Aktia Pankki Oyj

Good morning everyone and welcome to Aktia's Q4 results briefing. My name is Oskar Taimitarha, I'm head of Aktia's investor relations and I will be the moderator for this event today. As you all know, this morning we published our Q4 report, which shows solid operating income and positive development, especially in international sales. Aktias CEO Anssi Huhta and CFO Sakari Järvelä will soon walk us through the highlights of the quarter. And as always, after our presentations, we're happy to answer your questions. If you're following us online, please write your questions in the comments field. So, let's get down to business. Anssi, welcome on stage.

Thank you, Oskar, and welcome on my behalf as well. I'm delighted to see so many people joining us today, both here on site and online. My name is Anssi Huhta, Aktia's CEO. It's my pleasure to present our fourth quarter result today together with our CFO, Sakari Järvelä. Let me start with a few highlights from the quarter. Overall, we can report stable fourth quarter with a solid operating income and good business activity with successful new customer acquisition in our core segments. In terms of operating income, we were able to finish 2025 with the best quarter of the year. Net income from the life insurance was supported by both favorable market conditions, as well as positive development in risk and unit link insurance. Net commission income was the same level as last year, but higher than in all other quarters of 2025. And as expected, net interest income was lower than last year due to the lower market rates. At the same time, the level was in line with the previous quarters of the year. Asset management continued their upward trend in the third quarter. International sales stood out, contributing 170 million euros in net inflows. These inflows are especially valuable as they generate roughly four times the earnings of domestic institutional business. In addition to all this, we announced earlier today certain impairments. With the acquisition of TALRI in 2021, Aktia gained customers, expertise, and business operations that had generated revenue for the group. Since then, however, both the market environment and interest rate landscape have changed materially. Against this backdrop, we have sharpened our priorities in wealth management. Our focus is clear. grow international fixed income sales, and strengthen our allocation and wealth management offering for premium and private banking customers. At the same time, the relative importance of the wealth management operations acquired from TALRI has declined. As a result, we have reassessed the value of our intangible assets and conducted an impairment test of goodwill. This led to impairment of 70 million euro, impacting the reported result for the fourth quarter. These impairments do not affect our comparable results, our strong common equity tier one capital ratio, or our ability to pay dividend for 2025. Our CFO will go through these impairments in more detail in his part of the presentation. Comparable operating profit was stable throughout 2025. The fourth quarter came slightly below the previous quarter at 23.7 million euros, mainly reflecting the interest rate environment and higher credit loss provisions. For the full year, comparable operating profit reached 106 million euros, which I'm very pleased of, particularly given the credit losses recorded in the second half of the year. Overall, this is a solid result and fully in line with our outlook. According to our capital and dividend policy, we aim to distribute dividend equivalent to 60% of the profit for the reporting period, with the possibility of distributing excess capital through additional dividend and or share buybacks. In light of our robust operational performance and consistent with our capital policy, Aktias board of directors proposed a dividend of 80 cents per share. In February last year, we launched an updated strategy and acceleration program, setting a clear focus on growth. Let me give you three examples of what we have achieved. We launched a new premium banking concept and attracted a significant number of new premium customers in 2025. Secondly, we expanded our sales force and improved our capabilities in leasing, higher purchase and factoring. We have achieved a highly profitable portfolio of a half a billion euros. Thirdly, through Aktia Yrittäjäturva, we have strengthened our sales network to support entrepreneurs with the life insurance solutions. As the social security alone often falls short for entrepreneurs, private protection becomes a critical part of overall financial security. We executed our acceleration program successfully. delivering an operating profit run rate of 12 million euros, well above our target. This reflects strong execution across sales, discipline, cost management and capital excellence. Overall, our growth program has been strong. And we continue to expect to reach our 20 million euro run rate target early. It's increasingly clear that our business model has two distinct pillars. We have a capital-light life and wealth business, including life insurance and asset management, with a strong growth potential, alongside a stable but more capital-intensive banking business. These two areas complement each other while benefiting from separate governance, target setting and performance monitoring. We see our Capital Light life and wealth as a clear growth engine in the future. Importantly, growth initiatives in the Capital Light business have a clear positive impact to our ROE. As mentioned, our life building business represents the capital-like part of our operations and the area where we see clearest growth opportunities with a very attractive return on capital. Based on this, we have made clear strategic choices. Some legacy product groups, including Tariq Laws and Funds, are in runoff and their importance continues to decline. At the same time, we have actively invested in growth. Internationally, we have expanded our distribution network throughout partnerships with leading players, and we are now clearly strengthening our local sales presence in Germany, Austria and Switzerland. We are also growing strongly in Uniclink insurances. where the portfolio has already exceeded 1.5 billion euros, and risk life insurance, where our investment in Aktia Yrittäjätöä plays a central role. In addition, we have a strong position in premium and private banking segments, and in 2025, we attracted a meaningful number of high-quality customers' inflows in these segments. Let me highlight two growth areas, starting from the international growth. We have a robust and growing position in our core segments in Finland. At the same time, we see growing demand for our products outside Finland, offering significantly larger growth potential and clearly higher earnings. Our distribution model combines strong partnerships with our own sales capabilities, We are rapidly expanding our distributor network with several new partners, particularly in Central Europe, while materially scaling up our own international sales capabilities. We have high ambitions in this area and aim to more than double asset under management with international clients over the coming years. And we are already well on our way. Secondly, growing risk life, risk insurances. ActiaLife continues to grow faster than the market, faster than the market. To support for the scale, we have invested in a new core system, expanding our sales coverage and distribution network. We are already seeing clear benefits from the new system, while the full potential will unfold as we continue to scale. At the same time, we are strengthening Aktia Yrittäjäturva channel and expanding our presence in the entrepreneur segment. Together, this supports high net return premiums over time. In banking, our focus is in balance. Balance sheet stability and profitability. We are growing our most profitable product area, particularly SME finance and premium private banking, while remaining prudent in capital allocation and reducing exposures to housing company loans. In the banking business, we see leasing, higher purchase and factoring as important avenues for growth. As margins and earnings are higher, leasing a higher purchase and factory plays a particularly important role in our banking portfolio. We started this business in 2021 and now have a portfolio exceeded half a billion. We are extremely happy with what we have achieved and are now pushing even further by increasing our sales efforts and broadening our product range. Distribution in this area is also being strengthened through strong partnerships, such as Swedbank and SECTO. We aim more than double this highly profitable loan book in this product area by 2029. To sum up, this was a stable and disciplined quarter, reflecting the strength of Aktia's operating model. Asset under management continued to grow, supported by strong momentum in international sales. Our true engine model and hydro distribution approach give us a clear strategic advantage. Our scalable distribution model combining strong partners with Aktia's own sales force across life, wealth, banking is the key enabler of growth and allows us to scale far beyond a traditional sales approach. With a strong balance sheet, a clear strategy and the team that delivers, we are well positioned to generate growth. I will now hand over to Sakari for the final overview.

Good morning also from me. My name is Sakari Järvelä and I'm happy to present the financial result for the fourth quarter and the full year 2025. Today let's start with the write-down which Anssi already mentioned in his part. We announced this morning that we will write down a total of 70.1 million of intangible assets that were created in the acquisition of wealth management operations from Taaleri in 2021. This total is divided into impairment of 22.3 million euros of acquired intangible assets and 47.7 million of goodwill created in the acquisition. This follows from a comprehensive review of our strategic priorities and focus areas undertaken by Actia management during the latter part of last year, which from the accounting standpoint led to a full impairment review and reassessment of several potential impairment indicators that are studied as part of our reporting and goodwill testing. At the base of the write-down is the revision of cash flow projections for the operations and customer portfolios that came with the Taaleri acquisition in light of changed strategic focus, different market and regulatory conditions. The growth expectations for these parts of the business are no longer at the level they were at the time of acquisition and hence did not justify the carrying values of goodwill and other intangible assets on our balance sheet. As I mentioned before, these write-downs affect the reported result of Q4-25, but importantly, they do not affect our comparable result. Also, these impairments are non-cash items and they have no impact on our CT1 capital ratio. I further want to emphasize that this write-down is a logical conclusion of the strategic decisions we have made. We are allocating capital and management attention toward the areas where we see the strongest long-term growth potential. This means that we continue to build on the parts of Aktia's business where our ability to grow is the strongest and where we can scale internationally. This does not mean that we see no value in the old Taaleri assets. On the contrary, there is still remaining goodwill on our balance sheet and we are generating cash flow every month. Then moving into the result. As Anssi mentioned earlier, we are pleased to end the year with the strongest quarter in terms of operating income amounting to 75.6 million euros in Q4. The total operating income in the final quarter was 3% higher than the third quarter 25 and only 4% lower than the extraordinarily strong fourth quarter of the previous year. We can be broadly happy with the result, considering how interest rates have developed and also given the continued subdued activity in the Finnish economy and particularly in the housing market. Comparable operating expenses in the fourth quarter and for the full year 2025 were almost exactly at last year's level. As has been true all year, broad-based top-line growth has been hard to achieve due to structurally weaker net interest income generation, so we have implemented strong cost control to counter that. We also took somewhat higher credit loss provisions during 2025 compared to previous year, which I will come back to later. Taking the above-mentioned effects into account, we are pleased with the comparable operating profit of 106 million we report for the full year 2025. On the last row of the table, you can see items affecting comparability, which are significant in the fourth quarter and for the full year. These are not included in the comparable result. The largest part of the annual total of 81 million euros consists of the write-down of Taaleri-related intangible assets. In addition, we recorded slightly over 7 million costs related to momentum acceleration program, which we had already highlighted at the beginning of the year. And on top, we had restructuring costs amounting to approximately 3 million euros. When we look at where our operating income comes from, from a segment perspective, we note first of all that banking operations provide stability and solid financial base on which to build growth. It is worth remembering that a significant portion of banking revenue also comes from the sale of investment solutions. This shows how the different parts of our business support each other. We see that life and wealth accounts for as much as 35 to 40 percent of operating revenue. This is also where we predict the greatest growth going forward, as Anssi outlined. Our life insurance business once again showed stable numbers with a net income in the fourth quarter of 7.8 million euros and 30.6 million for the full year. As a reminder, our life insurance income is derived from three product areas. Risk life insurance, investment-linked savings products, and that with profit liability portfolio, which is in runoff and has an attached investment portfolio generating income. In the three segments, the result from risk insurance remained good and the claims ratio was at a very good level. The investment link insurance book increased by 4.2% to over 1.5 billion, which is a record level. following a good sales performance and positive market development. The favorable investment market development also had a positive effect on the net investment result, including the insurance finance and the income from investment activities. Overall, we are very pleased with the activity level we see in our life insurance business and are positive towards prospects for 2026. Our net commission income continued to increase for the third consecutive quarter and amounted to 32.3 million euros, which makes Q4 again the best quarter of the year. Commissions from funds and asset management was the strongest component, which is important as this is one of our priority areas. Our assets under management ended the year at 16.6 billion euros, which is almost one billion above the lowest point we saw in Q1 last year. After a difficult first half of the year, we somewhat reassuringly started to see quarter and quarter growth picking up in the second half of the year. Last quarter I spoke of defensive victory when it comes to net interest income and I can repeat that again when it comes to fourth quarter of the year. The decline has clearly showed and Q4 was even slightly higher than Q3. But it has to be said that in Q4 it was positively affected by some one-off and timing effects. It is still perhaps too early to conclude that the NII has now bottomed out, but we expect that to happen in the coming months, definitely by Q2 of this year. In line with the previous quarters of this year, our ECL expected credit loss provision increased from last year. In the fourth quarter, we recognized 5.9 million of expected credit loss provisions. For the full year 25, this number was 15.8 million, up from 10.6 the year before. Again, as we stated in Q3 presentation, the elevated ECL provision in 25 was driven by one single larger case. This case contributed over one third of the total annual provision and shows in the large increase in the stage three provisions in the adjacent graph. It is again very important to note that outside of the aforementioned individual case, we do not see any significant worsening in the credit quality of our loan book and ECL provisions remained largely stable compared to last year outside of this case. In the fourth quarter, we continued to report comparable operating costs unchanged compared to last year. Being able to counter the general cost inflation affecting most cost line items with specific cost reduction actions was one important component of our momentum program during the year. we can be broadly pleased with the end result with the cost staying flat. As we have guided before, our total IT spend has been elevated in 2025. We run at slightly higher IT OPEX level and have simultaneously also increased our capital investments. This will be reflected in larger annual depreciation charges in the coming years. Moving to capitalization, we close the year with CET1 ratio of 12.6%, slightly down from Q3 level. This ratio level includes an adjustment for a dividend of 80 cents, which Aktie's board of directors is proposing for the year 2025. Our capital policy sets a target CET one ratio range at 2 to 4% above the regulatory minimum level, which today is 8.6%. And we have also stated that in a typical year, we would expect to operate around the top end of that range. At 12.6%, CET ratio is right at the top end of the range where we would want it to be. Our capital policy is designed to maintain a capitalization level that is prudent and yet not excessively conservative. And it also guides our dividend decisions. We believe the proposed dividend appropriately reflects this principle and achieves a balanced outcome for shareholders. Here I would also like to take the opportunity to note that we are currently in an application process with the Finnish FSA to renew our advanced IRB models we use for our household customers. Based on our ongoing dialogue with the FSA, our expectation is that once fully completed, the renewal will lead to higher risk-weighted assets and hence lower CET1 ratio compared to our current models. This process is ongoing and our current expectation is that it will be concluded during the first half of the year when we can comment in more detail. Our liquidity remained very strong with LCR ratio at 212% at the end of the quarter, clearly above our internal minimum threshold. On the funding side, during Q4, we were active only in the private placement market and issued six new private placement transactions altogether, approximately 182 million euros. During the first quarter of this year, we are monitoring the covered bond market and senior preferred private placement market for refinancing transactions. It's also important to note that we have applied the permit to call the inaugural AT1 transaction issued in May 2021, which is coming to a call in May this year, with the plan to replace and refinance the node in due course. In Aktia's sustainability work, we took the step from our previous sustainability program, which ended in 2025, to our new sustainability strategy, which was approved by our board during the fourth quarter and which was launched earlier this year, and which extends from 2026 this year to 2029. As we have previously reported, the 25 targets were essentially already achieved in 2024. So here we are looking ahead and would like to give you a short introduction to the key elements of the new sustainability strategy. The strategy aligns with Aktia's group strategy, where Aktia experience is a central pillar. Our aim is to be among industry leaders in customer and employee experience. We specialize in attentive personal service for a growing and diversified customer base and offer them sustainable and profitable investment, insurance and banking services. The well-being of our workforce ensures our skilled and committed employees work together to deliver holistic solutions and respond to customers' needs. Transparent governance and strong business ethics form the basis of our sustainability strategy. We also do our part to support the transition to a low carbon future and to protect biodiversity and ecosystems. We will set science based targets and update our own medium term climate targets during the first half of 2026. Finally, I'd like to introduce our financial outlook for the year 2026. Aktie's comparable operating profit for 26 is expected to remain approximately at the same level as the comparable operating profit in 2025, which was 106 million euros. As usual, we also state the main assumptions underlying this guidance, namely that income from the life and wealth businesses is expected to grow. Income from banking business is expected to be lower than in 2025 due to lower net interest income. And we expect operating expenses to increase and credit losses to be lower. However, we also note that unexpected market movements in asset prices and interest rates may have an impact on various parts of our business. And just to finish my part, I would like to highlight that we will be publishing our annual report and Billa 3 report on 11th of March, which will provide further disclosure regarding our operations and our financials. Our annual general meeting will be held on the 1st of April, and we warmly welcome all shareholders to attend. With that, I can conclude and we can move into Q&A.

Thank you, Anssi and Sakari, and welcome back on stage. So now we're happy to answer your questions. And I would like to start with you, Anssi. You talked about Aktia's business as two complementing pillars, the capital life and wealth and then banking. Can you talk us through, what is this really about? Is this organizing, reporting, or steering the business, or perhaps understanding the business?

I'll start from the end part. It's understanding the business. So basically, we see that Akti has two pearls. And we haven't been so clear to communicate to market and the investors and also internally that we have really strong life insurance business inside Aktia and also really capable wealth management. And at the same time, obviously, this is our 200 years anniversary basically this year, and we are always talking about Aktiabank, but we need to remember that we have really good life insurance, super good wealth management, and we want to bring those out to the market and take a look at this.

Thank you. And Sakari, NII was somewhat higher than in Q3. But in the outlook, we're foreseeing a lower NII. So, when will it in fact stop increasing, or has it already?

Like I mentioned, in the Q4, it is true the NII was higher than in Q3, but it was affected positively in Q4 by some timing effects and some one-off effects. So the underlying NII is closer to flat or slightly down. when we look ahead it is a very good question when does it bottom out and we're also trying to follow that very closely but our current estimate is that we probably are not exactly there yet today but we're very very close so probably somewhere at the end of this quarter.

Okay thank you and of course when I said increasing I meant decreasing. Then I think we go to the questions here on site. So I guess that Kasper Nellas from Inderes has a couple of questions for us.

Yeah, I do. Thanks. Do you expect to book any one-time costs related to your acceleration program still in 2026? No. Okay, so that was it. Then I saw that your personal count was much lower at the end of the quarter compared to the quarterly average. Have you reduced staff count or what was the reason behind this development?

So do you mean HR costs and number of persons? Yes. We haven't reduced and it's a normal fluctuation what's going on under the years, so there is no specific plan to reduce people. We haven't reduced in 2025 and actually at the moment we are hiring a little bit more than... We're hiring more at the moment.

And were higher loan impairments related to the same client that was responsible for the majority of loan losses in the past quarters? And is it possible that there can be even further write downs from this?

Yes, it was the one individual case what we mentioned in the Q3 and related to that one case. And at the moment, we do not see that there is going to be any extra write downs from that case.

Okay. And lastly, how significant effect on your CET1 ratio do you expect from the upcoming model revisions?

That's of course very difficult to speculate on. I mean, it is not dependent on us. It is dependent on the regulator to large part. So both on the effect and timing is something that we cannot comment at this point. But once Once we get the decision from them, we will communicate it into your course.

All right. Thank you.

Thank you very much, Kasper. Do we have any further questions here on site? Well, then let's go to the questions from the analysts at the SEB bank team. So first, could you expand a bit on this individual causing your rising credit impairment? Any trend in this in terms of a sector outlook as impairments has been elevated two quarters a row now, or is the charges within corporate to be seen as a one-off?

It's to be seen as a one-off, as we have told, and we reported this already in Q3, that we have like one individual case, relatively big in our scale, and now it seems like that it's settled during the Q4. So it's one individual case, and to credit the whole loan book, through my classes, it's in a good condition.

Thank you. And then the second question from SEB. Second is a rather technical question on your 2026 guidance. You state that NII will decrease within banking business due to lower rates. But what's your view on volume development for 2026?

That's a good question and it depends on the volume what you're looking at and in mortgages we have a clear target group where we are aiming in mortgages it's like a premium private banking customers and the market is still rather slow in Finland at the moment so no big changes in that compared to 25. Then comparing to corporate banking side so as I mentioned before so we are putting a lot of effort to higher purchase leasing and factoring products and hopefully we see growth from that side. So that's basically the case where we are aiming for. And then we are slightly taking down our housing loans in a planned manner. That's our plan, what we have planned. Obviously, the market conditions have an impact to us. Sorry, I was going to say housing loan, I suppose you mean housing corporation.

Housing corporation loans, yeah. Maybe if I add, when we look at the quarterly NII in 2025 and 2024, we still see the average reference rate in Q1 2025, which is a comparable quarter to this one, it was still significantly higher than it is today. So for the first quarter, we are clearly operating at a different interest rate environment than last year. Then the rates stabilized relatively quickly after that, but today we see that it will be an interplay between what will happen to the rates and how quickly the volume developments Anssi highlighted will come, and what will happen in the housing markets. And we're very happy to be wrong, and say that we were too conservative and the NII will exceed last year's level. But at this point, our best estimate is that we will still be down a little bit in this year compared to last.

Thank you. And then continuing with the SEB question list. Third, the new IRB risk weight models to be implemented in age one, how large will the impact be? Can you say anything on CET1 headwind from this?

Yeah, I mean, like I said to Kasper, it's impossible for us to speculate. The process is ongoing. We are having a dialogue. We have a good dialogue with the FSA. And based on those discussions and based on also observing what has been the outcome of similar processes for some of our competitors, we foresee and we believe it is prudent for us to here also highlight that most likely the impact on risk-weighted assets will be increasing and the CET bond would be going down. The magnitudes, unfortunately, is something that we have to come back to when we have a decision on this topic.

Okay, and then so far, last question from SVB. What is the composition of the 12 million euro run rate impact achieved from Momentum versus the 20 million euro target? Which initiatives are still pending and what is the timeline?

That's a good question. I think overall, if we look at what we communicated on the run rate targets and the actions for the program, we were a little bit apparently conservative a year ago when we set a target of 7 million for this year and a total of 20 for the for the program. So we've been managing especially on the cost items in the sales items pretty much according to plan but the bigger sort of timing difference came that we were actually ready to add one covered bond 500 million already this year in September. So that was the big effect in timing between 25 and 26 effects. Other than that, I think we will continue in all of those three buckets. We work on the top line. It is a growth program. So I think we can expect, run rate wise, big effects from things that Anssi laid out in his presentation on the strategic areas where we're focusing on particularly heavily now. We still keep looking at our costs and we still keep trying to be more efficient in terms of capital. So it will be a mixture, but we're very confident that we'll get to 20 million by the end of the year.

Thank you. And that answer was actually a perfect segue to the next question from the nickname Matti. Anssi, how can Aktia increase its profitability considering the increasing and tightening financial regulation?

That's obviously, again, a really good question. And the answer is that, what if I think with our board and also management group, that we need to have a clearer focus in the product areas where we really are world class or European class. And for example, risk-loss insurances, unique links, those are our spearheads. Then the international sales in the fixed income side, we have super good world-class products, world-class solutions to our clients. And obviously in the corporate banking, those leasing higher person factoring products. So we have made clear choices where we invest IT-wise and also personal-wise, HR-wise. So in those target groups, we see those highly profitable for Aktia and we put a lot of effort for them. And then we reduce less profitable product areas at the same time. So that's the way how we see things and how we currently operate and will operate in the future. So clear spearheads where we are putting effort.

Thank you. And do we have any further questions here on site? Well, it seems that that was the last question for today. Then thank you, Sakari, thank you, Anssi. And many thanks to all of you, both those of you who have been participating here on site and those of you following us online. We wish you all a very nice day. Thank you. Goodbye. See you again. And happy Runeberg's Day.