Annual Report • Feb 13, 2018
Annual Report
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Figures in brackets refer to fourth quarter 2016.
Figures in brackets refer to 31 December 2016.
1) Key figures have been adjusted to show underlying earnings excluding items affecting comparability which arose in connection with the repurchase of subordinated debt and outstanding bonds during second quarter 2017 and with restructuring costs and an adjustment of previous cost accruals during the fourth quarter 2017. For the fourth quarter, these items totalled SEK 59m excluding tax, SEK 58m including tax. For the full year 2017 the corresponding figures were SEK 118m excluding tax, SEK 102m including tax.
Hoist Finance AB (publ) (the "Company" or the "Parent") is the parent company of the Hoist Finance group of companies ("Hoist Finance"). The Company is a regulated credit market company. Hence, Hoist Finance produces financial statements in accordance with the Swedish Annual Accounts Act for Credit Institutions and Securities Companies. In order to assess the operational performance of the debt purchasing and collection operations and to facilitate comparison with our competitors, Hoist Finance supplements its statutory financial statements with an operating income statement. The operating income statement includes items that have been reclassified relative to the statutory income statement, although valuations and earnings measurements for the two income statements do not differ.
The information in this interim report has been published pursuant to the EU's Financial Instruments Trading Act and Securities Market Act. This information was submitted for publication on 13 February 2018 at 8:00 AM CET.
Strong growth in the final quarter We have now closed 2017 and summarise a year with high acquisition volumes. Our pan-European presence, combined with our strong position, resulted in significant business during the year. During the last quarter alone we reached the highest acquisition volumes during a single quarter. This leads to a portfolio growth of 19 per cent seen over the last 12 months.
Market players are consolidating, while existing players are broadening their geographic presence. Taken together, this results in healthy – yet tougher – competition and margin contraction. In such a market, it is important to navigate correctly by making wellfounded and long-term investments, both in terms of portfolio acquistions and in investments to develop the company. It is also important to increase focus on cost efficiency in order to be competitive and offer a stronger comprehensive offer to our bank partners.
We therefore decided to restructure the business to reduce our cost base. We also accelerated our digital initiative during the quarter and strengthened our expertise in other asset classes. We are doing this to improve our cost efficiency as we prepare to meet the strong market growth ahead of us.
Profit for the quarter was therefore weaker than we previously planned. This is mainly due to the restructuring of our German and Belgian operations. Our office in Bremen will be closed, with our German operations centralised in Duisburg. We will also be closing our office in Brussels and centralising our presence in Belgium and the Netherlands in Amsterdam. These changes make us more flexible while also adjusting costs as we move forward. During the fourth quarter, restructuring costs totalled SEK 36 million. Profit for the quarter was also charged with an SEK 24 million item affecting comparability for the adjustment of previous cost accruals in Italy.
Adjusted for these items, underlying operating profit is somewhat lower yearon-year, mainly due to a mix of increased revenues but also to the increase in our investments.
A leading debt restructuring partner to inter national banks and financial institutions
On a regional level the fourth quarter was a strong quarter for acquisitions, with investments exceeding the same quarter last year in all regions. In Italy we continued our expansion in the SME loan market, with another acquisition from Banco BMP.
Operating profit (EBIT) improved in Region West driven by strong portfolio growth and greater cost efficiency. Regions Mid and Central East are reporting comparatively lower operating profit. The negative development in Region Mid is due to the above-referenced cost accruals adjustment, and in Region Central East to the fact that portfolio growth took place late in the year and therefore contributed only marginally to the year's profit.
We continue to build a company for the future. Banks will have even greater need for support when it comes to non-performing loans and our goal is to be their partner of choice. As I mentioned above, we will increase our focus in the coming year on building the company for the future. We will accelerate investments in digital processes to improve cost efficiency and to expand our customers' self-service options. We will also invest in the expertise needed to manage and expand in other asset classes, including SME loans and secured loans.
These investments, most of which will contribute to profit in 2019 and onwards, also entail costs in 2018. Our assessment is that this will result in return on equity falling short of our target, in the range of 17–18 per cent range for full-year 2018.
This is my final interim report as Hoist Finance's CEO, and I will soon be handing over to Klaus-Anders Nysteen. I would like to take this opportunity to extend our warmest welcome to him. I know he is looking forward to continue the work with our ambitious agenda, and that he will be sharing his views on the future once he has joined us and had the opportunity to form an opinion.
Finally, I would like to express my deepest thanks to all of the group's employees, partners and investors with whom I have had the pleasure of sharing this journey. Together, we have made Hoist Finance the strong, stable company it is today. Onward and upward!
Jörgen Olsson CEO Hoist Finance AB (publ)
| SEK million | Quarter 4 2017 |
Quarter 4 2016 |
Change, % |
Full-year 2017 |
Full-year 2016 |
Change, % |
|---|---|---|---|---|---|---|
| Total revenue | 744 | 672 | 11 | 2,811 | 2,627 | 7 |
| EBITDA, adjusted | 863 | 748 | 15 | 3,251 | 2,921 | 11 |
| EBIT | 190 | 242 | –22 | 951 | 935 | 2 |
| EBIT margin, % | 25 | 36 | –11 pp | 34 | 36 | –2 pp |
| Profit before tax | 110 | 155 | –29 | 581 | 533 | 9 |
| Net profit for the period | 85 | 118 | –28 | 453 | 417 | 9 |
| Basic earnings per share, SEK | 0.92 | 1.41 | –35 | 5.10 | 5.07 | 1 |
| Diluted earnings per share, SEK1) | 0.92 | 1.38 | –33 | 5.09 | 4.97 | 2 |
| Portfolio acquisitions | 2,075 | 1,568 | 32 | 4,253 | 3,329 | 28 |
| SEK million | 31 Dec 2017 |
31 Dec 2016 |
Change, % |
|---|---|---|---|
| Carrying value on acquired loan portfolios2) | 15,024 | 12,658 | 19 |
| Gross 120-month ERC3 ) |
23,991 | 21,375 | 12 |
| Return on equity, %4) | 15 | 17 | –2 pp |
| Total capital ratio, % | 17.71 | 16.76 | 0.9 pp |
| CET1 ratio, % | 11.70 | 12.46 | –0.8 pp |
| Liquidity reserve | 6,800 | 5,789 | 17 |
| Number of employees (FTEs) | 1,335 | 1,285 | 4 |
1) Includes effect of outstanding warrants. Following the 1:3 share split conducted in 2015, each warrant entitles the holder to subscribe for three new shares.
2) Including run-off consumer loan portfolio and portfolios held in the Polish joint venture.
3) Excluding run-off consumer loan portfolio and portfolios held in the Polish joint venture.
4) In conjunction with the December 2016 issue of Additional Tier 1 capital, the definition of ROE was changed to exclude accrued, unpaid interest on AT1 capital and the carrying value of AT1 capital in equity.
Unless otherwise specified, all market, financial and operational comparisons refer to fourth quarter 2016. The analysis below follows the operating income statement.
Net revenue from acquired loan portfolios increased 13 per cent to SEK 701m (620), with the change (after adjustments for portfolio revaluations) mainly attributable to growth in Spain, Italy and Poland.
Gross collections on acquired loan portfolios increased to SEK 1,359m (1,105) and include SEK 111m received through the divestment of part of a Polish loan portfolio during the quarter. Adjusted for this divestment, gross cash collections increased 13 per cent.
Portfolio amortisation and revaluation increased to SEK 659m (468), with SEK 108m attributable to the abovereferenced divestment. Portfolio revaluations alone accounted for SEK –3m (23). Portfolio acquisitions totalled
SEK 2,075m (1,568) during the quarter, mainly attributable to Italy. Due to these and other previous acquisitions during the year, portfolio growth was 19 per cent calculated over a 12-month period.
Profit for participations in joint ventures totalled SEK 21m (15) and includes a performance-based remuneration of SEK 13m taken up as revenue and based on successful collections during 2017 by Hoist Finance's Greek joint venture.
Fee and commission income decreased 43 per cent to SEK 17m (30). The decline is mainly attributable to Poland, where a major service contract was terminated in early 2017. Total revenue totalled SEK 744m (672).
Total operating expenses increased to SEK 554m (431). The current quarter includes SEK 36m in restructuring costs related to the decision to coordinate Hoist Finance's operations in Germany, as well as in Belgium and the Netherlands, in fewer offices. These restructuring costs are allocated between personnel expenses (SEK 32m) and other operating expenses (SEK 4m). After adjustments for restructuring costs, personnel expenses increased 5 per cent and were mainly related to strengthening in Central Functions and to Spain and Italy, where staff levels were adapted to strong growth.
Collection costs totalled SEK 203m (146), with the increase mainly attributable to Italy, Spain and Poland. Previous cost accruals were adjusted in Italy (where the largest share of the increase was seen), which increased the figure for the current quarter by SEK 24m.
Other operating expenses totalled SEK 118m. After adjustments for the above-referenced restructuring costs this figure totals SEK 114m, as compared with SEK 93 for the fourth quarter 2016. The higher figure reflects continued high costs for change initiatives, including advisory services regarding potential portfolio acquisitions, during the eventful fourth quarter of 2017. Hoist Finance increased its investment rate in 2017, including in new collection systems. These are not yet fully operational, however, and expenses for depreciation and amortisation of tangible and intangible assets accordingly remained unchanged at SEK 14m (14).
Total financial items as per Hoist Finance's operating income statement were SEK –80m (–87). Interest income totalled SEK –5m (1) due to the prevailing interest rate scenario coupled with the low risk level of Hoist Finance's liquidity portfolio.
Interest expenses, which totalled SEK –75m (–79), mainly include interest expenses from debt instruments issued and deposit-related interest expenses. Although there was a significant increase in the volume of debt instruments issued in 2017 (in terms of both senior unsecured debt and subordinated debt), interest expenses for market debt decreased somewhat year-on-year. The decrease is due to Hoist Finance's restructuring of outstanding market debt in 2017, with a strong credit rating and favourable market enabling the issuance of new debt at attractive levels. The depositrelated interest expense is essentially unchanged, as volume growth (mainly within the German deposit offer) was offset by lower average interest rates (mainly on fixed deposits in Sweden).
Net financial income totalled SEK 0m (–8). The result for the three main components – changes in value for interest rate hedging instruments, changes in market value for bonds in the liquidity portfolio, and profit/loss from FX hedging – was limited, with the individual components also producing limited results. However, the year-on-year comparison is affected by Hoist Finance's expanded application of hedge accounting as from 2017, which resulted in the reporting of most earnings from currency fluctuations as other comprehensive income.
Unless otherwise specified, comparisons regarding balance sheet items refer to 31 December 2016.
Total assets increased SEK 3,387m year-on-year to SEK 22,537m (19,150). The change is mainly due to an SEK 2,380m increase in acquired loan portfolios, primarily attributable to acquisitions in Italy and UK. Bonds and other securities increased SEK 1,150m and lending to credit institutions increased SEK 620m, while treasury bills and treasury bonds decreased SEK –784m.
Total liabilities amounted to SEK 19,308m (16,225). Deposits from the public increased SEK 1,378m. Senior unsecured debt increased SEK 1,229m due to the issuance of bonds. Subordinated debts increased net SEK 462m due to the issue of Tier 2 capital in the amount of EUR 80m and the repurchase of previously subordinated debts.
| 31 Dec 2017 | 31 Dec 2016 | Change, % |
|---|---|---|
| 17 | ||
| 18 | ||
| 22,537 | 19,150 | 18 |
| 13,227 | 11,849 | 12 |
| 4,355 | 3,126 | 39 |
| 803 | 342 | >100 |
| 18,386 | 15,317 | 20 |
| 923 | 908 | 2 |
| 3,228 | 2,925 | 10 |
| 22,537 | 19,150 | 18 |
| 11.70 | 12.46 | –0.8 pp |
| 17.71 | 16.76 | 0.9 pp |
| 6,800 | 5,789 | 17 |
| 15,024 | 12,658 | 19 |
| 6,861 15,676 |
5,877 13,273 |
Gross 120-month ERC3) 23,991 21,375 12 1) This item does not correspond to an item of the same designation in the balance sheet, but rather to several corresponding items.
2) Including run-off consumer loan portfolio and portfolios held in the Polish joint venture. 3) Excluding run-off consumer loan portfolio and portfolios held in the Polish joint venture.
Hoist Finance funds its operations through deposits in Sweden and Germany and through the bond market. Deposits from the public totalled SEK 13,277m (11,849) as at 31 December 2107. Deposits from the public in Sweden, which are carried out under the HoistSpar brand, totalled SEK 12,242m (11,849). Of this amount, SEK 4,569m (4,266) is attributable to fixed term deposits of 12-, 24- and 36-month durations. Since September 2017, deposits for retail customers have been offered in Germany under the Hoist Finance name.
Deposits in Germany totalled SEK 985m as at 31 December 2017. Of this amount, SEK 78m is attributable to fixed term deposits of 12- and 24-month durations.
As at 31 December 2017 outstanding bond debt totalled SEK 5,158m (3,468), of which SEK 4,355m (3,126) was senior unsecured debt. During the quarter Hoist Finance, through Hoist Kredit AB (publ), issued EUR 250m in new senior unsecured debt with a 4-year duration under the Company's EMTN programme. The bond carries a fixed annual coupon rate of 1.125 per cent and is listed on the Dublin stock exchange. In conjunction with the issue, EUR 100m in previously issued senior bonds maturing in December 2019 were repurchased through a public offering. All repurchased bonds have been cancelled.
Group equity totalled SEK 3,228m (2,925). The increase is mainly due to net profit for the period.
The total capital ratio was 17.71 per cent (16.76) and the CET1 ratio was 11.70 per cent (12.46). Hoist Finance is therefore well capitalised for further expansion.
Hoist Finance's liquidity reserve, presented in accordance with the Swedish Bankers' Association's template, totalled SEK 6,800m (5,789).
Basic earnings per share totalled SEK 0.92 (1.41). Accrued, unpaid interest on AT1 capital is included in the calculation.
Comparative figures refer to fourth quarter 2016.
| SEK million | Quarter 4 2017 |
Quarter 4 2016 |
Full-year 2017 |
Full-year 2016 |
|---|---|---|---|---|
| Cash flow from operating activities |
819 | 1,003 | 2,495 | 2,977 |
| Cash flow from investing activities |
–2,637 | –2,065 | –5,439 | –4,605 |
| Cash flow from financing activities |
2,333 | –154 | 2,751 | 1,032 |
| Cash flow for the period | 515 | –1,217 | –193 | –597 |
Cash flow from operating activities totalled SEK 819m (1,003). Gross cash collections from acquired loan portfolios continued to increase in relation to acquired loan portfolios and totalled SEK 1,359m (1,105).
Cash flow from investing activities totalled SEK –2 637m (–2,065). Portfolio acquisitions increased during the quarter as compared with Q4 2016, totalling SEK 2,075m (1,568). A net total of SEK –550m was invested in bonds and other securities during the quarter due to the inflow of cash from the new issue conducted during the quarter and the inflow from deposits from the public.
Cash flow from financing activities totalled SEK 2,333m (–154) and is attributable to issued bonds and the inflow from deposits from the public. The newly started deposits in Germany accounted for SEK 842m of the inflow.
Total cash flow for the quarter amounted to SEK 515m, as compared with SEK –1,217m for fourth quarter 2016.
Hoist Finance is exposed to a number of uncertainties through its business operations and due to its broad geographic presence. New and amended bank and credit market company regulations may affect Hoist Finance directly (e.g., via Basel IV capital and liquidity regulations) and
indirectly through the impact of similar regulations on the market's supply of loan portfolios. Hoist Finance's crossborder operations entail consolidated tax issues relating to subsidiaries in several jurisdictions. The Group is therefore exposed to potential tax risks arising from varying interpretation and application of existing laws, treaties, regulations, and guidance.
Credit risk for Hoist Finance's loan portfolios is deemed to be largely unchanged during the quarter. Credit risk in the liquidity portfolio remains low, as investments are made in government, municipal and covered bonds of high credit quality.
There were no major changes in Hoist Finance's operational risks during the quarter. The Group works continuously to improve the quality of its internal procedures to minimise operational risks.
Market risks remain low, as Hoist Finance continuously hedges interest rate and FX risks in the short and medium term.
Capitalisation for Hoist Finance remains strong, with a CET1 ratio that exceeds regulatory requirements by a good margin. Hoist Finance is therefore better able to absorb unanticipated events without jeopardising its solvency, and is well capitalised for continued growth.
Liquidity risk was low during the quarter. Hoist Finance improved its liquidity position during the quarter with the issuance of EUR 150m in bond loans. The launch of deposits from the public in Germany during the quarter also did well during the quarter and contributed to a strong funding base. Hoist Finance's liquidity reserve exceeds the Group's target by a good margin. Due to its strong liquidity position, Hoist Finance is well equipped for future acquisitions and growth.
Parent Company Hoist Finance AB (publ) reported a profit before tax of SEK 78m (168) for fourth quarter 2017. Income and expenses are related to the Parent Company's function as a holding and purchasing company in the Hoist Finance Group.
The Parent Company's net sales totalled SEK 40m (62) during the fourth quarter. Earnings are attributable to management fees within the Group, and the year-on-year decrease is due to the adjustment of expenses charged to Group subsidiaries. Operating expenses totalled SEK 126m (74). The year-on-year increase is attributable to increased internal expenses related to management fees and advisory services regarding forthcoming new IFRS regulations.
Tax adjustments were carried out via the receipt of a SEK 180m group contribution from subsidiary Hoist Kredit AB (publ) and the allocation of SEK 24m to the tax allocation reserve.
The balance sheet total decreased somewhat year-onyear to SEK –57m. The decrease is mainly due to intra-group receivables and liabilities that were settled during the year. The SEK 39m increase in intangible assets is attributable to major investments in the Group's IT environment, which is scheduled for operational implementation during 2018.
The nature and scope of related-party transactions are described in the Annual Report.
Hoist Finance AB (publ), corporate identity number 556012- 8489, is the Parent Company in the Hoist Finance Group. Hoist Finance is a Swedish publicly traded limited liability company headquartered in Stockholm, Sweden. Hoist Finance has been listed on NASDAQ Stockholm since March 2015. The Parent Company serves as a holding and purchasing company for the operating subsidiary Hoist Kredit AB (publ) ("Hoist Kredit") and its sub-group. The Hoist Kredit Group acquires and holds the Group's loan portfolios and the loans are managed by its subsidiaries or foreign branch offices. These entities also provide management services on a commission basis to external parties.
See the 2016 Annual Report and the Subsequent events section for details on the Group's legal structure.
The number of shares totalled 81,184,546 at 31 December 2017, as compared with 80,719,567 at 31 December 2016.
The share price closed at SEK 92.25 on 29 December 2017. A breakdown of the ownership structure is presented in the table below. As at 31 December 2017 the Company had 3,248 shareholders, compared with 3,298 at 31 December 2016.
| Ten largest shareholders, 31 December 2017 |
Share of capital and votes, % |
|---|---|
| Carve Capital AB | 9.7 |
| Zeres Capital | 8.6 |
| Swedbank Robur Funds | 8.1 |
| Handelsbanken Funds | 6.1 |
| Didner & Gerge Funds | 4.5 |
| Jörgen Olsson privately and through companies | 4.1 |
| Carnegie Funds | 3.6 |
| AFA Insurance | 3.2 |
| Danske Invest Funds | 3.0 |
| Costas Thoupos | 3.0 |
| Ten largest shareholders | 53.9 |
| Other shareholders | 46.1 |
| Total | 100.0 |
Sources: Modular Finance AB, 31 December 2017; ownership statistics from Holdings, Euroclear Sweden AB; and changes confirmed and registered by the Company.
In accordance with adopted instructions, the Nomination Committee shall be comprised of the three largest shareholders and the Chairman of the Board of Directors. The Nomination Committee is currently comprised of the Chair of the Board and members designated by Carve Capital AB, Zeres Capital and Swedbank Robur Funds. The Committee's mandate period extends until a new Nomination Committee is appointed. For the period preceding the 2018 Annual General Meeting, the composition of the Nomination Committee has been based on shareholder statistics as at the final business day of August 2017.
The Board of Directors proposes that the 2018 AGM approve the distribution of a dividend of SEK 1.90 (1.30) per share, for a maximum total of SEK 154m (105), and a record date for the dividend of 18 May 2018.
The proposed dividend payment date is 23 May 2017.
This year-end report has not been reviewed by the Company's auditors.
The AGM will be held on Wednesday, 16 May 2018, in Stockholm.
Hoist Finance AB (publ) and Hoist Kredit AB (publ) were merged on 2 January 2018. Through the merger, all of Hoist Kredit's assets and liabilities were transferred to Hoist Finance and Hoist Kredit was dissolved. Consequently, the company has simplified its corporate structure as previously announced and Hoist Finance has moved from being a holding company to being the Group's operating parent company. The merger does not entail any material financial effects for Hoist Finance. Like Hoist Kredit, Hoist Finance is a credit market company under the supervision of the Swedish Financial Supervisory Authority.
| SEK thousand | Quarter 4 2017 |
Quarter 3 2017 |
Quarter 2 2017 |
Quarter 1 2017 |
Quarter 4 2016 |
|---|---|---|---|---|---|
| Gross collections on acquired loan portfolios | 1,358,948 | 1,133,761 | 1,198,123 | 1,186,339 | 1,104,772 |
| Portfolio amortisation and revaluation | –658,741 | –499,280 | –552,499 | –522,624 | –485,532 |
| Interest income from run-off consumer loan portfolio | 1,156 | 518 | 1,021 | 1,845 | 1,153 |
| Net revenue from acquired loan portfolios | 701,363 | 634,999 | 646,645 | 665,560 | 620,393 |
| Fee and commission income | 16,774 | 16,986 | 18,396 | 21,145 | 29,513 |
| Profit from shares and participations in joint ventures | 20,962 | 11,326 | 16,188 | 27,662 | 15,222 |
| Other income | 4,837 | 2,240 | 1,562 | 4,640 | 7,110 |
| Total revenue | 743,936 | 665,551 | 682,791 | 719,007 | 672,238 |
| Personnel expenses | –219,390 | –171,165 | –170,987 | –168,463 | –177,988 |
| Collection costs | –203,118 | –142,782 | –157,200 | –169,008 | –145,560 |
| Other operating expenses | –118,297 | –90,374 | –99,543 | –94,160 | –93,170 |
| Depreciation and amortisation of tangible and intangible assets | –13,593 | –14,258 | –14,173 | –13,919 | –13,891 |
| Total operating expenses | –554,398 | –418,552 | –441,903 | –445,550 | –430,609 |
| EBIT | 189,538 | 246,999 | 240,888 | 273,457 | 241,629 |
| Interest income excl. run-off consumer loan portfolio | –4,602 | –3,542 | –3,154 | –3,048 | 700 |
| Interest expense | –75,281 | –68,106 | –85,100 | –76,579 | –79,474 |
| Net financial income1) | 71 | 6,859 | –48,572 | –8,682 | –7,987 |
| Total financial items | –79,812 | –64,789 | –136,826 | –88,309 | –86,761 |
| Profit before tax | 109,726 | 182,210 | 104,062 | 185,148 | 154,868 |
1) Including financing costs.
| SEK million | Quarter 4 2017 |
Quarter 3 2017 |
Quarter 2 2017 |
Quarter 1 2017 |
Quarter 4 2016 |
|---|---|---|---|---|---|
| EBIT margin, % | 25 | 37 | 35 | 38 | 36 |
| EBIT margin, adjusted for items affecting comparability, %1) | 33 | – | – | – | – |
| Return on book, %2) | 8.4 | 10.0 | 10.3 | 11.3 | 11.1 |
| Return on book, adjusted for items affecting comparability, %1) | 10.1 | – | – | – | – |
| Portfolio acquisitions | 2 ,075 | 781 | 786 | 611 | 1,568 |
| SEK million | 31 Dec 2017 |
30 Sep 2017 |
30 June 2017 |
31 Mar 2017 |
31 Dec 2016 |
| Carrying value of acquired loans3) | 15,024 | 13,170 | 13,079 | 12,783 | 12,658 |
| Gross 120-month ERC4) | 23,991 | 21,421 | 21,417 | 21,297 | 21,375 |
| Return on equity, %5) | 15 | 17 | 15 | 21 | 17 |
| Total capital ratio, % | 17.71 | 19.43 | 19.73 | 16.79 | 16.76 |
| CET1 ratio, % | 11.70 | 12.72 | 12.99 | 12.51 | 12.46 |
| Liquidity reserve | 6,800 | 5,702 | 5,605 | 5,671 | 5,789 |
| Number of employees (FTEs) | 1,335 | 1,308 | 1,267 | 1,268 | 1,285 |
1) Key figures have been adjusted due to restructuring costs and an adjustment of previous cost accruals during the fourth quarter 2017.
2) Excluding operating expenses in Central Functions. For information on the calculation of key ratios, see Definitions.
3) Including run-off consumer loan portfolio and portfolios held in the Polish joint venture.
4) Excluding run-off consumer loan portfolio and portfolios held in the Polish joint venture. For information on the calculation of key ratios, see Definitions.
5) Comparative figures have been adjusted for all periods in 2016.
Hoist Finance purchases and manages non-performing loans in ten European countries, all of which have different legislative frameworks, shifting traditions for providing financial services and varying attitudes with respect to repayment patterns.
Operations in Europe are divided into three segments – Region West Europe, Region Mid Europe and Region Central East Europe.
| SEK thousand | Region West Europe |
Region Mid Europe MSEK |
Region Central East Europe |
Central Functions and Eliminations |
Group |
|---|---|---|---|---|---|
| Net revenue from acquired loan portfolios | 261,059 | 4 500 237,854 |
202,450 | – | 4 253 701,363 |
| Total revenue | 274,306 | 4 000 252,045 3 500 |
209,863 | 3 329 7,722 |
771 743,936 |
| Total operating expenses | –148,959 | 3 000 –154,167 |
–145,386 | 596 –105,886 |
–554,398 |
| EBIT | 125,347 | 2 500 97,878 1 568 |
2 075 64,477 |
–98,164 1 271 |
1 689 189,538 |
| EBIT margin, % | 46 | 2 000 39 118 1 500 |
466 31 |
– | 25 |
| EBIT margin, adjusted for items affecting comparability, %1) |
– | 1 000 1 053 500 50 397 |
1 211 46 398 |
1 462 – |
1 793 33 |
| Carrying value of acquired loan portfolios, SEKm2) | 5,658 | 0 5,262 Kv4 |
3,867 Kv4 |
237 Helår |
15,024 Helår |
| Gross 120-month ERC, SEKm3) | 9,233 | 2016 8,268 |
2017 6,490 Region Central East Europe |
2016 – Region Mid Europe |
2017 23,991 Region West Europe |
1) Key figures have been adjusted due to restructuring costs an adjustment of previous cost accruals during the fourth quarter 2017.
2) Including run-off consumer loan portfolio and portfolios held in the Polish joint venture.
3) Excluding run-off consumer loan portfolio and portfolios held in the Polish joint venture. For information on the calculation of key ratios, see Definitions.
Carrying value, acquired loan portfolios, 31 December 2017
The earnings trend for each operating segment (excluding Central Functions and Eliminations), based on the operating income statement, is set forth in the following pages.
France, Spain and the UK
management of loan portfolios.
Total operating expenses increased 15 per cent during the quarter, driven by the portfolio growth in the UK and Spain. These expenses are related to the increased collection level in the region and development of the Spanish collection management operations.
Operating expenses
Gross collections on acquired loan portfolios increased 30 per cent to SEK 452m (346), attributable to strong portfolio growth in the UK and Spain. Portfolio amortisation and revaluation totalled SEK –191m (–158) during the quarter, due mainly to the above-referenced portfolio growth and to major negative revaluations during the comparative quarter. Portfolio revaluations totalled SEK –7m (–38) during the quarter and were mainly attributable to an adjusted collection forecast. Fee and commission income continued to decrease in line with the previously communicated strategy of focusing on the acquisition and
Revenues
The region's EBIT increased 71 per cent to SEK 125m (73) for the quarter with a corresponding EBIT margin of 46 per cent (36). The improvement is in line with portfolio growth and cost efficiency improvements during the year. The comparative quarter was impacted by the negative revaluations.
The region's return on book increased during the quarter to 9.1 per cent (6.7). The comparative quarter was impacted by the negative revaluations.
The acquisition volume during the fourth quarter was SEK 398m (397) and is mainly attributable to acquisitions in the UK and Spain. The acquisition volume for full-year 2017 was SEK 1,793m (1,462). The carrying value of acquired loan portfolios increased 25 per cent to SEK 5,658m (4,522) since the turn of the year. Gross ERC increased to SEK 9,233m (7,927) over the same period.
| Earnings trend* | ||||||
|---|---|---|---|---|---|---|
| TSEK | Quarter 4 2017 |
Quarter 4 2016 |
Change, % | Full-year 2017 |
Full-year 2016 |
Change, % |
| Gross cash collections on acquired loan portfolios | 451,860 | 346,275 | 30 | 1,588,291 | 1,296,766 | 22 |
| Portfolio amortisation and revaluation | –190,801 | –157,845 | 21 | –668,970 | –487,587 | 37 |
| Net revenue from acquired loan portfolios | 261,059 | 188,430 | 39 | 919,321 | 809,179 | 14 |
| Fee and commission income | 13,101 | 14,083 | –7 | 54,387 | 65,629 | –17 |
| Other income | 146 | – | >100 | 154 | – | >100 |
| Total revenue | 274,306 | 202,513 | 35 | 973,862 | 874,808 | 11 |
| Personnel expenses | –59,040 | –57,771 | 2 | –231,925 | –231,502 | 0 |
| Collection costs | –57,557 | –45,304 | 27 | –204,900 | –246,005 | –17 |
| Other operating expenses | –29,405 | –23,551 | 25 | –112,823 | –112,356 | 0 |
| Depreciation and amortisation of tangible and intangible assets | –2,957 | –2,581 | 15 | –11,294 | –11,977 | –6 |
| Total operating expenses | –148,959 | –129,207 | 15 | –560,942 | –601,840 | –7 |
| EBIT | 125.347 | 73.306 | 71 | 412.920 | 272.968 | 51 |
| EBIT margin, % | 46 | 36 | 10 pp | 42 | 31 | 11 pp |
| Return on book, % | 9,1 | 6,7 | 2,4 pp | 8,2 | 6,5 | 1,7 pp |
| Expenses/Gross cash collections on acquired loan portfolios, % | 30 | 33 | –3 pp | 32 | 41 | –9 pp |
| Carrying value of acquired loan portfolios, SEKm | 5,658 | 4,522 | 25 | 5,658 | 4,522 | 25 |
| Gross 120-month ERC, SEKm | 9,233 | 7,927 | 16 | 9,233 | 7,927 | 16 |
*Based on the operating income statement, excluding operating segment Central Functions and Eliminations.
Belgium, Greece, Italy and the Netherlands
Gross collections on acquired loan portfolios increased 13 per cent to SEK 473m (418), attributable to higher gross collections in Italy where there was solid portfolio growth during the year. Portfolio amortisation and revaluation increased 16 per cent due mainly to portfolio growth in the region. Portfolio revaluations totalled SEK 5m (5) during the fourth quarter and are attributable to minor cash flow adjustments. Profit from shares and participations in joint ventures refers to the Greek operations, which took up a performance-based payment as revenue due to successful collections during 2017.
Earnings trend*
Total operating expenses increased 35 per cent, attributable mainly to an adjustment of previous cost accruals in Italy. The quarter also includes restructuring costs in Belgium and the Netherlands attributable to a merger of operations in Amsterdam conducted to improve cost efficiency.
EBIT
The region's EBIT totalled SEK 125m (103) for the quarter with a corresponding EBIT margin of 50 per cent (48), excluding items affecting comparability.
The region's return on book for fourth quarter 2017 was 10.7 per cent (10.6), excluding items affecting comparability.
The acquisition volume during the quarter totalled SEK 1,211m (1,053) and was almost exclusively attributable to the Italian market. The acquisition volume for full-year 2017 was SEK 1,689m (1,271). The carrying value of acquired loan portfolios increased to SEK 5,262m (4,331) since the turn of the year. Gross ERC increased to SEK 8,268m (7,117) over the same period.
| SEK thousand | Quarter 4 2017 |
Quarter 4 2016 |
Change, % | Full-year 2017 |
Full-year 2016 |
Change, % |
|---|---|---|---|---|---|---|
| Gross cash collections on acquired loan portfolios | 472,515 | 417,702 | 13 | 1,821,592 | 1,574,731 | 16 |
| Portfolio amortisation and revaluation | –234,661 | –202,695 | 16 | –904,006 | –763,410 | 18 |
| Net revenue from acquired loan portfolios | 237,854 | 215,007 | 11 | 917,586 | 811,321 | 13 |
| Fee and commission income | 1,164 | 1,400 | –17 | 4,796 | 5,006 | –4 |
| Profit from shares and participations in joint venture | 12,663 | 389 | >100 | 25,354 | 616 | >100 |
| Other income | 364 | 592 | –39 | 2,067 | 1,769 | 17 |
| Total revenue | 252,045 | 217,388 | 16 | 949,803 | 818,712 | 16 |
| Personnel expenses | –35,922 | –31,920 | 13 | –125,531 | –111,301 | 13 |
| Collection costs | –102,742 | –71,878 | 43 | –308,955 | –221,228 | 40 |
| Other operating expenses | –13,613 | –8,080 | 68 | –49,827 | –53,821 | –7 |
| Depreciation and amortisation of tangible and intangible assets | –1,890 | –2,032 | –7 | –7,790 | –7,210 | 8 |
| Total operating expenses | –154,167 | –113,910 | 35 | –492,103 | –393,560 | 25 |
| EBIT | 97,878 | 103,478 | –5 | 457,700 | 425,152 | 8 |
| EBIT margin, % | 39 | 48 | –9 pp | 48 | 52 | –4 pp |
| EBIT margin, adjusted for items affecting comparability, %1) | 50 | – | – | 50 | – | – |
| Return on book, % | 8.3 | 10.6 | –2.3 pp | 10.1 | 10.7 | –0.6 pp |
| Return on book, adjusted for items affecting comparability, %1) | 10.7 | – | – | 10.6 | – | – |
| Expenses/Gross cash collections on acquired loan portfolios, % | 32 | 27 | 5 pp | 27 | 25 | 2 pp |
| Carrying value of acquired loan portfolios, SEKm | 5,262 | 4,331 | 21 | 5,262 | 4,331 | 21 |
| Gross 120-month ERC, SEKm | 8,268 | 7,117 | 16 | 8,268 | 7,117 | 16 |
*Based on the operating income statement, excluding operating segment Central Functions and Eliminations.
1) Key figures have been adjusted due to restructuring costs and an adjustment of previous cost accruals, totalling SEK 27m, during the fourth quarter 2017.
Poland, Germany and Austria
Gross collections on acquired loan portfolios increased 28 per cent to SEK 435m (341) during the fourth quarter, with the increase attributable to Poland where part of a portfolio was divested during the quarter for strategic reasons. The divestment also affects portfolio amortisation and revaluation, which increased 87 per cent year-on-year due to the divestment and to major positive revaluations during Q4 2016. Portfolio revaluations totalled SEK –1m (55) during the quarter. Fee and commission income decreased 82 per cent to SEK 3m (14), with the decrease attributable to the termination of a major service contract in Poland in early 2017.
Earnings trend*
Total operating expenses increased 56 per cent during the quarter to SEK 145m (93), due primarily to restructuring costs in Germany. The increase was enhanced by a cost-intensive period in Poland where collection activities were adapted based on anticipated regulatory changes. The restructuring in
Germany refers to the decision to centralise operations in Duisburg to improve efficiency.
EBIT
EBIT for the fourth quarter totalled SEK 96m (145) with a corresponding EBIT margin of 46 per cent (61), excluding items affecting comparability. The lower EBIT and EBIT margin are due to major positive revaluations during the comparative period.
The region's return on book for fourth quarter 2017 was 10.5 per cent (16.1), excluding items affecting comparability, with the
decrease mainly due to the items affecting comparability mentioned above.
The acquisition volume during the fourth quarter totalled SEK 466m (118) and is attributable to Poland. The acquisition volume for full-year 2017 was SEK 771m (596). The carrying value of acquired loan portfolios increased since the turn of the year, totalling SEK 3,867m (3,564). Gross ERC increased to SEK 6,490m (6,331) over the same period.
| SEK thousand | Quarter 4 2017 |
Quarter 4 2016 |
Change, % | Full-year 2017 |
Full-year 2016 |
Change, % |
|---|---|---|---|---|---|---|
| Gross cash collections on acquired loan portfolios | 434,573 | 340,795 | 28 | 1,467,288 | 1,439,665 | 2 |
| Portfolio amortisation and revaluation | –233,279 | –124,992 | 87 | –660,168 | –655,210 | 1 |
| Interest income from run-off consumer loan portfolio | 1,156 | 1,153 | 0 | 4,540 | 5,841 | –22 |
| Net revenue from acquired loan portfolios | 202,450 | 216,956 | –7 | 811,660 | 790,296 | 3 |
| Fee and commission income | 2,509 | 14,030 | –82 | 14,118 | 46,182 | –69 |
| Other income | 4,904 | 6,957 | –29 | 12,762 | 14,502 | –12 |
| Total revenue | 209,863 | 237,943 | –12 | 838,540 | 850,980 | –1 |
| Personnel expenses | –76,161 | –48,016 | 59 | –208,484 | –181,875 | 15 |
| Collection costs | –42,819 | –28,378 | 51 | –158,248 | –128,682 | 23 |
| Other operating expenses | –24,498 | –14,667 | 67 | –64,730 | –49,924 | 30 |
| Depreciation and amortisation of tangible and intangible assets | –1,908 | –1,851 | 3 | –7,516 | –7,299 | 3 |
| Total operating expenses | –145,386 | –92,912 | 56 | –438,978 | –367,780 | 19 |
| EBIT | 64,477 | 145,031 | –56 | 399,562 | 483,200 | –17 |
| EBIT margin, % | 31 | 61 | –30 pp | 48 | 57 | –9 pp |
| EBIT margin, adjusted for items affecting comparability, %1) | 46 | – | – | 51 | – | – |
| Return on book, % | 7.0 | 16.1 | –9.1 pp | 11.2 | 13.6 | –2.4 pp |
| Return on book, adjusted for items affecting comparability, %1) | 10.5 | – | – | 12.1 | – | – |
| Expenses/Gross cash collections on acquired loan portfolios, % | 32 | 21 | 11 pp | 28 | 21 | 7 pp |
| Carrying value of acquired loan portfolios, SEKm2) | 3,867 | 3,564 | 9 | 3,867 | 3,564 | 9 |
| Gross 120-month ERC, SEKm3) | 6,490 | 6,331 | 3 | 6,490 | 6,331 | 3 |
*Based on the operating income statement, excluding operating segment Central Functions and Eliminations.
1) Key figures have been adjusted due to restructuring costs of SEK 32m during the fourth quarter 2017.
2) Including run-off consumer loan portfolio and portfolios held in the Polish joint venture.
3) Excluding run-off consumer loan portfolio and portfolios held in the Polish joint venture.
| SEK thousand | Quarter 4 2017 |
Quarter 4 2016 |
Full-year 2017 |
Full-year 2016 |
|---|---|---|---|---|
| Net revenue from acquired loan portfolios | 700,207 | 619,240 | 2,644,027 | 2,404,955 |
| Interest income | –3,446 | 1,853 | –9,806 | 2,558 |
| Interest expense | –75,281 | –79,474 | –305,066 | –300,288 |
| Net interest income | 621,480 | 541,619 | 2,329,155 | 2,107,225 |
| Fee and commission income | 16,774 | 29,513 | 73,301 | 116,817 |
| Net financial income | 71 | –6,727 | –50,324 | –97,529 |
| Other income | 4,837 | 7,110 | 13,279 | 13,651 |
| Total operating income | 643,162 | 571,515 | 2,365,411 | 2,140,164 |
| General administrative expenses | ||||
| Personnel expenses | –219,390 | –177,988 | –730,005 | –672,355 |
| Other operating expenses | –321,415 | –238,730 | –1,074,455 | –966,697 |
| Depreciation and amortisation of tangible and intangible assets |
–13,593 | –13,891 | –55,943 | –52,796 |
| Total operating expenses | –554,398 | –430,609 | –1,860,403 | –1,691,848 |
| Profit before credit losses | 88,764 | 140,906 | 505,008 | 448,316 |
| Net credit losses | – | –1,260 | – | –1,260 |
| Profit from shares and participations in joint ventures | 20,962 | 15,222 | 76,138 | 86,042 |
| Profit before tax | 109,726 | 154,868 | 581,146 | 533,098 |
| Income tax expense | –24,500 | –36,758 | –128,386 | –115,949 |
| Net profit for the period | 85,226 | 118,110 | 452,760 | 417,149 |
| Profit attributable to: | ||||
| Owners of Hoist Finance AB (publ) | 85,226 | 118,110 | 452,760 | 417,149 |
| Basic earnings per share, SEK1) | 0.92 | 1.41 | 5.10 | 5.07 |
| Diluted earnings per share, SEK1) 2) | 0.92 | 1.38 | 5.09 | 4.97 |
1) Following the 1:3 share split, each warrant entitles the holder to subscribe for three new shares.
2) Includes effect of 5,000 outstanding warrants.
| SEK thousand | Quarter 4 2017 |
Quarter 4 2016 |
Full–year 2017 |
Full–year 2016 |
|---|---|---|---|---|
| Net profit for the period | 85,226 | 118,110 | 452,760 | 417,149 |
| Other comprehensive income | ||||
| Items that will not be reclassified to profit or loss | ||||
| Revaluation of defined benefit pension plan | 927 | –1,941 | 927 | –1,941 |
| Revaluation of remuneration after terminated employment |
–782 | –617 | –782 | –617 |
| Tax attributable to items that will not be reclassified to profit or loss |
–204 | 654 | –204 | 654 |
| Total items that will not be reclassified to profit or loss |
–59 | –1,904 | –59 | –1,904 |
| Items that may be reclassified subsequently to profit or loss |
||||
| Translation difference, foreign operations | 76,898 | –21,068 | 89,611 | –21,872 |
| Translation difference, joint venture | 14,573 | –5,956 | 18,215 | 1,489 |
| Hedging of currency risk in foreign operations | –97,491 | – | –179,855 | – |
| Hedging of currency risk in joint venture | –15,484 | 5,075 | –26,592 | –7,421 |
| Transferred to the income statement during the year | 1,986 | – | 7,444 | – |
| Tax attributable to items that may be reclassified to profit or loss | 24,855 | –1,116 | 45,418 | 4,803 |
| Total items that may be reclassified subsequently to profit or loss | 5,337 | –23,065 | –45,759 | –23,001 |
| Other comprehensive income for the period | 5,278 | –24,969 | –45,818 | –24,905 |
| Total comprehensive income for the period | 90,504 | 93,141 | 406,942 | 392,244 |
| Profit attributable to: | ||||
| Owners of Hoist Finance AB (publ) | 90,504 | 93,141 | 406,942 | 392,244 |
| SEK thousand | 31 Dec 2017 |
31 Dec 2016 |
|---|---|---|
| ASSETS | ||
| Cash | 202 | 3,073 |
| Treasury bills and Treasury bonds | 1,490,152 | 2,273,903 |
| Lending to credit institutions | 1,681,458 | 1,061,285 |
| Lending to the public | 37,455 | 35,789 |
| Acquired loan portfolios | 14,765,989 | 12,385,547 |
| Bonds and other securities | 3,689,021 | 2,538,566 |
| Participations in joint ventures | 237,586 | 241,276 |
| Intangible assets | 287,038 | 243,340 |
| Tangible assets | 42,394 | 40,815 |
| Other assets | 198,832 | 193,470 |
| Deferred tax assets | 21,241 | 47,269 |
| Prepayments and accrued income | 85,196 | 85,593 |
| Total assets | 22,536,564 | 19,149,926 |
| LIABILITIES AND EQUITY | ||
| Liabilities | ||
| Deposits from the public | 13,227,450 | 11,848,956 |
| Tax liabilities | 84,091 | 52,887 |
| Other liabilities | 393,370 | 432,865 |
| Deferred tax liabilities | 147,523 | 163,264 |
| Accrued expenses and deferred income | 210,541 | 203,442 |
| Provisions | 87,027 | 55,504 |
| Senior debt | 4,355,000 | 3,125,996 |
| Subordinated debts | 803,257 | 341,715 |
| Total liabilities | 19,308,259 | 16,224,629 |
| Equity | ||
| Share capital | 27,061 | 26,906 |
| Other contributed equity | 2,101,668 | 2,073,215 |
| Reserves | –112,854 | –67,095 |
| Retained earnings including profit for the period | 1,212,430 | 892,271 |
| Total equity | 3,228,305 | 2,925,297 |
| Total liabilities and equity | 22,536,564 | 19,149,926 |
| SEK thousand | Share capital | Other contributed capital |
Translation reserve |
Retained earnings including profit for the year |
Total equity |
|---|---|---|---|---|---|
| Opening balance 1 Jan 2017 | 26,906 | 2,073,215 | –67,095 | 892,271 | 2,925,297 |
| Comprehensive income for the period | |||||
| Profit for the period | 452,760 | 452,760 | |||
| Other comprehensive income | –45,759 | –59 | –45,818 | ||
| Total comprehensive income for the period | –45,759 | 452,701 | 406,942 | ||
| Transactions reported directly in equity | |||||
| Dividend | –104,935 | –104,935 | |||
| New share issue | 155 | 28,675 | 28,830 | 28,830 | |
| Warrants, repurchased and cancelled | –222 | –222 | |||
| Interest paid on capital contribution | –27,607 | –27,607 | |||
| Total transactions reported directly in equity | 155 | 28,453 | –132,542 | –103,934 | |
| Closing balance 31 Dec 2017 | 27,061 | 2,101,668 | –112,854 | 1,212,430 | 3,228,305 |
| SEK thousand | Share capital | Other contributed capital |
Translation reserve |
Retained earnings including profit for the year |
Total equity |
|---|---|---|---|---|---|
| Opening balance 1 Jan 2016 | 26,178 | 1,755,676 | –44,094 | 551,000 | 2,288,760 |
| Comprehensive income for the period | |||||
| Profit for the period | 417,149 | 417,149 | |||
| Other comprehensive income | –23,001 | –1,904 | –24,905 | ||
| Total comprehensive income for the period | –23,001 | 415,245 | 392,244 | ||
| Transactions reported directly in equity | |||||
| Dividend | –58,974 | –58,974 | |||
| New share issue | 728 | 34,568 | 35,296 | ||
| Additional Tier 1 capital instruments | 283,3351) | 283,335 | |||
| Warrants, repurchased and cancelled | –2,066 | –2,066 | |||
| Interest paid on capital contribution | –15,000 | –15,000 | |||
| Tax effect on items reported directly in equity | 1,702 | 1,702 | |||
| Total transactions reported directly in equity | 728 | 317,539 | –73,974 | 244,293 | |
| Closing balance 31 Dec 2016 | 26,906 | 2,073,215 | –67,095 | 892,271 | 2,925,297 |
1) Nominal amount of SEK 291 million has been reduced by transactions costs of SEK 8 million.
| SEK thousand | Quarter 4 2017 |
Quarter 4 2016 |
Full-year 2017 |
Full-year 2016 |
|---|---|---|---|---|
| OPERATING ACTIVITIES | ||||
| Profit/loss before tax | 109,726 | 154,867 | 581,146 | 533,097 |
| of which, paid-in interest | 1,156 | 1,154 | 4,540 | 5,841 |
| of which, interest paid | –184,572 | –132,596 | –356,255 | –288,713 |
| Adjustment for items not included in cash flow | ||||
| Portfolio amortisation and revaluation | 658,740 | 485,532 | 2,233,144 | 1,906,208 |
| Other non-cash items | –353,979 | –12,202 | –208,654 | 232,902 |
| Realised profit from divestment of shares and participations in joint ventures |
–14,458 | –13,859 | –62,410 | –42,546 |
| Income tax paid | –14,194 | –23,327 | –51,995 | –49,000 |
| Total | 385,835 | 591,011 | 2,491,231 | 2,580,661 |
| Increase/decrease in lending to the public | –5,638 | 8,868 | –1,666 | 42,681 |
| Increase/decrease in other assets | 281,694 | 206,115 | 10,566 | 221,233 |
| Increase/decrease in other liabilities | 157,700 | 196,546 | –4,814 | 131,956 |
| Total | 433,756 | 411,529 | 4,086 | 395,870 |
| Cash flow from operating activities | 819,591 | 1,002,540 | 2,495,317 | 2,976,531 |
| INVESTING ACTIVITIES | ||||
| Acquired loan portfolios | –2,074,879 | –1,567,520 | –4,252,869 | –3,329,382 |
| Investments in intangible assets | –24,489 | –9,389 | –71,431 | –35,756 |
| Investments in tangible assets | –4,567 | –7,392 | –16,398 | –18,360 |
| Investments in/divestments of bonds and other securities | –549,627 | –481,615 | –1,149,630 | –1,232,503 |
| Investments in subsidiaries | – | –15,584 | –21,815 | –40,788 |
| Acquired shares and participations in joint ventures | – | – | – | –74 |
| Divested shares and participations in joint ventures | 16,618 | 16,672 | 72,942 | 51,891 |
| Cash flow from investing activities | –2,636,944 | –2,064,828 | –5,439,201 | –4,604,972 |
| FINANCING ACTIVITIES | ||||
| Deposits from the public | 961,318 | –403,680 | 1,407,244 | –957,707 |
| Issued bonds | 1,350,022 | –7,518 | 1,350,022 | 2,771,876 |
| Repurchase of issued bonds | – | –286 | –276,867 | –976,570 |
| Buy-back of issued bonds | – | –58,000 | – | –58,000 |
| Issued Tier 2 capital | – | – | 781,328 | – |
| Repurchase of subordinated debt | – | – | –399,550 | – |
| Issued Additional Tier 1 capital | – | 285,396 | – | 285,396 |
| Interest paid on AT1 capital | –7,500 | – | –35,107 | –7,500 |
| New share issue | 28,830 | 30,408 | 28,830 | 35,296 |
| Warrants, repurchased and cancelled | – | –700 | –222 | –2,066 |
| Dividend paid | – | – | –104,935 | –58,974 |
| Cash flow from financing activities | 2,332,670 | –154,380 | 2,750,743 | 1,031,751 |
| Cash flow for the period | 515,317 | –1,216,668 | –193,141 | –596,690 |
| Cash at beginning of the period | 2,628,241 | 4,563,409 | 3,338,261 | 3,936,624 |
| Translation difference | 28,254 | –8,480 | 26,692 | –1,673 |
| Cash at end of the period* | 3,171,812 | 3,338,261 | 3,171,812 | 3,338,261 |
*Comprised of cash, Treasury bills/bonds and lending to credit institutions.
| SEK thousand | Quarter 4 2017 |
Quarter 4 2016 |
Full-year 2017 |
Full-year 2016 |
|---|---|---|---|---|
| Net sales | 40,130 | 62,308 | 242,544 | 195,846 |
| Other external expenses | –123,224 | –71,085 | –331,102 | –219,855 |
| Personnel expenses | –1,409 | –1,192 | –5,282 | –7,100 |
| Depreciation and amortisation | –1,252 | –1,276 | –5,538 | –4,891 |
| Total operating expenses | –125,885 | –73,553 | –341,922 | –231,846 |
| Operating profit | –85,755 | –11,245 | –99,378 | –36,000 |
| Other interest income | 9,160 | 7,063 | 31,916 | 10,555 |
| Interest expense and similar costs | –1,894 | –889 | –4,731 | –1,602 |
| Total income from financial items | 7,266 | 6,174 | 27,185 | 8,953 |
| Earnings from participations in Group companies | 180,000 | 210,000 | 180,000 | 210,000 |
| Appropriations (tax allocation reserve) | –24,000 | –36,483 | –24,000 | –36,483 |
| Profit/loss before tax | 77,511 | 168,446 | 83,807 | 146,470 |
| Income tax expense | –17,297 | –33,118 | –18,801 | –29,150 |
| Net profit for the period1) | 60,214 | 135,328 | 65,006 | 117,320 |
1) Profit/loss for the period corresponds to Comprehensive income for the period.
| SEK thousand | 31 Dec 2017 |
31 Dec 2016 |
|---|---|---|
| ASSETS | ||
| Non-current assets | ||
| Licences and software | 64,329 | 25,169 |
| Total intangible assets | 64,329 | 25,169 |
| Equipment | 1,403 | 2,417 |
| Total tangible assets | 1,403 | 2,417 |
| Shares and participations in subsidiaries | 1,687,989 | 1,687,989 |
| Total financial assets | 1,687,989 | 1,687,989 |
| Total non-current assets | 1,753,721 | 1,715,575 |
| Current assets | ||
| Receivables, Group companies | 193,239 | 257,501 |
| Other receivables | 23,543 | 402 |
| Prepaid expenses and deferred income | 8,570 | 8,506 |
| Total current receivables | 225,352 | 266,409 |
| Cash and bank balances | 274,833 | 328,457 |
| Total current assets | 500,185 | 594,866 |
| Total assets | 2,253,906 | 2,310,441 |
| SEK thousand | 31 Dec 2017 |
31 Dec 2016 |
|---|---|---|
| EQUITY AND LIABILITIES | ||
| Equity | ||
| Restricted equity | ||
| Share capital | 27,061 | 26,906 |
| Statutory reserve | 3,098 | 3,098 |
| Development expenditure fund | 6,131 | 1,215 |
| Total restricted equity | 36,290 | 31,219 |
| Non-restricted equity | ||
| Other contributed equity | 1,722,091 | 1,693,638 |
| Retained earnings | 6,197 | –1,272 |
| Profit/loss for the period | 65,006 | 117,320 |
| Total non-restricted equity | 1,793,294 | 1,809,686 |
| Total shareholders' equity | 1,829,584 | 1,840,905 |
| Untaxed reserves | 83,995 | 59,995 |
| Provisions | ||
| Pension provisions | 34 | 24 |
| Total provisions | 34 | 24 |
| Non-current liabilities | ||
| Intra-Group loans | – | 65,000 |
| Total non-current liabilities | – | 65,000 |
| Current liabilities | ||
| Accounts payable | 20,822 | 12,863 |
| Tax liabilities | 34,680 | 27,157 |
| Liabilities, Group companies | 280,496 | 298,153 |
| Other current liabilities | – | 3,506 |
| Accrued expenses and deferred income | 4,295 | 2,838 |
| Total current liabilities | 340,293 | 344,517 |
| Total equity, provisions and liabilities | 2,253,906 | 2,310,441 |
This interim report was prepared in accordance with IAS 34, Interim Financial Reporting. The consolidated accounts were prepared in accordance with the International Financial Reporting Standards (IFRS) and interpretations thereof as adopted by the European Union. The accounting follows the Swedish Annual Accounts Act for Credit Institutions and Securities Companies (1995:1559) and the regulatory code issued by the Swedish Financial Supervisory Authority on Annual Reports in Credit Institutions and Securities Companies (FFFS 2008:25), including applicable amendments. The Swedish Financial Reporting Board's RFR 1, Supplementary Accounting Rules for Groups, has also been applied.
The accounts of Parent Company Hoist Finance AB (publ) were prepared in accordance with the Swedish Annual Accounts Act (1995:1554) and the regulatory code issued by the Swedish Financial Supervisory Authority on Annual Reports in Credit Institutions and Securities Companies (FFFS 2008:25), including applicable amendments. The Swedish Financial Reporting Board's RFR 2, Accounting for Legal Entities, was also applied. No IFRS or IFRIC amendments that became effective in 2017 have had any material impact on the Group's financial statements or capital adequacy. Hoist Finance has chosen to expand hedge accounting as from 1 January 2017 to include currency hedges used to hedge net investments in foreign operations. Under this expanded hedge accounting, a larger share of exchange rate fluctuations previously reported as Net financial income will be reported as Other comprehensive income. Hoist Finance has chosen to present cash flow statements using the indirect method as from first quarter 2017, as this format better reflects the way in which the Group monitors cash flow. Comparative figures for third quarter and full-year 2016 have been adjusted accordingly. In all other material respects, the Group's and Parent Company's accounting policies and bases for calculation and presentation remain unchanged from those applied in the 2016 annual report.
A number of new or amended IFRS that will come into effect during the coming financial years were not applied in advance as at the issuance of this interim report. Hoist Finance does not intend to apply new or amended standards in advance. For detailed information, see below.
GROUP
IASB has finalised the new standard for financial instruments, IFRS 9 "Financial instruments". The
standard is endorsed by the EU Commission. IFRS 9 "Financial Instruments" covers the reporting of financial assets and liabilities (classification and valuation, impairment and general hedge accounting), and will replace IAS 39 "Financial instruments: Recognition and Measurement". IFRS 9, like IAS 39, will classify financial assets into different categories but will also introduce new categories, with valuation at amortised cost, fair value through profit or loss, or fair value through comprehensive income. Classification and measurement are determined by the characteristics of the contractual cash flow generated by the assets and are also dependent on the company's business model.
IFRS 9 also introduces a new model for impairment of financial assets. The aim of the new model is to recognise expected credit losses at an earlier stage.
Upon transitioning to IFRS 9, the Group has the option of continuing to apply IAS 39 for hedge accounting or applying IFRS 9 hedging rules, and has decided to continue applying IAS 39 hedge accounting.
IFRS 9 "Financial Instruments" is effective as from annual periods beginning on or after 1 January 2018. Hoist Finance will apply the standard in the Parent Company and the Group as from 1 January 2018. Comparative figures will not be restated.
During 2017, Hoist Finance evaluated the effects of applying IFRS 9 on its accounting. In total, no significant impact in monetary terms on the Group's financial statements or capital adequacy is anticipated.
IFRS 9 also includes increased disclosure requirements under IFRS 7, which will expand the content of note disclosure. The assessments of effects described below are based on information that is currently known or anticipated, but may change due to information that becomes available during 2018.
All financial assets currently classified at fair value are expected to remain so classified, with the exception of acquired loan portfolios reclassified at amortised cost.
Hoist Finance's surplus liquidity is invested in a liquidity portfolio comprised of Bonds and other securities and Treasury bills and treasury bonds. The liquidity portfolio will continue to be valued at fair value through profit or loss. Consequently, there will be no transition effect.
Hoist Finance's acquired loan portfolios are classified at amortised cost under IFRS 9.
The acquired loan portfolios currently measured at fair value are reclassified and measured at amortised cost under IFRS 9. As it is impracticable to retrospectively recalculate the portfolios to amortised cost, the fair value at year-end 2017 will be the initial amortised cost amount under IFRS 9. The run-off consumer loan portfolio, SEK 21 million at year-end, will be included in Acquired loan portfolios.
The Group has concluded that trade receivables and other current and non-current receivables meet the criteria to be classified at amortised cost. Derivatives remain recognised at fair value.
Under IFRS 9, impairments follow an impairment model based on anticipated credit losses rather than on actual losses (as under the current model). Hoist Finance will report a loss provision for anticipated credit losses on financial assets valued at amortised cost.
Lending to credit institutions is comprised of cash at bank and, under IFR 9, is subject to loss allowances. The anticipated credit loss is not material, however, and a loss allowance will therefore not be reported.
Hoist Finance's acquired loan portfolios are defined under IFRS 9 as Purchased Credit-Impaired financial assets. Under the standard, a loss allowance is reported which corresponds to anticipated credit losses for the entire remaining duration at first recognition.
The portfolios are recognised at amortised cost according to the effective interest method. The credit-adjusted effective interest rate, established at inception, is determined based on expected future cash flows for the remaining duration.
Prior to the introduction of IFRS 9, the portfolios' carrying value was based on expected cash flows and revaluation effects were reported under income statement item Net revenue from acquired loans. This method corresponds in large part with the calculation of loss allowance under IFRS 9; consequently, the transition impact in the opening balance is immaterial. However, some changes have been made, as described below.
Under IFRS 9, Hoist Finance will determine the credit-adjusted effective interest rate and calculate future expected credit losses based on an anticipated 15-year lifetime. Currently, a 10-year lifetime is applied for portfolio valuations. Hoist Finance does not include any collection costs in the calculation of the initial credit-adjusted effective interest rate under IFRS 9.
Projected cash flows and the credit-adjusted effective interest have been recalculated for all acquired loan portfolios as a result of the changes made.
Trade receivables and other current and non-current receivables are subject to loss allowance under IFRS 9. The Group will apply the simplified method for calculating expected credit losses on trade receivables. The expected credit loss is not material, however, and a credit loss allowance will therefore not be reported.
In addition to the above-mentioned amendments, other reported items in the financial reports may be affected, including taxes, participation in joint ventures and translation differences.
Hoist Finance has remeasured the modified senior unsecured liabilities according to the initial effective interest rate with consideration to transaction costs. This has led to a lower amortised cost on the liability.
The Group assumes that IFRS 9 does not have any other effects on the classification and measurements of financial liabilities as at 1 January 2018.
Effects on the opening balance in consolidated equity on 1 January 2018 is estimated to SEK +20m at the issuance of this report.
The current assessment is that the transition effects of IFRS 9 will not have any significant impact on capital adequacy or large exposures for the Hoist Finance consolidated situation or for Hoist Kredit AB (publ).
Following the transition to IFRS 9, Hoist Finance will report interest income in accordance with the effective interest method, under which interest income essentially refers to all income from acquired loan portfolios reported at amortised cost.
In reporting acquired loan portfolios in accordance with the effective interest method, Hoist Finance will calculate the period's interest income based on recognised amortised cost in the opening balance multiplied by the credit-adjusted effective interest. Recognised amortised cost is the gross carrying amount, less the loss allowance. Changes in the loss allowance are reported in a separate income statement item, Impairment gains and losses. This represents a change to previous reporting practices, under which profit/loss from changes in acquired loan portfolios was reported under income statement item Net revenue from acquired loans.
The Parent Company will apply IFRS 9 in its entirety as of 1 January 2018. However, the RFR 2 exception will be applied with respect to guarantee agreements benefiting subsidiaries.
The Parent Company's financial assets will continue to be classified at amortised cost and, accordingly, the transition to IFRS 9 will have no effect.
The Parent Company's financial assets recognised at amortised cost are subject to a loss allowance. The calculated credit loss for Hoist Finance is not significant and no loss allowance is presented.
IASB has published a new standard, IFRS 15 "Revenue from Contracts with Customers".
The new standard specifies a single comprehensive reporting model for revenues from customer contracts, and replaces all previously published standards and interpretations for revenue reporting under IFRS. The purpose of the standard is to have one single principle-based standard for all businesses to replace existing standards for revenue recognition. The standard does not apply to financial instruments, insurance contracts or lease contracts.
The new standard is effective as from annual periods beginning on or after 1 January 2018. Earlier application is permitted. The standard will be applied by the Hoist Finance Group and the Parent Company as from 1 January 2018.
The new revenue standard specifies the accounting treatment for all revenue arising from contracts with customers, and is based on recognising the revenue when or as the entity satisfies a performance obligation by transferring control of a promised good or service to a customer, which can be satisfied over time or at a specific point in time.
The revenue comprises the amount the company expects to receive as compensation for the good or service transferred. Variable remuneration is recognised as revenue to the extent it is highly likely that there will not be a significant reversal of previously reported accumulated revenue in a later period. Consequently, comparable figures will not be restated.
The principles in IFRS 15 will be applied using the following five steps:
There are three transition methods: full retrospective approach, modified retrospective approach and retrospectively with a cumulative effect. Existing contracts which follow the old regulation (IAS 11/IAS 18) are subject to an adjustment to the opening balance of retained earnings for the annual reporting period that includes the date of initial application.
Hoist Finance has completed its analysis of the impact IFRS 15 will have on its accounting and deems that the new standard will not have any significant impact on Hoist Finance's accounting, financial reporting, capital adequacy or large exposures during the initial application period.
The assessments of effects described below are based on information that is currently known or anticipated.
Within the Hoist Finance Group, fee and commission income will be affected by the new standard.
Companies in the Hoist Finance Group provide collection services for third parties. In such agreements the counterparty selects the receivables to be included in the contract and transfers those to the Group, while retaining ownership of the receivables. In such contracts the Group is generally entitled to remuneration corresponding to a fixed percentage of the successful collections.
The assessment is that the transfer of existing services and revenue recognition essentially occurs as services are performed, and this does not entail any change to the way in which revenues were reported in previous periods. To date, variable remuneration based on results not yet known at the close of the reporting period represents only an insignificant amount. There are, therefore, no effects on reported revenues for 2017. Variable remuneration of uncertain amounts at the
close of the reporting period will likely also be insignificant in 2018, for which period the choice of transition method is also insignificant.
Finally, IFRS 15 includes increased disclosure requirements regarding revenue, which will expand the content of note disclosures.
IASB has published a new standard, IFRS 16 "Leases". The standard was endorsed by the EU Commission in 2017. The new standard replaces existing IFRS (including IAS 17 and IFRIC 4 "Determining Whether an Arrangement Contains a Lease") related to the reporting of lease contracts. IFRS 16 primarily affects reporting requirements for lessees. All lease contracts will initially be reported as an asset with right of use and a liability (i.e. future lease payments) in the lessee's balance sheet. Asset depreciation is reported in the income statement, with lease payments allocated as interest expense in the income statement and as amortisation in the balance sheet. However, the standard includes two recognition exemptions for reporting the lease as an asset and a liability respectively – short-term leases (i.e. leases with a lease terms of 12 months or less) and leases of low-value assets.
Reporting requirements for lessors remain mostly unchanged. The new standard includes increased disclosure requirements, which will expand the content of note disclosures. The new standard is effective as from annual periods beginning on or after 1 January 2019. Earlier application is permitted. Hoist Finance does not intend to apply IFRS 16 in advance. The standard is to be applied using either the full
retrospective approach, which requires entities to retrospectively apply the new standard to each prior reporting period, or the modified retrospective approach, recognising the cumulative effect as an adjustment to the opening balance of equity. The Group intends to apply the modified retrospective approach, i.e. recognising the cumulative effect of IFRS 16 in retained earnings in the opening balance of equity as at 1 January 2019. There will be no restatement of comparative figures.
Hoist Finance is in the process of analysing the financial effects of the new standard. Calculations of the monetary effect of IFRS 16 have not been conducted. The final transition effect of IFRS 16 in the financial reports will be affected by future economic conditions, including the funding rate in the Group as at 1 January 2019, the composition of the lease portfolio at that date and the Group's latest assessment of whether options prolonging a lease contract will be used. Hoist Finance's assessment is that the new standard will entail changes to accounting and that the Group will account for new assets and liabilities for leases.
The information provided in Note 28 on operating leases in the 2016 annual report is an indication of the type and scope of current agreements.
No other IFRS or IFRIC interpretations that are not yet effective are expected to have any significant impact on Hoist Finance's accounting, capital adequacy or large exposures at initial recognition.
| Quarter 4 2017 |
Quarter 4 2016 |
Full-year 2017 |
Full-year 2016 |
|
|---|---|---|---|---|
| 1 EUR = SEK | ||||
| Income statement (average) | 9.6331 | 9.4622 | 9.6331 | 9.4622 |
| Balance sheet (at end of the period) | 9.8497 | 9.5669 | 9.8497 | 9.5669 |
| 1 GBP = SEK | ||||
| Income statement (average) | 10.9991 | 11.5849 | 10.9991 | 11.5849 |
| Balance sheet (at end of the period) | 11.1045 | 11.1787 | 11.1045 | 11.1787 |
| 1 PLN = SEK | ||||
| Income statement (average) | 2.2629 | 2.1688 | 2.2629 | 2.1688 |
| Balance sheet (at end of the period) | 2.3606 | 2.1662 | 2.3606 | 2.1662 |
| Consolidated income statement | Quarter 4 | Quarter 4 | Full-year | Full-year |
|---|---|---|---|---|
| SEK thousand | 2017 | 2016 | 2017 | 2016 |
| Revenues from acquired loan portfolios | 700,207 | 619,240 | 2,644,027 | 2,404,955 |
| of which, gross cash collections | 1,358,948 | 1,104,772 | 4,877,171 | 4,311,162 |
| of which, portfolio amortisation and revaluation | –658,741 | –485,532 | –2,233,144 | –1,906,207 |
| Interest income | –3,446 | 1,853 | –9,806 | 2,558 |
| of which, interest income from run-off consumer loan portfolio | 1,156 | 1,153 | 4,540 | 5,841 |
| of which, interest income excl. run-off consumer loan portfolio1) | –4,602 | 700 | –14,346 | –3,283 |
| Interest expense | –75,281 | –79,474 | –305,066 | –300,288 |
| Net interest income | 621,480 | 541,619 | 2,329,155 | 2,107,225 |
| Fee and commission income | 16,774 | 29,513 | 73,301 | 116,817 |
| Net financial income1) | 71 | –6,727 | –50,324 | –97,529 |
| Other income | 4,837 | 7,110 | 13,279 | 13,651 |
| Total operating income | 643,162 | 571,515 | 2,365,411 | 2,140,164 |
| General administrative expenses | ||||
| Personnel expenses | –219,390 | –177,988 | –730,005 | –672,355 |
| Other operating expenses | –321,415 | –238,730 | –1,074,455 | –966,697 |
| Depreciation and amortisation of tangible and intangible assets | –13,593 | –13,891 | –55,943 | –52,796 |
| Total operating expenses | –554,398 | –430,609 | –1,860,403 | –1,691,848 |
| Profit before loan losses | 88,764 | 140,906 | 505,008 | 448,316 |
| Net credit losses | – | –1,260 | – | –1,260 |
| Profit from shares and participations in joint ventures | 20,962 | 15,222 | 76,138 | 86,042 |
| Profit before tax | 109,726 | 154,868 | 581,146 | 533,098 |
| on segment reporting | Quarter 4 | Quarter 4 | Full-year | Full-year |
|---|---|---|---|---|
| SEK thousand | 2017 | 2016 | 2017 | 2016 |
| Gross cash collections on acquired loan portfolios | 1,358,948 | 1,104,772 | 4,877,171 | 4,311,162 |
| Portfolio amortisation and revaluation | –658,741 | –485,532 | –2,233,144 | –1,906,207 |
| Interest income from run-off consumer loan portfolio | 1,156 | 1,153 | 4,540 | 5,841 |
| Net revenue from acquired loan portfolios | 701,363 | 620,393 | 2,648,567 | 2,410,796 |
| Fee and commission income | 16,774 | 29,513 | 73,301 | 116,817 |
| Profit from shares and participations in joint ventures | 20,962 | 15,222 | 76,138 | 86,042 |
| Other income | 4,837 | 7,110 | 13,279 | 13,651 |
| Total revenue | 743,936 | 672,238 | 2,811,285 | 2,627,306 |
| Personnel expenses | –219,390 | –177,988 | –730,005 | –672,355 |
| Collection costs | –203,118 | –145,560 | –672,108 | –595,915 |
| Other operating expenses | –118,297 | –93,170 | –402,347 | –370,782 |
| Depreciation and amortisation of tangible and intangible assets | –13,593 | –13,891 | –55,943 | –52,796 |
| Total operating expenses | –554,398 | –430,609 | –1,860,403 | –1,691,848 |
| EBIT | 189,538 | 241,629 | 950,882 | 935,458 |
| Interest income excl. run-off consumer loan portfolio | –4,602 | 700 | –14,346 | –3,283 |
| Interest expense | –75,281 | –79,474 | –305,066 | –300,288 |
| Net financial income2) | 71 | –7,987 | –50,324 | –98,789 |
| Total financial items | –79,812 | –86,761 | –369,736 | –402,360 |
| Profit/loss before tax | 109,726 | 154,868 | 581,146 | 533,098 |
1) Comparative figures have been adjusted due to the reclassification of banking fees from Other operating expenses to Collection costs.
Segment reporting has been prepared based on the manner in which executive management monitors operations. This differs from statutory account preparation; the material differences are as follows:
Group costs for central and supporting functions are not allocated to the operating segments but are reported as Central Functions and Eliminations.
A financing cost is allocated to the operating segments based on the acquired loan portfolio assets. The difference between the actual financing cost and the standardised cost is included in Central Functions and Eliminations.
With respect to the balance sheet, only acquired loan portfolios are monitored. Other assets and liabilities are not monitored on a segment-by-segment basis.
| Income statement, Quarter 4 2017 | Region West | Region Mid | Region Central East |
Central Functions and |
|
|---|---|---|---|---|---|
| SEK thousand | Europe | Europe | Europe | Eliminations | Group |
| Gross cash collections on acquired loan portfolios | 451,860 | 472,515 | 434,573 | – | 1,358,948 |
| Portfolio amortisation and revaluation | –190,801 | –234,661 | –233,279 | – | –658,741 |
| Interest income from run-off consumer loan portfolio | – | – | 1,156 | – | 1,156 |
| Net revenue from acquired loan portfolios | 261,059 | 237,854 | 202,450 | – | 701,363 |
| Fee and commission income | 13,101 | 1,164 | 2,509 | – | 16,774 |
| Profit from shares and participations in joint ventures | – | 12,663 | – | 8,299 | 20,962 |
| Other income | 146 | 364 | 4,904 | –577 | 4,837 |
| Total revenue | 274,306 | 252,045 | 209,863 | 7,722 | 743,936 |
| Personnel expenses | –59,040 | –35,922 | –76,161 | –48,267 | –219,390 |
| Collection costs | –57,557 | –102,742 | –42,819 | – | –203,118 |
| Other operating expenses | –29,405 | –13,613 | –24,498 | –50,781 | –118,297 |
| Depreciation and amortisation of tangible and intangible assets |
–2,957 | –1,890 | –1,908 | –6,838 | –13,593 |
| Total operating expenses | –148,959 | –154,167 | –145,386 | –105,886 | –554,398 |
| EBIT | 125,347 | 97,878 | 64,477 | –98,164 | 189,538 |
| Interest income excl. run-off consumer loan portfolio | – | 1 | 459 | –5,062 | –4,602 |
| Interest expense | – | –33 | –506 | –74,742 | –75,281 |
| Net financial income1) | –68,643 | –56,260 | –45,852 | 170,826 | 71 |
| Total financial items | –68,643 | –56,292 | –45,899 | 91,022 | –79,812 |
| Profit/loss before tax | 56,704 | 41,586 | 18,587 | –7,142 | 109,726 |
| Income statement, Quarter 4 2016 | Region West | Region Mid | Region Central East |
Central Functions and |
|
|---|---|---|---|---|---|
| SEK thousand | Europe | Europe | Europe | Eliminations | Group |
| Gross cash collections on acquired loan portfolios | 346,275 | 417,702 | 340,795 | – | 1,104,772 |
| Portfolio amortisation and revaluation | –157,845 | –202,695 | –124,992 | – | –485,532 |
| Interest income from run-off consumer loan portfolio | – | – | 1,153, | – | 1,153 |
| Net revenue from acquired loan portfolios | 188,430 | 215,007 | 216,956 | – | 620,393 |
| Fee and commission income | 14,083 | 1,400 | 14,030 | – | 29,513 |
| Profit from shares and participations in joint ventures | – | 389 | – | 14,833 | 15,222 |
| Other income | – | 592 | 6,957 | –439 | 7,110 |
| Total revenue | 202,513 | 217,388 | 237,943 | 14,394 | 672,238 |
| Personnel expenses | –57,771 | –31,920 | –48,016 | –40,281 | –177,988 |
| Collection costs1) | –45,304 | –71,878 | –28,378 | – | –145,560 |
| Other operating expenses1) | –23,551 | –8,080 | –14,667 | –46,872 | –93,170 |
| Depreciation and amortisation of tangible and intangible assets |
–2,581 | –2,032 | –1,851 | –7,427 | –13,891 |
| Total operating expenses | –129,207 | –113,910 | –92,912 | –94,580 | –430,609 |
| EBIT | 73,306 | 103,478 | 145,031 | –80,186 | 241,629 |
| Interest income excl. run-off consumer loan portfolio | – | – | 2,260 | –1,560 | 700 |
| Interest expense | – | –46 | –1,320 | –78,108 | –79,474 |
| Net financial income2) | –55,023 | –49,511 | –46,436 | 142,983 | –7,987 |
| Total financial items | –55,023 | –49,557 | –45,496 | 63,315 | –86,761 |
| Profit/loss before tax | 18,283 | 53,921 | 99,535 | –16,871 | 154,868 |
1) Comparative figures have been adjusted due to the reclassification of banking fees from Other operating expenses to Collection costs.
| Income statement,Full-year 2017 | Region | Central | |||
|---|---|---|---|---|---|
| SEK thousand | Region West Europe |
Region Mid Europe |
Central East Europe |
Functions and Eliminations |
Group |
| Gross cash collections on acquired loan portfolios | 1,588,291 | 1,821,592 | 1,467,288 | – | 4,877,171 |
| Portfolio amortisation and revaluation | –668,970 | –904,006 | –660,168 | – | –2,233,144 |
| Interest income from run-off consumer loan portfolio | – | – | 4,540 | – | 4,540 |
| Net revenue from acquired loan portfolios | 919,321 | 917,586 | 811,660 | – | 2,648,567 |
| Fee and commission income | 54,387 | 4,796 | 14,118 | – | 73,301 |
| Profit from shares and participations in joint ventures | – | 25,354 | – | 50,784 | 76,138 |
| Other income | 154 | 2,067 | 12,762 | –1,704 | 13,279 |
| Total revenue | 973,862 | 949,803 | 838,540 | 49,080 | 2,811,285 |
| Personnel expenses | –231,925 | –125,531 | –208,484 | –164,065 | –730,005 |
| Collection costs | –204,900 | –308,955 | –158,248 | –5 | –672,108 |
| Other operating expenses | –112,823 | –49,827 | –64,730 | –174,967 | –402,347 |
| Depreciation and amortisation of tangible and intangible assets |
–11,294 | –7,790 | –7,516 | –29,343 | –55,943 |
| Total operating expenses | –560,942 | –492,103 | –438,978 | –368,380 | –1,860,403 |
| EBIT | 412,920 | 457,700 | 399,562 | –319,300 | 950,882 |
| Interest income excl. run-off consumer loan portfolio | – | – | 1,291 | –15,637 | –14,346 |
| Interest expense | – | –112 | –520 | –304,434 | –305,066 |
| Net financial income1) | –250,874 | –218,741 | –176,083 | 595,374 | –50,324 |
| Total financial items | –250,874 | –218,853 | –175,312 | 275,303 | –369,736 |
| Profit/loss before tax | 162,046 | 238,847 | 224,250 | –43,997 | 581,146 |
1) Including financing costs.
| Income statement, Full-year 2016 | Region | Central | |||
|---|---|---|---|---|---|
| SEK thousand | Region West Europe |
Region Mid Europe |
Central East Europe |
Functions and Eliminations |
Group |
| Gross cash collections on acquired loan portfolios | 1,296,766 | 1,574,731 | 1,439,665 | – | 4,311,162 |
| Portfolio amortisation and revaluation | –487,587 | –763,410 | –655,210 | – | –1,906,207 |
| Interest income from run-off consumer loan portfolio | – | – | 5,841 | – | 5,841 |
| Net revenue from acquired loan portfolios | 809,179 | 811,321 | 790,296 | – | 2,410,796 |
| Fee and commission income | 65,629 | 5,006 | 46,182 | – | 116,817 |
| Profit from shares and participations in joint ventures | – | 616 | – | 85,426 | 86,042 |
| Other income | – | 1,769 | 14,502 | –2,620 | 13,651 |
| Total revenue | 874,808 | 818,712 | 850,980 | 82,806 | 2,627,306 |
| Personnel expenses | –231,502 | –111,301 | –181,875 | –147,677 | –672,355 |
| Collection costs | –246,005 | –221,228 | –128,682 | – | –595,915 |
| Other operating expenses | –112,356 | –53,821 | –49,924 | –154,681 | –370,782 |
| Depreciation and amortisation of tangible and intangible assets |
–11,977 | –7,210 | –7,299 | –26,310 | –52,796 |
| Total operating expenses | –601,840 | –393,560 | –367,780 | –328,668 | –1,691,848 |
| EBIT | 272,968 | 425,152 | 483,200 | –245,862 | 935,458 |
| Interest income excl. run-off consumer loan portfolio | 101 | – | 3,513 | –6,897 | –3,283 |
| Interest expense | –3 | –102 | –1,347 | –298,836 | –300,288 |
| Net financial income1) | –207,219 | –182,721 | –181,453 | 472,604 | –98,789 |
| Total financial items | –207,121 | –182,823 | –179,287 | 166,871 | –402,360 |
| Profit/loss before tax | 65,847 | 242,329 | 303,913 | –78,991 | 533,098 |
| Acquired loans, 31 Dec 2017 | Region West | Region Mid | Region Central East |
Central Functions and |
|
|---|---|---|---|---|---|
| SEK thousand | Europe | Europe | Europe | Eliminations | Group |
| Run-off consumer loan portfolio | 21,325 | 21,325 | |||
| Acquired loan portfolios | 5,658,134 | 5,262,229 | 3,845,626 | 14,765,989 | |
| Shares and participations in joint ventures1) | 236,635 | 236,635 | |||
| Acquired loans | 5,658,134 | 5,262,229 | 3,866,951 | 236,635 | 15,023,949 |
| Acquired loans, 31 Dec 2016 | Region | Central | |||
|---|---|---|---|---|---|
| SEK thousand | Region West Europe |
Region Mid Europe |
Central East Europe |
Functions and Eliminations |
Group |
| Run-off consumer loan portfolio | 32,194 | 32,194 | |||
| Acquired loan portfolios | 4,522,429 | 4,331,437 | 3,531,681 | 12,385,547 | |
| Shares and participations in joint ventures1) | 240,580 | 240,580 | |||
| Acquired loans | 4,522,429 | 4,331,437 | 3,563,875 | 240,580 | 12,658,321 |
1) Refers to the value of shares and participations in joint ventures in Poland with acquired loan portfolios and is therefore not equivalent to corresponding item in the balance sheet.
The Group uses observable data to the greatest possible extent when assessing the fair value of an asset or liability. Fair values are categorised in different levels based on the input data used in the valuation approach, as per the following:
instruments traded on markets that are not active, or other valuation techniques in which all important input data is directly or indirectly observable in the market.
Group, 31 December 2016
Level 3) Based on inputs that are not observable on the market. This category includes all instruments for which the valuation technique is based on data that is not observable and has a substantial impact upon the valuation.
| Group, 31 December 2017 | |||||||
|---|---|---|---|---|---|---|---|
| SEK thousand | Loan portfolios |
Financing | Carrying value |
Fair value | Level 1 | Level 2 | Level 3 |
| Treasury bills and Treasury bonds | 1,490,152 | 1,490,152 | 1,490,152 | 1,490,152 | |||
| Acquired loan portfolios | |||||||
| of which, carried at fair value | 939,812 | 939,812 | 939,812 | 939,812 | |||
| of which, carried at amortised cost | 13,826,177 | 13,826,177 | 13,425,810 | 13,425,810 | |||
| Bonds and other securities | 3,689,021 | 3,689,021 | 3,689,021 | 3,689,021 | |||
| Derivatives | 10,546 | 10,546 | 10,546 | 10,546 | |||
| Total assets | 14,765,989 | 5,189,719 | 19,955,708 | 19,555,341 | 5,179,173 | 10,546 | 14,365,622 |
| Additional purchase price liability | 26,718 | 26,718 | 26,718 | 26,718 | |||
| Derivatives | 10,392 | 10,392 | 10,392 | 10,392 | |||
| Senior debts | 4,355,000 | 4,355,000 | 4,532,397 | 4,532,397 | |||
| Subordinated debts | 803,257 | 803,257 | 810,885 | 810,885 | |||
| Total liabilities | 5,195,367 | 5,195,367 | 5,380,392 | 5,353,674 | 26,718 |
Cash flow forecasts are discounted at the market rate when calculating the carrying value of acquired loan portfolios recorded at amortised cost. As regards the market rate, IRR is calculated based on an established WACC (Weighted Average Cost of Capital) model with a final conservative adjustment. For acquired loan portfolios recorded at fair value, the valuation approach, key input data and valuation sensitivity for material changes thereto are described in the Accounting Principles in the annual report 2016.
Derivatives used for hedging were model-valued using interest and currency market rates as input data.
Acquired loan portfolios Group SEK thousand 31 Dec 2017 31 Dec 2016 Opening balance 12,385,547 11,014,699 Acquisitions 4,252,869 3,329,382 Adjustment of acquisition analysis – –29,536 Translation differences 360,717 –22,785 Changes in value Based on opening balance forecast (amortisation) –2,244,1341) –1,911,916 Based on revised estimates (revaluation) 10,990 5,703 Carrying value 14,765,989 12,385,547 Changes in carrying value reported in the income statement –2,233,144 –1,906,213
Treasury bills and treasury bonds, and bonds and other fixed income instruments, are valued based on quoted rates.
The fair value of liabilities in the form of issued bonds and other subordinated debts was determined with reference to observable market prices quoted by external market players/places. In cases where more than one market price observation is available, fair value is determined at the arithmetic mean of the market prices.
Carrying values for accounts receivable and accounts payable are deemed approximations of fair value. The fair value of current loans corresponds to their carrying value due to the limited impact of discounting.
| Of which, designated at fair value | Group | |
|---|---|---|
| SEK thousand | 31 Dec 2017 |
31 Dec 2016 |
| Opening balance | 1,044,660 | 1,177,808 |
| Translation differences | 28,067 | 52,874 |
| Changes in value | ||
| Based on opening balance forecast (amortisation) |
–119,616 | –186,090 |
| Based on revised estimates (revaluation) | –13,299 | 68 |
| Carrying value | 939,812 | 1,044,660 |
| Changes in carrying value reported in the income statement |
–132,915 | –186,022 |
1) Including SEK -108m related to a partial disposal of a Polish loan portfolio.
While Hoist Finance considers the assumptions made in assessing fair value to be reasonable, the application of other methods and assumptions may produce a different fair value. For Level 3 fair value, a reasonable change in one or several assumptions would have the following impact on earnings:
| Group | |||||
|---|---|---|---|---|---|
| SEK thousand | 31 Dec 2017 | 31 Dec 2016 | |||
| Carrying value of loan portfolios | 14,765,989 | 12,385,547 | |||
| A 5% increase in estimated cash flow over the 10-year forecast period would increase the carrying value by: |
721,425 | 558,977 | |||
| of which, valued at fair value | 46,994 | 51,685 | |||
| A 5% decrease in estimated cash flow over the forecast period would reduce the carrying value by: |
–721,425 | –558,977 | |||
| of which, valued at fair value | –46,994 | –51,685 | |||
| Carrying value of loan portfolios acquired prior to 1 July 2011 | 939,812 | 1,044,660 | |||
| A 1% decrease in the market rate of interest would increase the carrying value by: | 28,304 | 31,174 | |||
| A 1% increase in the market rate of interest would reduce the carrying value by: | –26,770 | –29,483 | |||
| Shortening the forecast period by 1 year would reduce the carrying value by: | –26,700 | –26,534 | |||
| Lengthening the forecast period by 1 year would increase the carrying value by: | 21,324 | 20,938 |
The Group has chosen to categorise portfolios acquired prior to 1 July 2011 as designated at fair value through profit or loss, as these financial assets are managed and their performance is evaluated on a fair value basis in accordance with the Group's risk management policies. Information on the portfolios is provided internally to Group Management on this basis. The underlying concept for valuation at fair value is to assess the carrying value of an asset by using the best available price for the asset. Loan portfolios are typically not traded publicly and, consequently, there are no market prices available. Most participants in the industry, however, apply similar pricing methods for portfolio acquisitions and calculate the present value of cash flows that correspond to the market value of a portfolio.
The three main influencing factors in calculating fair value are: (i) the gross collections forecast, (ii) the cost level, and (iii) the market discount rate. Each month, the Group looks at the forward ten years'
net collection forecasts for all portfolios and discounts the forecasts to present value, which serves as the basis for calculating the reported fair value for each portfolio.
The insights that Hoist Finance, as one of the industry's biggest players, gains from the many portfolio transactions the Company participates in or has knowledge of form an important component in estimating a market discount rate. The discount rate corresponding to the market's required return is updated regularly and reflects actual return on relevant and comparable transactions in the market. Portfolios are currently valued at an IRR of 12 per cent over a ten-year period.
The estimated market discount rate is only applied to the portion of the portfolios valued at fair value. For the portfolios valued at amortised cost, the IRR at which the original acquisition was carried out is applied and the revenues are expensed at this effective interest rate.
This note provides information required to be disclosed under the provisions of FFFS 2008:25, including applicable amendments, regarding annual accounts for credit institutions and FFFS 2014:12, including applicable amendments, regarding prudential requirements and capital buffers. The information relates to Hoist Finance on a consolidated basis ("Hoist Finance") and Hoist Kredit AB (publ) ("Hoist Kredit"), the regulated entity. The difference in the basis for consolidation between the consolidated accounts and the consolidated situation is that joint ventures are consolidated using the equity method in the consolidated accounts, whereas proportional consolidation is used for the consolidated situation. When establishing the company's statutory capital requirements, EU regulation No 575/2013 and the Swedish law (2014:966) on capital buffers primarily apply.
The table below shows own funds for Hoist Finance and for the regulated entity Hoist Kredit.
| Hoist Finance consolidated situation |
Hoist Kredit AB (publ) | |||
|---|---|---|---|---|
| Own funds, SEK thousand | 31 Dec 2017 | 31 Dec 2016 | 31 Dec 2017 | 31 Dec 2016 |
| Capital instruments and related share premium accounts | 1,286,805 | 1,286,805 | 482,963 | 482,963 |
| Retained earnings | 744,837 | 472,965 | 402,218 | 307,205 |
| Accumulated comprehensive income and other reserves | 282,494 | 331,293 | 1,081,441 | 1,081,949 |
| Independently reviewed interim profits net of any foreseeable charge or dividend1) | 298,510 | 292,004 | 183,089 | 267,191 |
| Intangible assets (net of related tax liability) | –287,038 | –243,340 | –44,343 | –37,647 |
| Deferred tax assets that rely on future profitability | –21,241 | –47,268 | –2,581 | –2,734 |
| Common Equity Tier 1 | 2,304,367 | 2,092,459 | 2,102,787 | 2,098,927 |
| Capital instruments and the related share premium accounts | 379,577 | 379,577 | 379,577 | 379,577 |
| Additional Tier 1 capital | 379,577 | 379,577 | 379,577 | 379,577 |
| Tier 1 capital | 2,683,944 | 2,472,036 | 2,482,364 | 2,478,504 |
| Capital instruments and the related share premium accounts | 803,257 | 341,715 | 803,257 | 341,715 |
| Tier 2 capital | 803,257 | 341,715 | 803,257 | 341,715 |
| Total own funds for capital adequacy purposes | 3,487,201 | 2,813,751 | 3,285,621 | 2,820,219 |
1) Dividend deduction is calculated based on the year's proposed dividend.
The tables below shows the risk-weighted exposure amounts and minimum capital requirements per risk category for Hoist Finance and the regulated entity Hoist Kredit.
| Hoist Finance consolidated situation |
Hoist Kredit AB (publ) | |||
|---|---|---|---|---|
| Risk-weighted exposure amounts, SEK thousand | 31 Dec 2017 | 31 Dec 2016 | 31 Dec 2017 | 31 Dec 2016 |
| Exposures to central governments or central banks | 0 | 0 | 0 | 0 |
| Exposures to regional governments or local authorities | 0 | 0 | 0 | 0 |
| Exposures to institutions | 380,984 | 261,882 | 150,270 | 78,060 |
| of which, counterparty credit risk | 54,333 | 29,036 | 54,333 | 29,036 |
| Exposures to corporates | 135,760 | 199,920 | 10,934,711 | 10,238,303 |
| Retail exposures | 15,994 | 24,146 | 15,994 | 24,146 |
| Exposures in default | 15,348,907 | 13,270,498 | 2,496,093 | 2,646,432 |
| Exposures in the form of covered bonds | 368,902 | 247,485 | 368,902 | 247,485 |
| Equity exposures | – | – | 2,142,880 | 570,038 |
| Other items | 145,310 | 132,315 | 44,323 | 6,116 |
| Credit risk (standardised approach) | 16,395,857 | 14,136,246 | 16,153,173 | 13,810,580 |
| Market risk (foreign exchange risk – standardised approach) |
113,090 | 28,858 | 113,090 | 28,858 |
| Operational risk (standardised approach) | 3,158,430 | 2,622,373 | 1,127,520 | 893,024 |
| Credit valuation adjustment (standardised approach) | 27,430 | 0 | 27,430 | 0 |
| Total risk-weighted exposure amount | 19,694,807 | 16,787,477 | 17,421,213 | 14,732,462 |
| Hoist Finance consolidated situation |
Hoist Kredit AB (publ) | ||||
|---|---|---|---|---|---|
| Capital requirements, SEK thousand | 31 Dec 2017 | 31 Dec 2016 | 31 Dec 2017 | 31 Dec 2016 | |
| Pillar 1 | |||||
| Exposures to central governments or central banks | 0 | 0 | 0 | 0 | |
| Exposures to regional governments or local authorities | 0 | 0 | 0 | 0 | |
| Exposures to institutions | 30,479 | 20,951 | 12,022 | 6,245 | |
| of which, counterparty credit risk | 4,347 | 2,323 | 4,347 | 2,323 | |
| Exposures to corporates | 10,861 | 15,994 | 874,777 | 819,064 | |
| Retail exposures | 1,279 | 1,932 | 1,279 | 1,932 | |
| Exposures in default | 1,227,913 | 1,061,640 | 199,687 | 211,715 | |
| Exposures in the form of covered bonds | 29,512 | 19,799 | 29,512 | 19,799 | |
| Equity exposures | – | – | 171,430 | 45,603 | |
| Other items | 11,625 | 10,583 | 3,546 | 489 | |
| Credit risk (standardised approach) | 1,311,669 | 1,130,899 | 1,292,253 | 1,104,847 | |
| Market risk (foreign exchange risk-standardised approach) | 9,047 | 2,309 | 9,047 | 2,309 | |
| Operational risk (standardised approach) | 252,674 | 209,790 | 90,203 | 71,442 | |
| Credit valuation adjustment (standardised approach) | 2,194 | 0 | 2,194 | 0 | |
| Total own funds requirement – Pillar 1 | 1,575,584 | 1,342,998 | 1,393,697 | 1,178,598 |
| Total own funds requirement – Pillar 2 | 195,886 | 136,891 | 195,886 | 132,785 |
|---|---|---|---|---|
| Other Pillar 2 risks | 25,909 | 794 | 25,909 | 794 |
| Pension risk | 3,000 | 4,106 | 3,000 | – |
| Interest rate risk in the banking book | 36,203 | 30,000 | 36,203 | 30,000 |
| Concentration risk | 130,774 | 101,991 | 130,774 | 101,991 |
| Total own funds requirements | 2,274,409 | 1,905,945 | 2,033,572 | 1,690,465 |
|---|---|---|---|---|
| Total own funds requirement – Capital buffers | 502,939 | 426,056 | 443,989 | 379,082 |
| Countercyclical buffer | 10,569 | 6,370 | 8,459 | 10,770 |
| Capital conservation buffer | 492,370 | 419,686 | 435,530 | 368,312 |
The own funds for the Company's consolidated situation totalled SEK 3,487m (2,814) as at 31 December 2017, exceeding the own funds requirements by a good margin.
Regulation (EU) No 575/2013 of the European Parliament and the Council requires credit institutions to maintain Common Equity Tier 1 capital of at least 4.5 per cent, Tier 1 capital of at least 6 per cent, and a total capital ratio (capital in relation to risk-weighted exposure amount) of 8 per cent. Credit institutions are also required to maintain specific capital buffers. Hoist Finance is currently required to maintain a capital conservation buffer of 2.5 per cent of the total risk-weighted
exposure amount and an institution-specific countercyclical buffer of 0.05 per cent of the total risk-weighted exposure amount. The table below shows CET1 capital, Tier 1 capital and the total capital ratio for Hoist Finance and for the regulated entity Hoist Kredit. The table also shows the institution specific CET1 capital requirements.
All capital ratios exceed the minimum requirements and capital buffer requirements by a healthy margin.
| Hoist Finance consolidated situation |
Hoist Kredit AB (publ) | |||
|---|---|---|---|---|
| Capital ratios and capital buffers, % | 31 Dec 2017 | 31 Dec 2016 | 31 Dec 2017 | 31 Dec 2016 |
| Common Equity Tier 1 capital ratio | 11.70 | 12.46 | 12.07 | 14.25 |
| Tier 1 capital ratio | 13.63 | 14.73 | 14.25 | 16.82 |
| Total capital ratio | 17.71 | 16.76 | 18.86 | 19.14 |
| Institution-specific buffer requirements for CET1 capital | 7.05 | 7.04 | 7.05 | 7.07 |
| of which, capital conservation buffer requirement | 2.50 | 2.50 | 2.50 | 2.50 |
| of which, countercyclical capital buffer requirement | 0.05 | 0.04 | 0.05 | 0.07 |
| Common Equity Tier 1 capital available to meet buffers1) | 7.20 | 7.96 | 7.57 | 9.75 |
1) CET1 ratio as reported, less minimum requirement of 4.5 per cent (excluding buffer requirements) and less any CET1 items used to meet the Tier 1 and total capital requirements.
The internally assessed capital requirement for Hoist Finance consolidated situation totalled SEK 1,771m (1,480) at 31 December 2017, of which SEK 196m (137) is attributable to Pillar 2.
This note provides information required to be disclosed under the provisions of FFFS 2010:7, including applicable amendments, regarding the management of liquidity risks in credit institutions and investment firms.
Liquidity risk is the risk of difficulties in obtaining funding, and thus being unable to meet payment obligations, without a significant increase in the cost of obtaining means of payment.
Because the Group's revenues and costs are relatively stable, liquidity risk is primarily associated with the Group's funding which is based on deposits from the public and the risk of major outflows of deposits on short notice.
The overall objective of the Group's liquidity management is to ensure that the Group maintains control over its liquidity risk situation, with sufficient amounts of liquid assets or immediately divestible assets to ensure timely satisfaction of its payment obligations without incurring significantly higher costs.
Funding primarily takes the form of deposits from the public and the issuance of senior unsecured debt and own funds instruments, as well as equity. The majority of deposits from the public are payable on demand (variable deposits – "floating"), while about 35 per cent (36) of the Group's deposits from the public are tied to longer maturities ("fixed deposits") ranging from 12 to 36 months. About 99 per cent of deposits are backed by the deposit guarantee scheme.
| Funding | Hoist Finance consolidated situation |
Hoist Kredit AB (publ) | |||
|---|---|---|---|---|---|
| SEK thousand | 31 Dec 2017 | 31 Dec 2016 | 31 Dec 2017 | 31 Dec 2016 | |
| Current account deposits | 8,580,487 | 7,582,909 | 8,580,487 | 7,582,909 | |
| Fixed-term deposits | 4,646,963 | 4,266,047 | 4,646,963 | 4,266,047 | |
| Senior debts | 4,355,000 | 3,125,996 | 4,355,000 | 3,125,996 | |
| Convertible debt instruments | 379,577 | 379,577 | 379,577 | 379,577 | |
| Subordinated debts | 803,257 | 341,715 | 803,257 | 341,715 | |
| Equity | 2,848,728 | 2,545,719 | 2,100,176 | 2,077,009 | |
| Other | 922,552 | 907,963 | 612,823 | 695,522 | |
| Balance sheet total | 22,536,564 | 19,149,926 | 21,478,283 | 18,468,775 |
The Group's treasury policy stipulates limits on how much liquidity is to be available and the nature of such liquidity. As at 31 December 2017, available liquidity totalled SEK 6,800m (5,789), which is well in excess of the limit.
Hoist Finance's liquidity reserve, presented below pursuant to the Swedish Bankers' Association's template, primarily comprises bonds issued by the Swedish government and Swedish municipalities, as well as covered bonds.
| SEK thousand | 31 Dec 2017 | 31 Dec 2016 |
|---|---|---|
| Cash and holdings in central banks | 202 | 3,073 |
| Deposits in other banks available overnight | 1,620,581 | 1,036,749 |
| Securities issued or guaranteed by sovereigns, central banks or multilateral development banks |
1,060,775 | 1,528,116 |
| Securities issued or guaranteed by municipalities or other public sector entities | 429,377 | 745,786 |
| Covered bonds | 3,689,021 | 2,474,849 |
| Securities issued by non-financial corporates | – | – |
| Securities issued by financial corporates | – | – |
| Other | – | – |
| Total | 6,799,956 | 5,788,573 |
Hoist Finance has a contingency funding plan for managing liquidity crises. This identifies specific events that may trigger the contingency plan and actions to be taken.
| SEK thousand | Group | Parent Company | ||
|---|---|---|---|---|
| 31 Dec 2017 | 31 Dec 2016 | 31 Dec 2017 | 31 Dec 2016 | |
| Pledges and comparable collateral for own liabilities and for reported | ||||
| commitments for provisions | 246 | 478 | – | – |
| Group | Parent Company | |||
|---|---|---|---|---|
| SEK thousand | 31 Dec 2017 | 31 Dec 2016 | 31 Dec 2017 | 31 Dec 2016 |
| Commitments | 697,816 | 1,565,944 | – | – |
| Return on book | ||||
|---|---|---|---|---|
| SEK thousand | Quarter 4 2017 |
Quarter 4 2016 |
Full year 2017 |
Full year 2016 |
| EBIT | 189,538 | 241,629 | 950,882 | 935,458 |
| + Operating expenses in Central Functions | 105,886 | 94,580 | 368,380 | 328,668 |
| EBIT excl operating expenses in Central Functions1) | 1,181,695 | 1,344,835 | 1,319,262 | 1,264,126 |
| Average carrying value of aquired loans2) | 14,096,694 | 12,158,301 | 13,342,942 | 11,968,471 |
| Return on book, % | 8.4 | 11.1 | 9.9 | 10.6 |
1) Calculated on an annualised basis (quarterly). 2) Calculated as average on previous period.
| SEK thousand | Quarter 4 2017 |
Quarter 4 2016 118,110 |
Full year 2017 452,760 |
Full year 2016 417,149 |
|---|---|---|---|---|
| Profit for the period | 85,226 | |||
| + Income tax expense |
24,500 | 36,758 | 128,386 | 115,949 |
| + Portfolio revaluations |
2,860 | –22,662 | –10,990 | –5,703 |
| – Interest income (excl. Interest from run-off performing portfolio) |
4,602 | –699 | 14,345 | 3,283 |
| + Interest expense |
75,281 | 79,474 | 305,066 | 300,288 |
| +/– Net result from financial transactions, incl. Net credit losses | –71 | 7,987 | 50,324 | 98,789 |
| + Depreciation and amortisation of tangible and intangible assets |
13,593 | 13,891 | 55,943 | 52,796 |
| EBITDA | 205,991 | 232,859 | 995,834 | 982,551 |
| + Amortisation on run-off portfolio |
1,616 | 6,735 | 10,869 | 26,171 |
| + Amortisation on acquired loan portfolios |
655,881 | 508,193 | 2,244,134 | 1,911,916 |
| EBITDA, adjusted | 863,488 | 747,787 | 3,250,837 | 2,920,638 |
| Book value of run-off consumer loan portfolio | 21,325 | 32,194 | 21,325 | 32,194 |
| SEK thousand | Full year 2017 |
|---|---|
| Equity | 3,228,305 |
| Additional Tier 1 capital | –379,577 |
| Reversal of interest expense paid for AT1 capital | 27,605 |
| Reversal of items affecting comparability1) | 102,191 |
| Total equity | 2,978,524 |
| Total equity (quarterly average) | 2,751,606 |
| Profit for the period | 452,760 |
| Reversal of items affecting comparability1) | 102,191 |
| Estimated annual profit | 554,951 |
| Adjustment of interest on AT1 capital | –40,486 |
| Adjusted annual profit | 514,465 |
| Return on equity, % | 19 |
1) Items affecting comparability refer to costs which arose in connection with the repurchase of subordinated debts and outstanding bonds during second quarter 2017 and with restructuring costs and adjustment of previous cost accruals during fourth quarter 2017, including tax.
The Board of Directors and the CEO hereby give their assurance that the interim financial statements provide a true and fair view of the business activities, financial position and results of operations of the Group and the Parent Company, and describes the significant risks and uncertainties to which the Parent Company and Group companies are exposed.
Stockholm, February 12, 2018
Ingrid Bonde Chair of the Board
Cecilia Daun Wennborg Malin Eriksson Board member Board member
Liselotte Hjorth Joakim Rubin Board member Board member
Costas Thoupos Gunilla Wikman Board member Board member
Jörgen Olsson CEO Board member
| SEK thousand | Quarter 4 2017 |
Quarter 4 2016 |
|---|---|---|
| Gross cash collections on acquired loan portfolios | 1,358,948 | 1,104,772 |
| Portfolio amortisation and revaluation | –658,741 | –485,532 |
| Interest income from run-off consumer loan portfolio | 1,156 | 1,153 |
| Net revenue from acquired loan portfolios | 701,363 | 620,393 |
| Fee and commission income | 16,774 | 29,513 |
| Profit from shares and participations in joint ventures | 20,962 | 15,222 |
| Other income | 4,837 | 7,110 |
| Total revenue | 743,936 | 672,238 |
| Personnel expenses | –219,390 | –177,988 |
| Collection costs | –203,118 | –145,560 |
| Other operating expenses | –118,297 | –93,170 |
| Depreciation and amortisation of tangible and intangible assets | –13,593 | –13,891 |
| Total operating expenses | –554,398 | –430,609 |
| Operating profit (EBIT) | 189,538 | 241,629 |
| Funding | ||
| Interest income excl. run-off consumer loan portfolio | –4,602 | 700 |
| Interest expense | –75,281 | –79,474 |
| Net financial income | 71 | –7,987 |
| Total financial items | –79,812 | –86,761 |
| Profit before tax | 109,726 | 154,868 |
| SEK thousand | Quarter 4 2017 |
Quarter 4 2016 |
|---|---|---|
| Revenue from acquired loan portfolios | 700,207 | 619,240 |
| Interest income | –3,446 | 1,853 |
| Interest expense | –75,281 | –79,474 |
| Net interest income | 621,480 | 541,619 |
| Fee and commission income | 16,774 | 29,513 |
| Net financial income | 71 | –6,727 |
| Other income | 4,837 | 7,110 |
| Total operating income | 643,162 | 571,515 |
| General administrative expenses | ||
| Personnel expenses | –219,390 | –177,988 |
| Other operating expenses | –321,415 | –238,730 |
| Depreciation and amortisation of tangible and intangible assets | –13,593 | –13,891 |
| Total operating expenses | –554,398 | –430,609 |
| Profit before credit losses | 88,764 | 140,906 |
| Net credit losses | – | –1,260 |
| Profit from shares and participations in joint ventures | 20,962 | 15,222 |
| Profit before tax | 109,726 | 154,868 |
Hoist Finance supplements its statutory presentation of the income statement with an operating income statement in order to assess the operational performance of the debt purchasing and collection operations and to facilitate comparison with our competitors.
The operating income statement does not include any amendments or adjustments as compared with the statutory income statement. The same accounting and valuation principles are applied in both versions.
Hoist Finance regards the acquisition and management of acquired loan portfolios as the Group's core operational activity. Deposit-taking in HoistSpar is thus part of the Group's financing activity.
An outline guide is presented to the left in order to assist understanding of our financial performance presented in the statutory income statement as compared with the operating income statement.
The statutory income statement complies with the Swedish Financial Supervisory Authority's general recommendations FFFS 2008:25.
In an analysis of Hoist Finance's operating profit (EBIT), income and expenses attributable to the acquisition and management of loan portfolios, run-off consumer loan portfolios, fee and commission income, profit from joint ventures as well as general administration are regarded as our operational activity.
Interest expenses for deposit-taking are regarded as financing expenses.
Alternative performance measures (APMs) are financial measures of past or future earnings trends, financial position or cash flow that are not defined in the applicable accounting regulatory framework (IFRS), in the Capital Requirements Directive (CRD IV), or in the EU's Capital Requirement Regulation number 575/2013 (CRR). APMs are used by Hoist Finance, along with other financial measures, when relevant for monitoring and describing the financial situation and for providing additional useful information to users of the financial reports. These measures are not directly comparable with similar performance measures that are presented by other companies. Estimated remaining collections, Return on book and Adjusted EBITDA are three APMs that are used by Hoist Finance. Furthermore, during the period, Hoist Finance has opted to present Return on equity, excluding items affecting comparability, as alternative performance measure. Alternative performance measures are described below.
Total of acquired loan portfolios, run-off consumer loan portfolios and participations in joint ventures.
An acquired loan portfolio consists of a number of defaulted consumer loans or debts that arise from the same originator.
Capital instruments and associated share premium reserves that fulfil the requirements of Regulation (EU) 575/2013 of the European Parliament and the Council and that may accordingly be included in the Tier 1 capital.
Net profit for the year, adjusted for interest on capital instruments recorded in equity, divided by the weighted average number of outstanding shares.
Minimum capital requirements for credit risk, market risk and operational risk.
Capital requirements beyond those stipulated in Pillar 1.
Capital instruments and associated share premium reserves that fulfil the requirements of Regulation (EU) 575/2013 of the European Parliament and the Council, and other equity items that may be included in CET1 capital, less regulatory dividend deduction and deductions for items such as goodwill and deferred tax assets.
Common Equity Tier 1 in relation to total risk exposure amount.
Net profit for the year, adjusted for interest on capital instruments recorded in equity, divided by the weighted average number of outstanding shares after full dilution.
EBIT (operating earnings), less depreciation/ impairments and amortisation for run-off consumer loan portfolio and depreciation of acquired loan portfolios.
Earnings Before Interest and Tax. Operating profit before financial items and tax.
EBIT (operating earnings) divided by total revenue.
on acquired loan portfolios Operating expenses less fee and commission income, divided by the sum of gross cash collections and interest income from the run-off consumer loan portfolios. The expenses related to fee and commission income are calculated with reference to commission income costs related to other income and actual profit margin.
Fees for providing debt management services to third parties.
"Estimated Remaining Collections" – the company's estimate of the gross amount that can be collected on the loan portfolios currently owned by the company. The assessment is based on estimates for each loan portfolio and extends from the following month through the coming 120 months. The estimate for each loan portfolio is based on the company's extensive experience in processing and collecting over the portfolio's entire economic life.
Gross cash flow from the Group's customers on loans included in Group's acquired loan portfolios.
Items that interfere with comparison due to the irregularity of their occurrence and/or size as compared with other items.
Legal collections relate to the cash received following the initiation of Hoist Finance's litigation process. This process assesses customers' solvency and follows regulatory and legal requirements.
The sum of gross cash collections from acquired loan portfolios and income from the run-off consumer loan portfolio, less portfolio amortization and revaluation.
Sum of Tier 1 capital and Tier 2 capital.
The share of gross collections that will be used for amortising the carrying value of acquired loan portfolios.
Change in carrying value of acquired loans over the last twelve months.
Changes in the portfolio value based on revised estimated remaining collections for the portfolio.
An originator's loan is non-performing as at the balance sheet date if it is past due or will be due shortly.
Number of employees at the end of the period converted to full-time posts (FTEs).
EBIT (operating profit) for the period calculated on annualised basis, exclusive of Central Functions operating expenses, divided by average carrying value of acquired loan portfolios. In the financial statements, calculation of average carrying value is based on opening amount at the beginning of the period and closing amount at the end of the period. For the full year the carrying value is calculated as an average for the year based on a quarterly basis.
Net profit for the period adjusted for accrued unpaid interest on AT1 capital calculated on annualised basis, divided by equity adjusted for AT1 capital reported in equity, calculated as an average for the year based on a quarterly basis.
The risk weight of each exposure multiplied by the exposure amount.
A company that employs fewer than 250 people and has either annual turnover of EUR 50million or less or a balance sheet total of EUR 43 million or less.
The sum of CET1 capital and AT1 capital.
Tier 1 capital as a percentage of the total risk exposure amount.
Capital instruments and associated share premium reserves that the requirements of Regulation (EU) 575/2013 of the European Parliament and the Council and that may accordingly be included in the funds.
Own funds as a percentage of the total risk exposure amount.
Total of net revenue from acquired loan, fee and commission income, profit or loss from joint ventures and other income.
of diluted shares
Weighted number of outstanding shares plus potential dilutive effect of outstanding warrants.
Hoist Finance's business model is designed to ensure continuity and to deliver both growth and long-term strategic initiatives. Our model is hallmarked by solution-oriented settlements with respect, confidence and trust in everything we do.
Hoist Finance is a trusted debt restructuring partner to international banks and financial institutions. We specialise in purchasing portfolios of non-performing loans.
To become the leading debt restructuring partner to international banks and financial institutions.
Achieve an operating margin of over 40 per cent in the mediumterm horizon by leveraging our operational scale advantages. By ensuring the right balance between growth, profitability and capital efficiency, we aim to achieve a 20 per cent return on equity in the medium-term horizon.
Under normal conditions, the CET1 ratio should be 2.5 – 4.5 percentage points above the overall CET1 requirements specified by the Swedish Financial Supervisory Authority.
Pursuant to our dividend policy, we will initially pay a dividend of 25–30 per cent of the Group's net profit in the medium-term horizon. In light of the strong cash flow that our business has generated historically, our long-term goal is to pay a dividend of 50 per cent of our annual net profit.
Strategic objectives
| Preferred by customers | Be customer-centric, with a focus on amicable and fair settlements. |
|---|---|
| Preferred partner | Be trustworthy with unparalleled funding capacity. |
| Attractive to investors | Redefine industry standards with our disciplined approach & ambitious targets. |
| Best place to work | Build an extraordinary company with extraordinary people. |
| CSR | Integrate CSR into everything we do and continue to build trust with all our stakeholders. |
| Annual report 2017 | 11 April 2018 |
|---|---|
| Interim report Q1 2018 | 15 May 2018 |
| Annual General Meeting | 16 May 2018 |
| Interim report Q2 2018 | 27 July 2018 |
| Interim report Q3 2018 | 25 October 2018 |
Investor Relations Michel Fischier Group Head of Investor Relations
Ph: +46 (0) 8-555 177 45 E-post: [email protected] Hoist Finance AB (publ) Corp. ID no. 556012-8489 Box 7848, 103 99 Stockholm Ph: +46 (0) 8-555 177 90 www.hoistfinance.com
The interim report and investor presentation are available at www.hoistfinance.com
Every care has been taken in the translation of this report. In the event of any discrepancy, the Swedish original will supersede the English translation.
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