STO.HOFI - Hoist Finance

[NewbieD]

Company focusing on being a trustworthy "bad bank" to the european financial sector. That is, purchasing non-performing-loans from banks at a low % of par and making a gain on collections. Mostly unsecured consumer loans but also loans to SMEs.

 

Customers are major banks like Barclays, Banco Santander and HSBC. Market cap is about $1 billion with $3 billion in assets. Shareprice is 84 they look to make 6-7 after tax next year.

 

Investment thesis

-Market demand driven by banking regulation; banks required to set aside more money for NPLs encourage selling instead.

-Former director of Swedish FSA is chairman of the board which should speak to low risk level

-Current cheap funding. 60% through swedish deposits with deposit guarantee costing 1%. They recently increased their outstanding bonds for 50 MEUR at 1.71%. PurchaseDebt portfolios yield 10-12% so profitability on already purchased portfolios should not be that sensitive to rates increase.

-Write off of european banks have been lower than US/asian banks which indicates there is potential for upcoming deals

-Hoist in particular seems to have a close collaboration with Banco Santander and HSBC and have indicated there is demand for them to expand the business geographically to Brazil and Asia.

 

Recent presentation: https://wonderland.videosync.fi/2016-09-15-hoist-finance-capital-markets-day

 

Rapid expansion since 2011; Debt portfolios 0,3 billion usd to 3 billion usd. 360 to 1350 employees.

 

Being a tech guy I have little experience judging banking and related businesses and only dared to buy a small position, 1%, to learn more. Aware I might be missing obvious things on this one. The presentation was pretty smooth and they seem to have a good time. Being pleasant to do business with which seems to matter more than one might think in how easy it is to find lucrative deals. One warning flag is that CEO was involved with the Icelandic failed bank Kaupthing indicating he might be a bit of a gambler. If one believes in prolonged struggle in European banks and little inflation it should be hard to fail with the strategy given this start though unless I'm missing something.

 

Curious to hear what others think about Hoist and tips for other companies in this area. One company of similar size and strategy I know about is B2 Holding.

[misterkrusty]

Hoist is unique in that it's funding base comes from bank deposits.  most players use bonds and bank debt for borrowing.  there are a ton of NPLs still to be shed by European banks, but at the same time this opportunity is well known and lots of folks are chasing it, including private co's backed by private equity (e.g. Apollo, etc.)

 

B2 was interesting to me since they were pursuing the frontier markets (for this industry) in Europe - including the Balkans, Bulgaria, and Romania.  But strangely their forecast returns on NPLs from these countries don't seem to be any better than in more developed countries (e.g. Scandinavia, Poland, etc.)  Maybe mgmt is low-balling projections so as to avoid attracting competition?  time will tell