The business of Intrum

Intrum’s origins are in traditional debt collection. A client, or creditor, would hire the company to collect money owned from a customer, or debtor. This is still core business – but the Intrum of 2023 does so much more.

Today, for instance, banks hire Intrum to service their non­performing loans (NPLs), supporting the banks’ own collection operations. Some banks also fully outsource their collection operations to Intrum, meaning that Intrum takes over the bank’s collections department in a carve­out. Other businesses outsource similarly related services to Intrum such as handling credit information, reminders, accounts receivable, and sales ledgers.

Some companies, primarily financial institutions, sell just their NPLs to Intrum. This is Portfolio Investment (PI), where Intrum takes full ownership of the “bad loans”. To make this business work, the amount collected must exceed the amount paid for the NPLs. A related business area is secured assets, where Intrum acquires, manages, and services real estate assets.

This expansion in Intrum’s offering has been driven both by global developments and Intrum’s own innovation and acquisitions. As the global economy became increasingly interconnected following World War II, outsourced operations became more common.

Global economic downturns also had their impact. During the 2008 financial crisis, Intrum saw substantial growth in its PI business, especially in hard­ hit Southern Europe. Banks were faced with an increasing number of NPLs that they sold completely, instead of just outsourcing their collection.

The growth of Portfolio Investment (PI)

At the time, Sweden’s Intrum Justitia and Norway’s Lindorff both stepped in, bringing analytics, processes and underwriting models from more ma­ture markets like the Nordics and the UK to develop Portfolio Investments in Southern Europe. When the two companies merged in 2017, the PI business grew even faster.

The merger incre­ased our risk appetite. We had greater confidence and funding to make very big and bold investments

Javier Aranguren, today Chief Investment Officer (CIO) and earlier capital manager for Lindorff in Spain, remembers: “At Lindorff in Spain, we made investments in portfolios from Santander and Barclays in 2011, each with a face value of about EUR 500 million. These major transactions kickstarted PI in Spain.” Today, Spain is Intrum’s second largest PI market.

Hungary’s journey to a pure PI market

Hungary was hit particularly hard by the 2008 financial crisis, leading to huge portfolio write­offs in 2009. Peter Felfalusi, Managing Director for Intrum Hungary since 2004, was told to turn things around. Intrum Hungary put in place three key steps that returned it to profitability in the 2009–2010 period. Peter explains:

We firstly worked on our communication, concentrating on those who were in debt and provided unique solutions for each one. We prohibited the word debtor, changing it instead to customer in 2009.”

They then also got involved in the payment enforcement and bailiff system. “We are now the biggest creditors in the Hungarian bailiff system, with 800,000 cases in bailiff, representing 8% of the total population.”

And thirdly, Intrum Hungary took a more analytical approach to its job. “We hired more analysts, started segmenting and customer scoring. We did this earlier than the rest of the Hungarian market and other countries.”

Seeing exponential growth, Intrum Hungary became a pure Portfolio Investment market in 2017.

Working in a market with strict regulation, Felfalusi believes, has been key to Intrum developing its competitive edge in Hungary: “Regulations for NPLs and data processer agreements (DPA) have been stricter in Hungary than other countries. We hired a compliance manager already in 2013. Our compliance group is now 7 people and can share best practices to other parts of the Intrum Group, as regulations be­ come tighter in the rest of Europe with the upcoming NPL directive.”

Secured assets in Spain

In Spain, the financial crisis had by 2010 sparked turbulence in the real estate market. Banks had lent huge amounts to both homeowners and property developers, which now were unable to pay off their debts. The banks took ownership of the proper­ ties, which had been used as collateral for the loans.

Spanish banks ended up holding much real estate, which had to be maintained, and eventually also sold. To service these “secured assets”, Intrum (and before the 2017 merger, primarily Lindorff) started managing these assets for the banks, including property and land management and commercialisation services.

Antonio Fernandez Garcia­Fraile, Intrum Spain’s Business Development Director, sees how important it has become for Intrum to cover the entire value chain for secured assets:

“Clients can hire us for any individu­al service or region or all of them. An investor in real estate assets may have us do the servicing. Others may want to focus on commercialisation while we help with property management or vice versa. We have developed systems to track the full lifecycle of assets, showing the current status and next steps."

Full service in Finland

In Finland, Intrum is known for innovating many additional services alongside debt collection. For instance, Finland started providing sales ledger services in the early 2000s. Recently, Intrum Finland developed its own accounts receivable system, which now will be exported to other markets. It will help clients who are looking to digitalise their invoicing channels.

Tommi Sova, Managing Director for Intrum Finland explains: “With the addition of accounts receivable, we now provide an end-to-end solution for the entire process. We’re there from credit information to sending invoices and reminders, everything that comes between the invoice date and the due date, and then of course we have traditional collections when needed. This way we can be a one stop shop for our clients and give them insights into how they can find better customers to sell to and reduce defaults.”

CIO Javier Aranguren believes that being a full-service provider sets Intrum apart. Competitors who can only provide investments services or only do servicing or only do a few markets are showing signs of wanting to divest.

“With more difficult market conditions and significantly increasing funding costs, we see a strong trend towards consolidation,” says Javier. “This is where the next growth chapter of Intrum is expected to be written.”