Earnings Call: Q2 2019

Jul 30, 2019

Ladies and gentlemen, welcome to the Hoist Finance Q2 Reports 2019. Today, I'm pleased to present CEO, Claus Anders Nystien and CFO, Kristo Johansson. Speakers, please begin. Thank you, and welcome. Thank you for taking your time. Here in this office in Stockholm, we have me Julia, Head of IR. We have Klasanders Nisbian. We have Kristi Jannson. And I would also like to present Andreas Lindblom, our new Head of Investor Relations. So I will start by handing over to Andreas and Christoph that will give you a short presentation, and then we will follow after the presentation with questions. Thank you, Julia, and a very good morning to everybody, and welcome to this Q2 earnings call. We will, of course, cover the Q2 performance, I'd also like to use this opportunity to update you on the work we are doing to mitigate the regulatory recent regulatory changes that we are experiencing and, of course, go through the secret essential that we issued a press release about last night. But let me then first start off by talking about our second quarter earnings. And I will refer to page number four, slide number four, in the presentation. And I'm not going to steal all of Kristo's thunder, but just say that we are again reporting strong financial performance, all time high earnings before tax at million excluding items affecting comparability. And this is actually the fourth quarter in a row with an all time high financial performance, and this is, of course, something we are really happy about. Collection performance continues to be strong and robust, up 104%. Cost income ratio at 71%. And I'm particularly pleased by the fact that we have strengthened our capital ratio. Our CET1 ratio now is at 9.9%. And we should have in mind that we have absorbed the full change of the new risk weights, at the same time, sustain what I would call a healthy investment level in the first half of the year. The way we look at the market, we still feel optimistic about what we see. Conditions are quite positive with strong supply out there. It's improved margins. And of course, what we have seen is also that industry consolidation is continuing. Really happy about our rollout of digital solutions. We are definitely still on track. I will comment a bit more on this later. And of course, now almost needless to say, I guess, that we have good progress in implementing mitigating actions. And of course, very happy and very proud that we have announced our first securitization. Moving then to Slide five. I'm not going to spend enormous amounts of time on this page, but just want to reiterate and say that I'm happy to see both the improvements quarter on quarter over this time, but also the consistency of our earnings and our returns. Moving quickly to Slide six in the deck, the headline there is that twenty nineteen volumes remain strong despite the regulatory changes, and that's actually a pretty precise summary of that slide. The total investment level year to date is billion. And as you know, of course, most of this is related to the acquisition of the Get Back portfolios as we have discussed in the past. I think it's a reasonably healthy number, SEK2.3 billion, not at least factoring in the fact that we had these regulatory changes that we are so familiar with by now. So on top of the get back portfolios, we have done some smaller acquisitions in most markets and, of course, the regular forward flows. The investment level is lower than what we saw in 2018, but definitely on par with previous years, perhaps even stronger. And the pipeline remains very strong and healthy. And our previous guidance has been around €5,000,000,000 for the full year. But that's before taking mitigating actions into considerations. We can share some more thoughts about this a bit later into the presentation. Moving to Slide number seven. I think it's sometimes important just to remind ourselves what we're trying to achieve here. And Slide number seven just summarizes the whole finance strategy, the key cornerstones at least. And the first one is that we focus on some prioritized markets and aiding for the top three position rather than being too geographically scattered. And we are now top three in three of our important markets. And of course, on the back of the Get Back transactions, we're happy that we now have taken an opportunity position in the Polish market. Second cornerstone is to become the most effective, the most efficient operator in the industry. And I think we are on our way. We have redefined our ways of working. We introduced a much leaner and tighter organization. We have established three centers of excellence. We have established a shared service center, and we've done site consolidation. On top of this harmonizing, standardizing our key work processes are ongoing. We are now managing centrally for instance campaigns, analytics, business intelligence. So we are very happy with this progress. But the good news is that there is more work to be done, so the potential is definitely not capped. In terms of digital leadership, and we as an industry, we are definitely behind other industries, so we should take inspiration from others. We have set ourselves out to become digital leader. And in the second quarter, two additional countries have now introduced our self-service portal to our customers. And that means that only one country is remaining, and that country actually has a well functioning payment portal actually. And then to my knowledge, none of our peers have been able to do anything similar. So that's, for us, at least a testimony that we are moving in the right direction. If you think about cash collections coming through digital channels, it is increasing rapidly, I would say, quarter over quarter, and it increased by 13% compared to Q1 this year. So it's going in the right direction. But of course, the level is still low. The cash collection rate through digital channels is at Q2 at 11%. So there's a significant and important potential to increase this number going forward. The last cornerstone in our strategy is to capitalize on our unique funding model and our regulated status. And I've said this many times, but being regulated as a bank has actually served us really well over time. And I would say that now having announced securitization, we are adding another option to our toolbox to continue to deliver low cost of funding also in an NPL backstop environment. At the same time, let me also say that we take a lot of pride in our amicable and holistic approach to collection and making sure that our operation is sustainable in all ways and over time. And this builds our brand, our reputation and strengthens our position vis a vis our clients and our customers. And this is a good bridge into the next page, slide over red. We're talking about sustainability because the way we look at this ethics and sustainability are not separate from the business. On the opposite, to be a truly sustainable and ethical company, these matters need to be integrated in all processes and decisions of the company. And as you know, our vision is to help people keep their commitments. And if we take a closer look at the United Nations 2030 Sustainable Development Goals, they actually represent like a blueprint to achieve a better and more sustainable future for all. And these Sustainable Development Goals address the global challenges that we all face, including those related to poverty, inequality, climate and prosperity, peace and justice. This might seem as a rather lofty type of vision or goals to have, But we, at Horace Finance, see that we actually have a role to play. And through the work that we do, we support a number of these stability relevant goals. And if we think about it, being financially excluded from society is quite a heavy burden to carry for many people. And we are really proud to help people, to help our customers with financial difficulties and help them back on track. So let me just pause here then for now and hand over to Kristor, and he will take us through our financial performance in the quarter. So to you, Kristor. Thank you, Klasanders. And starting on Page 10. Our financial performance in Q2 was solid with total operating income closing in on SEK 800,000,000 with profits before tax of SEK $230,000,000. This bottom line contribution is slightly better than Q1 twenty nineteen, which in itself was an all time high. Collection performance came in at 104%, cost income at 71% and ROE at 16%. Now this quarter did not include any items of the sort we would qualify as affecting comparability, but we did, in fact, have and disclose such items on the cost side for the comparison quarter Q2 twenty eighteen. And for this reason, I suggest that we move to Page 11, where adjustments for those items have been made. To start with, on Page eleven, one can observe that growth in loan portfolio at 25% ties in well to growth in net interest income at 26%. And this, if you think about it, confirms our previous comments on reduced margin pressure. Cost increased as well, but they did so at roughly half the pace of income growth, so 13% versus 23%. On an aggregated level, costs in Q2 correspond to 71% of income, whereas in the same period last year, they amounted to 75% of income adjusted for items affecting comparability. I will come back to those costs a bit more on the next page. First, I'd just like to make a quick comment on the line related to profits from joint ventures. The low profit from joint venture in this quarter is explained by a negative revaluation on portfolios held within the Polish JV. This came with a negative SEK 11,000,000 P and L impact. Despite that headwind, profit before tax came in 39% higher than Q2 last year. Moving to Page 12 and costs. As mentioned, there are no particular one off items in Q2 twenty nineteen. So what you see here is a fair reflection of the underlying cost level. And I'd like to comment on three things. First, the increase in personnel costs. So this is partly explained by the acquired entity Maran, which we consolidate since Q4 twenty eighteen. And this entity has some 150 FTEs located in Spoleto, Italy. So of course, it makes a better difference here. Secondly, a comment on collection expenses. So we carry out most of the collection activities ourselves, and that's also our preference. Nevertheless, we do incur external variable costs, and that can, for example, be in the shape of court fees, and those are accounted for as part of collection costs. Due to their nature, they will vary a bit from quarter to quarter, and the levels seen in this quarter, I would rate as normal. Thirdly, just as a reminder, IFRS 16 is not a major topic for Hoist. However, it does move some SEK 13,000,000 from administrative expenses to depreciation. Turning to Page 13. As outlined, we are today at cost income 71%. And as you will probably know, we target 65% by 2021. So it should come as no surprise that we have more work to do. There has been no change in our assessment of what can be achieved and no change in our assessment of what it will cost. Current completion adds up to around 17% of the savings target. And as you would expect, our action list includes both short term fixes and some more far reaching changes to the way we operate, We are progressing initiatives in both categories. In the short term category, just as an example, can mention that travel cost is down 29% per employee when comparing H1 this year with the same period last year. Now that kind of incremental change did not require much investment. In the category of more far reaching changes, Actions often take longer and come with upfront costs, and we will update you as certain milestones are passed in the coming quarters. Turning to Page 15. On capitalization. I mentioned in our Q1 earnings call that we entered into the year within our CET1 target interval and that we expect to end the year within that interval. That's still true. But unlike our position a quarter ago, we are now also within that range. So that's great. This is the result of accumulating profits at a reassuring pace but also the result of us holding back a bit on acquisitions in Q2. We could have invested more, but the acquisitions we did complete still amount to a decent growth rate in core assets, so 7% up versus year end 2018. Our liquidity position remains strong, which makes us well equipped for the second half of the year. And normally, the second half of the year is the busy season in debt purchasing. Turning to funding on Page 16. In fact, interest expense in relation to NPL book value is coming down slightly to 1.9%. This is a very, very competitive level. As illustrated in the graph, the proportion of funding sources have not changed much. And remember, the securitization, which we will come back to in a second, is not in place as per end of Q2. Within the retail deposit component, we have, during 2019, adjusted our pricing to the benefit of longer term deposits. We've also launched new longer fixed term accounts in the German markets, and those have been well received. When combined, those two measures, of course, come with a cost since overnight deposits are cheaper, but in exchange, it helps our asset and liability management. This can be seen if you turn to Page 17. As shown on the left hand side, when we came into 2019, fixed term deposits constituted 35% of total deposits. As per end of Q2, the corresponding figure is 48%. By realizing this significant change, we have reduced our interest rate risk. And by extension, this allows us to manage capital requirements that build on such risk exposures. And with that, I'd like to hand the word back to Thors Anders, who will continue on the regulatory front. Thank you, Kristo. I will spend a bit of time on Page number 19, trying to talk to the background also about what's going on. So please bear with me. So as you have seen from our announcement yesterday, we have taken one important step in the plan to adapt our business model to this new regulatory environment. And our announcement yesterday is an important milestone for us, and I believe that this is proof that we have a viable business model going forward. So as you are aware of them, in December 2018, the Swedish FSA changed its practice and interpretation of the CRR in respect of risk weights for purchased secured NPLs. And this revised interpretation forced us overnight to apply a risk weight of 150% rather than the previous 100% that was used for those assets. And also the European Parliament and the Council approved and adopted the NPL backstop regulation, which in many ways is more important in this matter. And this NPL backstop regulation came into force in April. But it's only a forward looking problem. It doesn't really affect the back book because it applies only to loans originated after the April 26. This NPL backstop is a so called prudential regulation, which effectively forces institutions like Hoist and other banks to fully deduct nonperforming loans from its CET1 capital according to a specific time line that you can see from the graph, which then from a regulatory capital perspective, essentially, it's the same thing as a full write down to zero after three years for unsecured NPLs. And as you are fully aware of, our curves are much longer than three years. I also think it's important to mention then that the NPL backstop was introduced to incentivize banks to offload NPLs into a well functioning secondary market. That's really the purpose of the whole regulatory change. And while hoist finance has an important role in the secondary market, they are also rigorous as a bank and therefore, to the backstop regulation even though it wasn't designed with us in mind. So the NPL backstop consequence is unintended, but obviously, it's something that we need to adapt to, and that's exactly what we are doing. So over the last few months, we have worked intensively together with financial and legal advisers, and we have gone through and evaluated many different alternatives. And we have developed securitization structures where NPL assets are transferred out of hoist finance prudential balance sheets so that assets are e recognized from a risk and capital adequacy perspective. That's the important point. Again, if you look at the underlying purpose of the EU regulations that are addressing NPL issues, again, two main features: one, to shift the risk of nonperforming loans out of the balance sheets of the banks, which is a good thing and two, establish a well functioning and competitive secondary market with market participants that are able to handle those nonperforming loans. And we are very confident that we are fulfilling both of these objectives by establishing securitization structures. We will be transferring the NPLs from the balance sheet from a risk perspective and at the same time, to be an active and responsible debt purchaser on the secondary market, helping our banking partners to clean up their balance sheet as well as finding amicable and good solutions for our customers. So I would like to emphasize at this point in time that we are not circumventing the relevant regulations or setting up a structure which is contradictory to the purpose of the regulation. We are merely adapting our financing model to the new regulatory environment. So even though this backstop regulation is new, there is a well established securitization framework in the CRR, which clearly addresses capital treatment and, for example, requirements to achieve significant risk transfer. And this is something that is done by banks all over Europe. In the process, we have received significant appetite or interest from a number of investors, and we are looking forward to developing these relationships further in the future. There is, of course, more work to be done. But going forward, we see securitization as a very viable route. As again mentioned, being a bank has historically sold as well, we have, by far, had the lowest cost of funding in the market, and Christian Louisa, when he went through the numbers. Securitization structures will increase our financing costs to some extent, and we do expect to fund ourselves well below where our predominantly high yield bond finance peers currently finance themselves. Consequently, we will be well placed to compete in our chosen and prioritized markets. So before discussing the securitization that we announced yesterday, let me first explain how we think about potential features of a securitization program in the context of the NPL backstop regulation. I realize this is a long speech, but let's now move to Slide number 20. So on this slide, in this picture, we're trying to get across how two different types of securitization structures actually work. And we kind of call it step one and step two because, in essence, you're moving from step one towards step two. So the unrated securitization structure is what you see to your left on this picture. And this is the structure that we announced yesterday, and Christian will go through the key financial aspects and details in a couple of minutes. So this structure does not require a rating process and can therefore be implemented in a fairly short time frame. The securitization structure that we announced relates to our backlog. And being able to move at speed in implementing securitization but particularly will be particularly important as we move towards securitization on the front book and the new purchases. This unweighted securitization can be a short term step to facilitate transfer to a potentially more efficient rated securitization, which is a step two step. In the unrelated structure, retains the junior tranche, and the external investor holds the senior tranche. Under existing CRR securitization rules, Hoist will deduct the retained junior tranche in full from the CET1 capital. In other words, this reduction will cover Ahoyst's entire risk exposure in relation to the securitized portfolio. As the senior tranche is placed with an external investor, the securitized portfolio will not be treated as risk weighted assets by Hoist, which in turn will achieve capital relief. To the right on this slide is the step two, rated securitization. And the structure that we are envisaging is aimed at achieving so called significant risk transfer through selling the majority of the junior and mezzanine tranches and achieving derecognition from a prudential perspective. The senior tranche will be rated and retained by funded by our deposits, of course. And depending on the rating, the risk weight applied by Horst on this retained tranche is lower than holding the NPL directly. For example, a BBB rating would have a risk weight of 105% under the ARR regulation, which is lower than the 150% applicable to unsecured NPL assets comprising majority of our current book. And we believe that we can implement such a structure subject to finalization of the rating process and conclusion of our dialogue with other stakeholders, including the regulator and investors. This rated securitization takes longer to implement given the rating process, but we are well underway and hope to deliver and expect to deliver this during the next few months. Step one and two, while different in structure, both achieve capital relief. However, we expect that step two will be slightly more efficient from a funding cost and capital relief perspective. Due to the different time lines to implement, we expect both these securitization structures to form an increasingly important part of our financing structure in the future. As you know, the backstop is not in scope for our assets today since it applies only for loans originated after April 2019. So the importance of having these structures in place is gradually increasing, and of course, it's going to be very important from 2021 and 'twenty two onwards. So having spent quite a lot of time on these two slides, I now hand over to Christoph for him to explain for us the financial implications of the undulated securitization. So please. Thanks. And turning to Page 21, where we have provided a somewhat simplified summary. The transaction is an unrated securitization of €225,000,000 with the underlying assets being Italian unsecured NPL portfolios. As outlined, Hoist Finance will retain the junior tranche, representing, in this case, 5% of the overall portfolio book value. The senior tranche, representing 95% of the overall portfolio book value, will be held by the external investor and come with an initial coupon of 3.5%. As made public, we have a firm commitment from a fund managed by Corral to subscribe to the senior tranche, and we are expecting to close this transaction in August. From an accounting perspective, our assessment is that the securitization vehicle will be fully consolidated and the senior tranche will be recognized as a liability. Assets in question will not be recognized in accounting terms. But just to be clear, this does not mean that the assets will be consolidated from a risk and capital adequacy perspective, and that is the key consideration in relation to the backstop. As I will outline in a while, this securitization frees up around 60 basis points of CET1 capital, which in turn enables us to make at least €100,000,000 of additional portfolio investments. Upon closing the transaction, we will, of course, strengthen not only the capital position, but we will also strengthen an already strong liquidity position, and we will adapt the use of other funding sources accordingly in order to offset parts of the additional funding costs. In net terms, funding cost will still rise. But over time, this increase will be more than offset by us targeting SEK6 billion in acquisitions instead of the previously targeted SEK5 billion. Or put in other terms, we expect the marginal return of those additional portfolio investments to exceed the marginal cost of the securitization. As this structure is a first of its sort for hoist, we have had to carry out substantial preparations, as you can imagine. And this has, of course, involved also external advisers, which comes with some cost. And we anticipate that most of this cost will be accounted for as part of the financing cost over time. Hence, the financial instrument will, in our books, run with an effective interest rate, which is somewhat higher than what the coupon alone would suggest. Turning to Page 22, which illustrates the capital impact of an unrated securitization. So as a result of the securitization, there is an RWA relief, as Claus Anders outlined. And this comes from the fact that the portfolio is deconsolidated for prudential purposes. However, on the capital side, the junior charge will be deducted in full as it is retained by Hoist. And the net capital impact of the transaction we are announcing today or yesterday amounts to improving the CET1 ratio by approximately 60 basis points. So as said, that frees up at least €100,000,000 of additional investment capacity for us. Before I hand back to Klafanders, who will do a summary and open up for Q and A, I just want to mention that on Page 23, we have illustrated how the capital treatment would differ in the case of a rated securitization. But since that is not the transaction we've done, we will not go into details on that today. It's more for future reference. With that said, back to Frans Anders. Thank you, Kristian. So we're now on Page number 25. So regarding outlook, we definitely still see attractive market conditions. Regulatory changes that we have discussed in detail today will increase supply of NPLs from financial institutions in the years to come. The market is still developing favorably and margins are improving. We're seeing that from the years that we are making. And industry consolidation is continuing. And all those things we see are positive elements. And regarding strategy, let me first say that we are committed to our cost savings and operational excellence program and to become the digital leader in our industry. There is, as we discussed, good traction. And good news is that there is more to be done. Although the regulatory changes that recently reintroduced is positive for the industry and the market dynamics, they certainly gave voice some specific challenges being regulated as a bank. Now with yesterday's announcements, we have taken the first step in implementing the relevant mitigating actions. We see yesterday's announcement and the transaction together with carve out as an important milestone on the path towards a sustainable business model plus the introduction of the NPL backstop. Let me round off by saying that I am very proud of the work my team has delivered, and I'm very optimistic that we can emerge and develop as an even stronger hoist finance despite the recent challenges. And today, I think we show that hoist finance is a flexible, competent and agile organization, and I believe that we have a sustainable and competitive business model fit for the future. And let me also say that I'm excited about working more closely with investors as strategic partners going forward, and I'm encouraged by the strong interest in working with Horst Finance. So for now, I recognize that we have covered a lot of ground and that you may have questions, which we, of course, are happy to answer. So by this, we open up for questions. Our first question comes from the line of Ermin Kievich of Nordea. So not so unexpected perhaps, but the first questions are regarding the securitization. So you say that you free up around €100,000,000 on the $2.50 sorry, $225,000,000 you are securitizing right now. Is that a fair assumption that you get something similar in other transactions? Or how should we think about that? And also, approximately how much would you expect to free up if you get it rated, so if you're in a step two situation? Yes. Morning, Erwin. Kristian here. So as I think, Klaus Anders touched upon this briefly, we would expect the rate securitization to be somewhat more efficient. So in that sense, it should be somewhat better. But for the transaction that we've announced today, the numbers that we've given will give you a good understanding for how much capital we can free up in this transaction. Okay. But somewhat better, you can't provide us with any ballpark estimate on how much more efficient it would be in a step two? So the step two is still a few months out in time. And as we complete that step, we can give you more details on that. Okay. Thank you. Amongst other on the rating and yes. The process is well underway, as I said, and the feedback from the rating agencies and then more than two is very positive. So we expect the rated transaction to be more effective than unrated one. I understand. And you previously said that you aim to do maybe SEK 5,000,000,000 to 6,000,000,000 in securitization. What are you expecting to do with the rest of the portfolio when it starts getting sort of affected by potential backstops and so on? Are you still working on other solutions as well? Or have the sort of experience with securitization now been so good that this is the main track you will continue to pursue? Yes. So as you rightly say, we six months back, we announced four mediating actions. One was securitization, along with established fund structures. The third was to work with internalized rating, IRB. And the fourth would be to work with the business mix. Now we have announced our first securitization, which I think is a very important step. We are still working with the other existing actions, so both fund structures and IRB. You know IRB takes longer time, but we are working with it. Fund structures, we hope to do soon rather than later because I think that's interesting to have as a tool in the toolbox. So the work is ongoing also with the rest of the mitigating actions. And as far as securitization in terms of volume and issuance, I think it's fair to say that it was important for us now to get this well underway, to take away the shadow that's been hanging over the share price. The questions around the viability of our business model, I think we have done that now. And that gives us more time to maneuver to say it that way. And finally, is there anything that could be said about how regulators have been sort of being positioned regarding this transaction and overall the different initiatives you've taken? Have they said anything that you could share with us? Or is it more just informal discussions you have with I can start and Kristi can elaborate. The point is that the regulators will never give you any pre approval. That's important to know. But we have, of course, worked extensively with advisers on this process. So we feel very confident that it works in a post backstop environment, which is very important for us, of course. But of course, we also had a number of meetings with the Swedish Aerospace, so they were really well aware of the transaction. But Chris, do you want to shed some more light on this? No, I think, of course, pre approval would be the best thing. The second best thing would be to do your homework, and I think that's what we've done. Our next question comes from the line of Nicola Misadri of Barclays. Hi, good morning. Sorry, more questions about the securitization. Are they the senior notes, are they issued at par? And is there like a deferred purchase price for the portfolio? Yes, so the senior notes are issued at par, correct. And there is like there is, I would say, Hoist is getting the entire proceeds right away or there is a deferred purchase price so that, you'll get the proceeds from the securitization over time? We will get it upfront. So the true IRR, I would say, of the investment into the senior is the 3.5% you're guiding to? So as I said, there will, of course, always be some costs associated with this, even more so when you do it first time. So the effective interest rate in our books will be somewhat different for the Sorry, period I was meaning for the investor for Carval. Is Carval investing at 3.5% into the senior notes, like a debt to IRR? For the period of time that we expect this transaction to be live, I'd say that's a correct reflection of the return. And are there, I would say, repurchase or similar obligation on Hoist? Or is it completely, I would say, obligation free on your side of like moving from this structure into a new structure? I think the only sort of relevant mechanism to mention here is that, as we outlined, there's a step one and there's a step two. And we've done taken some steps to sort of prepare the ground for step two. But other than that, it's a cash securitization. It's a true sale and nothing strange in that sense. Got it. And two last questions, sorry, if I've used your time. What's the ERC associated to this portfolio? I'd say that the portfolio that we have securitized is similar to our overall book. So if you use the overall figures between book value and ERC, you should get an ERC that's roughly right. Got it. You mean on the average of your book or the or any other, so 1.6, I would say, is the money margin embedded? Portfolio that is being securitized is not very different from our overall book. Got it. And so very last question. How did you choose the assets to securitize? So was there a random selection in your Italian unsecured? Was there a particular portfolio? One of the considerations that we have taken into account is the originator because it makes things a little bit easier. So it's the assets are predominantly from one originator. Other than that, they're probably similar to other assets. Got it. Perfect. Thank you very much. Thank you. And we have one further question coming through. It's a follow-up from Ermin Kiedrich of Nordea. So I was thinking we could also maybe speak something about the Q2, which was actually quite strong. So when you say that you also see that margins continue to improve, do you now see that margins on new acquisitions are actually better than your back book Yes. So thanks for asking about Q2. And I agree with you, was a robust and strong quarter. So we showed you previously a slide which shows that the front book profitability now has been on par with the back book average, and we continue to see a healthy improvement in margins. Having said that, of course, and referring back to the slide on investment flow ins, we haven't done that many transactions this year. So our point of reference is slightly lower than it usually is because we have concentrated our money to get back acquisitions, portfolios from get back and some forward flows. And the forward flow volumes that we've acquired, I would say that they typically reflect the price levels seen in previous year when those contracts were entered into. So in that sense, also plays into the overall development. Okay. And I suppose based on what you just said, that would also explain the reason we've only seen unsecured so far this year is merely that the number of protections have been quite few, so it's more from incidents than a shift in trend, so to speak? Yes. And then looking at the pipeline, it's well diversified in Larry's asset classes. Okay, perfect. And then on the collection performance, it remains quite strong at 104%. But we've actually heard some of the banks in Spain talk about recovery rates being somewhat lower in recent time. Have you noticed anything from that in any of the geographies? I think what I can say is that, of course, 104% is the combined figure for the overall group, and we will always have some differences across countries. In Q2, we've seen very strong performance in Poland and Italy, and its impact has been a bit weaker on the Spanish side, which maybe goes to what you're saying. Yes. I think that coincides well with which banks have been saying those comments. Thank you. That's all for me. Thank you. Okay. There seem to be no further questions coming through, so I'll hand back to our speakers for the closing comments. All right. Well, thanks a lot for participating in the call, a fierce opportunity to thank Julia for her time in Horst Violence as the acting Head of Investor Relations and also to welcome Andreas in this role permanently. So here's the one you can always call. So again, thank you for participating on the call. I wish you a great day and also a great summer. Goodbye.