Basel Costs Become Goldmine for Swedish Firm Restructuring Debt

  • Deutsche Bank, Santander are on Hoist's growing client list
  • Hoist is currently in talks with central bank of Greece

For Europe’s banks, rising capital requirements represent a huge cost. But for one Swedish firm, the post-crisis world order is proving a goldmine.

Hoist Finance, which helps international banks restructure debt by acquiring or managing non-performing unsecured consumer loans, anticipates stricter capital demands will force more banks to shed their problem loans in an effort to remove the costliest assets from their balance sheets and boost returns.

Jorgen Olsson

Source: Hoist Finance

“Banks have always had trouble getting decent returns on problem loans but they will have even bigger problems doing so in the future with higher capital requirements,” Hoist Finance Chief Executive Officer Jorgen Olsson said in a March 30 phone interview. “That’s the trend we have established ourselves in -- banks having a future problem in producing good returns on bad credit.”

The company, which counts Deutsche Bank AG and Banco Santander SA among its clients and is currently in talks with the Greek central bank, sees business opportunities in “all markets -- and that’s absolutely not any exaggeration,” Olsson said.

Global banks have cut thousands of jobs and scaled back capital-intensive business areas to keep up with stricter requirements laid out by the Basel Committee on Banking Supervision following the 2008 financial crisis. In Scandinavia, Nordea Bank AB Chairman Bjoern Wahlroos has warned that the regulatory “tsunami” may be counterproductive and limit credit supply. Regulators have countered that well-padded banks tend to have better access to capital markets and lower funding costs.

For Hoist, the regulatory development is allowing it to move into new markets in Europe, Olsson said. He also envisages expanding outside the region as Hoist follows existing partners into markets where those banks already operate.

“We’re with Deutsche Bank in three countries -- they operate in 72 -- and with Santander in seven countries -- they operate in 55 -- so there is of course enormous potential there,” he said. “Many of these countries are outside Europe. I don’t think we’ll expand outside Europe this year, but in the longer perspective it’s obvious that we will grow outside Europe too, absolutely.”

Operating in the U.K., France, Belgium, the Netherlands, Germany, Poland, Italy and Austria, Hoist is currently closely looking at expanding into Spain, Portugal, Ireland, Romania and Greece, Olsson said. It may decide to add more and other markets than those five in the near term, while the talks with the Greek central bank “is definitely not a one-off,” he said.

It also sees opportunities in the Nordic region, whose banks escaped the European debt crisis largely unscathed.

“There will be potential also in the Nordic region because of the higher capital requirements -- the market is already there and it will grow in the future,” Olsson said, adding that rival Lindorff’s agreement in August to take over overdue debt portfolios from Nordea shows the need for such services.

Nordea “is very well capitalized” but given the heavy buffer requirements, the bank “concluded that there are parties that can handle problem loans better,” Olsson said. “By selling these problem loans, they can allocate the capital used for these loans to services that yield higher returns.”

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