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Q2 2018 Helping people keep their commitments 1 AGENDA 1 - PowerPoint PPT Presentation

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Presentation August 2018 Q2 2018 Helping people keep their commitments 1 AGENDA 1 Introduction and key highlights Q2 2018 2 Financial update Summary and key take-aways 3 2 Hoist Finance plays an important role in the financial ecosystem

  1. Presentation August 2018 Q2 2018 Helping people keep their commitments 1

  2. AGENDA 1 Introduction and key highlights Q2 2018 2 Financial update Summary and key take-aways 3 2

  3. Hoist Finance plays an important role in the financial ecosystem …Hoist Finance is the trusted partner to banks and customers Credit is at the center of a well- functioning economy… that closes the loop when commitments are not fulfilled Hoist Finance Higher rate of economic Payments Acquisition growth Non- More job Customers/ Increased Customers/ performing oppor- Bank borrowers income borrowers loans tunities Larger Increased household consump- income tion 3

  4. Three trends currently shaping our industry Market maturation Growing market Consolidation European NPL deal value 1 Consolidation curve EUR billion, CAGR growth % Market share of top 5 players (%) UK 10 +11% p.a. Spain 9 100% Poland 8 UK 7 Germany 6 Spain Italy 5 Belgium 4 Germany 50% France The Netherlands 3 Greece 2 1 Europe 0 2017 2020E 0% Introduction Growth Maturity Consumer unsecured Consumer secured SME unsecured SME secured 1 Source Company market study 4

  5. Our position Capital Diversified market funding funding base Complexity Focus and and specialisation diversification Regulated Unregulated 5

  6. Hoist Finance has the lowest cost of funding among the peer group Weighted average cost of debt (WACD) Net debt / LTM Net debt / 10.0% adjusted Tangible Peer 1 EBITDA equity 9.0% Peer 1 3.2x 24% 8.0% Peer 2 Peer 3 Peer 2 3.6x 84% 7.0% Peer 4 Peer 3 5.2x (51%) 6.0% Peer 5 Peer 6 WACD Peer 4 4.1x (14%) 5.0% Peer 7 3.4x 46% Peer 5 4.0% 3.0% Peer 8 2.0x 98% Peer 6 2.0% 4.0x (4%) Peer 7 1.0% 3.9x (31%) Peer 8 0.0% 1.5x 2.0x 2.5x 3.0x 3.5x 4.0x 4.5x 5.0x 5.5x 6.0x ~1,2% 4.0x 23% Net debt / LTM adjusted EBITDA 0,0% 2,0% 4,0% 6,0% 8,0% 10,0% Bubble size represents ERC Privately-owned peers Listed peers Note: Numbers latest disclosed by the peers. Hoist Finance numbers exclude AT1. Hoist Finance adjusted for IACs Source: Company reports, Bloomberg 6

  7. Today our gap in operational efficiency is compensated by low funding costs, giving us a big potential to outperform by improving operations Earnings before tax margin (including interest expense) 22% 21% Peer average Gap in operational Funding cost Hoist Finance 2017 efficiency vs. peers advantage vs. peers 7

  8. Cornerstones of our strategy aiming to increase operational efficiency Market • Clear focus on prioritised markets to leverage 1 leadership benefits of scale and reduce complexity One Financial • Expansion into new asset classes for profitable Hoist Institutions growth Finance • Effective and efficient operating model • Banking licence is a competitive advantage Unique Knowledge funding driven Digital leader 8

  9. Strategy – current status of key initiatives ✓ ✓ Simplified operating model with fewer Focused and at scale in priority markets capturing 80% layers and strong functional of European transaction volumes responsibility ✓ Continue to build out capabilities to price and assess ✓ Implementing revised legal structure opportunities in new asset classes and converting subsidiaries to branches ✓ Expand services to meet the full spectrum of client needs ✓ Consolidation of Germany and the UK Market ✓ Process initiated to establish shared 1 leadership services in low cost jurisdiction ✓ Specialized leader in FI originated ✓ First steps to identify savings through debt procurement Financial ✓ One Hoist Continue to build out capabilities to Institutions Finance price and assess opportunities in new asset classes ✓ Expand deposit offering ✓ Maintain Baa3 rating ✓ Highest level of ethics and regulatory compliance Knowledge Unique funding driven ✓ Cloud based diallers in all jurisdictions Digital leader ✓ Unified data model and standardised KPI’s ✓ Centre of expertise in big data/machine learning ✓ Centre of expertise in core collection strategies ✓ End-to-end service self-service and omni-channel support and campaign management ✓ Harmonised core collection platform ✓ Standardised best practise systems ✓ Improved segmentation, customer “personas” and ✓ Standardised core processes scorecards 9

  10. Initial review indicates 150 - 200 MSEK or more in cost savings during the next three years taking the C/I-ratio below 70% Market 1 leadership Over the next three years achieve One Financial • Cost savings and cost avoidance of Hoist Institutions Finance at least 150 – 200 MSEK • C/I-ratio below 70% Unique Knowledge funding driven Digital leader 10

  11. Q2 2018 Highlights Growth • Portfolio acquisitions +198% YoY 165 • LTM portfolio growth +37% • Strong expansion in new asset classes Profit before tax excl i.a.c Q2 2018, MSEK Financial performance 15% • Total operating income excl. i.a.c +9% YoY • Profit before tax excl i.a.c. 165 MSEK Return on equity excl i.a.c. Q2 2018 • Return on Equity excl. i.a.c 15% +198% • Collection performance of 103% Outlook Portfolio acquisitions, YoY • Strong transaction market growth • Stabilised front book returns • Decisions taken on long and short term initiatives to increase operational efficiency 11

  12. 2 Financial update 12

  13. Financial summary SEK million Q2 2018 Q2 2017 Change, % Net interest income 592 559 n/a • Net operating income Net operating income 648 530 22% − Portfolio growth contribution Total operating expenses 529 442 20% • Total expenses impacted by 24 MSEK in items affecting Net operating profit 119 88 35% comparability Profit from participations in joint ventures 22 16 38% • Strong portfolio acquisition Profit before tax 141 104 36% concentrated to end of the quarter Ratios Q2 2018 Q2 2017 Change pp Return on Equity, % 12% 10% 2 pp Cost/Income ratio, % 79% 81% -2 pp EBIT-margin, % 30% 35% -5 pp Volumes, SEKbn Q2 2018 Q4 2017 Change, % Carrying value on acquired loan portfolios 17,8 15,0 18% ERC (120-month) 25,7 24,0 7% 13

  14. Operational efficiency Cost/Income ratio, % • Increased capabilities in other 100% asset classes 90% 83% 81% • Advisory costs 79% C/I-ratio 76% 80% 74% 71% C/I-ratio excl i.a.c. • Cost mitigating efforts in 70% 75% 75% 75% 70% 74% progress 72% 71% 70% − Site consolidation 60% − Project portfolio review 50% FY 2016 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 2018 Q2 SEK million Q2 2018 Q2 2017 Change, % Personnel expenses -212 -171 24% Collection costs -167 -157 6% Administrative expenses -135 -100 35% Depreciation and amortisation -15 -14 7% Total operating expenses -529 -442 20% 14

  15. Financial summary segments 1 2 3 Acquired loan portfolios, SEKbn Net operating income, SEKm Profit before tax, SEKm 1% 12% 14% 17% 26% 29% 33% 8% 16% SEK 648m 13% SEK 17,8bn SEK 141m 9% 14% 13% 30% 27% 38% Country Q2 2018 Q2 2017 Change (%) Country Q2 2018 Q2 2017 Change (%) Country Q2 2018 Q2 2017 Change (%) UK 5,099 4,056 26% UK 158 134 18% UK 66 47 40% Italy 4,823 3,032 59% Italy 176 130 35% Italy 76 50 52% Germany 2,269 1,917 18% Germany 85 91 -7% Germany 19 32 -41% Poland 2,848 1,519 87% Poland 76 72 6% Poland 17 44 -61% Other segments 2,492 2,313 8% Other segments 104 84 24% Other segments 25 1 >100% Central functions 232 242 -4% Central functions and eliminations 49 19 158% Central functions and eliminations -62 -70 11% Total 17,176 13,079 36% Total 648 530 22% Total 141 104 36% 15

  16. Funding and funding costs Funding excluding equity and AT1-capital, SEKbn Key takeaways SEKbn % • Established commercial paper 25 2,0% 1,16% program 1,72% 1,8% 20 1,6% • AT1-issue and buy-back 1,4% 15 1,2% • Deposits in euro, 22 per cent of 1,0% total deposits 10 0,8% • Interest expenses/book value 0,6% well below 2% 5 0,4% 0,2% 0 0,0% Q3-16 Q4-16 Q1-17 Q2-17 Q3 -17 Q4 -17 Q1-18 Q2-18 Deposits Senior unsecured debt Subordinated liabilities Commercial Paper Average cost of funding, % Interest 2,3% 2,2% 2,1% 2,2% 1,9% 1,7% 1,5% 1,4% expense/ Book value 16

  17. Capital and liquidity ratios Capitalisation, % Liquidity reserve Capital ratios, % 31 Dec 2017 30 Jun 2018 31 Dec 2017 30 Jun 2018 18,0% 17,7% 3,3% 11,1% CET1-Target 14,2% 13,6% 7 440 6 800 11,7% 11,1% 7,9% Regulatory Margin above CET1-ratio Common Equity Tier 1 Total capital capital Tier 1 capital ratio capital ratio capital ratio requirement requirement 17

  18. 3 Summary and key take aways 18

  19. Summary and key take aways +37% 1 Strong growth and continued expansion into newer asset classes Portfolio growth LTM 17,8 Further diversification of funding base and strenghtening 2 of Tier1 capital Carrying value Q2 2018, SEKbn 3 11,13% Several initiatives launched to increase operational efficiency Q2 2018 CET1-ratio 19 19

  20. Appendix 20

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