Welcome to Hoist Finance Q3 report for 2026. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key five 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 third quarter of 2026. I am Harry Vranjes, CEO of Hoist Finance, and next to me I have Magnus Söderlund, our CFO, and Karin Tyche, our Chief Investor Relations Officer. Let's see if we can switch slides. Yes. Thank you all for logging in and for your interest in Hoist Finance. We will try to run you through this third quarter in about 30 minutes to leave room for any questions you may have. I think before we get into the material, I think the third quarter has been, let's say, more of a nuts and bolts quarter compared to the blowout we had in Q2 when it comes to the headline numbers.
As you can see from this year-on-year profit growth and our solid return on equity, the scaling benefits of this business are now sort of consistently shining through. We have successfully onboarded the extraordinary volumes from Q2. We are busy with integrating Azzurro into our structure. We said it during Q2, we will say it again, this is a light touch integration. We want to learn as much as possible from our new colleagues. We are happy to see that collections have come in spot on forecast for this first quarter as a joint company. We have not booked any integration activities as one-offs in the quarter for this, and Magnus will take you through that in more detail shortly. I think in the marketplace or in the world around us, we see a bit of stress in the system with interest rate inflation and sovereign debt fears.
In this environment, we are actually strengthening our funding cost. As before, when it comes to the collections, we do not see any impact on our collections relating to this. The cash flows tend to remain stable during worrying times, let's say. We are, of course, though, monitoring this closely. We do expect that these movements will add volumes, not least in the secondary markets where portfolios are resold by funds and industrials. We expect more developments to happen there during the beginning of 2027. Let's dive into the highlights of the quarter. Strong, steady delivery with high profitability. We closed portfolio investments of SEK 1.6 billion in the quarter at accretive returns after a summer where most deals landed in Q2, as you saw before the holidays, which is typically a cutoff point.
Per the last of September, we have now invested SEK 9.7 billion this year, so close to 10. Post quarter closing, we have signed and/or closed an additional SEK 1 billion . The market is active, the pipeline is healthy, and the investment team is still fully occupied. Our portfolio now stands at SEK 40 billion , up 27% from last year. Collection performance, as you know, Q3 is our seasonally slowest quarter. We did collect SEK 3 billion in absolute collections, which is a new Q3 record for us. The collection performance came in at 103%, same as last year. I am really happy about that number, as it basically shows that we are able to over collect at the same time as we are onboarding significant volumes. The performance is broad-based with all markets contributing.
Return on equity 21.2, well in line with our new financial targets that we announced on the Capital Markets Day. Our new floor is 20. We are in line with that, I would say. The profit before tax at a strong SEK 503 million compared to SEK 349 million last year. 44% growth or 47% if you adjust for the 10 million non-recurring. Those of you who have followed us for a while, you will remember that two years ago we announced that we were super proud of reaching 1 billion in EBT for the year. We deliver the same amount in six months. Scale matters. Earnings per share, same trend, increase of 34% to 4.5 SEK per share. At the end of the period, we had a CET1 ratio at around 12.88%. Very strong capital position, giving us ample firepower for the upcoming quarters.
Investments compared to the 6.1 billion in Q2, this is a softer quarter. We keep repeating that to be the leading investor and manager of NPLs in Europe, you need to have significant presence in the large six European economies, because that is where the NPLs are. We now have 80% of our portfolio diversified over those six markets, Germany, France, Italy, Spain, Poland, and the U.K. That is also where we acquired 90% of our volumes in Q3. U.K., Germany, Poland for unsecured, and Spain, Italy, France secured. As you can see from the donut diagram there, we maintain our very nice geographical diversification. Looking at the secured versus unsecured split remains at 30% secured, 70% unsecured. If we would split the portfolio by borrower type, we do not have a donut for that here yet, we would have 17% SME or small companies and 83% private individuals.
We managed to close a number of smaller SME portfolios in Q3 through Azzurro and also a large forward flow. The forward flow will deliver monthly volumes now for the coming years. Average IRRs are holding up in the quarter. As during the summer, we keep seeing selective aggressiveness around certain transactions, especially in the Nordics. As always, if returns drop below our appetite, we walk away. So far in October, we have signed transactions for about SEK 1 billion , and we expect to close those transactions by the end of the year. As per the end of the second quarter, our total portfolio now stands at SEK 40 billion , with an estimated 180-month remaining collections of SEK 67.8 billion . 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. Going into a bit more detail around the quarter, as Harry concluded, we saw new investments of SEK 1.6 billion, leading up to a SEK 40 billion portfolio at the end of the quarter and delivering a really strong 21.2% return. Profit before tax at SEK 503 million, versus SEK 349 million last year, leading up to a 44% growth year-on-year. The FX impact in the quarter is not material compared to last year, and the level of one-off impacts are also limited. We have a total of SEK 10 million related to indirect costs that appeared in the quarter, part of it related to project costs and then one piece of reprovisioning for a legacy case.
Excluding this, we have an underlying profit before tax of SEK 513 million and therefore a 47% growth compared to last year. Net profit at SEK 384 million compared to last year's SEK 284 million, so that's a 35% growth and 39% adjusting for the one-off impact in the quarter. We have a return on equity of 21.2% compared to 17.6% last year. If we adjust for the one-off costs, we land at 21.5%. So we see a continued strong return level also now in Q3. Looking a bit more in detail in the P&L, we have interest income, including the income from co-investments at a combined SEK 1.6 billion, leading up to a 25% growth compared to last year. This to be compared to a portfolio book value growth of 27%. For the book value, the FX is however carrying some impact as it is a point-in-time reporting.
Adjusting for the FX, the underlying book value growth is 24%. In the net interest expense, we see an increased cost of SEK 18 million which represents a 5% increase. We have a lower NSFR ratio at 138% compared to last year's 142%, and a continued good NSFR efficiency level in our deposit composition, driving an improved net interest margin. This leads up to SEK 1.24 billion of net interest income compared to last year's SEK 937 million. So that's a 33% growth year-on-year. Out of this, SEK 103 million comes from our Q2 acquisition of Azzurro. Looking at our impairments, we closed the quarter at 103% collection performance. That's in line with the outcome last year and at expected levels, considering the third quarter is normally a bit slower, as Harry mentioned.
We collected a total of SEK 3 billion in the quarter, and we have a SEK 264 million total overperformance, of which we de-risked SEK 175 million as timing adjustments, resulting in a net SEK 88 million of pure overperformance. This combined with some smaller positive revaluations across the group leads up to the SEK 98 million we see in the impairment line. Out of SEK 3 billion collected, we saw roughly SEK 250 million coming from Azzurro in the first quarter now after implementation. In other income, we see SEK 49 million for this quarter, mainly coming from the servicing side of the Azzurro entity. That's SEK 27 million and the rest coming from real estate sales in Spain and the small servicing piece we have in Germany and have had for some time. It's a minimal impact.
Net result of financial transactions at SEK 11 million , mainly driven by outperformance and gains coming from the notes held in co-investment vehicles where the U.K. and our co-investment structure there came in very strong for the quarter. This leads up to a total operating income of SEK 1.4 billion compared to last year's 1.05. That is a 34% growth, again to be compared to the portfolio book value growth of 24% adjusted for FX. Out of the 1.4 billion, 133 million comes from Azzurro. On the cost side, we see a year-on-year growth of 39% in direct costs. That is 629 versus 451 last year. This is a larger than usual increase. Out of the 629, roughly 90 million is coming from Azzurro, where we see a high activity in legal investments for the quarter. That is roughly 35 million out of the 90.
This is obviously to drive a higher collection in the coming period. Within the 90 million, 17 million is coming from the servicing part of the business. In the indirects, we see 266 million versus last year's 250. That means a 6% growth. Adjusting for the 10 million of one-offs in the quarter, this comes to a 2% growth, and this is including the indirect costs coming from Azzurro as well, and that is roughly SEK 20 million . So a really positive outcome for the quarter. All in all, we end on a total cost-to-income ratio of 63.8% in Q3 versus last year's 66.8%. So a good development year. Go to the next slide. To conclude, another strong quarter with an annualized ROE about 21%, solid collection performance and an improved operational leverage.
Net interest income and total operating income at good growth levels compared to the portfolio growth. We also see a really strong outcome in the funding cost, so very happy to see continued results from the tireless efforts in our treasury activities. On the cost side, as said, a higher growth than what we normally see in the direct costs, but mainly driven by increased legal investments and also the servicing part of Azzurro. For the underlying indirect part, we are pretty much flat despite 20 million of new costs coming from Azzurro. So we are very happy with that. We can go to the next slide. Looking at the direct costs, we see an increase, as I mentioned in the quarter compared to Q2, and also an increased cost-to-collect ratio. We were at the total 17.2% in Q2. We now come in at 21% in Q3.
This is mainly driven by increased legal expenses, as I said. We also have the 17 million related to third party servicing as part of the direct cost as well. These costs do not have any relation to the reported collection figure in the graph. For Q2, we had two big one-off interim payments factored into the forecast, and that was a total SEK 180 million , and I mentioned this in the Q2 call. They did neither impact the performance percentage nor incur any costs in Q2, but they had a material impact on this collection total figure. This obviously impacts the change in the ratio as well. If we further consider the seasonally lower collection in Q3, this impacts Q3 negatively to the tune of roughly 150 million of collection for the quarter on a like-for-like basis compared to the second quarter.
For the indirect costs, we see the already mentioned flattish development despite taking on new costs. On the FTE side, we see a small movement in direct FTEs, that is mainly a consequence of our growing NPL portfolio. Looking at the funding structure, no major movements during the quarter. We had one Tier 2 issuance in the quarter at favorable levels that we are very happy with. Besides that, things remain similar to prior quarters regarding the funding mix. We see further improvement of our funding cost to a great 3.21%, driven by similar or slightly lower costs for our deposits and a continuously improved pricing in the bond market. This obviously keeps us at a very competitive level moving forward.
The funding cost in relation to the NPL portfolio book value continues to drop and is now below the 4% level, where we saw a really strong 4.1% in Q2. That has improved even further. NSFR comes in at 138%, which drives the cost down as well. At this level, we feel that we are very much in control as our ambition is to be at around 140% mark. You can go to the next slide. Looking at our capital position, CET1 comes in at 12.9%, well above regulatory levels and not materially different than the level we saw in Q2, which was also to be expected given the investment volumes for the quarter. LCR remains at continued high levels.
Our liquidity reserve remains at around SEK 27 billion , which leads to a ratio compared to the NPL book value of 68%, and this is to be compared to 79% in Q3 last year. So we are continuing to improve our NSFR efficiency. This ratio has steadily been decreasing quarter by quarter with the now record low level in Q3 of this year. As mentioned, 138% NSFR, relatively low, but still very much in control. To conclude, a continued strong operational performance in the quarter with a really strong and healthy return level. We are in a really favorable position from a capital and liquidity perspective to continue to grow in the coming quarters and to continue to perform at great levels we have been demonstrating now over the last couple of years. That is about it from me. With that, I hand back to you, Harry.
Thank you very much, Magnus. Yes. Before we open up for questions, just a few concluding remarks here. Q3, as I said, has in many ways been a nuts and bolts quarter, a delivery quarter, heads down, collecting and integrating and onboarding, at the same time optimizing our funding mix and cost, and keeping the teams active on the sourcing end of the business. We have invested close to SEK 10 billion already in the first months of this year, and we continue to see an active market for the end of the year, with the pipeline also for Q1 starting to fill up. As I mentioned earlier, we see renewed activity in the secondary market. Now in the U.K., we are building position there.
We're merging the Azzurro SEK 2.6 billion SME portfolio and operations with our previous 2.6 billion SEK private individuals portfolio, making it our second largest portfolio in the company with a solid platform for continued growth and local scale advantages in the U.K. market. On the funding side, following our successful launches of our own euro deposit platforms in Germany and Spain during late 2025 and early 2026, we will now also launch a Polish zloty platform in Poland during Q1 2027 to further diversify our funding sources and of course trimming our NSFR efficiency and thereby funding cost. We have come a long way as Hoist Finance to becoming the leading investor and manager of non-performing loans in Europe, and we will continue to strengthen our position going forward, portfolio by portfolio, quarter by quarter. With that, let's open up for questions.
The next question comes from Björn Olsson from SEB. Please go ahead.
Hi, guys. First on the funding cost. The mix between the asset and liability side clearly supports your funding margin, although market rates are going up. I guess with an average deposit fixed for more than a year, this trend looks to, is then sort of fully priced in now, or could we expect this trend to continue into 2027?
Hi, Björn, and thanks for the question. I think as you say, we have increased our maturity period for the deposits, and we are now more optimized than we were a couple of quarters ago from an NSFR efficiency perspective. So I would expect our favorable outcome here to continue for at least a couple of more quarters, one or two quarters.
Clear. Then just a second on portfolio acquisitions. I guess is it only seasonal volatility explaining that you are only investing in primary this quarter, or are you seeing a trend where just the most portfolios for sales are coming from primary market, while secondary is a bit more muted, or how do you see this trend going forward?
Hey, Björn. Thanks for the question. Yeah, I think for the last few quarters we have been heavy on the primary market, and I think last time we saw a lot of activity on the secondary market, that was like 2024, 2025, during those years. What we see now is that that activity on the secondary market is picking up again. So this quarter, just like the previous one, was primarily primary. But I think now we see funds and industrials looking over their positions and we see some activity there we expect will materialize during 2027.
Okay. Thanks, guys.
Thank you.
The next question comes from Ermin Keric from DNB Carnegie. Please go ahead.
Good morning. Thanks for the presentation, for taking my question. Maybe first, I think you said that you saw accretive returns on your investment in the quarter. Is that any trend shift? I think before you talked about seeing more stable returns relative to your back book.
Hey, Ermin, by the way, first of all. Thanks for the question.
Hey.
I guess we have been investing on accretive returns over the last five years, right? But I think in terms of compared to the average, I would say yes, a slight uptick this quarter. Very slight. But of course it helps the average for the year as well.
You have had some peers out talking about increased competition in the markets. Do you see that as well, or are you able to offset it by having maybe a more diverse investment palette?
I think as we have said, I think before, what we have seen on certain transactions in the Nordics, we have seen let us say new competition or increased competition. Now of course we are able to deploy capital in 15 different markets in secured, unsecured, in consumer, in SME. Of course, that optionality gives us exactly that, right, optionality to deploy in other markets when we see a certain market becoming tight. In the Nordics we have seen increased competition.
Okay. Last question, maybe just if you could talk a little more about the cost outlook. I think it is quite impressive with the indirect cost being still flat despite consolidating Azzurro and so on. How much more scale can you actually get out of this?
Hi, Ermin. I think what we illustrated at the CMD in September, I think it was. We have throughout the last couple of years been improving this on a steady basis. We expect to see this improvement to continue as we grow the book, and we are extracting scale out of the existing business. I do not want to give any guidance on an exact percentage number or something, but we are expecting and working hard to keep improving this metric.
Okay, splendid. Thank you very much.
Thank you.
Thank you, Ermin.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad.
Okay. That seems to
There are no more phone questions or written questions at this time, so I hand the conference back to the speakers for any closing comments.
All right. We have a couple of written questions as well, so we will take them. First one, you mentioned that your SEK 27 billion liquidity reserve acts as natural hedge against rising interest rates. Can you briefly explain how that works?
Yeah. I would say that our SEK 27 billion liquidity reserve mainly acts as a mitigant to our FX mismatch in the balance sheet. When it comes to the rising interest rates, what we see now where we have moved from overnight to now longer tenors in our deposit base, we will see a delayed impact of any interest rate hikes. Where in the wholesale section of our funding, we will obviously see it immediately, and likewise in the liquidity reserve. But the longer tenors we have now in our deposit base, that is really what covers us for a longer period of time for the actual financial impact.
Yeah. So simplify, you could say, I guess if the interest rates go up it is bad for the bond side, let's say, or the bonds get a little bit more expensive. We have about SEK 10 billion of bonds. At the same time then you also get higher yields on the treasuries that we have in the liquidity buffer. And there we have SEK 27 billion. That is how we think about that hedge.
Okay. Yeah.
Yeah.
Thanks for clarifying.
Yeah. So it is both on the assets and liability side. That is clear. Okay, another question then. How should we think about the net impact of higher rates on Hoist today? Has your overall interest rate sensitivity changed compared to a few years ago?
Let's see if I understand this question correctly.
I think let me try that one. I think a little bit as Magnus just explained, we have a delayed impact on the deposits because all of it is fixed term. I would say that impact is on average 1.2 years. How has this interest rate sensitivity changed compared to a few years ago? If the market is rational and interest rates go up, that should mean that portfolio prices will go down. The funding for the competition has gone up, basically. People should be bidding a little bit lower for new portfolios. If you look at Hoist in the years 2022, 2023, even 2024, maybe when interest rates went from the zero level almost up to, was it even 4%, I think for a while, 4.5%? Those were some of Hoist's, let's say, most competitive years.
Our funding was much more competitive in that environment than most of our competitors. We don't fear interest rate changes at Hoist.
I think that's clear. Great. There are no more questions. If you have any, just call us.
Thank you all very much. Hope you have a great day.
Thank you.
Thank you.
Thank you. Bye bye