Bad Loans at German Banks Feed a Swedish CEO’s Expansion Plans

Updated on
  • Hoist CEO says more German banks likely to buy its services
  • Plans expansion across Europe by buying non-performing loans

A little-known Swedish company that buys and restructures bad loans from Europe’s biggest banks says it’s seeing growing demand from lenders in Germany, the euro zone’s biggest economy.

Hoist Finance AB, based in Stockholm, provides credit-management and debt collection services. It’s currently in talks with a number of German banks to acquire parts of their non-performing loan portfolios, mainly unsecured consumer loans, Chief Executive Officer Jorgen Olsson told Bloomberg on Thursday.

Jorgen Olsson

Source: Hoist Finance

“The large banks, and not least Deutsche Bank, have big problems with their balance sheets,” Olsson said. “They struggle to reach their current capital goals and the goals that will come in the future.”

“Deutsche Bank will of course have to evaluate its business model, across the line,” he said. “Part of that will be to look at how it can make its so-called back-end more efficient.”

Demand for debt restructuring services has encouraged Hoist’s management to plan for an expansion into several new markets in Europe this year. The next step after that will be to offer its services outside Europe.

Olsson said in December that much of that growth will probably come from existing clients. Banco Santander SA is big in South America, while HSBC Holdings Plc has large operations in Asia and Barclays Plc operates in markets such as South Africa, he said then.

In June, Hoist entered the Spanish market after purchasing a portfolio of non-performing claims originated by four regional Spanish banks. In September, Hoist acquired Madrid-based servicing company Optimus. In the past few months, it has also acquired portfolios in Italy, where efforts to save Banca Monte dei Paschi di Siena S.p.A. have made headlines around the world.

Olsson says Italy isn’t necessarily unique in Europe.

“Just as their Italian counterparts, the German banks have not addressed their non-performing loans in a structured way,” he said during an interview in December. “These non-core assets, sitting on their balance sheets, are simply assets that they do not want. Our belief is that German banks will start to deleverage and refocus their strategy as well.”

Asked whether German banks face a similar restructuring burden to lenders in Italy, Olsson said, “I dare say so, yes.” To be sure, European Central Bank figures published in November show the ratio of non-performing loans at Italian banks was more than six times that at German lenders in the second quarter of 2016.

Hoist focuses on portfolios of distressed, unsecured consumer loans and credits to smaller companies. Banks use its services to remove bad loans from their balance sheets and reduce their capital requirements, while Hoist generates a profit by managing the portfolios and collecting the money owed. In the fourth quarter, Germany accounted for about 23 percent of Hoist’s total revenue, compared with 22 percent for Italy and 29 percent for the U.K. It expects to buy portfolios for as much as 4 billion kronor ($451 million) this year.

Hoist’s profit before tax jumped 18 percent last quarter from a year earlier, the company said on Thursday. Revenue grew 8.2 percent. It acquired portfolios for 1.57 billion kronor in the three months through December, 8.1 percent more than a year earlier. Over the past 12 months, Hoist’s shares have risen more than 20 percent.

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