banking license will serve us well in the future. So I mentioned we had 2 difficult years, but we haven't wasted our time. Let me just call out a couple of things. I will save Some of the thunder from my colleagues that will bring out more evidence, but I just wanted to bring out a couple of things. And let me mention one first, which is the Ambition to invest into new asset classes. A year ago, we invested in the biggest portfolio That Hoist had ever done throughout its inception. That was in secured MPLs in France. And this completely, of course, transformed the French market for us. And France is now the clear number one in secured NPLs, Very important milestone for Hoist Finance. The second thing I would like to call out is Our professional and passionate colleagues now working in shared service center from Poland, but also in near shoring centers in Romania. These are really, really important for us. And we, of course, increase the talent pool, but we certainly benefit from scale And scales. My 3rd call out will be digital collections. We've basically gone from close to 0 to 20% self-service ratio over the last couple of years. And now, of course, with a banking license, We're looking forward to develop our services and products in the next coming years. So we have had 2 tough years, which comes out really clearly When you look at the share price development. So at the previous Capital Markets Day, November 2018. We felt pretty good about ourselves. We had raised new equity during Q3 And our CET1 ratio was above 13%. We were ready to go and attack the market and have our lion's share of the market opportunity. However, on 17th December, We received an unexpected letter from the Swedish FSA where they had they were implementing a new interpretation Our old rule regarding risk weights. And the risk weights for our unsecured NPLs changed From 100% to 150% overnight, wiping out our capacity to invest. And then a couple of weeks later, we learned that EBA, European Banking Authority, Was implementing a new mechanism called the potential NPL Backstop. And the backstop was put in place for good reasons. We'll put in place to push banks to divest more of their non performing exposures, which is a good news for this industry. But for Hoist Finance, did this change put our very existence, our business model At risk. So 2020 became the year So we had to manage and implement mitigating actions to deal with regulatory change. And then, of course, as you can clearly see from this picture, 2020 became the year of the pandemic. And you see the consequences of the share price of the impairments that we did in the first half of last year. So what has the consequences been then from these changes? Well, I think this picture kind of says it all. To the right, you will see the Original plan of investments that we had put in place in 2018, and we are targeting Investments of SEK 31 1,000,000,000 from 2018 to 2020 in our 3 year period. Due to the new regulatory constraints and the pandemic, we have only invested half of that volume SEK 16,000,000,000. And you can see it to the left How the CET1 ratio has developed. As mentioned, we had 13.1% CET1 at the end of Q3 2018. You see the drop from that level to 9.7 percent just, you know, at the internal limits Due to the change in risk weights, you see the second trough from the pandemic. And of course, our capacity With the new risk weights has been very limited and we shouldn't forget that we are in the business of portfolio Investments, that's what we do. And if you take a look at the consequences through another lens, If you look at this from a return on equity perspective, let's just take the bridge together. So the first step of the bridge is the reported return on equity for 2020 At 1%, very low number. If you add back the consequences from the impairments, 9% you come to a new, call it, underlying level of around 10% to turn on equity. For illustrative purposes, we have even added back what would the ROE be? What would our return on equity have been If we have been able to execute on our original plan, investing above SEK 30,000,000,000 and you can clearly see that size matters. It has a significant impact on returns. And I think we could have said that we would have delivered around 20% So looking ahead, I guess the key question is when will Hoist be back, Delivering consistent returns at that level. Let me just say that change is needed to do so. I'm not going to take you through all the details in this picture. But let me just say that in 2018, we identified that Hoist was behind. We are behind the curve and behind competitors in terms of operational excellence. So we have to implement our 1 Hoist Transformation program. My experience is that if you want to make real change happen And if you want to make change stick, you have to move on a number of key fronts. And that's what's highlighted in this page. So we had to put in place a new operating model. We had to work with performance management, of course, the people side of the business, because we know that soft issues can potentially become hard issues. And of course, leadership, culture, behavior, again, a very important topic. And I can tell you and I can assure you, I can underwrite even that we see so much improvement on so many KPIs. We can see it on performance. We can see it in our work processes. We can see how we work with training. We can see it from the feedback from the organization through Gate Place to Work. And we are going to share a lot of these facts and KPIs in the next few hours. So I'll say most of it for my colleagues, but I just personally had to bring out 4 key examples. And the first one is digital collection. I said that the digital transformation is happening. It's real. It's happening now. So we set ourselves out to become the digital leader in our industry. And since 2018, we have moved on a number of key areas. And just recently, we conducted a market survey with a very reputable consultancy firm, which made us really happy because the survey reveals We are actually at this point in time, the industry leader in the sector. And we will show you more of this In a little while. The second example I want to bring out is related to cloud migration. Just 18 months ago, we were at a very low level in terms of moving to the cloud. Now, As we speak and I checked the numbers yesterday, we are at 95% level on client Migration. And this is a significant improvement and it's of course very important for us because if you want to have a front end That works. A front facing the customer, you need to rely on a strong backbone. And our IT colleagues have made tremendous effort to standardize, harmonize and move to the cloud so that we can deliver a consistent high quality service 20 fourseven, 365 to our Customers. The 3rd example I want to bring out is related to 2 specific markets. I did already mention this transformational transaction that happened in France, But also Germany has made significant progress the last few years. France used to be loss making. Now with SEK 106,000,000 profits, it's a significant and important contribution to the bottom line in Hoist. In Germany, we used to be big and relevant. However, we lost momentum over many years. It made me really happy last year when Germany became our most important and dynamic market from an investment perspective. And you can see the improvement in profits. There are a number of key common denominators between These 2 turnaround processes, the use of near shoring and shared service capabilities, the digital transformation. France is ahead of Germany, but Germany is picking And also how we've been working with our people. And look at the change in Great Place to Work In these two countries. So there's no question about how we have been working with leadership behaviors with our teams. And this feedback from the organization is really, really powerful and it shows that engagement matters. And finally, the example I want to bring out then is the assuring and shared service centers. And let me just say that we are on a journey. We've taken huge strides. Now 14% of the workforce is working from Romania and shared service centers in Poland. Really happy for this development. So, I tried to give you a little cliffhanger today when I started Saying that there are 2 thoughts I want you to hang on to. The first is how we are transforming Hoist. More about that later. And the second is that the market opportunity is very, very promising. Let's first Take a look at what happened last year. As you clearly can see from this slide, volume was low in 20 -20. Actually half of what we saw in 2019 and all the way back to the levels seen in 2013. And this is obviously driven by the COVID-nineteen pandemic. So last year's shortfall Welcome to market. Maybe some of them that volume will come this year. I personally think that The outlook for 2021 is better than it was last year, but I think the future ahead is even more interesting. And I think you can look at it through with different references, all pointing in the same direction That, you know, banks taking large provisions now every quarter, the NPL stocks on banks balance sheets It's building rapidly and we think it's going to be twice the level that we saw pre COVID-nineteen. So growth matters. I think we have said that a few times already, but let's take a look at the financial consequences From growth. Now we will again take you through the steps in this bridge. So you've seen this before already, actually. So the 2018 plan was to invest SEK 31,000,000,000. We already did half SEK 16,000,000,000. What you see ahead of us now is that over the next 3 years, We expect investment volume to pick up to be at around SEK 25,000,000,000 to SEK 30,000,000,000. We laid out a couple of reference points in this bridge. To your right, you can see that the replacement CapEx It's around SEK 10,000,000,000. The SEK 20,000,000,000 mark that you see there is where we believe we can achieve 15% return on equity. But the generation of capacity to invest is even higher than this. And Kristi can explain this better in his section, but by investing into assets with lower average risk weights, We do actually free up capacity to invest more. So from a profitability perspective, then we, of course, completely realize that growth is not the only parameter. There is also a significant impact from becoming more effective and more efficient and close The final piece on the performance gap. And the good news is that we know what to do. We have our plan. We have the projects. We have the initiatives. A lot of the investments have been taken And the benefits are to come. We are realizing we are tracking the benefits every single week. And another piece of good news is that we have the right operating model And we have the right team to deliver on these plans. And I'm very proud to have these colleagues around me to deliver and execute on our strategy. I think if we add it all together, you will find 60 years of experience from the collection industries, 100 years from bank and finance And you find the right personal qualities in this team to be able to deliver. And one little fun fact is that this strong team of 9 comes from 8 different Nationalities. That's at least some diversity to reckon with. So let me stop here and thank you for your attention. So thank you, Claus Anders. And one of the things that Claus Anders stressed was how we really want to support our customers. Indeed, our commitment or our mission is to help people keep their commitments And our vision is by your side, reflecting how we really want to support our customers every step of the way towards financial inclusion. So I thought we'd do just what Claus Anders proposed. Let's put the customer first and let's put some color to the customer, who is our customer, who are our customers. And with me to do just that, I have the Chief Retail Banking and Business Development Officer, Julia Erhat. So maybe if you could put some color on yourself, who's the woman behind the long title? Thank you, Inge. And nice to be here today. I joined Hoist as a consultant just before we received that letter from the Swedish FSA regarding the risk weights in 2018. At that time, I was very impressed about the way they handled the challenge situation. So when I had a question to join Hoist and to head up the retail bank business line, It was an easy answer. I've started my career working for Treasury and Risk in 1 of the largest banks in Sweden Just in time to experience the financial crisis. I was working during the time when we were heavily loaded with new regulations In the banking industry. But as much as I like the spreadsheet and understanding how to deal with these problems, I have a big passion for understanding our customers and understanding what's driving the business. I think the financial industry is playing an important role in The society to make an impact and the Hoist is in a great place to do a great impact. Okay. So passion for Excel sheets, but also passion for people. Let's stick to the people for for now because our industry is a little bit different to other industries. Pries. Let's face that. I mean, most of our customers have not chosen to be our customers. But even so, you always say that Coming to Hoist should be felt as an opportunity. You say that coming to Hoist, the customer is given a second chance. What do you mean by that, a second chance? Normally, our customers started their journey by taking a loan, a consumer loan in a bank. Something happens in their life and they fall into debt. Coming to Hoist, we give them the time needed to sort out their financial situation And to set up a payment plan that works for them. Just one step back now. So what are these things that happen to people? It's usually there is an external, a major life event that could happen to anyone. As Klas Anders was saying, It can be the worst, a job loss. I was listening to some one customer that had burgers breaking into their house, And they became in-depth for the next 2 years. And then you said that they can stay longer with Hoist than they normally can with the So how long does a customer normally stay with Hoist? Our customer, normally they pay off their debts within 4 to 5 years. And what more can we do for our customers? We understand our customers. We have 25 years of To handle people in financial difficulties, and we have built relationships with those customers. We know what kind of support they need. And through open banking that we launched in 2020, we can give them more support. We have Help them to understand their financial situation such as a budgeting tool, switch utility bills and More things that I will talk about later on today. Okay. So we'll get back to that. But how many customers do we have? It's like 1,000,000, right? Yes, we have 5,000,000 active customers. 5,000,000. Okay. So I guess it's very difficult to talk about any one customer. But if we could Try to put some color to some of our customers. What would that look like? Yes. We took three examples of typical Hoist customers With us today. So we have Maria and Maria was working as a teacher and she got sick. And when something like this happens to you, all of your energy needs to focus on your health. And she didn't have time to sort out her financial Situation, she missed some payments and she fell into debt. Maria came to Hoist, and we have set up a payment plan for Maria. She makes smaller payments every month to get out of the debt. She does so as an average payer or a regular payer. And this is what our average pay look like. It's about 50% of our customers. They stay to a payment plan. So the most common customers, they pay regularly. Correct. Okay. But then we have Beatrice. She's different. Yes. Beatrice is more similar to an entrepreneur. She's working as an artist and she was one of our customers That the pandemic hit and it's hard for Beatrice to find income at the moment. So Beatrice is one of our irregular payment, Which is roughly 20% of our customer. Some months she's able to pay, but not every month. And then the third one you brought. Yeah. I took a student, Henry. He took a student loan for a car And he had an accident with a car and he fell into debt. So when we contacted Henri, He was actually working as a financial consultant. He logged into our self-service portal with his iPhone 11 and made an one off payment to pay off his debt. How do you know it's an iPhone 11? Actually, when I talked to our digital team, they told me that On our self-service portal in the UK, 20% of our customers are using an iPhone 11 to do their settlements. Okay. So, we will continue to follow these customers during the day and you will also be back later on today. But thank you for now, Julia. So I think the conclusion from what we heard with Giulia is that there is obviously no one customer. All our customers have their own individual stories, their individual challenges, and they need to be taken care of in an individual way. And that's why we have created 4 business lines that cover our 3 main asset classes, unsecured non performing loans, Secured Nonperforming Loans and Performing Loans. So I said 4 business lines, 3 asset classes. Well, actually, the unsecured nonperforming loans, our core business, It's covered by 2 business lines. So, the portfolios are owned by our digital business line, But the servicing, the management of these portfolios can be done either by the customers themselves through the self-service portals or in a more traditional way through our contact center operations. That's when we call proactively. That's when we send letters. That's when we send emails. That's when we text Customers, etc, to help them find a way out. And the man who leads this New business line, the contact center operations officer. That's my dear friend Jelle Decker. He's also the country manager of the Benelux Countries. And he may look relatively young, he may look relatively fresh, but don't be fooled. He's been in the collection business for a long, long time, both with Hoist and elsewhere, haven't you, Jelle? Yes, indeed, Ingen. Thank you. So, yes, my career The last 17 years has been about collections. And the last 5 years were with Hoist Finance. Now after these 5 years where My great team in the Benelux and I achieved very healthy profitable results. I'm now looking very much forward to take on this challenge for the contact center business line. But these 5 years have also given me a great inside view As to how we operate in Hoist Finance. It has shown me that on one side, we have fantastic colleagues that work very hard every day To make tomorrow a little bit better than yesterday, but it has also shown me on the other side what you, if you're an analyst or an investor watching, Probably have also seen that we have already come a long way, but there's still a bit of a performance gap left for us to close vis a vis our competition. And how we intend to do that, that's what I'll talk about in roughly the next 15 minutes. Now, as you heard Claus Anders say, the digital transformation of our industry has gone much faster than we thought over the last 3 years. And before my colleague Jarko will talk all about the digital development we have going on in Hoist, I'll talk about how we're constantly improving our contact centers Across Europe, because collections is still also very much a human business where apart from automated decisions, Humane decisions sometimes also need to be taken. We just heard Julia, for example, talk about Maria and some other of our customers. Now, first, let's listen to one of my colleagues about how her work in the contact center is steadily changing. Now with digital development, we We have been able to be more proactive when it comes to handling questions. We are more effective because we have the answer to easy questions ready before Requests like what is my outstanding balance for example. Those requests are becoming more a thing of the past now Within the contact center because now all our customers have to do is log on to their self-service portal and everything is there. This in turn frees up more time for a contact center representative to handle more difficult questions the customers may have. As our contact centers Are seeing the easy question, easy, answer to customers move more towards, our digital platforms to find their answers there. We're also seeing an increase in the more complex questions where a more nuanced answer is crucial For the successful handling of the raised issue, we're also witnessing an overindebtedness becoming a more An ever increasing issue within society. And this makes it all the more important that we get an overall view or Comprehensive view of the issues our customers may have and that we take the time to really listen To understand each individual story. For more complex cases, it's More about creating a relationship with a customer and having an ongoing dialogue with them, so that we can lead and support them towards A more debt free future. Now when it comes to that, you could almost say that the job of a contact center representative is shifting more Towards that of a credit coach, almost a therapist even sometimes. And that all So What does this story teach us? It tells us that virtually all transactional communication will eventually go digital And all interactional communication, so where you and I engage with each other in conversation, that is where the human will likely remain needed. So for example, vulnerable customers like Maria, who ended up in bad debt through no fault of their own, Or as you heard, over indebted customers and as you heard in the video, make no mistake, 75% Of all our customers in Hoist Finance who are in a situation of over indebtedness got there through originally being in a vulnerable situation. And also litigation processes make up still a considerable portion of the contact center work. That s probably a good bridge, but take a look at my business line in numbers. 70% Of all amicable collections in Hoist Finance are done in amicable ways. So don't let the word contact center fool you. 30% is also about litigation work. So the work of a contact center agent is about more than just creating payment plans on the phone. A very important metric in our industry is the so called conversion rate. This is the percentage of calls Now To some of you, 30% may seem low, but if you consider the tremendous growth we've seen in digital self serve payment plans, actually, it is not. It merely shows that contact center agents do more than creating payment plans. And at the same time, As one third of our contact lead to collections performance, it is a very important lever for us to focus on. And I'll get back about the conversion rate later in this presentation. Last, as you heard Claus Anders say, we're very proud To already be able to report that out of our 850 agents in the contact center business line, now 150 operate out of low cost Jurisdictions with an ambition to grow to 200 by the end of this year. Where did we depart since the previous time we met on our Capital Markets Day? So the slide you see in front of you from left to right Takes you through the last couple of years and the development we've seen. And as you can see, indeed, we did come a long way. We've consolidated sites In the U. K. And France, we've created standard contact center KPIs throughout Hoist to more holistically measure performance. And then last year, coronavirus struck. All of a sudden, we were confronted by a crisis. And all of a sudden, all of our people needed to work from home to be safe. We needed to respond. But that didn't only bring us bad things. I mean, a little over a year ago, my colleagues in the Benelux were still punching in numbers on keypads on their telephones, very inefficient. And now we have dialer deployed in all of our markets. So one could say that COVID here and there sped up some of the automation we had planned. For the future, for the next couple of years, the contact center business line strategy focuses on 3 topics. First of all, our collections performance, which has been and will always be our core focus. 2nd, the human in our industry, both our internal humans in Hoist, but also the customer experience. And 3rd, Our cost to operate. And the latter you can see, we've already achieved some tangible results over the last few years. Our cost per FTE came down and also the number of FTEs we need to operate our books came down. And in the right of your screen, for the future, I truly believe that we have what it takes by deploying these initiatives to further close the rest And let me now give you a little bit of an inside view That I had the last 5 years as to how we operate in Hoist Finance. So it starts after onboarding Push customers, the key for Hoist is to get in touch with as many customers as we can. This is what we call our so called portfolio penetration rate. Then, we offer our customers the means of communication best suited to that customer. And since the last year, we are greatly assisted here by Rules Engine. And I'm actually a little bit jealous that Jarko, in a while from now, can tell you all about that. We then differentiate between customers willing to pay, unwilling to pay perhaps, or maybe unable to pay. For those willing and able to pay, we offer a payment agreement that sticks, like you just heard Julia explain, By doing thorough affordability assessments and offering the customer a payment method they like best. This is where we truly make the difference, and a conversion rate is what it's all about. Here is where we help people keep their commitments. And it's also the quality of our contact centers that has come a long way. It is then so good to see that after many years of hard work, that hard work is also recognized outside of Hoist Finance. And I'm very proud of the people in Hoist Finance, but also our external partners like Aspect, for example, For the close collaboration that they did to create the success that got us nominated. And as I said a few minutes ago, when coronavirus struck, we needed to respond. And to then be recognized As a top 10 contact center business in Europe, for the way we responded, that makes me extremely proud. So what lies ahead? I've singled out 3 topics that I believe are important And they're actually topics that we address throughout our conversion funnel that you've just seen. Our Skip Trace initiative focuses on reengaging with customers. For those of you who paid attention and heard Julian saw on my slide, we have 5,000,000 customers that are active in Hoist, Customers we are in contact with and who have made a payment to us in the last 12 months. Our Skip Trace initiative focuses first on validating Our existing contact details enriching them were necessary to reconnect with some 1,500,000 inactive customers still currently sitting in our back book. Our High Performing Teams program Focuses on training and coaching of staff and embedding that knowledge throughout the organization to increase our conversion rate. And these two initiatives combined, I believe will have significant effect on our collections performance for the next couple of years. Our workforce optimization program focuses on how we use our workforce properly. I think maybe one of the most commonly used words in the contact center business is shrinkage. Shrinkage It's the number of hours a full time employee is not able to be productive. And this program focuses on more efficiently managing our shrinkage levels. You could think about Business line. Our speech analytics program over the last 6 months was able to reduce the in conversation silence Time by some 14%, making the conversation itself more efficient. And I really believe we have what it takes Let me conclude by saying that we notice the digital transformation It's going much faster than originally anticipated, but we know what to do to further close our performance gap. And the contact center business line continues to focus on improving those areas of the process where the human will always be needed. I'm very much looking forward to taking on this challenge of leading the contact center business line and working together With all of our markets to further close our performance gap. Thank you all for listening. Over to you, Inge. Thank you, Jelle. I want to reiterate one thing that you said. I am truly impressed that our 850 contact center agents are working on a daily basis to make tomorrow a little bit better then yesterday or today for our customers. That makes it a very important job, a very important job indeed. And as Gelle and Marie both said, our contact center agents are also informing our customers how they can serve themselves using our digital channels and our self-service portals. We are happy to support our customers through the more traditional ways, but we know that our customers want to go digital. As Claus Anders said, the digital shift is happening now in our industry very much the same way as it did in the banking industry 10, 15 years ago. In order to mark the importance of this, Hoist Finance has created a brand new digital business line. And I think every successful organization should have a steady Fin. Now we have 1, too. He's heading the digital business line. He's our Chief Digital Officer, Jarko Heynonen. So straight from Helsinki, Finland, Jarko, other than being the 1st Finn in the company, what's your background? Thank you, Ingve, and good day, everyone. So yes, I'm indeed Jarkko Henan, and I'm based in our That's a good location, which is not a full office, at least now. So to your question, at Hoist, my role is to lead our New digital business line, which mainly consists of the unsecured NPLs, as you heard already. And I look after our digital development and IT teams, Which play a pivotal role in enabling our digital journey and the further growth we've been talking about already. So overall, I have over 20 years of experience in digital transformation and business leadership in various companies. And I have worked nearly 15 years in the finance sector in Investment Banking and Consumer Lending. And quite recently, I worked 6 years at Google At their EMEA headquarters in Dublin and later on in Helsinki, at Google, my role was to advise large companies On automated and data driven digital transformation, I had a chance to talk to dozens and dozens of companies in the EMEA region What digital transformation for them look like. And this is where I saw what world class digitalization really means. And now at Hoist, I want to put all that experience in play. And I'm very happy to be in the team and I'm very eager to accelerate our digital progress even further. So let's have a deeper look at what digital looks like at Hoist. When I came to Hoist in early 2019, I was met with a typical situation in collection companies as they've all grown through acquisitions. No cohesive integrated IT, different solutions in all countries, under investment in IT infrastructure. We immediately outsourced our IT. We moved our IT to the cloud. We harmonized collection systems And deployed a cloud based omnichannel contact center solution. We built and experimented with new self-service solutions with AI, chatbots, WhatsApp, the list goes on. In the process, we learned how to increase customer satisfaction and reduce cost to collect. Last but not least, we put in place an AI driven strategy engine that every day take millions of decisions based on 100 of millions of data points. To talk about this exciting development, I introduce you to my colleague, Chris Bates. Rules Engine implements a standardized approach to our collection strategies that we're implementing across the group. It makes a daily decision on the next best action for each of our customers. We've already put RollsEngine into 2 markets where it's making more than 1,000,000 daily decisions. These decisions are driven by data. They use our predictive models and scores to customers and we're able to run multiple tests simultaneously to learn what works and to optimize our performance. It's also digital by default. It uses omni channel contact strategies that are fully integrated with our different digital products. For Germany, the implementation of the new rules engine has significantly improved customer interaction. In only few months, the additional collections related to it overshot the plans by a factor of 4. The systematic use of all contact data and communication channels has led to a shift from mostly analog To mostly digital outbound communications. We can see from the first results of Champion Challenger tests that there is still room to improve. So for us, it is just the beginning of operationalizing on the new rules engine. So, as you heard in the video and earlier from Claus Anderson, Jelle, This is what our digital journey looks like so far. I will now dive deeper into digital and share a few more examples on what we have done and what we have achieved. And in the end, I will share an overview of our future plans. So now let's look at some key figures. We have a digital Self serve coverage in all countries where we operate, meaning that customers can engage with us using a digital portal. The only exception is Greece, where we have outsourced our operations. And secondly, we have harmonized and greatly simplified our infrastructure. Currently, we have over 85% or even 95 Our systems and data in the cloud. And we have reduced the number of different collection systems into half of what it used to be. And today, over 20% of our eligible NPL collections are fully digital, meaning that there's no human interaction at any stage of the process. This is an important metric to keep in mind, and I will come back to that a bit later. And in terms of growth, our digital collections have increased by 40% year on year In the last 3 years and outside the U. K, which is our most mature market, we have seen a much higher growth, nearly tripling every year. And overall, as a result, we have collected over SEK 800,000,000 digitally so far. And here's a couple of more milestones. A few years ago, we started investing in digital customer experience and launched self-service portals Where customers can manage their debt, create payment plans and of course do the actual payments. And last year was much about getting smarter in digital. We built a number of AI powered tools and reports, including predictive models and forecasts, and we launched the rules engine you just heard about In the video, we centralized and harmonized much of our infrastructure and applications. And as I mentioned before, Our digital collections rate has quickly grown to over 20%, and we only expect this growth to continue. In the next 2 years, we aim to collect 40% digitally. And our plan is to roll out digital first Services and collection strategies broadly across all markets and eligible customer portfolios. And we continue to innovate and provide value added services That will further increase engagement with our customers. And now let's put our digital maturity in the broader External context. Here you can see a summary of a recent study from a top consultancy firm. It shows that we at Hoist are the digital Leader or the industry leader in digitalization. Our digital collections rate again is over 20%, while the industry average seems to be somewhere Under 10% today. And the chart on the right tells that we have at least 1 digital touchpoint in all collection activities. That's another area where we have a leading position compared to our peers. And here's another dimension. Looking at digital penetration by market in Europe, we have launched digital Self-service is in all markets where we operate and where we manage debt collections ourselves. The darker the colors are on this slide, the higher The digital penetration there is. And you can see Hoist on the top. So overall, the industry is getting increasingly digital, as we've been hearing, But we believe to have an advantage with digital adoption in key European markets as you can see on this chart. But we should never forget our customers And how they experience and interact with our digital services. Earlier, you heard Julia describing our typical customer profiles. And now let's have a look at the story of another Hoist customer. The world has changed more than ever. People and their circumstances change. We made a promise to be by our Customers side when life changes and help them keep their commitments. Here, we contacted our customer, Leoni, with our newly designed correspondence, Which is easily accessible, engaging, and reflects our digital focus. With just one click, she can be connected to our mobile friendly portal using a unique QR code. This empowers her and literally places the management of her account in the palm of her hand. But what if Leoni is interrupted and doesn't complete a registration and set up a payment plan? We fully realize how busy life can be. In line with our promise To help customers keep their commitments, our data driven rules engine will reignite the conversation and invite Leoni to finish her registration. Once registered, Leoni can instantly view her personalized options. With our innovative You Pay, We Pay promotion, Customers have never had such a transparent online negotiation. Plus, with over 15 payment methods available, Including Apple Pay, Google Pay, and Direct Debit, making payments has never been so simple. But what if Leoni's circumstances were to change again during the arrangement. If she could no longer afford her payments, we reconnect through her preferred channel to once again Show that we are by her side. And with recommendations such as AppJobs, we can support our customers even further With a solution that may help them make up a loss of income and keep to their commitments. Now that Leoni is back on her feet, using our quick access journey, Leoni can instantly update her account. Within just a few clicks, she can pay her arrears and continue with her payment plan. And when Leoni has cleared her balance with us, we This achievement and also offer onward support with useful tips and advice. This really embeds our positive relationship with our customers. And has resulted with a customer satisfaction of 91%. At Hoist Finance, we ensure the customer receives the right message at the right time Through the right channel, underpinned by data and built on trust. Hoist Finance, by your side. Hoist Finance by your side, That is our vision and true commitment to our customers. And for us, it's really important to provide, again, the right message at the right time As you just heard in the video, and that's where rich data and advanced systems come to play. We just saw a Customer Leoni setting up a payment plan using YouPay, WePay. The concept of YouPay, WePay is to provide our customers With a data driven, fully automated and personalized settlement offer, which is easy for them to review and accept And to give their commitments. And we have seen highly promising results, an uplift of 30% in the number of payment plans, A 15% increase in average installment values and a much lower planned breakage rate. UPay is just one example of our recent innovation that has proven to be successful and valuable for our customers. And of course, we are extremely happy about the 91% customer satisfaction rate, which is not something to take for granted in our industry. And finally, let's look at what we are going to focus on in the near future. The first pillar on the left is service and market expansion. We are in the process of deploying all eligible digital services A new innovation in all markets where we operate. We will roll out full self-service solutions into the remaining markets, Namely Italy, Netherlands and Belgium. And the second pillar is automation. We will roll out digital first or digital only Collection strategies for new portfolios across our markets. And we continue to invest in further process automation. Earlier, you heard about our new rules engine that powers our collection strategies, making millions and millions of decisions, Something we could have not achieved manually at such a scale and consistency. We launched this Rooms engine into the rest of our markets Beyond the U. K. And Germany where we have it today. And we keep optimizing the rules engine into an even powerful machine than it is today. And thirdly, moving on to IT, we have already consolidated and harmonized much of our IT infrastructure and data, And we have moved most of our systems to the cloud and reduced the number of collection platforms. This work will continue in the near future. And last but definitely not least, ongoing innovation is critical for our future success. We will look at new ways to engage with our customers And to increase performance. And we want to make sure that our customers remain committed to engaging with us digitally. We will test and try out New contact channels such as automated chatbots, social media and so on. And with that, we expect to significantly increase our digital collections rate The first 30% and later 40% and over. Customer engagement is another important KPI for us because that allows us to introduce additional services, value added services and support for our customers in the future. So to sum up with, for us, digital is Not just a project. Our business is increasingly digital. And in the future, we expect digital to become the backbone of our NPL business. And I believe we are on a very steady track to get there in the coming years. Thank you. Thank you, Jarlco. So digital, not a project, but the future backbone of our company. If you want to understand why 91% of our digital customers are satisfied, you have the opportunity to do so in the break, as I said, because You could be Leonie for 15 minutes setting up your own payment plan and trying out our self-service portal. In order to do so, you need to send us your mobile phone numbers. So please do so before the break. All right. So lots of interesting changes, lots of developments in the NPL field. But actually, one of our biggest changes Since 2018 has been the asset class diversification. We had started that already when we had our Capital Markets Day in 2018, but of course, With the unexpected events just a month later, we accelerated this and now 20% of our assets are in the secured asset class. We heard Claus Anders speak about the amazing turnarounds in Germany and France previously. And Actually, the French turnaround is very much attributable to the secured business. So who could be better suited to lead the secured asset business line than our French Country Manager, Fabienne Clichard. And Fabienne has made an interesting journey with Hoist. He started out in investments. He then went to sales. He did the country turnaround. And now, Fabienne, now you're leading an entire business area, the Secured Assets business line. Thank you, Inge. I'm Fabienne Klechard speaking from our French office in Lille. I joined Hoist Finance in 2012 in the investment as an investment manager in London. Prior to that, I gathered experience in investment banking and startups. My focus at that time was expansion into Italy, the UK and Poland, where we did not have presence. 2 years later, I moved into the country manager position in France. And as you've heard from Klaus Sanders previously, A major turnaround has been performed, and France is now a key market for Hoist Finance. In 'nineteen, I joined the EMT as Chief Sales Officer, Double hatting with my country manager role. And since the beginning of this year, I'm in charge of the secured asset class. So, my objective is to consolidate in existing markets and deploy our secured asset business line in new markets. I believe we have a strong purpose in Hoist, and we want to be recognized as responsible and inclusive finance experts, providing bespoke and value added solutions to our customers in financial difficulties. Before we start, let me So first, in terms of products, whilst in unsecured, we are focusing on personal loans, Credit cards and overdraft. In secured, we are focusing on mortgages and warranted business loans. So the average claim size is actually higher. In terms of operational management, you heard from Jelle and Jaakko that we were focused on industrialized optimized workflows. In secured, it's a more tailor made approach. And finally, a key collection driver is different. Whilst it's individual and warrantors in unsecured, it's more towards collaterals in secured. So there are operational differences, but we share the same banking clients and we share the same infrastructure. For example, we have the same data lake, The same debt manager system and of course, we share the same support functions. So that leads to economies of scale and synergies. So during my presentation, I will describe our journey since the last Capital Markets Day in 2018 and explain our growth ambition and strategy. So, How much have we grown in the past 3 years? Well, we decided to expand into the secured back in 2018, and we have delivered. Just a quick reminder of the rationale. Secured was a big untapped potential. 40% of the NPL stock is secured. That leads to increasing our share of wallet with our banking partners, increased cost synergies and also a benefit from better capital treatment. So key achievements during that period is that we have invested SEK4.4 billion in 3 years in 3 markets. We already collected close to 40% of our purchase price, And it is a profitable business line with strong growth prospects. But probably what I'm most proud of It's that we have 60 highly skilled people with strong experience in asset management. So let's see what are the key milestones in our growth. We started with significant investments In Italy and France in 2018 and in 2019, we've done this landmark transaction that was mentioned earlier in France. This was the largest ever transaction in Hoist's history. And we have rated our Platforms with Fitch rating, which is a testimony of our strong servicing capabilities. And towards the end of 2020, We even opened a new market, the Spanish market. So we have demonstrated in a short period of time our ability to grow and deliver strong results. We have also demonstrated our ability to deliver on large and complex transactions. Let's visualize our growth and our focus when it comes to the underlying assets. Our focus has been on granular portfolios underpinned by liquid assets. We have invested mainly in residential real estate portfolios We'll continue going forward. 80% of our book value is backed by granular residential real estate. On the map, you can see our geographical footprints toward Northern Italy, France, and now even in Spain. The assets we are acquiring are liquid. We only have 21 assets in our RioCo to date. We have now, as you can see, a very strong presence in France and Italy, and our ambition is to consolidate and we will expand into other countries. So let's see how we did it in France. Let's go back in time. We have identified a big market opportunity With few players in France, so we initially looked at potential bolt on M and As. Ultimately, we decided to build up the servicing capabilities internally instead. And we have set up a strong operating model with a few key building blocks. The first one was to establish the customer journey with qualitative customer touch points To maximize the amicable approach, also we focus on the due diligence and underwriting discipline, And we have developed both loan asset management and real estate asset management capabilities. We have set up the governance for the portfolio management, but probably the most important aspect is was to attract And retain the best talent in the industry and build, carrier and development plans for those people. So the French model has allowed us to gain scale and skills to tackle bigger portfolios, and we have shown that we can grow fast And execute well. Now to be able to grow, we have 3 pillars in our strategy. First one is our ambition to double the book value in 2 years and expand into 2 additional countries. Our focus will be on granular secured portfolios. This will allow us to strengthen our synergies. So that's number 1. Number 2, our ability to manage secured assets in various jurisdictions makes us a perfect partner for potential local investors. So we have an opportunity here to generate capital light revenues, and that is part of our strategy. So this will benefit our return on equity. Number 3, we are building One secured team that will share the same system to allow for better learning and sharing as well as greater visibility and control over performance. And that is key to the scalability of our operations. So the key message For the secured business line today are that we've come a long way Since the last Capital Markets Day, investing close to €500,000,000 in the new asset class in just 3 years. Despite the pandemic, we are running a profitable business with very strong growth prospects. And the 3rd point I would like to stress is that our ambition is to continue growing in this asset class in other jurisdiction and gain share of wallet with our banking partners. Thank you. Thank you, Fabienne. So, the secured asset class is Clearly becoming very, very important to Hoist and it's projected to grow in the future, as we heard Fabienne saying. But it's not the only asset class, the new asset class that we're trying to grow. We are also growing in our performing asset class. Thanks to our banking license, we can offer our NPL customers, our core customers, a widened product and service portfolio And we believe that this is an underserved customer segment. We can also buy performing loans off of banks wanting to So the market, for instance, like we did with Nukkredit in Poland a few years back. And leading this exciting business line It's Julia Erhardt. The business line is called Retail Banking and Business Development. And Julia, you all know from before, She's the lady with equal passion for spreadsheets and numbers and the people behind them. Here she is again, Julia Erhardt. Thank you, Yngve. The retail bank is responsible for the banking license, and the business line consists of 4 parts. We are managing our performing loans. We We are managing our deposits, which is 70% of our total funding. We do so through hoist bar in Sweden with Swedish krona and in Germany The business line is not new. We've done deposits since 1996 when we got the credit market license. Our strategy that Klas Anders was talking about that was set in 2018 to move into other asset classes includes performing loans. In 2018, we bought performing loan portfolios, actually exactly 3 years from today. We are handling mortgage loans and consumer loans. SEK 750,000,000 across 2,500 customers. We have the full setup for IFRS 9 risk and compliance As any other regulated banks, we have the infrastructure, we have the license and we are ready to ramp up our Acquisition of performing loans and also origination of performing loans to our current NPL customers. And this is what I will talk about for the next couple of minutes. This is an illustration of the transformation to become customer centric organization. So what are the key capabilities that we have to deliver to our customers and to do the new possibilities that I've been speaking about? Well, we've been in the market for over 25 years. We have loads of data. We always used our data to price our portfolios. But when I look into our database, I see huge potential what we can use this data for. We can understand our customers' behavior Better by using the data. We have the skills and experience, and we have strong relationship with our customers. We have the infrastructure and we have the proprietary data and the technology. We're using open banking And we have a strong analytics team to look at new possibilities. This creates innovative solutions That are tailor made for our customers to help them that are in financial difficulties to get back on their feet again. Let's now look at how it looks like for customers that repaid the debt. What are the possibilities outside of Hoist once you got out of debt? When you paid off your debt, life is not always easy. You live with a payment remark that might stick with you for the next 6 years. You have limited opportunities To be bankable again, and many people get refused by banks because of the payment remark. We have chosen to call this customer segment The underserved people. Talking to former customers when we did an interview with them, we understand There is a tough time. They get refused by banks, and it's hard for them to come back to financial inclusion again. We are not here to compete with our client banks. We are here to bridge the gap that exists in the market for our customers That are creditworthy, but still has a payment remark. We have all of the capabilities, as I was talking about in the previous slide, to help customers from financial exclusion and back to financial inclusion and to be bankable again. In this way, we are maximizing the value of our customers. We already have the customer in house. We understand this risk. We understand those customers. We have the data on the customers. And the customer acquisition cost has already been taken care of I have given a few examples of the support that we can offer our current customers. You saw some examples in the video that Jarko showed you with AppJobs. During the pandemic, a lot of our customers called us because they lost their job. We made a partnership with AppJobs. Upjobs is a gig worker platform that enables people to find a gig work and to get an extra source of income. During 2020, we also built a support platform for our customers to give them help with budgeting, to switch utility bills And to do a benefit checker to see what benefits they are entitled to. We're also looking into possibilities, What we can do for customers once they are out of debt. That can be debt consolidation, refinancing of loans and give them new Loan Products. We have all of the key building blocks to do so this for all of our customers and also after They've been in-depth to extend our customer journey. You remember the customer you met in the beginning. So here we have Maria. Maria was sick and she had to focus on her health. Maria is now back again, working as a teacher. But while she still was sick, she needed help to find out what kind of benefits she was entitled to. She didn't really have the energy To make all of the applications herself, do you actually know that in the French market, there is EUR 26,000,000,000 of euro that you can apply for in benefits every year, but only half of them are used. Henrik, That's now working as a financial consultant and just got out of debt, needs to live with his payment remark for 6 years. Henri wants to buy a house. We know Henri and we understand him and we are happy to provide him with a loan. Then we have Beatrice. For Beatrice, it's a difficult situation and she has debt with more than us, with more players than us. So for her to put all of her debt in one place makes her life easier. She's also So as you can hear, the time is perfect and we are ready to grow the retail bank, and we have 4 pillars for our strategy to do so. The first two I spent a lot of time talking about today, extending the product Offering and extending the customer journey for our customers. But we haven't forgotten about loan acquisition and where we started our performing loans in Hoist. We are continuing to buy performing loans. We see a good pipeline, and we are helping our client banks to get out of if they want to exit the market or get out of a product segment. We're also expanding the Hoist's bar, where we do the funding and deposits. Currently, we are active in Sweden and Germany, And we are soon to launch in the UK to match our funding with sterling deposits. By building trust with our customers and give them the support they need, we are increasing the customer satisfaction. This slide I like to call closing the lope in the financial ecosystem. We help people keep their commitments and we are by their side. We are not here to compete with our client banks. We are here to collaborate with them and other financial players in the industry. This is our way of contributing to the society and help people back to social life. Thank you, Julia, coming behind me now to take some questions from our Viewers, we have quite a few questions actually. We'll try to cover most of them now. If we don't have time before the break, then shortly we'll come back to them after the And I'll try to group them a little bit, but the first question is actually a quite general question, Claus Anders. What is the average amount in the consumer loan business? I guess customer claim maybe or? The average amount in our NPL claims? Yes. I interpret it as the average claim. Yes. I should know that number off my cuff, but I guess it's around €10,000? But let me come back and confirm that number after the in the second Q and A session. Okay. I can say it differs a bit between different countries, actually. So in the French market, we see an higher amount From the average claim. While in the U. K. Market, we usually have lower amounts. And I think this is because in the French market, It's hard to it's not all everyone that are bankable. It's harder to access the banking system in France. So it's more wealthy customers in the French market. Thank you both. We have a few questions related to digital. How many collection What systems do you have now? And are you moving towards 1 global system? Yes. We are moving to 1 global system. Sure. So we have the system in place now in several markets in Germany, Spain, U. K. Now is almost live. Next is Poland. So that's been rolled out, more or less rolled out. So that is certainly happening. I know that some competitors have and they have 10, 15, 20, 30, even 50 collection systems. So they're going to have a tough job in harmonizing and standardizing. We have come a very, very long way. Excellent. If we're already ahead of peers on digital collections, where is the leakage then when it comes to still having a gap relative to Pearson efficiency. That's a good question, of course. What is the performance gap? Where is it coming from and how do we close it? So When I joined Horst, I could clearly see the benefits of the banking license and the enormous funding advantage. The flip side is that we were not more profitable as a company than the peers. So The funding advantage was all given away by lack of efficiency. The funding advantage compensated, if you could like, The lack of efficiency. So we identified gaps, performance gaps in different markets. It ranged from technology, You saw dialers. I think Jelle revealed that we put in place finally a dialer in Belgium last year. Analytics, another one. I would say training, a 4th one. So there are a number of key elements. And that's also why in my opening remarks said that if you wanted to change, you wanted to make it right for every single market And you have to address multiple questions at the same time. So I see a lot of good traction in Closing the gap. I would still say that there is more to do here, but we know what to do and we are committed to closing the residual gap. So we're still on it. Yeah. What is the level of digital collections in France and Germany? I always hear about the Okay, but now I would like to know the level for these two countries. Yeah, good question. So there is a big variety here. I think it's really fair to say that U. K. Is going 1st, and my colleague, Julie, will talk more about that in a second. So the U. K. Is the most mature market by far, And we are at 30% and above. I guess our least sophisticated market from a digital standpoint would be Italy, I think we are at 1% or 2%, a very low number. In Germany, we see enormous growth from a very low base, but I think Germany still is around, call it, 5% mark. While France is quite sophisticated, somewhere between 15% 20%, if I'm not mistaken. So there is a variety here. But I think that speaks to one important topic, which is that we have taken the investments. Now we're deploying Our solutions and then we'll reap more benefits in the years ahead. Right. So not only we have to reinvent the wheel, the wheel is already there. Now it's putting it into use. Yes. And Germany was actually the market where we were most active last year, and that's where this uptake in digital comes In Germany, right? Yes. And as I tried to say also in my opening statement that in Germany, we used to be a very important and large player in the market. Unfortunately, we kind of lost momentum there. So the books that we are working on, the portfolios that we are working on in Germany are quite old and Not so suitable for digital collections. Hence, we didn't start the rollout there first. But now we see a significant uptick from The rules and drill that we can call you in the Q4. And it's really giving us momentum. It's good to see. Yeah. And we heard Oh, yes, we do. What is your long term target for fully automated and digital if 20% is the current status, near term goal is 35% to 40%? Yeah, I think we always will have contact center services. We're always going to have vulnerable customers, people who need someone to talk to We're not self-service. I think it's hard to gauge exactly how far we can go. I think in the Reasonably near term. We can get to 35 to 40, but I think we can do more, maybe 5060. I think it's hard To be extremely precise, we're going to learn fast. This is, I mean, the collection industry is not fast moving consumer goods now, But we are picking up. We are learning fast. And of course, having a standardized, harmonized industrial approach makes us able to Learn quickly what actually works. Yeah. Now, I think I read that only 2 years ago, 80% of debt collection companies didn't have any digital channel. So it's happening very fast now. Yes. And I think if you look at the feedback that we're getting from this market survey is that most competitors can They can be pretty strong in one country, right? We have competitors that are kind of local champions and they're pretty good at having self-service capabilities. The hard part, the tricky part, which really proves the point, is that you can have a solution which is common for all, Where country borders do not matter anymore. We have one approach to every customer. Moving on to secured, in which markets have you so far acquired secured assets? Is there a risk when entering new markets greenfield? So why don't Fabienne do a question? I think he knows that even better than I do. And the good thing is that we're looking at a number of key things. Fabienne was quite right when he said that, you know, on the total NPL stack, the secured Portion is 40%. It's amazing. So maybe Fabienne can give some more color. Yes. Did you get the question, Fabienne? Yes. I think I do. So we invested in Italy, France and Spain so far. And as I said, We have created a standard priority model, which enable us now to enter new markets. But of course, what is key is to gather the right talents within the market To be able to price the portfolios and to service the portfolios afterwards. So it's I would say that The competencies are really our key focus when we get into a new market. Hope that answers the question. Yes, I hope so too. Thank you, Fabienne. Then we have a question for Julia, it's a very similar question. In which geographies have the performing loan portfolios been acquired and what type of loans unsecured or secured? We have performing loan portfolios in Poland. That is the main mortgage loans. And then we have loans in Germany and in the UK market, which is consumer loans. But the largest portfolio is in Poland. Changing the topic slightly, maybe back to you, Claus Anders. You excluded 3PC in the U. K. Last year. Are you considering exiting other markets or joining forces forming joint ventures with peers? Yeah. So good question again. So I think 3PC is actually very interesting. It was a bit sad to let 3PC in the UK go, But we couldn't find a way to really make it as profitable as we would like. And then again, I think the argument of focusing on something I kind of prevailed. We do have servicing in Italy. We have some servicing in Spain And even Germany, but to a very small degree. Yes. But I'm not ruling out that that is something that we can do later on. Especially, and I think this is the interesting part, as we understand more and more how to work digitally, I think offering maybe a digital only servicing solution holds a lot of merit, but we are not there yet. But for being a bank or operating with a banking license, of course, having capitalized revenues makes all the sense in the world. And one final question before the break, which is slightly related to that, how large proportion of total staff base to be near short or placed in shared service center in the future. Will it change drastically in the near term, let's say, next 1 to 2 years. So we have around 150 employees now in Romania working with back office and even Contact center operations. And then we have around 100 people in Rocklau, Poland working with cold shared service centers. Those will continue Then we'll see how much technology will help and take us. So we'll always try to find the next Best way forward for our customers, right? The most efficient route. Yes. So I think the customer response is very important. I think The very promising numbers that I think Jako shared on the payment plans and installment levels going up and people are Selling themselves and the breakage rates being significantly lower. Of course, it makes a lot of sense to prioritize the digital channel. But of course, we want to offer a seamless and strong customer journey. And I'm convinced that we're going to find out what the potential is. Thank you, Claus Anders. Thank you, Julia. Thank you, everyone on the screen. That concludes the first part. I hope that you have Understood a little bit how we're trying to harmonize and standardize our contact centers, how we're increasing the digital collections while simultaneously making significant inroads into the secured and performing asset classes. So now you might ask yourselves, what about the future? If you hold that thought for 15 minutes, we'll get back to that, I promise you. And now is the time when you can play around with the self-service portal. So enjoy the break and we'll be back in 15 minutes. Thank you. So, welcome back to the second part of our Capital Markets Day. I hope some of you had the chance to try out the self-service portal and I hope all of you enjoyed this short film. There are some quite impressive statistics there. I find myself around customers or employee satisfaction, I should say, and the Leadership Score. And if the technique is allowing us, then we should have now Melanie Foster with us to comment on this. She's our new Chief of Staff. Are you there, Melanie? Hi there. I'm Hi. So you're quite new to the Hoist Finance executive team. You've been in that team for 2 a week, 2 months. But you're not new to Hoist by any means. You've been you actually have the longest tenure in the executive management team together with Fabienne And you have had, just like Fabienne, lots of different roles. Could you share with us a little bit your path in Hoist? Sure thing. So I joined Hoist Finance as part of the acquisition of Robinson Way in 2012. And fairly soon after that, I was promoted to be the Head of Information Systems for responsible for IT in the UK. And then in 2015, I got the chance to move to a group role, heading up the project management office responsible for projects across the company. And it was a great 5 years because I've been able to work on acquisitions and projects across all of our jurisdictions, To know and work with all of the great people out there in the countries. And then as you said, in January this year, I moved to my new role as Chief of Staff. So a variety of experience, but we also heard that from Fabienne. So that doesn't seem to be completely unusual for Hoist Finance, is it? No, it isn't unusual. And in fact, later on today, you'll meet Julian Winfield. He's also a good example of that. As Fabienne mentioned earlier, top Talent is extremely important to us and whether that's attracting it from outside or growing it internally. One of the important things of Attaining that talent is that people can see a career path within the company. And I said you I promised the viewers that you would comment on some of figures we saw in the film and one of those figures was from our survey that we do every year, our employee satisfaction survey, great place to work. And the most important index in that survey is what we call the trust index, where we've gone from 61% 2 years ago to 77% last year. Melanie, why do you think that is? It's quite a big leap, isn't it? So it's a big jump. And I think if we look at last year, it brought challenges to lots of us. And if I use myself as an example, I'm really used to working from home. I do it all the time and I have done for years. But when you add in things like home schooling, it becomes a Really different proposition, not in the least the fight for bandwidth. So, I think here we at Hoist Finance, we recognized this early And we worked with our people to ensure that we supported them in making any adjustments they needed in order to be able to work in this new environment. And I think that those that support and that flexibility it shows in the trust index numbers this year. Yes, but it's not only external things or shocks that have been happening. And Klas Anders was mentioning that we've had a very, very intense change agenda as well. So I find it quite amazing, to be honest. And I do too. I think the move to One hoist strategy, it's been a huge change. And unlike any large scale change, it wasn't easy to start with. But we worked with our people and We talked a lot to make sure that people understood why we were changing and to make sure that they came on that journey with us. So and if I look at it from my perspective As someone who has experience with the company before One Hoist and obviously now in One Hoist, I think that change has been for the better because Before, we were a group of loosely connected countries and now we're a much more federated entity and we're working in a much more collaborative way, which brings lots of efficiency with it. And I think that the strategy works and people can see it and that again shows in the Trust Index. All right. But now that we are at 77, it becomes Harder and harder to improve, what are the actions you're planning for 2021 or how can we work with employee satisfaction in 2021? So we'll continue to work on pride, recognition and developing our people. And I'll give an example of that. We have the Hoist Academy, which Looks after our operational excellence training and our leadership training. And as Jelle mentioned earlier, a good example of that is the high performing teams rollout that's going on at the moment. And my team personally, we've got experience of working with the academy to develop lean Training and project management training, all of which will be rolled out across the organization. It's all part of our drive to develop our people and Spread the knowledge and also to retain that top talent. And one theme that has been coming back a lot in the first Oh, it's definitely not just for customers only. It's reflected in our internal work a lot. One example that jumps to mind is our new cloud based HR system, which We've recently launched and it has a learning hub in it, which means that our personal development activity and our e learning is completely online. These are the really vital task force. And it's not just the user experience that's better. It's so much more efficient than before. We've saved a lot of admin time with So it's definitely not just our customers, we're very becoming digital by default, but with our employees too. Exactly. We're on Teams every day. Thank you, Melanie. Melanie, you join us from our Manchester office and we will actually remain in our Manchester office. We will just change rooms. So we will go from one of our Scottish colleagues to a Welshman, Julian Winfield. You are the country manager of the UK, but you are also the Chief Market Execution Manager or Chief Market Execution Officer. I believe everybody understands what a country manager does, but What does a country market execution officer do? Thanks, Inge. That's a great And it's a question that I'm going to attempt to answer over the next 10 minutes. But first, let me introduce myself. I'm Julian Winfield, and I am Chief Market Execution Officer and also Country Manager of the UK. I've been looking after the UK since 2016 and joined Hoist initially as UK CFO in 2014. Market execution is essentially all about how we operate in the individual jurisdictions that we are present in. And I'm going to bring that to life a little bit with some examples. So primarily today, I'm going to talk to you about the work that has been taking place Over the last 2 years in our various markets and how we've been creating a seamless integration from origination to onboarding. And now some of the ways of working have significantly changed and also share with you some of my experiences operating both prior to 2018 with Hoist and how it works today. So you've already heard today from Claus Anders about how we expect in the market to double from the levels seen in 2019 I really take us back to the levels witnessed as a result of the financial crisis in 2008. I'm going to talk to you a bit about why Hoist is best placed to leverage these opportunities As we head into both 2021 2022, particularly as a result of the work to change our operating model that has been ongoing over the last 2 years. So back in 2018, you heard us talk extensively about the OneHoist strategy And how at the time we were working as independent islands, country by country and the significant duplication and inefficiency this created. This was even more apparent when we were implementing new systems and processes, all ultimately designed to do the same thing. I want to share with you today some of my experiences from running the UK and how differently we now operate, how we have changed our ways of working over the past 2 years Now we continue to look at opportunities to create further efficiencies going forward. As I said before, I joined Hoist in 2014 and experienced how we used to operate. I can tell you now how we operate today is a very different place. The UK has been at the heart of our transformation. We have been developing the way we work across all the jurisdictions much more as one and sharing and challenging each other on how we operate on a day to day basis. Whilst there's an element of locality in each jurisdiction that we operate in, we have found that the more we dig into processes that each country is undertaking, Circa 80% of what we do is commonality. And this has fundamentally allowed us to change our approach and take the best practice from 1 country And adopt it into our other countries. So So let me show you some practical examples of what the market execution model actually means. Each of the country heads now meets each Monday morning. We discuss our experiences, operational plans for the week and month ahead, successes and challenges that we are facing. Sometimes these can be very local issues, But often these are experiences that other countries have faced previously. And therefore, the solutions, as a result, will often present themselves much quicker. And clearly, the more processes and ways of working we align, the more efficient this model and this way of working becomes. So we've been taking and continue to take specific operational topics, challenge each other in our approach, how they operate in each country. And again, some examples of this are campaign management, trace activity, litigation. And the key point is the way we've been using data, Which in the past has been significantly different country by country. Sometimes this can be a result of data availability, But in many instances, it's how we're using the data we hold. Again, let me give you another example. We've tried and implemented a particular All card in one country, let's say litigation and how we select accounts for legal. We're then able to quickly adapt and port across the key learnings into the starting point in another country. So our initial implementation is far more optimal. This approach has really transformed not just the way we operate, but our thinking and approach to managing each jurisdiction Driving efficiencies and benefits across the countries. And whilst we have made significant progress, As you've heard a number of times today, this is a journey we are on and we continue to look at and implement further efficiencies as we move forward. So let me give you another example of some of the changes that's been taking place over the past 2 years. The U. K. Has been leading the way in its digital transformation and as a result has become significantly more efficient in its operation. Since 2017, the UK has reduced its headcount by circa 40%, while the book size has grown roughly around 25%. Whilst there have been a number of initiatives aimed at creating a more efficient operation, including the utilization of lower cost jurisdictions, digital collections has been the key enabler. Currently, 33% of all collections in the UK are via our self serve portal. This as well allowed us And again, back in our Capital Markets Day in 2018, we talked a lot about asset class diversification in our various jurisdictions. Since then, Hoist has taken great steps to expand our reach into a number of complementary asset classes across a number of our markets. Our One Hoist approach has enabled us to share best practice and capitalize the knowledge and expertise in the markets where we are present in a particular asset class And build up that knowledge and expertise far quicker as we move into a market where the asset class is new for us. We will continue to build on this model into 2021 and beyond, but in particular with the development of our capabilities for performing assets. So let's dive into some of the countries that we operate in. So France, France has really been at the forefront of developing our secured NPL strategy and again, sharing that best practice. The The combination of this was acquiring a secure portfolio in 2019, the largest transaction in Hoist's history, which you heard Fabian talking about earlier. When we look forward with France, France is one of the largest stocks of NPL in Europe. We believe we'll offer Hoist significant opportunities for growth. So from France to Italy, there's been a lot of collaboration across these two markets, particularly with the secured as we've moved into the secured market. And Italy has traditionally been one of Hoist's strongest markets and one that has maintained a consistent flow of portfolio acquisitions for us Over the past few years. And our presence and maturity in Italy really helped enable Hoist to execute our 1st rated NPL securitization. Again, this was another significant milestone for us. Italy will continue to be an extremely buoyant market for us over the coming years, With a strong secondary market expected to account for circa 30% of NPL transactions in 2021. The UK. The UK is arguably the most regulated market we operate within, And the approach we take with the customers in the UK has enabled us to roll out a number of best practices, particularly around our vulnerable customers. When we look back over 2020, there was a period of considerable change and transformation within the business, which really sets us up within the core consumer unsecured market. And there's some significant opportunities expected in 2021. Forward flow contracts are expected to feature heavily in the UK over the next 2 years, Which is just a continuation of the trend we've seen over the prior 2 years. And Poland, Poland has remained one of our more consistent markets throughout the challenging times we've seen over the last 12 months. And again, we see a broad range of asset opportunities in Poland That meets our core criteria. I believe this market will play a significant part of our growth plans, both in 2021 and into 2022. And finally, on to Germany. So Germany is our oldest and it's a very stable market for us in Hoist. As we saw a number of opportunities come to market last year, which we were successful in, we see the market opportunity driven by an increase in forward flow contracts Expected throughout 2021. The opportunities for us in Germany are primarily in the secured unsecured and performing assets. We've also seen some delays from 2020 as a result of COVID, which we're expecting to catch up in 2021. So to summarize, as we've mentioned a number of times today, the impact of COVID has created a significant opportunity for our industry Hoist is in an excellent position when these opportunities come to market over the next 12 to 24 months. We have a significant presence in all the key markets across Europe A strong industry experience in each of the individual markets that we operate in. We've got visibility of our pipelines We have very strong relationships with a number of our key clients and as well as operating under a banking license. This really enables us to be much more relevant In commercial conversations and discussions compared to a number of our peers. And as you've heard a number of times today, Our OneHoist strategy and execution has created a seamless way of working across our markets and a significantly more efficient way of operating with plenty of opportunities ahead to further improve as we continue on this journey. Thank you. Thank you, Julian. And we will actually stay in the UK, but we will move from our main office in the UK, the Manchester office, down to our much smaller office in London, where we find our Chief Investment Officer, Stefan Uhlmeier, who I think might be known to many of you. Stefan, Julian mentioned that there are massive opportunities ahead. That should excite an investment officer, shouldn't it? Are you excited, Stefan? Hey Ingvar, yes, absolutely, I am excited. And hello, everyone, from London, England, although to be clear, I'm actually German, Which is great every 4 years during the World Cup Football World Cup except for the last one, never mind. Just a brief introduction, Stefan Ohlmeier, Chief Investment Officer. I joined Hoist Finance 3 years ago in 2018. I've been working in this industry for over 20 years At Investment Banks as well as fund managers and even at our largest peer interim also as Chief Investment Officer. So I really have the chance to see our industry from various angles. But let me give you the Hoist Finance investment perspective. I will tell you about our great track record of projecting cash flows, our low funding cost that makes us so competitive, Our expansion into new asset classes leading to more growth and securitization plus IRB as our solutions for our regulatory challenges. All of this means we're in pole position for an amazing market opportunity. Let's kick this off with our track record. Whenever we make an investment, we forecast collections. Then we measure actual collections against this. And on this slide, you can see cumulative collections against our initial forecast Since 1998. So our aggregate collection performance over the last 20 years is 103%. The word aggregate is important here because at the individual portfolio level performance can of course vary. Even at the country level, we see differences. But across all acquired portfolios, the figure is 103%. And we have acquired over 1,000 portfolios over the last 20 years. Now 103% is a great result, but it's also an average over time because there is a business cycle And we're not immune to macroeconomic shocks. Looking back at the financial crisis, which you can see here on the left, At the time, we saw under collections of around 5% to 10%, but then collections bounced back, not just 100%, but beyond. So we managed to catch up those lost collections and the crisis often marks the start of a new cycle with new opportunities. And we are at another turning point right now. You can see this on the chart on the right where the arrow points upwards. And this applies not only to collection performance, but also to volumes and returns. Let's take a look at historical market activity. During the last cycle, the market grew rapidly. Here you can see This is adding up to over €15,000,000,000 But you will also notice the recent flattening. The market is taking a breather. Naturally, backlog is building up and the crisis is generating even more product. Moving on from the asset to the liability side. Most of our industry use bonds as their main funding tool. On this chart, you can see growth in bonds outstanding, roughly matching market growth on the previous page, Only that our share of the bond market is quite small because we fund ourselves mostly with deposits. Now you may have heard that bond markets have become more difficult and COVID has of course made things worse. As a result, Funding costs for industry have increased. In our industry, funding costs and returns are strongly correlated. Just take a look at returns over the last years on the left of this chart. You see ever lower funding costs passed on to sellers In the form of higher portfolio prices and lower returns, good for sellers, but obviously less than ideal for our industry. However, now that funding costs are increasing, we also expect to see higher returns. And I like to refer to this graph as the smile, And it really makes me smile to see that returns are finally recovering. But what about the funding costs specifically for Hoist Finance? Christo will also comment on this later on. Quite simply, though, we have the lowest funding cost in the industry. You can see the gap to our peers. I mentioned increases in funding costs. We are, of course, not immune to these. Our bonds are also more expensive, but we are issuing bonds mainly for funding diversification Since most of our funding comes from deposits and those are largely unaffected, so not only do we have the lowest funding cost, But we also expect our advantage to increase. That should enable some serious growth for us. But our biggest growth driver is actually our expansion into new asset classes. On this chart, you can see secured and performing taking off in 2018. We will continue on this path, supported by increasing market volumes mentioned by Julian earlier. Now we showed a similar chart at our last Capital Markets Day 2 years ago, But as mentioned by Claus Anders, the last 2 years have been challenging, regulatory changes and even a global pandemic, But we're ready to jump back on the growth track. Let's have a look at diversification created by our new asset classes Because these have quite some different characteristics. Our classic unsecured business run by JARCO and Jelle shows high returns, But also high costs to collect. Our secured business run by Fabienne has low returns, but more predictable cash flows And lower cost to collect. Finally, our performing business run by Julia has the safest investments but also lowest returns and cost to collect. Ultimately, though, our shareholders are looking for return on equity. To bring in the capital perspective, consider the different risk weights for each asset class. Performing has the lowest risk weight, secured a higher one, but unsecured the highest. All of this balances nicely With the returns in each business line, as a result, all business lines generate similar ROE. And there is further diversification with regards to duration. On the next chart, I just wanted to show you the projected growth of our book. And it's very nice to see the impact of our new asset classes. Moving on to the regulatory changes at the end of 2018. We worked extremely hard in 2019 2020 to create a solution. A major milestone has been our rated deal called Marathon, where we securitized almost our entire Italian unsecured NPL back book. This freed up capital And it served as a proof of concept for a European backstop solution. The key here is significant risk transfer to 3rd party investors. We achieved this by placing mezzanine and junior notes with carve out funds. This was also assessed and concluded by the Swedish FSA. Now we could securitize more of our back book to free up more capital, but what we really want to do is fix our unsecured NPL funding model. And this brings us to our pan European securitization partnership with Magnetar. We're setting up securitizations in all of our markets to acquire unsecured NPL portfolios going forward. And mezzanine and junior notes will be acquired by Magnetar. Magnetar have committed €150,000,000 This means we can buy unsecured NPLs worth EUR 1,000,000,000 and drum roll, please, These portfolios will have a risk weight of 100%, even slightly below and they will not be subject to the European backstop. Boom. If I had a mic, I would drop it now. So Securitization is like a time machine, taking us back to our last Capital Markets Day in 2018. On this slide, I will illustrate what that means. Until 2018, shown on the left, our risk weight for unsecured NPL was 100%. With the regulatory changes, this increased to 150, shown here in the middle. Naturally, this results in lower ROE. Now I mentioned significant risk transfer in our securitization. To take that risk, we have to pay the investor. This reduces earnings as seen on the right, but the securitization reduces the capital requirement even further. And remember, this also solves the backstop. So securitization really does take us back in time. Note that this applies to newly acquired portfolios, so our average risk weight will go down as our securitized book grows. Now you're probably wondering what about our existing back book. Well, something else we're working on is IRB, the internal ratings based approach to calculating capital requirements. It works for experienced players like us who have lots of data To show that acquiring NPL at steep discounts means low credit risk. And because we're a bank, governance structures are already in place. A team of 8 experts are working on this project, and there's a clear timeline, see here at the bottom of the chart. We've been working on this since 2019. We plan to submit our application by the end of this year, And we expect to receive approval by the end of 2022. There are important benefits from IRB, including improved risk management, But the main aim is to reduce risk weights from the standard approach. And this would reduce the risk weight of our back book in one go And further improve our CET1 ratio and free up even more capital for growth. So let's recap the investment big picture for Hoist Finance. Strong track record, lowest funding cost in the industry, Growth in new asset classes and securitization plus IRB to solve our regulatory challenges. Bring it on. Thank you. Thank you, Stephan. Glad to see you very optimistic and glad to see the performance resilience over time. We are coming closer to the end. I hope you have heard some recurring themes over the course of the day. We put the customer first. The digital shift is happening now. The performance gap is closing now. The asset diversification is happening now. And finally, from Julian and Stefan, you heard a little bit about the massive opportunities ahead. So how does this all translate into figures and numbers? I'm sure Some of you are asking that question. Well, if someone can shine a light, I hope it's our CFO, Christer Johansson. He's ready. Here he is, Kristi Wamsen. Thank you, Ingve. Yes, that is right. I've been CFO for 3 years now, but prior to stepping into this role, I spent 4 years in business control, Keeping track of our financial performance and the valuation of our portfolios. That experience actually turned out to be Especially useful in 2020, a year when we had to navigate some uncharted terrain. In this session today, I will give you a sense of how the pandemic impacted Hoist. Separately, I will also Zoom in on the actions we have going to close the operational gap. And thirdly, I will share our outlook on funding and capital. So in essence, 3 chapters, starting with the first one and some comments on our performance in 2020. As you heard from Klas Andes, we found 2020 to be a bit difficult when it came to acquisitions. So we had a pipeline that was moving around. We also had demand in the market was moving around. Towards the end of the year in Q4, demand was very strong And we were not willing to invest at substandard returns. So as a result, we ended up investing a bit less than planned, Even less than replacement level. When it comes to collection, the situation was certainly better. So for the full year, comparing collections to pre COVID forecast, we came in at 93%. And in a scenario as extreme as this one, I have to actually have to say that that's pretty okay. More Importantly, we are closing the gap. So gradually, as you can see, we are closing in on the pre COVID forecast. If you take a longer perspective, look at lifetime collections as shown here, You can see that, for example, looking at the 2019 2020 vintage, you can see that our current expectations for lifetime collections It's actually very close to the initial expectations. So the impact on lifetime returns is very limited. So all in all, I'd say that 2020 goes a long way to prove the resilience of this business, and I'm glad to say that actually goes for the whole Industry. So leaving COVID aside, We have an underlying performance gap to close, and that has remained our focus throughout 2020 despite these external events. The strategy to close this gap has been well covered during the day. You have it on the left hand side here. It includes a number of important levers. What I wanted to add on this page is a sensitivity perspective. It should come as no surprise, I guess, that cost reduction helps return on equity. In fact, if you could bring costs down by 2 0.5%, you would bring return on equity up by 1 percentage point. If you instead focus on collection performance, You would bring return on equity up by 1 percentage point for each percent that you can bring collection performance up. I believe earlier today you heard my colleague, Chris Bates, talk about the 1,000,000 decisions Made by the rules engine. And just imagine if you can get those decisions a little bit better, Then surely things can happen on collection performance. Similarly, if you target growth, we estimate that you could bring Turn on equity up by 1 percentage point for each 2.5% that you bring the growth in the loan book up. Now taking a step back, I think there's 2 points to be made here. 1 is that collection performance matters a lot. The second point is that operational leverage is strong. So it doesn't take a miracle to move the ROE from, say, 10 To say, well beyond 15. It does, however, take hard work. Some of that hard work has been going on in the cost saving program. This program has been running for 2 years now. It targets to deliver SEK 400,000,000 in savings Up to the end of 2022, execution is going well. As you can see on the top bar, we're almost halfway. I do, however, realize that some of you may think, well, if execution is going so well, then why is the net impact not larger? And the answer here is, in a sense, simple. There is implementation cost and there is a time to realization. And to make that a bit more tangible, I brought 2 examples here. So looking at our near shoring to Romania, for example, this is something that we've ramped up in 2020 from 0 to a year end position of 150 FT feet feet feet feet feet feet feet feet feet feet feet feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet. That came with some cost, cost to set it up, Cost to run 2 operations during the training phase. As a result, 2020 actually saw A net benefit which is far smaller than the total benefit. If you turn to IT outsourcing, this is an area where we have a considerable Saving, SEK 35,000,000 per annum on average. That saving is phased in over a long contract. It's a 5 year contract. And on top of that, we have in 2020 had around SEK 20,000,000 in transition cost. So in fact, there is 0 net benefit In 2020 from the IT outsourcing, and that's certainly something that's going to change as we progress. So even though these are just two examples, in reality, it's a long list. And by adding up that list, I take comfort in us being on track We do, however, also need to have full traction on the other levers And the establishment of 4 business lines serves that purpose. On this slide, we've split up Current business and the 2020 results into the various business lines. A lot of numbers, but don't worry, I won't go through this line by line because in fact You've already met Fabienne, who spoke about secured. We listened to Jarko. And remember, we see Jarko as being the owner of the unsecured portfolios For the parts which cannot be collected digitally, he relies on the contact center team, Gelles team. That's also where you have most of the people, of course. And you've also met Julia twice. So no need for me to repeat all of that. And in fact, in the financial disclosure and our fact book, we are starting now including these numbers. So you will be able to See how this progress over time. And make no mistake, we do intend to change this. So by 2023, we do expect to be in a very different place, and I want to highlight 2 parts of that change. So within digital, the self serve part and within Retail Banking, I want to highlight the growth in performing loans. So starting with digital, today we are at 20% of the currently addressable collections. It's not bad, but it does of course mean that 80% Still manual. Now also consider the fact that we intend to grow this business quite a lot, so So maybe say 40% over the coming 3 years on the unsecured side. Everything else equal, that would see us bringing in maybe 200 More employees, sorry, maybe 200 more employees. Now fortunately, everything else is not equal because we see great potential in increasing the digital collection rate from its current 20 to around 35, 40. And by doing so, that will, in We estimate that the value of that efficiency improvement would be around SEK 80,000,000 to SEK 100,000,000 by 2023. Now that number may not seem so large, but then please remember that this is assuming that the current scope Addressable activity cannot be increased, which is wrong. Of course, that can be increased and that's what we're doing. It also assumes that there is no Benefit on the revenue side. And of course, there's benefits on the revenue side. In fact, a quarter of digital collection comes in During hours when the contact center is closed, lights out. So of course, there is potential there. Turning to the right hand side and our growth in performing loans. This is an area where we tend to add cost. We're also going to invest into IT, but we do so because we see the potential to grow this book from its current Roughly SEK 1,000,000,000 to say SEK 4,000,000,000 by 2023. And that will, of course, also bring in a significant contribution. So with that, let's turn to the 3rd and final chapter, and this is where I promised you our outlook On funding and capital. Starting with funding. Our current funding cost, it's Really competitive. You can see it on the left hand side here. The secret ingredient is not very secret. Deposits constitute the foundation of our funding. It's cheap. It's accessible. You can even get it in different currencies. So euro, SEAC planning to add sterling. So that's great. On top of this, we have market funding. For funding purposes, we have our investment grade Rated senior unsecured bonds. For capital purposes, we have issued 81, Tier 2 and more recently also mezzanine notes. Now that is, of course, the as is situation. As we have entered into the Magnetard partnership, we do expect the share Of mezzanine funding to increase, we expect it to increase from its current 1.5% to around 5% of the total funding. The good news here is that if you go back to where we started, you will see that 2.4% is still very competitive. So that's good news. And I have good news on the capital side as well. Because we've been very prudent in 2020, We have a strong starting point on capital. So this is a starting point that allows us to grow, and that is even more true because the new transactions, Well, to a fair share, take place in the structure setup as described by Stefan, And that structure is more capital efficient. And this is really important. So have a look at the middle box here Because what you can see here is that we expect the blended average risk weight to come down from being above 130 To being somewhere just below 110,000,000. It's a big improvement in the capital efficiency, and that's on the blended stock 2020 to 2023. Now IRB represents further upside on that and it's a further upside that is quite significant. But even if I leave that out, we're in a good place and we're in a place where we can Grow quite significantly. How much? Well, liquidity is also strong, so we could actually go out in a week and Big transaction if we wanted to. Give us a bit more time and we could acquire for maybe SEK 6,000,000,000, SEK 7,000,000,000. In a year, we're at around SEK 9,000,000,000 to SEK 12,000,000,000, and that is assuming that we pay dividends In accordance with the policy, so 25 percent of net profit. That's the assumptions that I've used in that estimate. Taking a 3 year perspective with the same assumption, our acquisition capacity is in the range of SEK 25,000,000,000 to SEK 30,000,000,000. So that's a lot of numbers in one go. So let me repeat what I want to get across here. Performance has been resilient despite a very tough year. We are closing the operational gap and growth capacity is restored. Those are All things that we've taken into account now that we've updated our financial targets, and Klas Anders will come back to that in just a minute. Thank you. So thank you, Christer, for those words and that wrap up. The words on this slide, they are of course, they are not by coincidence. They are carefully And I think you've heard many of my colleagues use these terms and words many times throughout our Capital Markets Day. But you should be aware of and know that these are not merely words. They're almost like concepts. So when I talk about customer first So 1 Hoist or data driven or digital first or how we increase knowledge of others, they mean something for the whole organization. They are meaningful and they are powerful, and it gives us direction and they give us purpose. The banking license has been a very important part of the foundation and history of Hoist Finance. I said it clearly in my opening remarks that we are building on our banking license with the benefits that you can see to the left there In green. Of course, the funding advantage that Christa talked about and why Stefan was so upbeat, but also because The banking license gives us other benefits, commercial benefits, for instance, when we're talking with our clients. I sometimes say that Regulation is our friend. I have to admit that I was in doubt a couple of times during the last couple of years. What we have done is to look down in the toolbox that we have being regulated as a bank I've pulled out the right tools to deal with these challenges. So let me also make it very clear that We are continuing to build on the banking license. At all times since 1996, There are discussions around regulation. There's always ifs and buts and this is business as usual for Hoist Finance. What I do want to say now is that we say at this point in time, no reasons for concern. There is obviously discussions in Brussels about NPLs, levels of provisioning, the systemic crisis of banks, Even bad banks being potentially being established, we don't worry. We participate in those discussions and we have our say. And if anything, I'm more positive to the response that we are receiving from the regulator. I do think they acknowledge that Hoist Finance has an important role to play in the secondary market for non performing loans. So let me then finish off this Capital Markets Day by talking you through Our updated financial targets. And they should come to no surprise, I think, As we have been kind of building up to this wrap up during the course of the different sections of the presentation. Of course, now on the back of having cured our regulatory challenges and as we are freeing up capital By buying into assets with lower risk weights, we think it's a very natural target to have Our return on equity target of above 15%. Our cost to income ratio target is below 5%. And we see that the earnings per share target should give us around 15% EPS growth over the next 2 years, starting point being 2019. Christa said that we are in a good place from The point of view and CET1 is strong. We feel that the CET1 ratio is that with the buffers as indicated on the slide are the right ones Given our profile, but also our investment grade rating. The dividend, of course, will be decided by the board, but we have a dividend policy in place here where we will now Set aside profits according to dividend policy or paying out 25% to 30% net profits. So that concludes the Capital Markets Day. I will now move into the Q and A section. All right. We're doing some reshuffling here so that all three colleagues who are here in the studio can sit and answer All of your questions, I hope you have a lot of energy left because we have some curious viewers today and there are quite a few questions. And actually, I would like to start where we left off before the break with some questions around performing loans. So what What kind of loans could be originated in retail banking? Unsecured SME mortgages is the question. Our main focus in the performing loan space will be on the current NPL customers, which mainly is private individuals. And I will come back later on what kind of product we think is most suitable to help our customers. All right. So we have to wait a little bit for that. What do you plan as duration and what are the risk weights for performing loans? How much of the targeted growth will come from performing loans? The risk weights on performing loans, of course, depends whether if it's a mortgage loan or if it's Consumer loans, but it's a lot less than when we speak when we look at the NPL business. When it comes to how much growth, I think I gave some pretty good numbers there in my presentation. Yes. I think some of these Questions came in before your presentation. So but I'm sure we're happy to repeat some of those figures. Of course, right. So the current book is a bit below SEK 1,000,000,000 and we see definitely see the potential to grow this up to, say, SEK 4,000,000,000 2023. Now that is not going to be mainly originating. That is going to be acquiring existing loans as we've done so far. Thank you, Christoph. Moving on then to the Magnetar deal. Given the agreement with Magnetar of €1,000,000,000 if we get capital relief either through IRB or reduced risk weights, Would we then try to increase the framework amount? Yes. I think what you should assume is what we have indicated, Around SEK 25,000,000,000 to SEK 30,000,000,000 over the next 3 years. And that number is, of course, built on the fact that we will be using The Magnator transaction, the Magnator structure for the next coming years in unsecured NPLs. And Is it exclusive with Magnetar or could you have someone more? Maybe that's a question that Stefan can answer for us. Stefan? Sure. I mean, yes, Magantar is our exclusive partner. And again, The agreement is set up in a way that it covers the next 2 years of unsecured NPL acquisitions. So we're covered with them for the next 2 years. What I can add is that there were lots of investment appetite for the securitization structure, and I think that appetite will continue to grow As people are getting more and more familiar with these type of structures. And so, Claus Anders, if the ROE is the same So the asset classes that we showed, and Stefan had a good slide, I think you called it a tornado diagram showing duration and returns, etcetera. I think the asset classes there are the white ones for us at this point in time. Performing loans makes a lot of sense for us given the banking license. Yes. In the secured space, which is our classic core and of course secured NPLs. So that will be the space we're looking at, the universal asset classes and of course across our jurisdictions. Let's see where we move on. I think this was this one was answered, Christer, but maybe to repeat, what is the ROE 2020? What are the estimated ROEs for 2021 to 2023 on the different segments or asset classes. Yes. So The financial targets that we've given, they relate to the group as a whole. Claus Anders pointed out just recently here that our Target is to have an ROE exceeding 15%, and that's as specific as we've been. So we haven't defined ROE targets by business line. So when you're buying portfolios, when you are in a portfolio investment business, It is important to be have a lot of at least some diversification. I think the asset classes that we have now is giving us that diversification. And We can look at markets, we can look at individual asset classes and we are reasonably agnostic to how to where to invest and when to invest. So the space is large enough for us to be active and relevant. But staying with investments, did you say that in Q4 demand was very high and you would have needed to invest at substandard returns. And if so, how can you be confident that this won't continue in 2021? I can start at least and maybe Christa can fill me out. Yes. So we were hoping to do replacement CapEx in 2020. We didn't. I guess we were somewhat surprised with the supply side being lower than we expected for the full year and I Showed that in one of my slides. And of course, the demand was pretty high in the Q4. We knew, of course, that we had a bank transaction coming up. So we wanted to make sure that we went for the right deals with the appropriate returns. I think Christo alluded to that point. And hence, volume became low for us in the Q4. And one should not forget that the investments we do now will be with us for 10 years. So it's important to not sort of Get carried away and do that underwriting at the wrong level. Thank you. How we go back maybe to this ROE And we were talking about the investments. How much of the SEK 25,000,000,000 to SEK 30,000,000,000 investments could come each year, 2021 to 2023? Yes. So I would say that this will be fairly evenly distributed over the period of time, Maybe with 2022, 3 being a little bit higher than 2021. So that's what we expect. But If we had 20% ROE without COVID and full pipeline, as we alluded to in it was only for illustrative purposes, But does that mean you aim at 20% going forward now that you have mitigations? And also the historic pro form a 20% would have been without cost benefits, So can we assume future potential above 20%? Yes. Good question. So I mean, the bridge is illustrative. Of course, to add in revenues you never had Might be seen as a bit silly and creative. But anyway, I thought it was important to show the leverage, Operational leverage, and that point was also made by Christo in his presentation, that there is a lot of operational leverage. We are a little bit subscale at the moment, so we need more volume in. We need to grow the book. So that is important. And if you look at also, growth is not the only component. It's also closing the performance gap. And I see a lot of potential in the Projects and the initiatives that we are running now, we have taken some big investments in the last couple of years. We haven't wasted our time. We are starting to see the early benefits that will be ramped up every quarter. And I think we can do more. I certainly do. I mean, on digital, for instance, we have basically just started the transformation. We can do much more there. We can use analytics in a different way, a more intelligent way. We can certainly do more on all fronts. We are ramping up the assuring service capabilities, Etcetera. So I'm hopeful and we have indicated in some of the slides that there is an upside potential to create even more value for shareholders. Okay, great. I think there are some more ROE questions, but I want to cover all areas. So when it comes to funding costs, how important is it for you to have an IG rating on your unsecured bonds. Very. Is that good enough? No, we remain committed to sustaining the rating that we have and we think it served us well. For example, we were able to issue Debt during 2021 times were not so attractive for non EGA rated companies. So we've been quite happy with that and we're going to defend that. Yes. And maybe the question was related to the bonds. Was it in the securities and social structures? And if so, rating is not important. Okay. It was important. So it depends on the Yes. That's why I'm trying to add the dynamics to Christer's Yes. Answer here because I think the bond word was in that question, right? So in the second securitization structure we did, also the first, We had an investment grade rating. There was a second, right? Yes. And that was important for us at that point in time. But for now, That is not an important factor. Okay. And sticking to funding cost, have you made an assessment of what your underlying funding cost is, including the cost for needed junior capital tranches and the alternative cost for the liquidity held. Christer? It's a long question. Can you repeat it? Okay. So have you made an assessment of what your underlying funding cost is, including the cost for needed junior capital tranches and the alternative cost for the liquidity. Yes. So in our ongoing quarterly reporting, we usually, we Showed 2 metrics. So we showed the average funding cost. We also take the interest expense in relation to the book. And if you look at those 2, you could see that Taking the cost for liquidity in, of course, the sort of the underlying cost is a bit higher and that will stay that way. So we're going to keep liquidity strong. We have it there to be able to acquire as well. So of course, that effect will still be there. We've not made a prediction that we're That I feel is meaningful to share here beyond what we had on those slides. Okay. The Performing and retail banking areas keeps attracting interest. So I have a few more questions there as well. Would you consider to offer mutual funds to complement Your deposits and does open banking offer any other opportunities for you with your large customer base? So I will at least start with the second part of the question and maybe someone else can think about it. The first one, yes. Pointing at you, Christer. So the second part is about open banking, how we can potentially use that in phase Or that regulation to our benefit. So remember that on my slide today on key messages, The first point was customers first. And all the value creation that We can achieve actually happens in the customer dialogue to find the customer, to engage the customer, To create customer commitment, to make sure that the customer pays us first, that we establish holistic and sustainable payment plans And we can really help, nurture and support the customer along the way. So that's all about the customer interface and open banking can give us a lot more Than maybe ordinary sources can offer. And of course, when we are looking at affordability On a customer level, the more we know about the health, the well-being financially for the customers, the more helpful we can be. And going back to the point about the retail banking, of course, I guess our primary focus now is to Acquire performing loan portfolios because they are just an asset class as any other asset class. And the vast majority of the growth We'll be from acquiring performing loan portfolios, existing books. And we've done that a couple of times in Called runoff situations where a bank wants to leave a market and you're buying these performing loan portfolios with a rebate. Makes perfect sense for us. And then we're going to take some initial baby steps and try to understand better what can we potentially do and help And due to help our customers even more, can it be debt consolidation? Can we look at how we can refinance when we know the payment history All of the customers. But it's too early to give any promises as to how large that area can be. We wanted to give you a glimpse All that, there is potential, which is really there. Okay. Yeah. And did anyone think about the first question, Christe? Whether or not we see mutual funds as an attractive product, not at this time, no. Okay. Going from €700,000,000 performing loans, how much would be Hoist's own origination? Not so much. Not so much. Good. Clear question, clear answer. Another one, cost to income below 65%, is that for full year 2023 run rate? Full year. Full year. We're on a roll now. How do you view this is probably Klas Anders, how do you view the risk from having national or regional bad banks being formed In Italy, is that seen has seen some competition from such a competitor? Yes, that's a good question. So It's not new to the sector that bad banks are being established. I mean, we've seen that in Greece, for instance. We certainly see it In Spain with Zareb and there are other examples too. We don't see this as a threat. We see it as one way that countries can deal with non performing loans. And we see that, for instance, that Airbus has been selling off a lot of non portfolio, MPL's portfolios over time. So I don't see it as a big issue. Good. You mentioned the European Commission in the end here, Claus Andes, how do you view the European Commission's paper released December 16, 2020, suggesting to lower the risk weights for NPLs For smaller banks active in acquiring NPLs, will your securitizations vehicles become irrelevant and perhaps expensive if materialized? Exactly. So I tried to make that point a little bit at least when I talked about the banking regulation that if anything, We see a slightly more positive development with the discussions we have with policymakers in Brussels. I think it's good to see that they are acknowledging that we are an important company in the secondary market for NPLs. It would be great if the risk weight will be changed. I'm not going to discount that at all. But we have to have in mind that The securitization structure is primarily there to cure the NPL backstop regulation. So there are really 2 questions. 1 is risk weights and the other one is the NPL backstop. We happen to solve both issues with securitization in a way, Yes. Which is of course great. But yes, that's where we are. Great. This is a broad question. What is the additional potential in the ROE bridge? How do you unlock it both in terms of more investments and efficiency program? I think I already talked about that. I hope so. Yes. So There are some certain extra pockets of value that we have added as for illustration purposes. And I believe in this. Let's mention one then. If you, for instance, think about IRB, that can certainly be on How to unlock more capacity from investments, we have not factored that in, of course, in the plans. But that's one example, right? And of course, in the example Our valuation sorry, value from performance, we can certainly think about how we can even ramp up, for instance, digital collection even more And even address the volumes that currently is out of scope. And we were not really looking at how we can do digital collection for, Call it litigation or secured. But over time, of course, more and more of the what's out of scope today will be included. We have to make the right choices in the right sequence. Good. Jumping from one area To another, you say ESG is important. How have you integrated ESG into your business and operations? Also a broad question. I don't know who will speak. Well, I could start and maybe Giulia can add some more color to that, right? I I think it goes almost without saying that one of my first point is customer first, right? That shows you how dedicated we are in helping people back Into financial inclusion, supporting them. Now we are by your side every step of the way and we are helping people keep their commitments. And I clearly see and we have an underwritten on the United Nations SDGs. And of course, we need to make sure this is not greenwashing. It Needs to be part of our DNA in every practice that we have. So we have put in place a governance structure, for instance, to work with ESG in the company, we have a sustainability committee. We're making sure that this has been cascaded down to all the markets and all the We are also management. And we are spending a lot of time to talk about our purpose and how we work. And we have some great partnerships. Maybe you want to mention 1 or 2, Julia? Yes. We have partnerships with a team you in Germany that is a partnership where we have Help them by financing a platform for helping SME customers that are in financial difficulties and to get help. On the group level, we are also implementing group wide customer treatment principles, how to treat customers in that are vulnerable. And we're also setting up a CSAT program on the group level to be able to measure customer satisfaction On the group level, not only on the individual countries as we do today. Excellent. Thank you. It's been great to That there's actually been there's been really strong engagement amongst our staff for participating in these efforts. So I think that's really great to see as well. Thank you, Christa. When are you assuming dividend payments to come back? Well, I just want to say that this is a Board decision, Right. So it's not up to us to decide. We have a dividend policy, which I alluded to in my closing remarks, 25% to 30% Net profits to be distributed. And that's the policy. We will add her from this year on to the policy. And then, of course, we'll have to wait and see what the board We'll recommend for the shareholders. Yes. So that means that for the financial year of 2021, I. E, the dividend to be paid out in 2022, That's what we assumed. We did not assume any change for the 2020 where we've previously communicated there would be no dividend. Thank you, Christi. Let's see what we have left. I think we have another regulatory question here. There has been some recent discussion of German and Italian regulators proposing some forbearance for NPL provisioning backstop. This development, if approved by regulators, would be very positive for Hoist Finance. Could you provide any details on potential developments on this front? Not really. I think it's too early to say anything specific, so I'd rather refrain from answering that. But it's a relevant question, of course. And As I said, we are, of course, really close to these discussions and we try to influence the maximum of our ability. And Soren, really talk about It is and how good it is to be operating with a banking license in this market. And I think that an asset heavy industry like ours, It makes a lot of sense to have the stringency of compliance and internal audit and risk and all those functions To do that right, and I think the banking license provide a lot of that just due to that kind of business model. Yeah. Okay. Two more questions. How do you balance the visibility provided by forward flows with the negative impact such contracts can have when operating environment change like during 2020 and COVID. Yes. So we actually more or less stopped buying on forward flows when the backstop regulation hit. So we haven't been having much forward flows. There are some old contracts. So for now, we are not Really a big player in the 4 and 4 market. Of course, that can be reassessed and we have those client relationships, but that's where we are right now. The last question is the same we had in the first. I hope I'm not we haven't this is what happens live. Have we checked that number that we didn't have before. Yes, we have. Yes, we have. Yes, exactly. I was worried here. No, I checked. And it was not far away. That's good news. So For credit cards, the average claim size is €3,000 to €5,000 and for consumer loans, between €10,000 and €15,000 So the average around 10 wasn't such a bad answer. Good. Thank you. Thank you. So it's been a pretty long afternoon, Claus Anders. Lots of interesting messages. I don't think we should go on for too long now, but is there anything final, final you want to say? Well, first of all, Viggo, I'd like to thank you for being the moderator. I think it's great to have such Internal talent can be superstars and almost like a news anchor. So don't think about the 2nd career. And then I would just like to add My add to this closing remark, what I said in the opening that we are transforming Hoist Finance. It is working, and you have seen a lot of evidence come out today. And the second thing is that We do see a very interesting and large market opportunity. And we have the great team that we'll be able to meet during the course of this afternoon. So thank you. Thank you, Claus Andesch, and thank you to all my colleagues around Europe. But most of all, of course, thank you for watching. Stay safe, Stay healthy and goodbye.

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