Logotype
Search

Administration Report

Business overview

Hoist Finance AB (publ), corporate identity number 556012-8489, is the Parent Company within the Hoist Finance Group, registered in Stockholm, Sweden. Hoist Finance is a registered credit market company under the supervision of the Swedish Financial Supervisory Authority.

Hoist Finance is a leading debt restructuring partner to international banks and financial institutions, with loan acquisition and management operations in thirteen countries across Europe. The Group’s core business has historically been the acquisition of non-performing loans (NPLs) originated by large international banks and other financial institutions with whom Hoist Finance has strong and long-term relationships. After purchasing an NPL portfolio, Hoist Finance’s primary method of collecting from its customers is through sustainable payment plan agreements. Most of Hoist Finance’s recovery activities for its acquired portfolios are managed through its own call centres across Europe, supplemented in some cases by carefully selected external debt recovery partners. For over 20 years, the Group has focused exclusively on the acquisition of NPL portfolios. This distinguishes Hoist Finance from many of its competitors, which have evolved from being solely collection companies (i.e., collecting on behalf of a third party) and, therefore, have significantly shorter histories in acquiring claims. This long-term focus and the Group’s flexible and tailored product offering have allowed Hoist Finance to develop the expertise to structure and execute complex transactions.

The Group operates a traditional internet-based retail deposit product in Sweden under the HoistSpar brand, and has also launched savings accounts in Germany, in partnership with one of the largest deposit savings platforms in Europe, under the HoistSparen brand. In 2021 Hoist Finance also launched deposits from the public in the UK under the HoistSavings brand. As a regulated credit market company, Hoist Finance can offer the public a deposit service which is fully covered by the Swedish state deposit guarantee up to an amount of SEK 1,050,000 for each account. This gives the Group a cost-effective, flexible and reliable source of funding, which is primarily used for the acquisition of NPLs.

The market

Hoist Finance’s geographic focus is Europe. The Group has acquired loan portfolios in Belgium, Cyprus, France, Greece, Italy, the Netherlands, Poland, Spain, the UK, Germany and Austria. By selling their NPLs, banks and other originators can focus on their core business, free up capital, improve liquidity, limit the risk of doubtful payment profiles and improve key performance indicators. The European NPL market has grown in recent years, mainly as a result of the underlying market expansion of the consumer credit market and the new capital adequacy (Basel III) regulations, as well as the regulation for minimum loss coverage for non-performing exposures (”NPL prudential backstop”) that took effect in 2019. For further information on the NPL prudential backstop, see the "NPL Prudential Backstop" section, the "Development of Risks" section in the Administration Report, and Note 33 "Risk Management". Hoist Finance’s main competitors include debt acquisition and collection companies, integrated players offering a wide range of financial services, and specialised investors.

Group structure and ownership

Hoist Finance was listed on the Nasdaq Stockholm Mid Cap list on 25 March 2015. At 30 December 2021, the number of shares totalled 89,303,000 and the share price closed at SEK 29.20, corresponding to a market capitalisation of SEK 2,608m. See Hoist Finance’s website, www.hoistfinance.com, for additional information on the share and shareholders. The Articles of Association do not include any restrictions on the negotiability of the shares and there are no other circumstances that require disclosure under Chapter 6, 2a § 3–11 of the Swedish Annual Accounts Act.

Hoist Finance together with a number of subsidiaries acquire and hold loan portfolios for the Group. Day-to-day collection operations are mostly run by local branch offices and subsidiaries. Some of these companies also provide commission-based administration services to third parties. The Polish, Romanian and the UK branch offices are providing services within the Hoist Finance Group. Note 19 "Shares and Participations in Subsidiaries", sets out the Hoist Finance Group and its key subsidiaries and branch offices as of 31 December 2021.

Proposed dividend

The Board of Directors propose to the Annual Shareholders meeting 2022 to not pay a dividend to the shareholders for the financial year 1 January - 31 December 2021, as the net result for the year is negative.

Proposed appropriation of profits 

According to the Parent Company’s balance sheet, the following unappropriated earnings are at the disposal of the Annual General Meeting:SEK
 Share premium1,882,891,946
 Reserves2,946,618
 Retained earnings1,534,674,487
 Profit/loss for the year-52,915,060
 Total3,367,597,991

The Board of Directors proposes that unappropriated earnings be
distributed as follows:
SEK
To be carried forward3,367,597,991


Key events during the year

  • Pan-European securitisation partnership agreement for new portfolio investments signed with Magnetar Capital, and several Italian portfolios acquired in the securitisation programme during the year.
  • Forward-looking negative impairment of unsecured portfolios of SEK -351m in Q1 2021.
  • Review of total tax provision resulted in additional provisions of SEK -102m in net effect.
  • Per Anders Fasth appointed acting CEO.
  • Christian Wallentin appointed CFO.
  • Transformation programme initated to right size company, improve productivity and increase growth, which started to pay-off during the fourth quarter.
  • NPL portfolio volumes bottoming out.
  • Investment grade rating and stable outlook from Moody’s.
  • Several attractive portfolio acquisitions late in the year.

Developments during the 2021 financial year

Unless otherwise indicated, all comparative market, financial and
operational information refers to 2020 financial year.

Profit before tax 

Profit before tax totalled SEK -39m (82). The decrease compared to last year is an effect of lower portfolio volumes and margins, partially offset by better collection performance and positive market valuation of hedging contracts. Expenses were in line with the previous year.

Total operating income

Operating income totalled SEK 2,255m (2,368). Net interest income totalled SEK 2,430m (2,726). Interest income on acquired loan portfolios decreased SEK -296m during the year to SEK 3,006m (3,302). The decrease is attributable to lower portfolio volumes and year-on-year margins. Interest expense totalled SEK -574m (-582). Impairment gains and losses totalled SEK -338m (-458). The surplus of collections against projections totalled SEK 298m, representing a collection rate of 101 per cent. All markets but the UK had a positive collection development. Revaluations totalled SEK -635m (-805) of which SEK -351m pertains to the forward-looking portfolio writedown conducted during Q1 2021. Other revaluations pertain mainly to secured loan portfolios, for which collections achieved earlier than projected reduced expected future cash flow. Fee and commission income decreased to SEK 63m (93) due to the closure of third-party collection services in the UK. Net result from financial transactions totalled SEK 82m (-7). Both periods were affected by unrealised gain/loss from market valuation of interest rate hedging instruments.

Total operating expenses 

Operating expenses was SEK -2,355m (-2,343). Personnel expenses for the period totalled SEK -867m (-862). During the year number of employees was reduced by 5 per cent to 1,544 FTEs. Legal collection costs increased to SEK -753m (-734) as courts reopened during the year. Other administrative expenses decreased to SEK -606m (-613). Depreciation and amortisation of tangible and intangible assets totalled SEK -129m (-134). Both periods were affected by IT project write-downs.

Net profit/loss and total comprehensive income

Net profit/loss for the year totalled SEK -117m (41). The year’s tax expense was SEK –78m (–41). The effective tax rate was 204 per cent (50) and is negatively affected primarily by a tax provision related to an ongoing tax audit, offset somewhat by tax revenue resulting from capitalisation of loss carry-forwards. 

Other comprehensive income was SEK -10m (-128) which mainly related to translation difference and hedging of currency risk. Total comprehensive income was SEK -127m (-87).

Balance sheet

Total assets decreased SEK -1,492m as compared with 31 December 2020 and totalled SEK 30,372m (31,864). The change is primarily attributable to a SEK -1,461m decrease in cash and interest-bearing securities. The carrying amount of acquired loan portfolios increased to SEK 21,337m (21,075). Including the recently signed portfolio in Greece, portfolio volumes totalled to SEK 22,442m. Signed but not settled portfolios are not included in the balance sheet. Other assets decreased SEK -293m.

SEK m20212020Change %
Cash and interest-bearing securities7,5589,019-16
Acquired loan portfolios21,33721,0751
Other assets1)1,4771,770-17
Total assets30,37231,864 -5
Deposits from the public18,16917,9281
Debt securities issued5,0596,355-20
Subordinated debt8378212
Total interest-bearing liabilities24,06525,104-4
Other liabilities1)1,3661,602-15
Equity4,9415,158-4
Total liabilities and equity30,37231,864-5


1) This item does not correspond to an item of the same designation in the balance sheet, but to several corresponding items

Total interest-bearing debt amounted to SEK 24,065m (25,104). The change is mainly attributable to an SEK -1,296m reduction in senior unsecured debts offset by deposits from the public, which increased SEK 241m. Hoist Finance funds its operations through deposits in Sweden and Germany as well as through the international bond market and the Swedish money market. In 2021 Hoist Finance also launched deposits from the public in the UK under the HoistSavings brand. In Sweden, deposits from the public under the HoistSpar brand amounted to SEK 8,541m (10,552), of which SEK 3,775m (5,391) is attributable to fixed term deposits of one-, two- and three-year durations. In Germany, deposits to retail customers are offered under the HoistSparen name. At 31 December 2021, deposits from the public in Germany were SEK 9,564m (7,376), of which SEK 7,201m (7,115) is attributable to fixed term deposits of one- to five-year duration.

At 31 December 2021, the outstanding bond debt totalled SEK 5,896m (7,176), of which SEK 5,059m (6,355) was comprised of senior unsecured liabilities. The change is mainly attributable to the redemption of senior debts totalling SEK –1,445m that matured in October and, to some extent, to bonds issued and repurchased in the Italian securitisation structure during the year.

Other liabilities decreased SEK –236m to SEK 1,366m (1,602). Equity totalled SEK 4,941m (5,158), with the decrease mainly attributable to the year’s negative result and to payment of interest on Additional Tier 1 capital contributions.

Acquired loan portfolios

SEK m20212020Change %
Portfolio acquisitions3,5581,761>100
Carrying amount, acquired loan portfolios21,33721,0751

The year-on-year loan portfolio acquisition volume more than doubled in 2021, despite the prevailing market uncertainty resulting from Covid-19. Total 2021 acquisition volume amounted to SEK 3,558m (1,761). The carrying value of acquired loan portfolios totalled SEK 21,337m (21,075) on 31 December 2021, an increase of SEK 262m since 2020. Work continued in 2021 on the securitisation of loan portfolios in Europe.

An agreement was signed in December with Alpha Bank in Greece for an SEK 1.1bn portfolio acquisition. Including this portfolio, portfolio acquisitions totalled SEK 4.7bn, representing Hoist Finance’s third-highest annual acquisition volume.

Cash flow

SEK m20212020Change %
Cash flow from operating activies3,4814,857-28
Cash flow from investing activies-2,996-3,066-2
Cash flow from financing activies-1,448-2,410-40
Cash flow for the year-963-61956

Cash flow from operating activities totalled SEK 3,481m (4,857). Amortisation of acquired loan portfolios increased during the year and totalled SEK 3,685m (3,164). Cash flow from other assets and liabilities amounted to SEK -260m (1,021), the majority of which pertains to realised cash flows for FX hedging.

Cash flow from investing activities totalled SEK -2,996m (-3,066). Portfolio acquisitions more than doubled year-on-year and amounted to SEK -3,558m (-1,715). Net cash flow from bonds and other securities totalled SEK 582m (-1,318) during the year.

Cash flow from financing activities totalled SEK -1,448m (-2,410). Net cash flow from deposits from the public amounted to SEK 117m (-3,272) during the year, with outflows in Sweden offset by inflows in Germany. Issued securities totalled SEK 94m (2,018) and pertain to issues in the Italian securitisation structure. Repurchases and repayments of issued securities totalled SEK -1,517m (-1,454). Of this amount, SEK -1,445m pertains to the senior bond repayment in October. Other cash flows from financing activities are attributable to interest paid on Tier 1 capital contributions (SEK -90m) and amortisation of lease liability (SEK -52m).

Total cash flow for the year amounted to SEK -963m (-619).

Capital adequacy

At the end of the year the CET1-ratio was 9.56 per cent (10.76) for the Hoist Finance consolidated situation. CET1 capital totalled SEK 3,317m (3,617). The risk-weighted exposure amount increased somewhat during the year to SEK 34,710m (33,625).

Market risk for open FX exposures decreased the CET1 ratio by -0.24 per cent compared to last year. New loan portfolio acquisitions decreased the CET1 ratio by -1.31 per cent. CVA-risk and operational risk reduced the CET1 ratio further by -0.05 per cent. Collections on existing loans contributed however positively on the CET1 ratio (1.17). Total capital amounted to SEK 5,260m (5,544) at the close of the year. The total capital ratio was 15.16 per cent (16.49).

All the capital ratios meet regulatory requirements. The signed but not yet settled portfolio in Greece is included in the risk-weighted exposure amount, the portfolio will be included in the Balance sheet the day of the settlement.

The parent company capital ratio amounted to 11.71 per cent (13.09).

Parent Company disclosures

Hoist Finance AB (publ) is a registered credit market company under the supervision of the Swedish Financial Supervisory Authority. The operating Parent Company acquires and holds loan portfolios, which are managed by foreign branch offices. These units also provide commission-based administration services to third parties. The Polish, Romanian and the UK branch offices are providing services within the Hoist Finance Group.

The Parent Company’s net interest income totalled SEK 1,010m (1,184) during the year. The decrease is mainly attributable to lower interest income on loans to subsidiaries, as a result of low acquisition volumes during the year and amortisation on loans to subsidiaries. Interest expense was on par with last year and amounted to SEK -518m (-521).

Total operating income amounted to SEK 1,354m (1,633). The Parent Company received no dividends from subsidiaries during the year, as compared with SEK 302m received in 2020. Net result from financial transactions totalled SEK 68m (-113) and is mainly attributable to unrealised profit from market valuation of interest rate hedging instruments, offset by exchange rate fluctuations in assets and liabilities in foreign currencies. Other operating income totalled SEK 274m (256) and is mainly attributable to management fees invoiced to subsidiaries, and a liquidation result from Hoist Finances services AB, which amounted to SEK 31m.

Total operating expenses amounted to SEK -1,273m (-1,206). Depreciation and amortisation of tangible and intangible assets totalled SEK -68m (-62), of which SEK -9m pertains to impairment of IT projects.

Net operating profit totalled SEK 82m (341). Impairment gains and losses of SEK 7m (-41) are attributable to the differences between actual and projected collections, to portfolio revaluations and to loss allowances for performing loans. Shares in participations in subsidiaries were written down by SEK -72m (-116). Profit from participations in joint ventures totalled SEK 66m (71).

Net profit for the year totalled SEK -53m (255) and taxes totalled SEK-127m (-77). During the year SEK -102m was provisioned for an ongoing tax audit.

At 31 December 2021, the carrying value of acquired loan portfolios totalled SEK 6,360m (6,755), a year-on-year decrease due primarily to reduced acquisition volumes due to the Covid-19 situation. Loans to subsidiaries totalled SEK 15,168m (14,402) attributable primarily to the financing of subsidiaries’ acquisitions of loan portfolios. Deposits from the public increased during the year to SEK 18,169m (17,928). In addition to Sweden and Germany, deposits from the public are now offered in the UK as of 2021.

Segment overview

Hoist Finance works under an organisational structure with a focus on building a stronger, more integrated company to improve the Company’s operational efficiency and better capture market growth. Since January 1, 2021 the division of segments is based on a new operating model with three business lines, for the Executive Management Team’s monitoring of operations. See Note 3 ”Segment Reporting” for additional details.

Sustainability report

Hoist Finance has prepared a Sustainability Report in accordance with the Annual Accounts Act. The Sustainability Report can be found in the "Sustainability" section under "The value we create" in Hoist Finance Annual report 2021, pages 46-70. The auditor’s report on the statutory sustainability statement can be found on page 215.

Other disclosures

Significant risks and uncertainties

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 cross-border operations entail consolidated tax issues relating to subsidiaries in several jurisdictions. The Group is, therefore, exposed to potential tax risks arising from varying interpretations and applications of existing laws, treaties, regulations, and guidance.

In addition, Hoist Finance’s operations are complex and the Group is comprised of various types of legal entities, branches and portfolio-owning companies, special purpose vehicles. Furthermore, Hoist Finance has had several historical tax risks which the Company with its own tax department, for several years, actively and continuously worked to reduce. An example of such a reduction in historical tax risks is the judgment in cases no. 7005–7007-19 and 7009–7011-19 issued by the Supreme Administrative Court (SAC) on 3 June 2021. The SAC upheld, with a positive outcome for Hoist Finance, the case that the Tax Agency pursued against Hoist Finance in which the Administrative Court of Appeal previously also ruled in favor of Hoist Finance. The case concerned deduction for losses for the years 2012-2014. Another example is the ongoing tax audit case pursued by the Swedish Tax Agency regarding cross-border allocation of profits. The tax audit has resulted in a negative proposal for a decision from the Swedish Tax Agency regarding a legacy structure with Polish assets established in 2014. The process is in an initial stage where Hoist Finance is of the view that a correct profit allocation has been made. However, the case is complex and concerns difficult tax issues. Hoist Finance has taken a prudential approach awaiting the administrative court's assessment of the case in accordance with the applicable tax legislation. Pending a final assessment, Hoist Finance has decided to further provision for additional tax in 2021. Another example where Hoist Finance has worked to reduce tax risks is the case of preliminary ruling where the Company received a positive decision from the Swedish Council for Advance Tax Rulings on 8 November 2021 in the case dnr 85-19/D regarding the new interest deduction limitation rules. The decision, which has been appealed by the Swedish Tax Agency, creates a certainty regarding the company's corporate income tax environment for the coming years.

The impact of Covid-19 on Hoist Finance’s operations is outlined in the Development of Risks section below. Details on Hoist Finance’s risk management and its most significant risks are presented in the Risk Management section and in Note 31, "Risk Management.

Development of risks

Due to the Covid-19 pandemic, credit risk is increased and is closely monitored. Due to the uncertainty regarding future developments, there is continued risk of additional loan portfolio write-downs. In order to diversify the Company’s assets in a positive way from a risk perspective, Hoist Finance continues to assess new opportunities to acquire portfolios of non-performing secured loans.

Credit risk in the liquidity portfolio remains low, as investments are made in government, municipal and covered bonds of high credit quality.

Hoist Finance has an internal framework for follow-up and oversight of the Group’s operational risks. The Group is committed to continuously improving the quality of its internal procedures to minimise operational risks.

Remote working recommendations differ between markets. Hoist Finance updates these recommendations on an ongoing basis, based on the rate of infection and local restrictions.

Flexible working methods, a combination of office and at-home work, are expected to continue even after Covid restrictions are lifted. This is not deemed to affect operational risks to any significant degree. The level of operational risks is therefore deemed to be unchanged from previous quarters.

Market risks remain low, as Hoist Finance continuously hedges interest rate and FX risks in the short and medium term.

Hoist Finance has elected to increase the volume of interest rate hedges to meet the new Pillar 2 requirements for market risks in non-trading activities previously announced by the Financial Supervisory Authority. Additional information on this development is provided in the Net Profit section.

Liquidity risk was low during the year. Hoist Finance’s liquidity reserve exceeds Group targets by a healthy margin. Additional securitisations of non-performing loan portfolios were conducted in Italy during the year. The securitisation of asset portfolios is an effective method of managing the regulatory changes introduced in December 2018.

The European Commission is working on an action plan for non-performing loans in order to be better able to manage an increased volume of these loans in the wake of the pandemic. Under the proposed change, an institution that buys a portfolio of non-performing loans from another institution may equalise the discount in the purchase price with a write-down when calculating risk weight. If the discount exceeds 20 per cent, the risk weight for the loan would be 100 per cent rather than 150 per cent. This would be positive for Hoist Finance from a capital adequacy perspective.

During the fourth quarter, the EBA published its recommendation regarding changes to risk weight calculations for acquired credit portfolios. The recommendation is fully in line with the European Commission’s proposal. The EBA’s recommendation is expected to be adopted by the European Commission and approved by the European Parliament. The timing of the final decision has not been fully determined and Hoist Finance is closely monitoring developments.

Remuneration to senior executives

Information on the most recently approved guidelines for remuneration for senior executives is presented in Note 9 “Personnel expenses”. The remuneration policy was approved by the Board at the April 2021 statutory board meeting and adopted by the April 2021 Annual General Meeting. The Board sees no need to update these guidelines prior to the April 2022 AGM and, accordingly, the guidelines adopted in April 2021 remain applicable. However, pursuant to Chapter 8, Section 51 of the Swedish Companies Act, the Board is required every four years to prepare a proposal for new guidelines to be adopted by the AGM.

Report on the most important elements of the system for internal control and risk management for financial reporting

The Board’s report on the most important elements of the system for internal control and risk management for financial reporting for the 2021 financial year is presented as a separate section in the Corporate Governance Report.

Subsequent events

At Hoist Finance AB (publ)'s Extra General Meeting 17 February 2022 the current board member Peter Zonabend was re-elected and Bengt Edholm, Camilla Philipson Watz, Christopher Rees, Rickard Westlund and Lars Wollung were elected as new members of the Board of Directors. The Meeting elected Lars Wollung as Chairman of the Board of Directors. The former board members Mattias Carlsson (chairman), Fredrik Backman, Malin Eriksson, Per Anders Fasth, Niklas Johansson, Henrik Käll and Helena Svancar resigned at the Meeting.

Hoist Finance acting CEO Per Anders Fasth will leave his position in connection with the agreement expiring on 31 March of 2022.

No other significant events affecting operations took place.

Outlook 

The supply of non-performing loans is expected to increase in the next few years, due in part to regulatory changes implemented in 2018 and 2019 that are driving banks to sell. Competition for portfolios available for sale is still significant, but is expected to ease with increasing supply. The effects of the pandemic on the economy are expected to lessen and court systems in several European countries have reopened, signifying an increase in collection activities. Hoist Finance will continue to have access to diversified operational funding. The foundation for this remains cost-effective deposits from the public, which tend to support profitability in an environment with rising lending rates. The transformation programme the Company is currently implementing will strengthen operations, improve productivity and reduce non-operating costs.

This website uses cookies to provide the best possible user experience. If you continue without making any changes you allow this. Read more about cookies here

- Annual Report 2021 -
- Årsredovisning 2021 -