Aktia Pankki Oyj

Good morning, everyone, and welcome to Aktia's Q1 results briefing. My name is Oskar Taimitarha. I'm head of Aktia's investor relations, and I will be moderator for this event. Earlier this morning, we published our Q1 interim report. Even in this turbulent market environment, Aktia's results were once again stable. A major focus during Q1 was, of course, the implementation of the new strategy we launched in February. Akties CEO Aleksi Lehtonen and CFO Sakari Järvelä will soon go through the results. And after the presentations, we're happy to answer your questions. If you're following us online, please feel free to write your questions in the comments field. Well, let's move on. Aleksi, the stage is yours.

Thank you, Oskar, and welcome on my behalf as well. For all of us who actively follow the markets, this year has so far been an interesting one, to say the least. News affecting the economy, both global and local, is coming thick and fast. In this environment, it's an advantage to be an institution with 200-year history and a related perspective and with an eye on the future of long-term value creation. Today, I will present yet another stable quarter in which Aktia launched an updated strategy with new long-term financial targets. Even in this turbulent market environment, it gives us a clear direction in everything we do for our customers, shareholders and society at large. I'll give an overview of the quarter and our CFO, Sakari Järvelä, will then delve deeper into the figures. Let us have a look at the Q1 highlights. First of all, Aktia's comparable operating profit, which amounted to 28.7 million euros, was in line with the previous quarter, actually even a little bit stronger. Compared to Q1 2024, the comparable operating profit was lower as the net interest income decreased due to the lower interest rate environment. The net commission income was 2% higher than last year, driven by good income from payments and cards business and also from fixed income funds. This is in line with our target setting to increase fee-based income lines. The comparable return on equity for the quarter was 13.5%. During the quarter, which was, as said, characterized by market turbulence, our AUM came down slightly. The main reasons were decline in market values and changes in individual institutional investors' allocations. On the other hand, we saw positive net subscriptions in the last month of the quarter. And on this topic of AUM, I'd like to remind you that from Q1 onboards, we report both net and gross AUM figures. Gross AUM at the end of the first quarter amounted to 15.7 billion euros. The performance of Aktia Life Insurance business was once again solid, although the insurance service result was somewhat lower than in the very strong corresponding quarter last year. On other fronts, we continue to develop and invest in our IT, and we have a fresh concrete example of this. As a part of our investments to build the bank for the future, we successfully upgraded our modern banking infra during the Easter break. Despite these investments, we've maintained and we continue to maintain strict cost control. Our credit loss provisions increased somewhat compared to last year, which reflects the market situation. Sakari will touch upon this in more detail later in this presentation. In February, Moody's confirmed our long-term A2 rating and raised the outlook from negative to stable. As a particularly important highlight of the quarter, I'm very pleased to share that the employee net promoter score, i.e. ENPS, rose strongly from plus 19 to plus 32 in the fresh survey we conducted right after launching our updated strategy. Satisfied employees usually correlate very strongly with satisfied customers. This supports greatly the Actia experience that we want to give to all of our customers, being a cornerstone of our strategy. When we compare the quarter with the previous quarters, we see this year starting in line with the end of 2024. This is also in line with our assumption for this year. We expect the comparable operating profit for 2025 to be lower than for 2024, mainly due to the lower interest rate situation. To ensure strong value creation, we launched an updated strategic plan and an acceleration program, which I will touch upon next. At our well-attended investor event on 27th of February, we announced our updated strategic plan, our long-term financial targets and our updated dividend policy. Our overall objective is to become a leading wealth manager empowered by a strong banking heritage. We are committed to succeed where it matters the most. In providing a genuine active experience, meaning the combined employee and customer experience, in focusing an active, comprehensive wealth management, and in winning in our strategic segments. We have competitive advantages and strengths to build on, such as a very strong client base and an award-winning asset management. To ensure an effective implementation of our value creation plan, we launched an acceleration program called Momentum. Through this concrete program, we will ensure that we can show measurable results already in the next two years. And let me briefly show you the building blocks of the program. As said, we will strengthen the execution of our value creation plan with the strategy acceleration program. This will ultimately result in an increase of our operating profit through a concept of operating profit run rate. This run rate increase should be considered as a high-quality recurring boost in our operating profit. We've launched 10 focused streams with numerous initiatives where we can see the biggest potential for growth and operating profit increase. The biggest impact can be realized from the six business-oriented streams market here in green. This will be supported by other initiatives such as operational efficiency, IT and balance sheet optimization. We'll take an active role in capturing growth by driving momentum in premium banking, private banking, small and medium-sized companies and institutional segments. We will strengthen our asset management operations by capitalizing on our high expertise and building on our service model. All this will be supported by our continuous efforts in data and technology to enable growth in a scalable and an efficient way, as well as the needed cultural shift underneath. We are confident that through these 10 streams in the programme, we will be able to achieve a recurring operating profit run rate increase of €20 million by the end of 2026. The work has started well, and as we said at our investor event, we will report every six months of the progress of this programme. So we are well underway and I can mention, for example, that new customer acquisition among premium and private banking customers is well ahead of our very ambitious targets for this year. And these customers have an average signed up for a broad range of products and services from several categories, which obviously I'm very pleased to see. An important argument for choosing Aktia is our accessibility, and therefore it is of great importance that our customer service unit has again received excellent marks for the service level with an NPS of a very high level at 60. In the times of uncertainty and market turmoil, we are well supported by this momentum program. Having in place an overarching program with focus on impact, it will support us in navigating any changes in our operating environment. And now, let us have a closer look at our three business areas and their performance in the first quarter 2025, in addition to sustainability topics. I will start with our asset management business. As I said in the beginning of this presentation, the first quarter was characterized by market turbulence. The turbulence has continued. Our assets under management came down slightly due to the decline in market values and net redemptions, mainly explained by changes in individual institutional investors' allocations. However, we saw positive net subscriptions in the last month of the quarter. International demand for our fixed income funds was strong. We launched a new private equity fund, Aktia Nordic Real Estate Opportunities, while Aktia Debt Fund 2 and Aktia SolarWind 3 were again opened for subscriptions. And let's take a look at the banking business. The pickup in new lending to private customers continued as we noticed in the fourth quarter 2024. New lending to private customers increased 20% year on year. The loan book remained approximately at the same level, and the average margin of the loan book continued to grow. The quality of the loan book has remained stable, and the collateral situation can be considered healthy. In corporate banking, the trend with strong growth in higher purchase and leasing financing continued. The demand for investment solutions remained strong, especially among premium customers, being an important part of our updated strategy. Last but not least, the service level in Q1 within our customer service was excellent and the NPS, as said, increased to plus 60, which I'm very pleased to see. And finally, our third business area, life insurance, which again delivered a stable net income. The insurance service result was relatively stable thanks to a growing insurance book of profitable risk insurances. Also, the investment-linked insurance book continued its strong growth. Life insurance is playing an important role for us in our wealth management offering and the Unitlink insurance is reached to a new all-time high over 1.3 billion euros. Then let's move on to sustainability topics. As we have reported before, we have already reached most of our 2025 targets one year in advance. This time around, I would like to specifically highlight the achievements here in the middle. As said earlier, the employee net promoter score, ENPS, increased to plus 32, which exceeds well our target level of 20, as defined in our sustainability program. This good performance was measured right after the launch of the renewed strategy, and the improvement was visible in all parts of Aktia's organization, making the results even more valuable. Thereafter, I would also like to draw attention to the SHE index, that measures and compares the gender balance in various organizations. We are at the level of 82 and starting to be very close to our target of 85. Already with 82, which is considered very high, Aktia is in the highest percentile amongst banking and capital markets companies. Our sustainability program will be updated later this year, and therefore an update also of the double materiality assessment has started. For the outlook, I'd like to inform that we keep our outlook for 2025 unchanged. Our comparable operating profit for this year is expected to be lower than the comparable operating profit for 2024. In our assumptions about net commission income, however, we are slightly more cautious and know that market uncertainty may have a negative impact on the net commission income. Now I will hand over to Sakari to go through our financials in more detail. Sakari, the stage is yours.

Good morning, everyone, and welcome also from me. Going into the numbers in the first quarter, as Aleksi already stated earlier, we are very happy to report a stable first quarter. Before diving deeper into the individual line items, I just wish to go through a few key highlights. First, the operating income decreased in the quarter, which is mostly due to the 3.9 million decrease in the net interest income. This decrease follows directly from the lower levels of short Euribor rates compared to a year ago. Our net commission income grew by 2% compared to Q1 2024. On the other hand, we managed to keep costs tightly under control with total operating expense of 44 million euros. Our comparable operating profit amounting to 28.7 million euros even increased compared to the previous quarter, as did the comparable return on equity, which was 13.5%. The bank group's common equity tier 1 ratio increased to 13% from 12, which is 4.4 percentage points above the minimum requirement. The improvement is explained by a partly temporary reduction in risk-weighted assets, which I will come back to later in the presentation. Looking at the net commission income, it did not offer any major surprises in the first quarter, increasing by €0.7 million compared to the corresponding quarter in 2024. We recorded an especially strong performance in higher service fees and income from card business, but also solid development from mutual funds, where the net commission income increased by 2%, mainly driven by fixed income funds. This is an important line of business for us, given our recently announced strategy, so we're very happy to see growth in the funds business. The net interest income declined in the quarter, as expected, following the significant decline in the short-term rates over the last 12 months. The reported net interest income was 3.9 million euros lower compared to the first quarter 24, and interest income from borrowing and lending decreased by 5.5 million euros. But this was partly offset by the falling interest cost from funding. At the same time, the deposit stock was slightly lower than in Q1 2024, but also slightly above the year-end level at the end of Q4 last year. Comparable personal costs remained relatively stable, as expected, and were in line with the second half of 2024. This was due to collective bargaining agreement increases, but also because of a temporarily low FTE count in the comparison quarter in Q1 2024. We have retained a very good cost control during the first part of the year with no increase in average headcount from the second half of 2024. We have on purpose increased our spending on IT since the beginning of 2024 as we continue to update our core IT system. This enables us in turn to meet the increasing need for speeding up our front end digitalization efforts and being able to further develop our data and AI capabilities. Depreciations decreased by 2 million from the comparison period, mainly due to impairments made in the fourth quarter of 2024. Impairment of credits and other commitments increased slightly compared to last year. The total increase in impairments from the loan book was €2.9 million, offset partly by €1 million of reversals of previous year's write-downs. Overall, credit losses are expected to remain at the moderate level. However, as we have stated earlier, the uncertainty in the Finnish real estate sector may affect the development of impairments and provisions for credit losses. This was taken into account in our decision in Q4 last year to implement an additional provision in the corporate loan book based on management's assessment. Our loan book consists mostly of loans to households and private persons with residential or real estate collateral with adequate loan to value levels. On the corporate side, there are some individual stage three cases which are being actively managed. Due to the good collateral position of the bank, we don't expect any substantial impact on credit losses. Coming back to what I mentioned earlier about risk-weighted assets or RWAs, there are two important methodological changes that will affect the calculation of our RWAs during the 2025 and hence also will affect the Core Equity Tier 1 ratio. Firstly, the new Capital Requirement Regulation, CRR 3, came into force at the beginning of this year. So in the first quarter numbers, we calculate our RWAs for the first time according to this new regulation, which leads to a relatively significant decrease in our risk-weighted assets of approximately 350 million euros compared to the year end. This effect is visible in our reported numbers now in our Q1 report. However, later in this year we will also implement another methodological change affecting RWAs. Currently we calculate our corporate loan book risk weights based on the foundational IRB model, but are in the process of moving to using the standardized model for this part of the loan book. This change will take effect in the third quarter of this year. Based on our initial estimates, this move from FIRB to standardized model will lead to an increase in our risk-weighted assets. We do not yet disclose a full quantification of this third quarter impact, but as said, we expect it to be an increase, and further, we expect the increase to be somewhat lower than the 350 million euro decline we recorded this quarter. These effects are shown in the illustrative diagram. So taking this together, there will be some methodology-induced volatility in our risk-weighted assets during this year, whereby we will report first 350 million euro reduction in the first quarter, which will be partly offset by an increase in the third quarter. Very importantly, though, I want to emphasize that the change to standardized model applies only to the corporate loan book, and we will still continue to apply the advanced IRB methodology to our retail loan book. Moving then into common equity Tier 1 capital ratio as shown here, it increased to 13% in the quarter, which is 4.4 percentage points above the minimum regulatory requirement. The improvement is mostly explained by the reduced risk-weighted assets, which as just explained, will be at least partly temporary as we expect a reduction in CET1 ratio in Q4. I would still like to emphasize though that we are very pleased that our capitalization continues to be solid. On 26th of February we were greeted by the good news that Moody's Investor Services had upgraded the long-term outlook on Aktie's credit ratings for short-term and long-term funding from negative to stable. At the same time, Moody's confirmed Aktia's short-term funding rating at A2P1 and long-term funding rating at A2. We see this as an important and good testament to the confidence in us, our financial position, our stability and our management. We still hold a very strong level of liquidity on our balance sheet, shown in our liquidity coverage ratio of 161%. This is somewhat lower than the level at the end of 2024, as we have deliberately reduced our excess liquidity during the quarter. In the funding front, we keep monitoring the market during Q2, especially for senior preferred private placements in euros. But we are very happy with the current liquidity level, so no large issues are expected right now. And finally, I would just like to recap on our long term financial targets for the five year strategy period we just started. Our three core financial performance targets are comparable return on equity, that is expected to exceed 15% by the end of 2029. We're aiming to have gross assets under management over 25 billion euros by 2029, and we aim to organically grow our net commission income over 5% per year. According to our new capital policy, we target common equity tier one ratio two to four percentage points above the regulatory requirement, and typically would expect it to be at the higher end of the range. Last but not least, we have made an addition to our dividend policy where we reaffirmed our goal to distribute 60% of the period's profits, but we guide that we could consider repatriating capital through extra dividends and share buybacks should we find ourselves in a situation of excess capital. We can note now that our CET1 ratio at the end of Q1 was above the higher end of the range in our capital policy. But as we expect a partial reversal of this quarter's increase again in Q3, we will be calmly monitoring the development of our CET1 later in the year. So no actions required or expected on this front. This completes my part of the presentation, so I hand back over to Oscar for the Q&A. Thank you.