Welcome to Hoist Finance Q1 report for 2026. For the first part of the conference call, the participants will be in listen only mode. During the questions and answer session, participants are able to ask questions by pound key 5 on their telephone keypad. Now I will hand the conference over to CEO Harry Vranjes and CFO Magnus Söderlund. Please go ahead.
Thank you very much. Good morning, everyone, and welcome to this Hoist Finance earnings call for the 1st quarter of 2026. I'm Harry Vranjes, CEO of Hoist Finance, and next to me I have Magnus Söderlund, our CFO, and Karin Tyche, our Chief Investor Relations Officer. Thank you all for logging in and for your interest in Hoist Finance. We'll try to run through this in 30 minutes and try to leave ample room for any questions you may have. Today, with a new year, we're also trying out a new slightly modified format, so please bear with us. Let's see here. Yes. There.
Before we jump into to the highlights, I think this quarter will be the first quarter in quite a while, where we will actually be comparing apples to apples. In the last four quarters, we've constantly compared Hoist with SDR costs for the current year, with SDR or Hoist without the SDR cost in the previous year. This has sort of clouded the underlying growth. If we now compare Q1 2025, where Hoist actually had full SDR cost with the current quarter, we see a profit before tax growth of currency adjusted 32% versus a total portfolio growth of 19. If we then also adjust for the transaction cost for Azzurro, growth is actually 37%.
I hope this gives an indication of sort of the scale effects of our business model. Before I go into the highlights, I just wanna say a few words about the ongoing acquisition of Azzurro Associates in the U.K. We are a leading actor in the industry. We're well capitalized and for that reason, of course, we look at opportunities, M&A opportunities, around the industry on a continuous basis. We are, however, a picky buyer. Our core strategy is to become the leading investor and asset manager of NPLs in Europe, we therefore primarily look for companies that have large portfolios that we can add on to the Hoist Finance portfolio.
They have to be at attractive returns, and of course, you know, we want to be able to improve our market position in the large economies in Europe. We are also striving to grow our share of SME loans, as we've discussed, which is the largest asset class in Europe, and we have been successful there historically. Now Azzurro Associates ticks all those boxes. We become stronger in the largest credit market in Europe, in the largest asset class of NPLs.
We will be allocating the entire purchase price of the circa GBP 200 million, so 2.5 billion SEK-ish, to their portfolio, which is a granular SME portfolio with an average ticket size of 120K SEK, a little bit larger than our consumer average in Hoist, right? There won't be any goodwill or other intangibles on our balance sheet after the closing. So far we have obtained positive responses from two of the four authorities that need to approve the transaction, and we are hoping that we will be able to close the transaction during the summer. Over to the highlights. Next slide, please. This here you see the new format. Strong start of the year.
We closed portfolio investments of SEK 2 billion in the quarter at good returns. Combined with what we have signed after the quarter closing and including Azzurro, we have secured SEK 5 billion in volume up until the summer, depending of course on the closing of Azzurro. The market is active. The investment team is currently fully occupied with 55 transactions. Our portfolio has grown 19% from last year. It stands at SEK 34.4 billion, and we are of course inching ever closer to our SEK 36 billion volume ambition, where we by no means will stop investing. We will continue, obviously, well further. Collection performance, again, strong quarter. The machine is working really nicely despite geopolitical uncertainties, fluctuating energy prices, interest rates.
It is a part pattern we see from previous external shocks. Collections tend to remain stable. Profit before tax, strong SEK 394 million, including the Azzurro transaction costs, compared to 332 last year. As I said before, a currency adjusted growth of 32%. This is driven by growth of the portfolio, accretive return levels and disciplined cost management. This also helps us out on the return on equity. That came in strong at 19.5. A solid improvement of almost three percentage points compared to last year. Earnings per share over 50% growth compared to Q1 2025. I think 53% actually.
At the end of the period, we had a CET1 ratio of 13.86%, giving us ample room to maneuver and plenty of firepower for the rest of the year. Next slide, please. It has been a busy investment quarter. We've described before Q1 is seasonally a slow investment quarter. In January, typically the market participants, they rest and regroup, not so much Hoist, but the sellers. After what is usually a super intensive December and when we really had an intensive December in 2025. This Q1 was no exception. The transactions that we booked this quarter were primarily transactions that we actually started working on in Q4 or even Q3 last year.
We are now a specialized debt restructurer and, being such, we have started participating in investment processes that we would've skipped last year simply due to the negative backstop impact on our capital. This is not a problem anymore. You know, it's still too early to say how successful we'll be on these portfolios. We'll have to come back to you on that in Q2 and Q3. But if you have, take a look at the bottom right graph, you will also see that we are co-investing less as a result of being an SDR. The co-investments we have now are mainly forward flows that have been signed previous years. Which basically means that we're landing a higher share of the 1 volume on our own balance sheet.
As you can also see in the bottom right graph, investment volumes are lumpy. That is just the nature of the business. We don't want to stress any transactions to any particular date. It makes us a weaker investor. The deals come when the deals come. However, internally, we usually assume a split of 40% for the first half year, 60% for the second half. Please don't see that as any guidance. It's sort of a rough rule of thumb. The market trend of NPL volumes moving north, as we've talked about before, continues. Currently almost half of the EU NPL volumes are on the balance sheets of French and German banks. These are markets where we have a solid market position.
Spain, the exception there to the south moving north rule, maybe Europe's most structured and mature NPL market is also very active. We won two secured mortgage portfolios there during the quarter, making Spain our largest market in our geographically very nicely diversified portfolio, overtaking Italy and Germany from Q4. Now, if we would pro forma include Azzurro Associates in this graph, the U.K. share of the donut would grow to 15%. And although not sort of depicted on this slide, it would also grow our SME share of the total portfolio from today's, let's say 10%, 10%-11% to 15%-16%.
As, as per the end of the quarter, again, the book value EUR 34.4, significant growth compared to last year and an estimated 180-month remaining collections of 58.7 billion SEK. With that, I will hand over to Magnus to take us through the quarter in more detail.
Thank you, Harry. Good morning all, and thank you for calling in. We are off to a good start of the year. We have a profit before tax at SEK 394 million versus SEK 332 million last year, meaning a 19% increase year-on-year. As FX is having a fairly material impact in the quarter-to-quarter comparison, the FX adjusted growth is at 32%. We see a net profit of SEK 337 million versus last year's SEK 260 million, which leads up to a 30% growth, 42% adjusted for FX. This SEK 337 million is impacted by transaction costs related to the Azzurro acquisition of some SEK 20 million-SEK 25 million, and that's reported in the indirect cost line. On the positive side, we have a SEK 43 million impact in the tax line coming from a provision release.
This relates to transfer pricing, legacy case going back to 2016, 2017. Underlying profit before tax, excluding the EUR 25 million of transaction costs, grows by 25% and 37% excluding FX. This results in a return on equity of 19.5% versus last year's 16.7%. Adjusting for the two mentioned items, the underlying return on equity for the quarter is at 18.4%. If we look at the P&L, a bit more in detail, interest income, including the income from co-investments, grows by 10% year-on-year compared to book growth of 19%. The variance in growth mainly comes from FX, where the book value is reported as point in time and interest income is reported on average throughout the quarter. Also from the fact that roughly 80% of the volume in Q1 was implemented in March.
We're not seeing the full quarter impact in the interest income for Q1. Excluding FX, the interest income is at a 15% growth versus the portfolio book value growth of 19% excluding FX. For the net interest expense, we see an increased net cost by some 42 million SEK, driven by the higher portfolio book value and higher NSFR ratio compared to last year. The increase in NSFR is coming from the fact that we have to hold liquidity for the Azzurro transaction, even though it has not yet been finalized, pending approval from regulatory authorities. Looking at the impairment line, we keep the positive momentum from 2025 and arrive at a 105% collection performance for the quarter compared to 103% last year. This is very much a tick in the box and confirmation that we have prudently and conservatively managed portfolio.
In other income, we have roughly SEK 15 million coming from Spanish real estate sales and the remaining mainly coming from servicing revenues in Germany. We have a decrease compared to last year and it's mainly driven by an asset sale conducted in Italy in Q1 of last year. Net result from financial transactions is driven by overperformance and gains coming from the notes held in our co-investment vehicles. Total operating income comes in EUR 138 million higher than last year, leading to a 13% reported growth, which is 20% adjusted for FX impact. Pretty much aligned with the portfolio book value growth. All in all, we see steady development on net interest margin with supportive pricing and really good return levels in the closed transactions for the quarter.
On the cost side, we are remaining at healthy levels with a direct cost for the quarter at a 15% growth in the reported figure. That's 20% growth excluding FX. This to be compared to a collection growth of 12% or 18% excluding FX. To note also in Q1 is that we are doing a small reclassification of certain costs related to the deposit platforms. These were historically considered as indirect costs, but as part of it is directly linked to the portfolio book value growth and size, we will now define them as direct costs moving forward. It relates mainly to personnel, marketing and IT costs. The impact from the reclassification now in Q1 adds roughly EUR 12 million of cost to the direct cost line and therefore a relief of the same in the indirect cost line.
We look at the indirect costs, we report a 3% increase versus last year driven by the EUR 25 million transaction costs already mentioned. Looking at the underlying growth adjusted for these costs and FX, the indirect costs are decreasing by 3%. On top of that, if we also add back the reclassified deposit costs, they are increasing by 1%. All in all, we are on flat levels compared to previous quarters. Adjusting for the 2 more significant impacts in Q1, the underlying return on equity for the quarter is, as I said, 18.4%. All in all, we're very happy with the strong start of the year. We see higher investment volumes in the traditionally slow Q1. Also with the material growth reflected more accurately, where we are now like for like on the financing side related to the SDR status.
We can go to the next slide. Just to recap, a very good start of the year. Net interest income growth of 15%, adjusting for FX, somewhat impaired by the majority of the new volume acquired at the end or towards the end of the quarter. Total operating income boosted by another quarter of strong collection performance. We overperformed by EUR 223 million and adjusted for earlier than planned collections by de-risking revaluations of EUR 88 million. Our expenses are at continued controlled and good levels. The net profit reported at a year-on-year 30% growth or 36% adjusting for FX and the two significant impacts, the tax provision and the transaction costs. We can go to the next slide.
If we look at our funding structure, the mix remains fairly similar to prior quarters, with the exception that we now also have a Spanish-owned platform up and running. This in addition to the German platform implemented during Q4 of last year provides a longer-term flexibility and ability to increase NSFR efficiency. We are always competitively priced with a stable funding base, which is and will continue to support our growth ambitions. In Q1, we see a 3.28% average cost of funding leading up to in relation to the NPL book value of 4.3%. This level has been very stable throughout the 2025 up until now. This obviously puts us in a very good position versus the competition. Our ambition moving ahead is to try and keep this mix of funding moving forward to support our industry-leading credit rating.
Can you go to the next slide? Looking at the direct costs, the cost to collect is roughly at the same level as in Q1 last year, adjusting for the newly reclassified deposit costs of EUR 12 million that I mentioned. Also slightly higher than Q4, where we saw a high earlier than planned secured collection, not adding any material cost, and this was particularly driven by France. In general, we had a larger share of the total collection coming from the secured side in Q4, which carries a slightly lower cost to collect compared to unsecured. Overall, the cost to collect is aligning with the growth of the portfolio, just as we anticipated. Our indirect costs remain on flat levels compared to prior quarters.
If we look at the FTE numbers, we see the shift for the deposit costs reflected in the decrease of indirect FTEs. In the direct FTEs, we see the similar increase of staff, and we're also adding roughly 10 operational staff across the markets in order to manage our growing book. We can go to the next, and I think last slide, Harry. Thank you. Our capital ratio is now increasing as a consequence of the backstop relief. The impact coming from this is roughly 2.7 percentage points, and this puts us in a very good position to keep growing as per our ambitions. We see LCR remain at very high levels. The liquidity buffer is at 27 billion SEK, with a continued lower ratio compared to the portfolio book value.
Looking at the NSFR, we see a high 145% for the quarter, and that's fueled by the fact that we have to hold the share of liquidity for the Azzurro transaction and also be prepared for the immediate closing when the approvals are finalized. To conclude, very strong start of the year, very healthy growth in earnings, and a continued strong collection performance over a very controlled cost base. With that, I hand back to you, Harry.
Thank you, Magnus. Yes, an intense start, and just some key takeaways before we open up for questions. We are now an SDR, and this gives us increased flexibility. We have stopped sort of excluding or filtering out deals that we would have done last year or the previous years. And we've also been co-investing a bit less in Q1 compared to previous years, landing a higher share of the source volume on our own balance sheet. The market remains active, strong primary market flows, and we expect to see some interesting secondary market opportunities as the year progresses as well.
Azzurro Associates, the acquisition will give us a stronger position in the U.K., both for our current consumer business and in the SME asset class. With the opening up of our Spanish deposit platform, we are further strengthening our platform resilience, basically taking down costs and making sure that we have multiple sources of collecting euros. With that, we'll open up for questions.
The next question comes from Björn Olsson from SEB. Please go ahead.
Good morning, guys. First, to follow up where you ended with your excess capital, you're now adding M&A as a bit of a new leg to your story. You're sort of guiding for that to continue ahead. Is this on top of existing investments, or should we see this as that you're sort of that you feel that the ordinary market, the primary and secondary market is sort of limited in terms of additional growth opportunity, or is it because the margins are more attractive?
Good morning, Björn. Thank you. Well, I think we have been looking at M&A continuously for the past years. As we've stated also in this call, we are a picky buyer. The portfolio needs to be valued at a price where we are willing to execute. Yeah, if we find those opportunities, we will go for them. I think viewing it on top of or as part of investment volumes, we wanna grow the book. We see a fantastic primary market out there. Of course, that doesn't sort of exclude any. That we also wanna take position in certain markets, right?
I think this will add to the size of the book and also to the very, very interesting SME asset class. We will be continuing to look at other options in Europe.
All right. As you're mentioning, the SDR enables you to broaden scope for primary investments as well. Could you give any quantification in terms of a ballpark percentage figure, how much larger is your addressable market now in terms of investments once you're SDR?
I think, looking at 2025, when we were not SDR, I think you could use the sort of co-investment volumes, that we've that we saw then, right? As some sort of a proxy. That would lead you to somewhere 15%-20%, larger market. Now we will, we will see the outcome of the bids, et cetera, and so on, later this year or later well, until the end of the summer, most likely, to see how successful we are. Yeah, it is an absolute benefit, of course.
Okay, thanks. Finally, on just a technical note, you're mentioning that you're ramping up your deposits due to the SDR acquisition. Is that basically just roughly SEK 2 billion of deposits that will go into their books and consequently NSFR to drop by a similar amount once the deal closes? How should we view that effect on NSFR and funding in general?
Hi, Björn. From a regulatory perspective, we're required to hold 40% of the acquisition price. That's what we have now, that is driving the NSFR ratio. Just to put it in perspective, if we would close the deal today, the 145 would drop to 140%. That's the sort of addition we have coming from the reservation for this deal.
Okay. Thanks for the clarification. That's all for me.
Thank you. Thank you.
The next question comes from Ermin Keric from DNB Carnegie. Please go ahead.
Good morning. Maybe the 1st question could be, you mentioned that you had a lot of volume coming in late in Q1. How much tailwind should we expect into the coming quarters? The 2nd question would be just on investment returns. Are you seeing any kind of incremental upwards, downwards pressure relative to your back book on the front book investments? The last one would be on the collection performance, which is obviously solid in Q1. How should we think about that for the coming quarters?
Good morning, Ermin. That's 3 questions. The first one was.
The tailwind coming from the late investments in Q1, right, Ermin?
Yes, exactly.
Yeah. I don't know. I mean, I think we had pretty much the same thing happening in Q4, and I think we see the impact of that now in Q1. Now in Q1, we obviously have roughly half of the investments we had in Q4, but I expect like 20, 30 million SEK. Like if we would have bought everything, yeah, at exactly in the middle of the quarter, that would probably be a sort of spillover or impact in Q2 compared to Q1 coming from the EUR 2 billion we invested of interest income, EUR 20 to EUR 30 roughly.
Yeah.
But, uh-
The second question was? Sorry, Ermin.
Sorry. It was on the investment returns, if you see the front book deviating, you know, upwards, downwards to your back book.
No, I think, from the investments we did now in Q4 and Q1, the return levels are very positive. They are very supportive. I don't know, at some stage we might run into the contrary, but so far we're very happy with what we see in the, in the books that we signed, in the deals that we signed.
Yeah. Return levels keeping stable and accretive. The third one.
Was collection performance?
Collection performance. Oh, yes. I mean, over the years now, with the rejuvenation program, with the various operational excellence initiatives around the group, we see a broad-based improvement in the collection performance across the markets. It's not one single market driving, and it is. So it's really good to see. Now we obviously expect those operational excellence initiatives, et cetera, to continue yielding. I think that's how we should think about that.
Great. Thank you very much.
Thank you, Ermin.
The next question comes from Markus Sandgren from Kepler Cheuvreux. Please go ahead.
Yeah, good morning, guys. Sorry, it was a bad line. Can you please repeat what you answered on Ermin's last question?
Oh, it was a bad line. On the collection performance?
Yes, please.
Well, Ermin Keric asked, I guess if it, well, if the strong performance will continue. Basically, my answer was that we see the effects of many of our initiatives that we have been doing, right? Large and small. I guess now we are in the continuous improvement phase. We see a broad-based strengthening of the collection performance across multiple markets, right? It's not any one market driving this.
Okay.
Yeah.
Sorry.
No.
Okay. since
Sure.
Since this seems to be broad-based improvement, why don't you bring up this as NII instead of impairments if it's not just something that fluctuates? Because I would expect it to be closer to zero, but with a higher NII if this is something that would continue.
Well, we do manage the book in accordance with with our auditors, right? To make sure that it has the appropriate value at all times, right? We do minor readjustments on a monthly basis, and we do of course larger revaluations every quarter. We believe the book has a fair value and and and we see this collection performance as as on top of it.
Yeah. I think, fair to say we're very conservative in the management of the book, and I think that shows now for many quarters in a row.
Yeah. Okay. Secondly, I was thinking about you pay the dividend now in, after you got the SDR status. It seems like consensus expecting continuous dividend payments, just disregarding the size of them. What's your thinking when it comes to capital repatriation versus growth? I mean, is it that you want to pay steady dividends, or is it what you have capacity to acquire, or is it the market size that limits growth instead of I mean, if you compare the alternatives to pay dividends and grow.
We believe that the best shareholder value we can give is by buying portfolios at certainly at the current return levels that we see in the market. That remains, right? That will be our primary focus, our primary use of our ample capital. For the rest, I would say we have the dividend policy, where we are accruing at the top range of that, in accordance with the auditors or in accordance with IFRS. We will continue to focus on buying portfolios.
I think in terms of capacity, given the operational model that we have, where we have a mix of in-house collection and an outsourced collection, we have the capacity to absorb quite high volumes. If the return levels stay as they are and we stay competitive, then that's what we're gonna go after.
Okay, thanks. That's all for me.
Thank you. Thank you.
The next question comes from Phillip Moe Mølmen from SB1 Markets. Please go ahead.
Good morning. Last year you sourced around eleven and a half billion SEK of portfolio acquisitions if you include core investments. You communicated that you expected inflows of portfolios coming for sale to be the same or larger this year. Should we expect your investments or your organic investments, so to speak, to be roughly the same or larger and Azzurro to come on top? Should we include Azzurro in the portfolio investments, rough guidance?
I think what we see in the market is roughly the same amount of portfolios or same amount of deals as last year or more, right? It seems to have been a sort of more active start of the year. We don't have full visibility on Q4 yet. If the trend holds up, then there might be an increase compared to last year. We will try to capture as much as possible of that. At the stable returns that we're seeing at the moment and pending competition. That is the target. Again, similar to I guess it was Björn's question, if this comes on top or not. We see the M&As, right?
We will do M&As primarily when there is a large portfolio. We see it as a portfolio in a company suit. Of course, with the specific case of Azzurro, we get extra capabilities, which we are very, very happy to get, right? An extra strong position in the U.K. market. There are many benefits of that M&A. Yeah, we will deploy as much as we have capacity to take on, depending on return levels.
Yeah. My second question is, of the EUR 2 billion closed in Q1.
How much represents the settlement of Q4 2025 signed deals versus the Q1 2026 originated transactions? If the whole EUR 1.4 billion spillover from Q4 is in this, is it correct to assume that you sourced around EUR 600 million portfolio acquisitions in the quarter?
The absolute majority is deals that we started working on Q3, Q4 last year, simply based on the timing. These are large transactions, you know, up to SEK 1 billion apiece. They take a little bit of time to negotiate, sign, and close, and that's the nature of the business. The market, let's say, opened up again in February this year with the first investment committees and so on. I would say a minority of what we have booked in Q1 has actually been sourced in Q1. We will see that coming in later.
Okay, thanks. That's all from me.
Thank you.
There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.
Thank you very much.
We have some questions on the chat as well here. Are there any markets or countries of current interest that Hoist is evaluating where it is not yet active, either within Europe or globally?
Thank you. That's a great question. Well, I think we have been vocal before about that we want to expand further in the Nordics. We have about 4% of our book in the Nordics, and we find it an interesting market. In the previous years, I think the dynamics in the Nordics are a little bit different. The banks typically, first of all, it's not usually the large banks selling, it's typically smaller institutions selling, and they typically sell earlier. A lot of the volume has been backstop affected in the Nordics.
Now with the SDR, it is a market that we will, we will be focusing more on, where the backstop is not a problem for us anymore. I would say that is, that is, the primary markets in Europe that we are, that we are looking at, and we are not looking outside of Europe at the moment.
Great. Thanks for that. There is a question on AI. Are you looking into using new technology such as voice AI to reduce your direct cost for collections?
A great question. We are using AI. We are using it mostly in the support functions at the moment. We typically have a bit larger ticket collection than many of our peers. That's typically more complex collections where a senior agent will be sitting with the debtor in 1 phone, the debtor's co-debtor's representative in another phone, the court on the 3rd phone, et cetera. Quite complex negotiations. So far, we have not seen any AI tool that can help in that respect. We do see benefits for in our head office. We see large benefits in our IT, where we are developing tools together now with Claude and so on.
We've seen some pickup there. You know, for all these tiny interfaces, and small improvements that we do in this continuous improvement base, we are using AI, and trying to maximize the benefit of that as much as possible. So far, we have not deployed it in the collection core, conversation with the debtors. We are looking into it and following the development.
Very good. We have a question on return on equity. If we adjust for the EUR 43 million tax reversal, we have an underlying ROE of 18.4%. What's the target ROE range on a normalized basis, and what are the key levers to sustain or improve it further?
If you look at the target ROE range, I mean, we have a target price communicated that will probably be updated at some point in time. We wanna be above 15%. When it comes to how to keep this up, I mean, that's basically to keep on doing what we're doing. Make great acquisitions and be conservative in our valuation and costs, and also to keep the very good level of operational performance that we have now, keep that going. That's basically how we sustain this and make it grow over time, which is always our ambition.
I think adjusting the underlying ROE down to 17, I guess then, or adjusting for the tax reversal, as Magnus said earlier, then we typically would also adjust for the one-time acquisition costs, and then we come to an underlying ROE of 18.4.
18.4, yes.
Yeah. Yeah.
Great. That was the final questions on the chat. That leaves us with saying thanks to everyone for listening in to this call.
Yes. Thank you, everyone, and have a continued wonderful day and rest of the week. Thank you.
Thank you.
Bye-bye.