Earnings Call: Q1 2019

May 14, 2019

Hello, everyone, and welcome to the DeHoist Finance Q1 twenty nineteen. Today, I am pleased to present CEO, Claus Anos Nussbein CFO, Costa Johansson and Interim Head of Investor Relations, Julia Earhat. For the first part of the call, all participants will be in listen only mode. And afterwards, there will be a question and answer session. Speakers, please begin your meeting. Welcome, everyone. In the Stockholm office, I have Kristo and Klaus Anders that will present the first quarter results. And I will start by handing over to Klaus Anders. Thank you, Julia, and a very good morning to all of you. And thanks thanks for spending time with us. Today's agenda, I will follow the usual structure. I will start and share with you some highlights, talk about strategy and how we're developing against the strategy. And Crystal will then do the financial review, talk us through the numbers, and also give an update on the regulatory issues and our mitigating actions. And I will come back towards the end and do a summary and, and some highlights and talk about the outlook. And after that, we will do the customary, q and a session. So let's start then on page number four in the presentation, the q one twenty nineteen highlights. And let me, first of all, and clearly say that this is a good quarter for Hoist Finance. Actually, in terms of numbers, it's the the best financial quarter ever for the company. Both the current market conditions and the market outlook are good. That means that, we have we have we see progress also in the marketplace in terms of supply and and margins. I will revert to that comment later on. And we also see, and this is very positive, that we are making a lot of progress as far as our own improvement initiatives are concerned. And we're really pleased to see that this is starting to show. The collection performance came in at a 105% in the quarter, which I think is this shows resilience and robustness in the way we correct. And we see that cost savings are starting to to bite and and costing income is coming down. And we did not close GetBack in in the first quarter, but we have closed GetBack now. That means that we we will see the contribution from GetBack and even the acquisition of Maran from from from the second quarter onwards. We had to hold equity, of course, against the, the potential closure closing of Get Back in the first quarter. So that all starts also a part of that on how you should look at that numbers. But to get back close, that's that's said in in April. Kristen will come back and and talk about, the work we're conducting to mitigate and look at the consequences or the regulatory challenges. We feel confident that we will be able to to mitigate these consequences. On slide number four, at the bottom half there on the slide, you will see that we have summarized the host finance strategy. And the four corners or the cornerstones in the strategy is, first of all, growth. We prioritize growth in our prioritized markets and with a broader product offering. That's important for us. And secondly, the the operational excellence agenda and the work that we're doing to become the most effective and efficient operator in the industry. Good progress there, and Chris will come back and discuss it in more detail. Become the digital leader, and, again, really happy to see progress, and I will come comment on that in a second. And we have this unique, low cost deposit based funding model, which gives us the lowest cost of funding in the industry. I will actually touch upon, how we are doing on on, delivering on the strategy with some very concrete and specific, case studies and case examples in my part of the presentation. However, let's then move to the next slide, page number five, and take a quick look at our earnings. And as mentioned, it is a very strong performance in the quarter. You can see that the profit before tax ended at 226,000,000 SEK, which is up 22%, compared to the fourth quarter in twenty eighteen. Seasonality is part of of, the collection industry, and typically, the first quarter is quite a quite a slow quarter, for the industry. When you compare this q one in nineteen with q one twenty eighteen, you should just keep in mind that the 2018 also was, at that point in time, the best q one ever. So we are really happy to see that, we are coming in at significantly higher level in the first quarter. In terms of return on equity, we are happy to see that we're delivering 17% return on equity in in the first quarter, particularly because we have, I guess, never had more equity than we have at this point in time in the company based on the share issue we did in September and also the full 2018 retained earnings. So in that sense, I think 70% of return equity is a very strong strong number driven by operations. So then I will actually take you through and and talk talk about some of the key, examples, the key initiatives that we are running to deliver on our strategy. And I will then move to to page number six and quickly talk about growth. And and for us, growth in the prioritized markets is very important. And we believe in in being and staying focused rather than being scattered. And that the largest scale benefits are found in growing market shares in the well established markets. And undoubtedly, on top of the scale benefits, scale is also important from a client relevance and a pricing perspective. And GetBack, acquiring, about one third of the portfolios from a previous competitor in the Polish market get back makes us very happy and and proud. We did work really hard for a long time to be able to to do this, and it just shows the strength of our our franchise. Also really happy to to have have acquired the Moran platform in, perhaps the most interesting market in in in Europe, the Italian market. And Moran gives us a a full product coverage and strengthens our market presence in a very important Italian market. This is also a chance to to increase operational efficiency and gives us even a presence in Romania, and I will touch about all this a bit later when I talk about nearshoring opportunities. Moving to slide number seven, I think it's fair to say an experience that showed this to me over the years that, one of the key challenges for many organizations is that they are working in silos. And in silos, there is very little sharing. There's actually very low visibility and lots of applications. And, knowledge transfer isn't really happening, and it's really hard to find common ground for developing operational excellence. And, in Hoist Finance, we have chosen a completely different path. So we launched, our one hoist operating model on the January 1 year. As an an important part of this, we have also established these three centers of excellence for unsecured nonperforming loans, for secured nonperforming loans, and for performing loans respectively. And the purpose for these centers of excellence is to share, to standardize, and make sure that we are as effective and efficient as we can be. And it's good to report to you that there is great traction across our markets. And what I've seen in q one makes me very confident and very optimistic for what is going to happen in the remainder of the year. We have embraced a new way of working, and it is paying off. Moving to the next slide, page number eight, I think, going digital is important for several reasons, and let me mention three then. First of all, we think it's important to service our customers better, being more flexible and to offer better solutions tailored to individual needs. That's one, showing the customer better. Secondly, just helping more customers than before. And, and this is, of course, from a collection standpoint, extremely important. If we can reach new customers, that will definitely be part of how we can push collection performance going forward. And we can see this through the the digital initiative that we are launching, that we are able to find new customers to help in their, way towards financial inclusion. We should have in mind that having financial difficulties typically is quite stressful and embarrassing, and many customers don't really want to talk to anybody. And to have self serve service portals and self-service functionality helps when they are trying to get back on their feet. And to point number three, digital and and going digital by default also, of course, improve our own operations because, digital solutions typically are significantly more cost efficient and cost effective than manual work. And what we have achieved now in a year's time has actually exceeded my expectations. And because we have implemented a harmonized and well functioning now operating model with the centers of expertise that I mentioned, we can actually develop once and then deploy our solutions across our markets. We have launched standardized customer facing solutions and improved our backbone significantly at the same time. And as more of this is coming this year, I believe that we can deliver on our strategy and our ambition to being the digital leader in our industry by 2020. Let's move to slide number nine, which again talks about the warm operating model and how we organize for a more effective efficient future. First, I will talk about the cost savings in a bit, but, I will just pause at this page number nine and say that we, as the senior team, we are very committed to our program. And that three important building blocks this year will be, first of all, to ramp up our shared service center in Wroclaw in Poland, and we're targeting having 50 full time colleagues there by the 2019 to benefit both from scale and skill in a shared service center. As you're aware of, we have been continuing, let me focusing, having a lot of focus on how we can optimize our site structure. And site consolidation has happened in Germany and The UK. We are continuing the work to optimize our site structure for the future. And as a point number three, another important building block this year will be near shoring and Moran, acquisition of Moran, gave us access to the Romanian market and the Romanian service center that Moran has been utilizing there. And we are dedicated to explore ways to expand the current scope in this part of our operations. So with that, I will then hand over to Christer, and he will take us through the financials. So over to you then, Kristo. Thank you, Konstantin. It's a pleasure to be here and to present a strong quarter. And if we turn to Page 11, you can see that we delivered double digit top line growth and improved cost income. In many ways, this is the best quarter ever. On income, which is up 13%, I'd like to comment on three things: portfolio growth, margins and collection performance, and starting with portfolio growth, it's amounted to 33% over the last twelve months. On one hand, this is somewhat boosted by the weaker Swedish krona, but on the other hand, it does not include the Getback transaction. And had that transaction been included, we would have had 7% growth in Q1 versus year end instead of 2%. On margins, one should note that the acquisitions we did complete in Q1 was to a large extent the result of old forward flow contracts, contracts from 2017 and 2018. But based on the new transaction, which we have participated in, we see continue to see improved margins. Last, but certainly not least, collection performance. This is where we spend much of our day to day focus. And in Q1, this remained steady at 105%. So that's the same level as the full year 2018. Now it's not all about income, of course. Cost matters a lot. Total expenses came in at SEK $561,000,000, and that is a level which is not containing any particular one off items affecting comparability. Cost to income, our primary external efficiency target improved from 74% to 71%. And although that's a step in the right direction, it's worth remembering that we strive towards 65% by 2021. Earnings before tax at SEK $226,000,000 corresponds to 17% return on equity. Turning to Page 12. I mentioned the income growth of 13% year on year, and our cost growth for the same period is well below that at 9%. And in fact, if we instead compare with the previous quarter, costs are actually down 3% despite being translated at a somewhat weaker share trade. So that's a development that we are happy with. I would also like to comment on IFRS 16, and this is, these are new accounting rules for leased assets. This has been a big thing for many companies going into 02/2019. For hoist finance, that's not really the case. We are mostly affected through rental contracts for office space. Anyway, under these new rules, a certain portion of what was previously accounted for under administrative expenses will now instead be recognized under depreciation and amortization. And this shift in between lines, which has no net effect, amounts to SEK 10,000,000 on a quarterly basis. It is also the case that these so called right of use assets add to the balance sheet, and as such, they impact the capital coverage calculation, which I will get back to later on. In case you are really interested in IFRS 16, there is more information in the appendix and in the report. Turning to page 13. Even though it's true that Q1 was a busy quarter, and it's, of course, encouraging to see cost income coming down to 71%, it's worth remembering that we have embarked on a much longer journey towards cost income of 65%. To get there, we are pushing ahead with a number of initiatives. And in cash cost terms, the initiatives that we have completed correspond to some 15%, with a total estimated investment of SEK 200,000,000 to SEK $250,000,000, so still plenty of work ahead of us. Nevertheless, we can see benefits of completed initiatives starting to materialize. And when we, by end of Q1, added things up, we were at some 12% of the total target of SEK300 million in run rate savings. You may remember may remember that these savings were coming from a number of different categories. And on page 14, I would like to give some color to recent examples in each category. Starting with collection excellence. In Spain, we have brought a lot of activity in house, and this has been possible by a significant ramp up in our own capacity and our own skills. And this is certainly translating into savings on external commission fees then. We have also revised our approach to so called field operations in Poland, and this is about door to door collection, which we expect to be a smaller piece of our future collection strategy, and we have adapted accordingly. On digitalization, we did in q four give an update about payment portals, and those are, of course, important, but a true self serve platform offers much more. And we have called this our two point zero platform, and this is live in UK. It's now live also in France. We have other markets coming on board during 02/2019. This allows us to run the business with less staff, so that's how those savings materialize. Within collection analytics, it's, of course, a lot about data, and two particular areas where improvements have been realized is within so called skip tracing in France and within so called scorecards qualification in The UK. Now both searching for contact information, which skip tracing is about, and initiating legal processes come with significant external costs. These savings materialize in the form of reduced excessive spend or avoiding excessive spend. Finally, Klaus Anders spoke a little bit about site consolidation, and this is a topic which we've been quite engaged in over the last years. And we've also seen that the actions we have taken have materialized into substantial savings, as such, it makes a lot sense for us to continue to assess those opportunities. Also mentioned the expansion of the shared service center in Rokla, where the typical cost for an employee is is less than half of what we would see in other markets. So here, there's some some benefits to be had by organizing ourselves in a better way. Turning to page 16 and coming back to the topic of capital and liquidity. Changes since the beginning of the year are, in fact, relatively small but still justify a few comments. If I start on the right hand side, the liquidity reserve increased to almost 8,000,000,000, and that's a bit more than we would normally aim towards. And this position was adapted to the payment of the Getback transaction, which amounted to almost SEK 1,000,000,000, and that transaction, of course, then took place in April. Turning to capitalization and the CET one ratio, you will see that we are just below the target range. And I want to be clear here that we entered into 2019 within the target range, and I expect us to leave 2019 within the target range. Now that said, the Q1 figure is influenced by a number of items, and I'd like to comment them in a bit more detail on Page 17. So to start with, I mentioned earlier that the introduction of IFRS 16 increases our recognized assets. That increase is some 242,000,000 SEK. Now in reality, we have not changed anything in how we rent office space, etcetera, but this still translates into a technical impact on the CET one ratio by some negative 0.1 percentage point. Secondly, the Get Back transaction was, as William said, not closed by end of Q1, but negotiations had come long enough for the anticipated purchase price to attract capital coverage, and that alone impacts the CET one ratio by some 0.4 percentage point. As per today, this transaction is, of course, closed, which means that it is now also contributing to income as opposed to only contributing to capital consumption. Thirdly, as you may be aware, the Swedish krona has weakened quite a bit also in q one, and Hoist uses a so called equity hedge against FX movement. Even so, the risk exposure amount is largely denominated in foreign currency, while our equity is SEK based. And as a result, we'll see what you could call an inflation of assets as measured in SEK. Now on one hand, this means that future income from foreign assets will translate into a higher amount in SEAC, so that's all good. But on the other hand, it translates into a circa 0.2 percentage point decrease in the CET1 ratio as per end of q one. In this context, it's worth recalling that the buffer between the regulatory limits and our target range is designed to absorb, amongst other things, FX variation. And, of course, the retained earnings add quite a bit. You can see the impact of the q one profits there, 0.5%, so quite a strong recovery, all else equal. On Page 18, our funding position has not changed much, and it remains well diversified and at low cost. And the increase that we do have is from funding volume, primarily in German retail deposits. During the quarter, we've done some adjustments in our deposit pricing, so adjustments to our offered interest rate with the ambition to gradually increase the average duration of deposits a bit. Of course, that comes with a slightly higher cost, but it also brings benefits when we model different interest rate scenarios. And if we are to believe the Swedish fixed bank, then the most likely scenario is continued very low interest rate. And so that's great. But we are certainly prepared also for other scenarios. Turning to page 20. Despite the operational agenda being quite busy, my top priority in q one has, in fact, been our so called mitigating actions. And just to to recall, so these are the actions which we pursue in order to counter negative impacts from recent changes in regulation. Specifically, this relates to the increased risk weights on acquired NPL assets and the so called prudential backstop. We said in connection with the year end results that many of these actions would take six to nine months to implement, and the progress that we've made in the first three months is consistent with that guidance. And, we are indeed pursuing several tracks with securitization being the work stream where we have invested most time and resources in q one. On securitization specifically, we have identified suitable portfolios in our two biggest markets, so that's Italy and The UK. We have been dropping the relevant structures, and the documentation is now at an advanced stage. Actually, it looks ready to me. And we've had discussions with several potential investors, and some of them have already visited the sites where we are servicing the assets in in question. We are also aligning key assessments with the auditors, and we've had dialogue with the regulator on certain aspects. We have also kicked off the rating procedures. So although we have not yet signed any securitization transactions, we are making good progress and probably switching is very tangible. On other forms of co investments, we are, which includes some fund structures, we are in advanced stages of discussions with investors. We have selected a specific asset for a pilot, and we are now defining the various mechanisms around governance, ownership, and risk sharing. More advanced risk modeling is something that we believe will make a lot of business sense, and, we do acknowledge that IRB methodologies will take time to establish and get approved. But we have set things in motion. And one of the important aspects in q one have been to review our internal capabilities and to recruit certain specialist skills for the benefit of the longer journey. Finally, we are on the topic of changing the business mix. We are exploring market potential for a number of products and services, which we could potentially offer based on our banking regulated model. And with that update on the mitigating actions, I'd like to hand over back to Kassandes. Thank you, Krista. So, we're on page 22 then, the outlook and First of all, I think it's good to to just establish the fact that we see attractive market conditions, regulatory changes that Christa just discussed. They are pushing banks to direct more of the advance. So supply is going going to be strong also in the next quarters to come from financial institutions in the big biggest markets in Europe. We see that the margin improvement that we experienced towards the end of last year is continuing into this year, so that that's that's also helpful. And the the theme, which we also have discussed in the past, namely industry consolidation, is also continuing to to be a force and a topic and a theme that will impact the industry going forward. We have been prioritizing operations, and and that comes through in the numbers in the first quarter. And we are definitely committed to deliver on our cost savings and operational excellence program. Really pleased to the work on addressing the regulatory, changes and the negative consequences that, we experienced from from this through mitigating actions. And we are on the path towards a sustainable business model post introduction of an NPL backstop. And we believe strongly that, Hoist China's diversified funding model based on the banking license remains very attractive. So with that summary, we close the presentation, and we open up for questions. Thank you. The first question is from Evnin Kitch from Nordea. Please go ahead. Your line is open. Good morning and thanks for taking my questions. So the first one is on Getback. I'm thinking given the size of the deal, could you give us any flavor for how to think about in terms of return dynamics? Should we expect it to be sort of in line with the group trend currently on interest income and also in terms of maybe ramp up phase and so on when it comes to the actual cash flows, the cash collections on the portfolio? Yes. Good morning, Armin. Kristi here. So the Get Back transaction closed in April, and we are recognizing income as of April. And of course, the income will not always reconcile with the cash flows. So even though the cash flows will pick up over time as we engage in the various collection activities, we will be recognizing income, you can say, at sort of full run rate from Q2. In terms of margins, you should think about this deal as being better than the transactions we've done in 02/1718. And I think that's a very good sign for our expectations going forward as well in the Polish market. Okay. Thank you. And then on Maran, that already had an impact in Q4 and also now in Q1. Could you just give us some flavor on how to think of the impact from the part you actually acquired now in Q1? So what's the delta? And is that still mainly on the fee P and L line as it's servicing? And also just I don't know if I followed 100% on the exposure you got to Romania. Is only sort of a back office service center or do you actually get exposure to the Romanian market? And then if that's the case, could you give us something on the logic behind wanting to expand in the Romanian market because you've previously said that you want to focus on those core markets you've seen a lot? Yes. Thanks, Ermin. So if I take the first piece of the question and then Klasander take the second piece. So the acquisition of the Milan entity in Italy has been quite an extended process in time, and this is due to Italian regulation. So even though we've been running the company since q three and we've been consolidating it in the in the numbers since q three, It hasn't actually been completed until very recently, or it's in the process of being completed. So if you look at q four and the run rate at that point, you you will capture sort of the impact of the Maran and the the fact that we are closing the transaction now in well, any day now, it doesn't really change the the run rate much from what you've seen in q four then. So that's how you should think about that. With regards to the Romanian market, maybe, Vasanders can comment. Yeah. Yeah. No. So, yeah, good question, and thanks for asking that. And we have a this is just a a back office facility serving the Italian market at this point in time, which I think is quite beneficial. They have proven their their works for for Italy for all over the years. So there's no exposure to the Romanian market, and we don't plan to expand into the Romanian market either. But we will, of course, use this Nexon platform to build a new sort of capability from. So that that's all. Okay. That that makes it much more clear. Thank you. And then just one final question that's maybe more philosophical one way. So you write in your CEO statement that you expect or at least hope to see Hoist being the sort of leader when it comes to digitalization and be best in class by 2020. But at the same time, the collection system, the FICO system, isn't that quite off the shelf? Sort of what's preventing your peers from then closing that gap by just acquiring the same collection system? I I know there's sort of other parts to it, of of course, well, but more in terms of the actual collections. Yeah. No. No. That's a very good question. I mean, I I agree with you. The backbone system in its own right doesn't necessarily give you a strategic advantage. The advantage is is just, I would say, the the interface. I mean, if you can standardize the backbone, which is the core collection platform, to develop once and then deploy all across market is much, much faster, much more easy, and, of course, much, much more cost effective and efficient. If you have ten, twenty, up to 50, even more core collection platforms that you have to make an interface towards, it's gonna slow you down massively. By having one system across all markets, we can be much more agile, much more flexible, and much faster in deploying new solutions and systems and processes. And that's where the competitive advantage is coming from. Understood. Thank you. That's all for me. All right. Thank you. Next question is from Ramil Kouria from SEB. Please go ahead. Your line is open. Thank you very much and good morning. Few questions from my end. Starting off at the if adjusting for FX, it seems like most of your investments in this quarter, albeit being quite small, looks to be in The UK. Is that simply due to forward flow agreements being there? Or is it simply so that pricing environment has improved? That was the first one. Thank you. Good morning, Ramil. Yes, you are correct in the sense that most of the acquisitions we did in q one are the result of existing forward flow contract, and it happens to be the case that some of the bigger contracts we have are in The UK market. Now, of course, we did a lot of work on the Get Back transaction. So in my mind, that's a q one transaction even though in the numbers, you will see it in q two. So in that sense, I would I would maybe think about Poland as being the most active market. So I mean, maybe maybe maybe even better, but if you add back in, get back transaction into the q one investments and assume that the the close in q one, actually, the investment level in q one would have been the highest first quarter ever for Horse Finance. So in that sense, if you adjust for that, it was actually a very good quarter from an investment point of view. Got you. And just a clarification on that. Under your commitments line in this quarter, the Getback transaction is included. Is that correct? Yes, that is correct. And that corresponds to roughly SEK 1,000,000,000. Okay. Thank you. Moving on to the cost side then perhaps. If looking at the FTE development, it's down roughly 2% sequentially. But if looking at, say, average personnel expense over FTEs, it seems like you've had quite an improvement there. Is that I mean, you could argue it's a pure timing effect or whatnot, but is it simply so that that line could include nearshoring feeding through as early as in Q1? Or should we expect that nearshoring should instead be evident in coming quarters? So we are indeed spending a lot of time on topics such as nearshoring, but I don't think you will see much of that in the numbers yet. In fact, the changes that you do see in the numbers are relating to, say, a relative change in mix of employees. So we've been reducing staff in Germany, and we were reducing staff in The UK over time. And the buildup that we have had been mostly in Poland and Italy. That will have changed the mix of the employees a little bit. And should we expect this to increase on the back of our well, cost income seems like it's the highest in The UK and also Germany. And given the site consolidation, should we expect that the mix in personnel should favor your personnel expenses moving forward as well? So we are we are certainly adding more people in Poland to deal with the GetBack transaction, and that will that will be employees who, on average, are at a lower cost than the existing ones. So so there will be some impact of that. I think in the longer term, which maybe matters more, it's about rolling out the digital platforms and making sure that we direct traffic in that direction. That's what's gonna matter long term. But but nearshore, you said, sales and the local jurisdictions are there to replace more costly salaries in the most costly, of course. So so it makes sense to think along the lines that you you think, believe. Thank you. And then just one final question. Looking at the collection cost side, and you mentioned that the legal costs, I don't know if you said that they decreased, but at least that's where the positive beat is coming from on our numbers. I mean, you know by now that secured is a very lumpy business by nature as we've seen with some of your peers. And presumably, most of the legal costs come from there, correct me if I'm wrong. How should we sort of model this going forward given the lumpiness of the business? Yes. So legal expenses are not they're not necessarily related to secure business, so it can also be on the unsecured business. So for example, in in GetBack transaction, we will be engaging in those activities as well. And as you point out, this will vary a little bit over time, and it's also relating then to which particular portfolios we acquire. So for that reason, it's very hard to guide on sort of the exact level quarter by quarter, but I don't think that this quarter is exceptional in any sense. Thank you. And just one final question, if I may. One of your peers mentioned that there's a change to the Polish bailiff structure. Have you looked into that? And if so, do you expect that to impact your business in Poland in any way? Over the last year or so, there's been quite a few changes in the Polish regulatory framework actually. We've been taking a proactive stance, we've been adopting through those regulations. And actually, part of the reason why we've had such a strong increase in in employees in Poland is that we are shifting our focus towards amicable collection versus going down the legal route. So that is a result of us being sort of ahead of the changes in this area. Yeah. The same goes for reducing the exposure to feed collection in the Polish in Polish market a little bit of the same roof. So so I think we're ahead of the curve there. Thank you very much. Next question is from next question is from Anil Sharma, Morgan Stanley. Please go ahead. Your line is open. Good morning. So I've got two questions really. Just trying to understand Slide eight versus Slide, gosh, where's it going, Slide 13? So it looks like a lot of the initiatives you have are going to come through this year and next year. And with this sort of cost saves of €300,000,000 what's the phasing of this? Would you I mean, obviously, I see what you're saying in terms of by 2021, you expect to deliver it all, but should we be thinking 50% done this year, 30% next year within the balance in 2021? Or how do we think about that phasing? And then obviously, the business has got relatively large now. So do you I know you used to provide, but I can't see anywhere here the sort of collection curves by vintage or, you know, how the performance is in terms of, you know, ERC multiples over time. Could you give us a feel as to how the performance is how the performance has been, please? Yes. So starting with this good morning, by the way. Starting with the phasing of the savings, what we've said in the Capital Market Day is that we expect this to be sort of a gradual improvement over the hit the whole period, so over the three years. And I think the start that we are off to is in line with what what I was hoping for. So we are we are on track, but there's gonna be a lot of work ahead of us, and it will take the full sort of three years to get all the way to 300 in cost savings. In terms of collection curves, it is, as you rightly point out, that we will, from time to time, give a little bit more extensive disclosure than we do in the normal quarterly reports. By year end, we disclosed the collection profile of the curves, And the changes that we've done in Q1 are actually very small. So basically, you can say that the sort of the long term expectations on the back book have not changed in relation to what we disclosed by year end. Okay. That's helpful. Thank you. Just one quick follow-up. In terms of sort of pricing for new portfolios, how's that developing? Again, I didn't hear that. I'm sorry. Please repeat. Yeah. Just wondering pricing on new portfolios. Is it getting more competitive or is pricing getting better? Right. Okay. So I tried to, yeah, tried to say that, we we see that as the the margin improvement that we experienced towards the back of 2018 is continuing into 2019. So there's less price price pressure now than it has been, and it seems like, you know, the the key key companies, the key competitors quite disciplined. As you are aware of, there are lot of competitors out there that are in need of deleveraging at this point in time because the leverage ratios are just too high. So that is benefiting us at this point in time because, you know, funding is, for us, in many ways, you know, also called easy. We got access to funding, and it's it's low cost funding. So I've since we are in a good good spot. Okay. So just to check, it's not because the number of competitors is is come down. It's just that there's no rational pricing there there. It's actually both, I would say. I mean, long term, of course, consolidation markets are a good driver for improving, I would say, the professionalism in the in the marketplace and the in the discipline. At the same time, I think what we have seen is that cost of funding has gone up significantly for many companies, and the actual funding is also very low for many companies. And and, when you combine that with high leverage ratios, some companies, yeah, have been more disciplined against them than before. Okay. That's helpful. Thank you. All right. Thank you. And there are currently no further questions registered. So I'll hand the call back to the speakers for any closing comments. Please go ahead. Thanks. Yeah. We have some questions from the web. So Can we hear me read about your challenges? Yeah. In addition to the CET one requirement, what is your total capital requirement? Yes. And in terms of of capital requirement, the report has quite a bit of information. So on page 28, for those who are really interested, you will see that the total own fund requirement is some 4,300,000,000.0 siek, and we are currently at 5,000,000,000 siek. So the next question is, what is the expected trajectory of your CET one over the next twelve to eighteen months? Yes. So what I said earlier on was that we entered into 2019 within the target range, and I expect us to to leave 2019 within target range. And on a sort of month by month basis, it will, of course, be impacted by anything from acquisitions to FX movements. And I think the important thing to remember here is that the underlying business is doing very well, and there's a lot of profits being generated, and that will add to to equity, of course, as you can see in that bridge. Yeah. On top of this, of course, the mitigating actions that we are planning to introduce should also benefit the capital ratios. And then the last question, what is the low end of your buffer target, and what actions would you take if it fell below? So the target range, which is illustrated on page 16 in the presentation is 9.7 to 11.7. So as as noted, we are just below that range. And, the actions that we take, as a result of this is, of course, that we we need to hold back a little bit on acquisitions, yeah, to get into the target range. There are no regulatory requirements because of being below this this limit. Right? Is a management target range. A management target range. So in that sense, we we're taking management ordinary course of action. Thank you. As you just mentioned, that this was Ebrahim from Deutsche that posted those questions. Yeah. Thank you for that. Yeah. Three last ones. Alright. But thanks a lot then for staying on this call with us today. We are obviously satisfied with the quarter. We're glad to see the operational activities and improvements are kicking in, and we are working hard to launch, the mitigating actions that we discussed. So thanks a lot, and have a great day. Bye bye. This now concludes the conference call. Thank you all for attending. You may now disconnect your lines.