Morrow Bank AB (MORROW) Q2 2026 Earnings Call Transcript

Welcome investors out there. The Nordic consumer finance bank Morrow Bank earlier this morning reported the results of the second quarter of 2026. Investors following the channel know that there has been a lot of activities and strategic deals lately. You can ask your questions for the Q&A in the live chat. I'm happy to present the Morrow Bank top executives, managers, CEO Öyvind Ohanas and CFO Erik Holtedal. Welcome. Öyvind, a growth of 70% in the second quarter. What's the view of the quarter in brief?

It's a strong quarter underlying if we look at pretty much all the KPIs and with the growth as we will show throughout the presentation. And there's also an exciting quarter as you alluded to with the large acquisition of Medmera Bank. that that was basically closed first day of the next quarter but obviously it was a key topic in q2 and with that please go ahead and present and i'll see you in for the q a thank you and welcome also from from our side we will go through a presentation here as usual and open up for questions at the end i will start by going through some of the highlights of of the quarter and we already touched upon some of these points. We've seen a very strong year-on-year loan book growth of 19 percent. If we're looking at the quarter isolated that's a roughly two percent growth in the quarter and our gross lending book now stands at 18 billion Swedish kronor. As you can see on the graph on the right hand side of this of this slide it's fairly evenly now distributed across the three markets on which we operate. Looking all the way down then to profit before tax we could report a strong quarter with profits at 100 million Swedish kronor that's up 17% versus second quarter last year. As I said the the quarter was also very much around the acquisition of Medmera Bank and we spent a lot of efforts obviously throughout the quarter and we'll talk about that in a minute of meeting all the conditions especially the all the regulatory conditions to be able to close that acquisition on 1st of July and this is a very important acquisition obviously for for the bank as it increases the size of the bank by around 65% so when we report Q3 the 18 billion number that you see on this page will be around 30 billion if we put the two banks balance sheets together. We also worked quite hard on obviously securing the financing of the deal and we successfully raised more than 1 billion Swedish kronor in a combination of rights issue additional tier one and tier two that enabled us to as i said close the the acquisition by the end of the quarter we we also continue to run the underlying business obviously in in the second quarter in a very strong way that included also offloading some NPLs in Sweden where we could sell off around 440 million Swedish kronor in NPLs that came out of our numbers in April. And last but not least if you look across sort of the other KPIs on the bottom side of this page you would in addition to the strong loan book growth see that we continue to deliver strong cost income and particularly strong development as we will also talk about later in the presentation on the credit quality when when looking at loan loss ratio here on this page of 3% 3.5% reported for the quarter that's down from 4.3% in Q2 2025. Last but not least earnings per share came in at strong 0.31 kronor in the quarter and as you would hear later in the quarter we have also stated our ambition to more than double the EPS when we look into the end of 2028. Now moving on to the next page this is a bit of a recap potentially for those of you new to the case just a little bit of an overview of what Morrow Bank does we provide flexible consumer credit products across three markets in the Nordics Sweden Norway and Finland that comprises loans credit cards and also various savings accounts and savings products the target market is credit worthy consumers individuals we see that our our typical customer would have slightly above average annual income the average loan amount that we give out is around 160 000 kroner and it's very important to also say that we're we're looking at a a near prime or a prime type of of segment so we see that 60 percent of our our customers roughly own their own home and And you can't have any sort of payment remarks and you need to be in permanent employment to qualify for a loan at Morobank. The market we address is large. When we look at unsecured credit across those three markets, Norway, Sweden and Finland, that is roughly 600 billion Swedish kroner large. As I said, with the inclusion of Medmera Bank, we're going to be at around 30 billion, which means that we have now a market share of around five percent. So there's still more room to grow we believe in these markets. Now talking about growth, just bringing back this slide as well that sort of puts this into a longer term perspective, potentially also something for you that look at the case for the first time. I think the most important thing to talk about on this page is that we label it here on the page as well. We did a bit of a restart if we look four or five years back where the bank had gone somewhat sideways through the pandemic years. We put in place a completely new management, we exited unprofitable products, we simplified our tech platform, automated a lot of processes and we've executed quite some M&A since then and also earlier this year we redomiciled the bank from Norway to sweden and obviously when you see at the at the growth here represented by gross loans you would see that we have more than doubled the lending book since the the restart so to speak and that's important to also understand that the acquisition now of midmera bank is a call it a natural continuation of that strategy where we now leverage that scalable platform that we've built over the last few years to also do another large acquisition in this case. That would, as I alluded to on the previous page, increase the lending book of the bank by around 65%, taking us up to around 30 billion Swedish kronor. Now, when we grow, we have grown obviously volume and that's good, but more importantly, we've also been able to demonstrate strong growth when we look at the earnings. Here you would see our CAGR earnings per share development over that same period where you can see that we have delivered a 38% CAGR over the period on earnings. Obviously very strong the fact that we now deliver also a strong second quarter just continues to deliver on this trend and as I already said is driven by strong growth in the lending book. It's driven also obviously by the fact that we have conducted now four acquisitions in the period. Cost income ratio has been a big driver obviously taking the cost levels dramatically down in the bank from a cost income ratio above 40% to now below 28% as we report this morning for Q2, demonstrating again the scalability. Now comparing that to our peers, and you would see the peers at the bottom of this page, it is a significantly better performance than what we have seen in the market. So that's obviously something that we are very happy to report. Now, I think we always need to talk a little bit about the macro environment. There's a lot going on in the world at the moment on the sort of global global scene. What we continue to see though is that we see a fairly robust and stable macro environment in the Nordics and the outlook for the KPIs that are more important for us to monitor is also showing a fairly positive trend now obviously growth when we see growth in the market that also drives demand for for our products or the products that that our products finance is probably the more right thing to to put it and we continue to see a growth across the three markets also in the outlook which we obviously like interest rates ticking a little bit up in 2026 but the outlook here is that that would start to come down again. The inflation is pretty much under control still across the market so we believe that the outlook here for interest rates is still that will continue to go down again past 2026. Again an important and key driver for our type of business. But maybe the most important driver that we always look at is obviously unemployment And you would see from the graph on this page that we have a positive outlook on unemployment. Unemployment obviously means that the customer's payment behavior and payment capacity remains strong as that will continue to trend downward. So, if I sum up this page, the sort of three key KPIs when it comes to the macroeconomic environment that we monitor because they can potentially have the biggest impact on our business, they continue to perform strongly and the outlook here is stable to positive. now the the other big thing obviously that happened in the quarter in addition to sort of the underlying uh strong performance of morrow bank was uh of course the the acquisition of medmera bank um and we talked quite a bit about that also at the uh at the previous report and uh in in various investor uh discussions uh in before the summer but i think it's important for us to just recap a bit around that acquisition as well. Now putting it a bit in in the context, we have done some, this is not our first acquisition, we have done some some acquisitions over the past couple of years. We have the three first ones that you see here, Cliro, Luna and Moank, those were pure performing loan portfolio acquisitions. So we acquired loan portfolios totaling around 3 billion Swedish kroner over the the 18 months and then we we added now we're adding mid-mera to that equation with a strong actually 12 billion gross loan volume at the end of of Q2 so again acquisitions is part of our strategy and we're continuing to execute on that strategy as we've communicated over the many last uh quarters um how you know putting that in a bit into context and for those of you who have followed us for for a while you would know that we moved the bank from Norway to Sweden um key driver for that was to to ensure level playing field especially around the regulatory environment and that basically means again around sort of the capital requirements that the bank holds. And as we move the bank from Norway to Sweden at the beginning of January, we managed to free up quite some capital and hold some excess capital. And we communicated that the intention with that capital was to deploy it into a creative M&A if we could find good targets. Now the good thing is that we found a good target fairly quickly and already in March we announced the acquisition of Medmera Bank. That is a direct positive consequences of us being able to move the bank from Norway to Sweden and freeing up that capital. And just a couple of words on that transaction as well. We believe it was a very competitive, strong price that we were able to achieve for a bank that actually performs very well. so a price book of 1.06 for a well-run and well-performing bank in the market we believe is a strong good price. The acquisition as I said successfully closed on 1st of July so not really in the quarter but the first day in Q3 and we were able to do so based on the fact that we also ran some quite successful financing projects and processes back in June where we issued new shares to the to the seller. They now hold around ten percent of our share as you might have seen. In addition we also went out with a with a structured rights issue where we raised a close to 600 million that was significantly oversubscribed I believe it was 130 something percent oversubscribed so happy with the interest in that project and last but not least also raised both 81 and tier 2 at very attractive prices, actually the record low prices for the bank in the market. So the whole sort of financing process went very well and we're very happy that we could close all those projects and finally then take over the bank on 1st of July. Now what are we basically, what are we getting now with Mimera Bank? We are getting a well-run and well-performing bank as you would see on this page and the numbers here. We will add around 65% to our loan book size. We report now around 18 billion. Medmera stood at around 12 billion at the end of the quarter so taking us to around 30 billion. That would position us as the third largest consumer lender niche bank in the Nordics. We will continue to run Medmera brand separately from Moro, currently also the whole bank separately in a group structure and we believe that there are a lot of opportunities in continuing to support both brands, actually three brands with the co-brand and build a strong multi-brand strategy as we go forward. So basically continuing Morrow Bank, continuing with Medmera Bank value proposition as well as Coop and building a broader reach in the market based on that. That it was also very much part of the strategy and the rationale for buying the bank in the first place. Looking at cost income both banks perform well but obviously when you take two banks and two organizations and two systems and process and put that together as we communicated before we definitely will be looking at taking out some synergies over time and work that cost income ratio down towards 20 percent by the end of 2028 as communicated when we announced the the transaction looking at the the loss profile of the two banks you would see a quite a difference here where you see that we reported for the first half year now quarter I alluded to that earlier for the quarter we we reported a loan loss ratio of 3.5 percent for the first half year together that's that amounts to 3.9 percent for for morrow and the the similar number for Medmerabank would be 2.1 percent. Now that also again demonstrates that we are targeting and operating in slightly different segments. We've sort of said earlier that Medmera Bank targeting potentially a more prime consumer loan segment where we are more of a near prime brand, basically positioning the two banks or the two brands slightly differently on, call it the risk curve. That is something that we very much aim to continue to do. Part of the multi-brand strategy as we go forward, position the brands into slightly different segments obviously when we put these two banks together with all the data and all the customers and and the the analytics capacity of the two banks we do believe that over time we will see not only mathematically when putting the two banks together but also when when when operating a larger platform with more data etc we will see that the the risk levels of the combined bank obviously will come down. Last but not least looking at profit before tax first half we reported 187 million. Medmera also reported equally a very strong first half year and delivered 122 million in profit before tax. That gives us quite some confidence around the the EPS target that we communicated when we announced the the transaction to more than double that EPS by end of 2028. Now over to you Erik to take us through some some of the financials.

Thank you Evin. Let's dig a bit deeper into Morrow Bank and this is Morrow Bank only. As Evin said we took government Meribank on the 1st of July, meaning in third quarter, hence the second quarter will be Meribank on a solo basis. Now the loan balance growth was good year on year, actually we increased it 19%. This was mainly driven, as you can see here, by the growth in the Norwegian market, the lower orange part of the bar, and that is actually our refinancing product which has been around for one year and which has proven quite successful and that's also showing up in our long growth overall the on the quarter of quarter basis the the development was flat but you need to take into account we sold an NPL portfolio of 440 million kroners which was offloaded in April hence the underlying growth was 2% quarter on quarter and as always we as As we keep reiterating and also repeating and also demonstrate, we're always looking at for opportunities to buy portfolios or companies if they are interesting and accretive for us. Going a bit further into the margin outlook, you can see that there's a small margin compression compared to one year ago. This is attributable that there's a small decrease in the yield going down from 13.5 to 13.2 and also a small increase in the deposit rates going up by 20 bps. The latter is driven by the fact that we in the quarter now or in this year we have been increasing our deposit rates basically to increase our liquidity so that we would be in the position to take over Medmedabank and also meet the regulatory requirements. But if you look at it on compared to last quarter the figure are not here but you they're available on our IR site you can also see that actually there's the NIM has increased by 0.1 percentage point quarter on quarter and if you what's important here is to look at also at the risk adjusted margin we're not seeing that in this picture but as even as shown here we aren't we have a decrease and we will show on later scale slides we have a decrease in the loan losses which are quite significant and by that you can see that the risk adjusted margin increases be it either a quarter or quarter or year on year going forward our NIM will be somewhat lower that's also when we take in Medmera Bank Medmera Bank has lower loan losses but they also have a lower yield and that will also weigh in on our blended yield when we go forward and start to consolidate but our risk adjusted margin are lower both in definitely in Mimera but also we're seeing a decreasing trend and hence our risk-adjusted margin will remain strong. On the total income side we're seeing a steady upward uptick. This is driven of course by the larger loan book which we talked about which had demonstrated a bit earlier and but it's also there's a but it's not fully covered by the growth in interest income because as I said there's a small compression on the net interest margin in the second quarter we also had some additional one-offs in relation to other income you can see that it's 36 million kroners those are related to some insurance and card scheme one-offs they will not be repeated in the third quarter but we nevertheless will see that we have lower commission expenses going forward and hence there will be an expansion not compared to Q2 but compared to previous quarters on our other income and of course we will be growing our loan balance. Now on the cost side you can see here that there is an increase and that is not to we're not trying to hide that fact we are recording at 10 million kroners one of those are chiefly related to the Minmera acquisition as such also some small leftovers to call it that from the transition to Sweden but what's also important to understand is that now we're becoming a larger bank yes we have a demonstrated scalability but now we're adding 65% on our loan book and hence we are now starting to strengthen let's call it the overall structure of the bank in order to be able to service and run this considerably larger bank and that is also these we are started we have already started to undertake these investments and those are contributing to the fact that the underlying cost picture is increasing but we are as we will be growing our loan book we will be increasing our top line we're maintaining that we will have around a 20% cost-income ratio when we have concluded the acquisition and integration of Medbener Bank, but we're then we're talking towards 2028 before that will be Before that will fully materialize, but we are clearly on that path on the on the nice side here And that's also what even spoke about. We're seeing a very nice development in our loan loss ratios we have previously been guiding between four and a half to four percent we've been then saying it probably will be closer to four percent but we had but the second quarter developed quite benignly and we ended at three point five percent that is measured in relation to to the gross loan balance to be clear about that it's also quite interesting to see that the nominal loss loan loss cost is three is virtually flat for all these three quarters but at the same time as we demonstrated earlier we have grown the loan balance by 19% and hence if we had maintained last year's loan loss rates at this loan balance we would have had 36 million more in loan losses and that more than covers the increase in cost just to put that into perspective. Also just to mention is the NPL sale here which reduces our NPL ratio meaning that our book is let's say cleaner more healthy and going forward when we add in Medmerabank they have a different risk profile they have lower loan losses and we will then have a broader customer base we will be with lower risk and which also will be more diversified which should entail that our loan losses will be or loanless will be or credit risk will be lower in the time to come. Finally, adding these elements together, total income growing, costs, yes going up a little bit, but loan losses reducing much more than costs, you can see that we now landed at a profit before tax of 100 million Swedish Kronors flat. This is equivalent to a return on equity of 11.9%, but what we like to measure the return on target equity and which i will also come back to because we are we were at the end of the second quarter uh over capitalized uh if you remove that fact we had actually a return on target equity of 16 which is actually show demonstrating that we are on a good path to achieve our 20 target for 2028 the profit after tax for the quarter was 78 million or an earning per share of 31. And as always here we maintain that we expect to double our EPS and that the return on target equity will increase. A word on the capital structure. You can see here that our overall capital ratio has decreased compared to year on year going from 17.9 to 16.2. This is a CET1 ratio this is because we're actually growing our loan balance faster than we have been growing our profits but that being said are if you look at our requirements they are decreased the requirements on left-hand side were those in Norway the requirements on the right-hand side known in the second quarter of those that we have currently in this in Sweden they are now at 9.5 percent before management buffers etc but we have a healthy 6.7 percent headroom towards that and you will see now that we are utilizing this headroom in the third quarter to buy Medmera Bank. I'm not going to go into the details of the acquisition I even did that but we are we have the AT1 and the tier 2 we also have the right issue at 592 million before cost which was undertaken on the 1st of July just after the balance sheet date but by that with the acquisition of Medmera and these capital increases you can see that now in Q3 we are very close to achieving our target capital structure meaning that we will have not much excess capital just a comfortable buffer but not more than that and as always we will be continuing to produce profits given that this development continues and that we will also we will therefore generate capital

for further expansion going forward with that i'll leave the word back to you evin thank you thank you all right so before summarizing the today's presentation and opening up for for questions we we always like to do a bit of peer benchmarking where we're competitive people now looking across some of the key kpis like loan growth cost income ratio and last but not least here EPS growth you would see that Morrow Bank over the period 22 to to the last quarter we continue to deliver strong numbers and continue to to outperform the peer average you would see the peers here at the at the bottom of the page that's pretty much all the the the relevant niche banks that we compare ourselves to so continue to deliver strong KPIs at Morrow Bank and continuing to outperform the peer average in the market. Price book and price earnings you can read them yourselves and compare two peers and hopefully the investors are appreciating those three performance KPIs on the top here so that the two performance KPIs on the bottom continue also to move up. We will do our best to deliver and continue to deliver strong growth and strong KPIs at the bank. Now summarizing then the the quarter as I said there are really two things that we have focused on obviously not taking our eyes off the ball on the underlying business we have strengthened the profitability throughout the the quarter with a profit before tax reported this morning of 100 million that is 17% up year on year. When looking at return on target equity, which we believe is the most relevant number to look at, we're dramatically up from or significantly up from around 12 percent at this period last year to now reported 16 percent for the quarter. Earnings per share came in, as Erik also said, at 0.31. That's also an improvement and we continue to see that earnings per share should improve as we go forward. The MedMera acquisition was completed we've said that a couple of times I think throughout the presentation the loan book increases by 65% literally than the bank size the size of the bank increases by 65% taking us to a combined loan book around 30 billion and positioning ourselves as the third largest Nordic Consumer Finance Bank. This was enabled, the acquisition was enabled by actually doing quite some successful rights issue and issuing of bonds in June as we've talked about at oversubscribed rights issue and record low pricing for both the AT1 and tier 2. So also very successful and very happy with those processes. Taking a bit sort of outlook and view to the future, we continue to say that the return on target equity should go above 20%. We reported already 16% for this quarter, so we're confident with that target. Cost income ratio, as Erik alluded to already, we haven't built in the synergies of Midmera Bank acquisition at all. That will come obviously over the next couple of years but when we look at sort of where that cost income ratio should be beyond that we are also confident that that should come down toward 20 percent in the outlook which will again take us to the last but not least KPI or target here of more than doubling the EPS by end of 2028. So with that I would say thank you for listening to the presentation and we can open up for questions.

Thank you so much Eurvind and Eirik. Let me start off. We have a bunch of questions from the viewers and investors community as well. What are the key value drivers from the Medmera acquisition?

Oh I mean as I said Medmera is a very strong performing bank so they pretty much have the same value drivers as we do. It is obviously growth. It is basically also the fact that they manage to have a good equation between the risk appetite and what they're looking at at margins. So they have a good risk-adjusted margin management together with with the growth and for us as we've we messed about this around the last few years it's all about scale in in this sector and for us taking over something that not only brings scale with 65 percent more volume but also comes with a a solid foundation a well-run machinery that that adds a lot of value to uh to the group now all right maybe this is a question for eric um why is the current cost income ratio temporary rather than structural it is

as I said earlier we're investing in becoming a larger bank and that is not for free we need to have a broader platform now general platform we need to invest more in control functions also in data management and the processing of that and that does not come for free but that being said it will be a little bit more elevated but there is now a more uh let's say temporary cost we're not calling them one-off but we are uh spending some more and we will over time of course work hard to not to reduce that cost base in general but basically now it's a time of investment and this of course just to repeat it we are adding 65 to our loan book yeah and another subject that you touched upon your net interest margin on performing loans improved in this quarter is this level sustainable yeah largely yes we do see however a little bit of pressure on the funding cost side now going into the third quarter the competition in the euro market is actually increasing so we also need to follow that we need to raise more liquidity because we are growing after the in mere acquisition so there will be a little bit pressure going forward on the net interest margin but it we're not thinking that it will be considerable broadly it should be at the levels we're seeing here give or take a little bit thank you and how sustainable is the improvement in credit quality um credit quality is this uh we've been working quite hard over the last years and we've been explaining about that to the market first we had strong growth and then we also tuned our credit models we adopted also our processes related to credit risk management that means both on the intake as well as how to handle delinquent accounts and that we believe now is starting to show results there's probably some benign macro in this but from what we're seeing now this overall level should be sustainable going forward that being said they can always come surprises but we're adding a healthy medmera portfolio and we're also seeing good results in our own so we think that the loan loss level should actually be favorable going or in on a relative perspective be favorable going forward okay thank you for that very enlightening answer and we have a question from a viewer here and your average loan was 160,000 Krono do you know anything what the average loan is being used to buy or

consume yeah that's a good question yes we we do I mean they the most of our our loans when we sort of look at what customers report a day they need to take the loan for there's a lot of home improvement whatever refurbishing the a new bathroom that type of thing our max loan amount goes all the way up to half half a million Swedish kronor so you would also see some used cars in there but those two categories are are probably dominant in in in what customers used alone for okay thank you and you talked about doubling the EPS what will

drive the ambition to more than double the EPS by 2028 it's a combination of many factors first of all the main drive for bank is the balance sheet we're adding 65% and also EPS per shares we have had a capital increase but as you have seen from our figures we acquired a bank which cost us 2 billion but in terms of share issues it was only 1 billion to put it that way so that is contributing our loan balance is contributing and we will work to maintain our margins we will work to have an efficient cost ratio we're aiming at 20% and also as we discussed keep a good loan and optimal to put it that way loan loss ratios and the combination of those factors should altogether provide for a doubling of the EPS into 2028.

Okay thank you.

Another viewer asks could you give some more color on your evaluation of strategic alternatives for a certain non-core assets in mera bank that was press released in june any updates yeah that is an ongoing uh process that we we announced before the summer we are we are looking at uh alternatives for some of the assets that let's say duplicate we we do have now two banks we have two it platforms we have two bank licenses etc. We have still a fair amount of NPLs that we continue to offload from from our balance sheet so taking that into consideration we're looking at what are the potential opportunities to structure something around that and and look at what the interest for that would be in the market that's an ongoing process and we'll obviously come back and report on that when we potentially conclude or we have some update question around this you guide for one hundred fifteen million SEC in Madmera synergies by 2028 what is the expected annual synergy impact and integration costs and can you

maintain a 17% capital ratio without further equity issues to start with the last part of the question yes we're sufficiently capitalized now as you will see when we present our third quarter and fourth quarter figures this year and also we'll be adding more profits so yes we are sufficiently capitalized as to the synergies they are what we expect to will come out after the integration and also of course there will be some time to run in to make things processes run smoothly etc that will take some time but in 20 2028 we will expect that on a running basis we will see the 150 million occurring.

Thanks. Medmera also reported its H1 figures. How are these tracking relative to your expectations?

They are tracking on plan or even slightly better than plan. They reported 122 million profit before tax which is a good increase from last year we've seen that they managed to grow their their lending book they have good control over the the risk parameters so we were very happy with the with the progress that that medmera also have reported for the this the the first half of the year the second quarter um as i said uh in the starter you know i'm very happy that we've we've managed to have two thoughts in in our heads at the same time running the business the underlying business the core business while while doing the acquisition and likewise for Medmera they've obviously sold the bank their bank while still having a really laser focus on continuing to deliver good performance in their underlying business so we're happy with that hmm and one last question what is your focus in H2? Well the focus on H2 I mean we now we got the keys to Midmera on 1st of July so the focus now and going forward will obviously be to together with the Midmera organization develop and strengthen the cooperation between the two banks that are now sort of structured in a group and look at how we can take out synergies as we talked about but synergies not only on on the cost side but synergies also on the business side they have a strong business model they target a slightly different segment than us they have very strong processes they have strong analytics strong data and and we will be working when already are working with

them to see and how we can sort of leverage and and best practice share between the two banks in parallel with obviously working on that longer-term plan of integrating this into one bank at some stage thanks um by that uh thank you uh oyvind and eric and thank you everyone that has been watching and it's great to follow your actions corresponding to what you're communicating uh we're already looking forward to the q3 report good luck with that thank you look forward to being back