Good market and strengthened organisation

The market was considerably more attractive in 2018, with higher returns and new regulation that has stimulated supply. This was instrumental in Hoist Finance delivering its best financial performance to date. We have achieved strong growth in portfolio acquisitions and are broadening our product and geographical spread. We have implemented a new operating model to become more effective and efficient.

2018 – great results

I am very pleased with the 2018 results. Hoist Finance’s portfolio growth in 2018 was the highest ever, exceeding total portfolio investments in 2016 and 2017. Total operating income rose 20 per cent to SEK 2,829 million (2,365) and profit before tax increased 30 per cent to SEK 755 million (581). During the year Hoist Finance acquisition of loan portfolios amounted to SEK 8,048 million, an increase by nearly 90 per cent, as compared with SEK 4,253 million in 2017. Our collections delivered 105 per cent of the portfolio value, representing the best outcome in five years. The C/I ratio is a new key metric for Hoist Finance that was introduced to increase our internal focus on cost efficiency.

A stronger organisation

In 2018, Hoist Finance took numerous steps to improve operations. We have a new strong, experienced and committed Executive Management Team, and I am convinced that we now have the right team in place to deliver on our goals. We implemented a new operating model across all markets, with fewer management layers. The model is identical in all of our markets and allows for rapid knowledge transfer. We are implementing new company-wide digital solutions that make performance management, analysis and customer interaction easier and more cost efficient. We are bringing down our costs and improving efficiency through site consolidation and resource sharing at our centres of expertise and shared service centres.

Expanded offering

Although NPLs within the unsecured consumer segment are only around 11 per cent of the total NPL market, this has traditionally been Hoist Finance’s core business. Addressing a larger portion of the NPL market, and also acquiring performing loans has, therefore, been a very important strategic priority for Hoist Finance in 2018. One example of this is the acquisition of the business in the Italian credit management company Maran. The wellrespected Maran Group was founded in 1993 and has major Italian banks and financial institutions as customers. With this acquisition we can offer a comprehensive solution in the Italian market, including third-party servicing and portfolio acquisitions of all asset classes, or a combination of both. The acquisition is expected to be finalised during the first half of 2019. In early 2019 we signed an agreement to acquire mainly unsecured consumer NPLs corresponding to approximately SEK 900 million (PLN 400 Hoist Finance Annual Report 2018 5 Statement by the CEO million) from the Polish debt restructuring company GetBack. The transaction is expected to be concluded in the spring of 2019. The ambition is still to grow within our historic core and to expand into the adjacent segments where we have experience and where we can achieve operational leverage. In 2018, 59 per cent of portfolio investments were in the unsecured consumer segment, 27 per cent in secured NPLs and 14 per cent in performing loans.

Outlook for 2019

As a result of the changes to our RWAs which we announced in December, our CET1 ratio fell to 9.66 per cent (11.70) as at 31 December 2018. This constrains our capital flexibility and our expected purchasing volume for 2019. In our ‘base case’ we expect portfolio investments totalling approximately SEK 5 billion in 2019, broadly in line with the average purchasing volume for Hoist Finance over the last three years. We expect purchasing volumes to continue to grow. The regulatory changes in 2018 resulted in changes for our business. In a longer-term perspective, the most important consideration is that we continue to create value by being more efficient in our core business. We proudly continue to develop in line with our vision, ‘Helping people keep their commitments’. With our amicable and holistic approach to collection, we help indebted households meet their commitments so that they can re-enter the financial ecosystem. Customers are often with Hoist Finance for up to ten years, so it is essential to our business that we always have customers’ best interests in mind. Sustainable collection of non-performing loans calls for a long-term perspective, analysis, high-quality case managers and a value-based approach. In summary, Hoist Finance operates in a growing and profitable market. We are committed to becoming more effective and efficient. Based on our new operating model, we will harmonise our key processes and leverage the benefits of skills and scale. Through our product and service offering, we will continue to develop our position as the trusted restructuring partner for European banks and financial institutes in our prioritised markets.

Klaus-Anders Nysteen

Managing Director and CEO

Hoist Finance AB (publ)

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