Aktia Pankki Oyj

Good morning everyone and welcome to Actea's Q3 results briefing. My name is Oskar Taimitarha, I'm the head of Actea's investor relation and I will be the moderator for this event. Earlier this morning we published our Q3 report. Actea's CEO Anssi Huhta and CFO Sakari Jarvela will soon walk us through the results. And as always after the presentations we are happy to answer your questions. This time we have also set up a conference call line for those who wish to ask questions. I hope you'll make use of it and I ask you to bear with me if I get a bit confused with the technical side of things. It is of course also possible to write your questions in the comments field. So let's get started. The stage is yours, Anssi.

Thank you, Oscar, and a warm welcome for me as well. There are several things in this quarter that I'm particularly pleased with. Customers are giving us very good feedback, asset management reached another record, and private banking delivered an excellent quarter in net sales. The quarter results also reflect the rapid movement in interest rates, particularly in life insurance. We will explain that clearly today. But looking at how our customer business is developing, I feel confident about the direction we are taking. Together with Sakari, I will walk you through the quarter. Let me start with the customer business, because that's where Aktia builds the future earnings. Asset management reached record 18.2 billion euros, within 124 million euros in net sales during the quarter. Private banking was a particular highlight. We also received excellent customer feedback in the independent EPSI survey. Akti ranked first in customer satisfaction among corporate customers. Among private customers, satisfaction improved to a very satisfied category. Our comparable operating profit was 22.5 million euros. Life insurance income was affected by rapid raise in market rates. Higher rates are positive for Aktia overall over time. The timing matters, however. Valuation effects can appear quickly, while the benefit to net interest income comes through more gradually. Commission income remained at last year level, and credit losses were extremely low at 1.5 million euros. Our CET1 capital ratio also strengthened to 12.6%. That brings our capital buffer back to close to upper end of our target range. Taking a slightly longer view, comparable operating profit for the first nine months was 84.8 million euros, up 3% from last year. We have seen substantial movements between the quarters, particularly in life insurance. Alongside these movements, the customer business has continued to progress. Net commission income is up 4% year to date, and the customers have entrusted us with more assets. That gives us a good basis to build on. Our job is to turn that growing customer business into sustainable earnings. This is development I'm very pleased with. Asset and management reached 18.2 billion euros, around 12% higher than a year ago. The net sales was 124 million euros in the quarter and 757 million euros for the first nine months. Private banking delivered 85 million euros in quarterly net sales. That's an excellent result. And I want to recognize the work our colleagues are doing with the customers. A significant share of those investments also goes to insurance wrappers. We can see the value of bringing wealth management and life insurance together around the customer. Internationally, our emerging market debt funds continue to grow, supported by positive net sales and good investment performance. We have strengthened our sales presence in the Dah region and customer activity has already doubled. There is also planned change with these AUM figures that I want to explain. As we stated in the beginning of the year, the legacy TALRI closed-end funds account for approximately 1.2 billion euros. These funds are in runoff and we expect around 300 million euros to be returned to investors over the next 12 months as funds mature. That will affect the AUM and commission income. The timing will be uneven. And our task is to stay close to customers and offer suitable investment solutions as capital is returned. At the same time, we continue to build the growth through our international fixed income business, and comprehensive wealth management offering especially in private and premium banking. Let's turn to our strategy and what it looks like in practice. We are concentrating our efforts to areas where Aktia has strong expertise and clear opportunity to grow. During the quarter, this trend was particularly evident across private banking, our international asset management business, and our rapidly expanding insurance portfolio. We manage Actia through two complementary businesses, life on wealth and banking. Life on wealth gives us attractive opportunities for capital-light growth. We have strong expertise in fixed income, particularly in emerging markets, as well as in manager selection and asset allocation. Our life insurance company is an important part of our customer offering, providing investment solutions and risk protection. Banking provides a stable foundation and opportunities to grow in selected customer segments. It also brings our wealth management expertise to much wider customer base. These businesses work best when the customer experiences Aktia as a one team. And that depends on our people. We want the colleagues to have the support and confidence to do their best work and customers to feel that we understand their whole situation. The customer feedback we received this quarter is a very encouraging sign of progress. This is one of the slides I'm most pleased to present today. It reflects the work our teams do with the customer every day. In the independent exit survey, Actia ranks number one among corporate customers in satisfaction, loyalty, and service quality. Among private customers, satisfaction improved significantly. That was the largest increase in the comparison. And our own customer survey supports this picture. Our customer survey points to clear growth potential in private banking. One in four respondents plan to increase their investments with Aktia over the next 12 months. That's the highest share in the five-year comparison. At the same time, the share of planning reduced investments has fallen from 21 to 12%. This is an encouraging sign of customer confidence. Our focus is to turn that potential into net inflows and profitable growth through good advice and strong customer relationships. For me, this shows the value of knowing your customer, giving a good advice and building last relationships. I'm proud of our teams and grateful for the trust our customers place in us. These results give us strong foundations to build on. Across the businesses, we are seeing concrete progress. In life and wealth, asset management reads another record. Risk insurance and unit-linked insurance products developed well, in line with our strategic priorities. Private banking had a particularly strong water. The combination of personal advice, investment expertise and insurance solutions is clearly relevant to our customers. Internationally, we have strengthened our sales resources in the DAH region. Investment engagement has increased and our focus is now turning that engagement to lasting customer relationships and new business. In banking, leasing and higher purchase finance continue to grow. Demand for cash management and working capital solutions remains strong. Premium customers also continue to invest, generating extremely positive AUM net sales that shows that contribution banking makes to wider life and wealth business. Credit quality remains solid with low losses. Taken together, this development gives us confidence in our direction. There is good work happening across Aktia, and I want to thank our colleagues for keeping the customer at the center of it. Sakari, over to you for the final result. Good morning everyone and welcome also from me.

My name is Sakari Jarvela and I'm happy to present the financial result for the third quarter and the first nine months of 2026. I'm very happy to start by noting that after three quarters we are heading towards a strong result for 2026. In the third quarter, we reported comparable operating profit of 22.5 million euros. For the first nine months, comparable operating profit amounted to 84.8 million euros, 3% higher than last year. While the result in the quarter looks slightly on the weaker side, this is mainly due to fair value changes and timing effects, while the underlying performance has remained strong. Starting with net interest income, we reported 31.9 million euros in the quarter. As I have said in previous quarters, we believe that NII bottomed in the first quarter and that view has not changed. The Q3 number looks somewhat weaker compared to Q2 than the underlying development actually was due to timing of certain one-off effects between the quarters. Net commission income was 31.1 million euros, approximately at the same level as last year. Also here, there are certain elements that make the headline number not fully reflect the underlying strength. I will come back to these when we look at the net interest income and net commission income in more detail. Income from life insurance was 5.7 million euros compared with 8.2 million last year. Risk insurance and unit-linked insurance continued to develop well, but the run-off portfolio of with-profit contracts was negatively affected by the rapid upward movement in short-term interest rate in a similar fashion as in Q1 this year. While such rate moves have led to fair value losses affecting our P&L immediately, it is very important to remember that the impact from higher interest rates over the medium term are unquestionably a positive one. We are also very pleased with the development of our capital position. Our CET1 ratio increased from 12% to 12.6% during the quarter, bringing us once again close to the upper end of our target range. We are also reporting relatively high costs in items affecting comparability. These relate primarily to strategic projects completed in the quarter and partly to costs related to a previously exited business in our life insurance unit. As said, net income from the life insurance amounted to 5.7 million in the third quarter. The two strategically important businesses within Aktia Leaf, Unitlink Investment Contracts and Risk Insurance Contracts, continued a solid performance. The result from risk insurance was 3.5 million euros supported by a good claims ratio, and the result from investment contracts was 2.6 million. The Unitlink insurance portfolio continued to grow to another record level supported by good new sales. As we have explained in detail in the first quarter, the run-off insurers portfolio and the attached investment portfolio can fluctuate between quarters in periods of larger interest rate moves. During 2026, we have now witnessed two large and abrupt periods of volatility, when short-term interest rates have rapidly moved up and the interest rate curve has inverted. First time in March and now again in September. What comes to these fair value moves, I will repeat what I also said in Q1. These effects materialize due to the hedging and investment strategy we have chosen, and once the interest rate curve normalizes, we will also see the opposite positive effect on our P&L. So despite the headline volatility, I would again draw your attention to the solid contribution from the strategic core businesses and the positive development there. Net commission income amounted to 31.1 million euros, approximately at the same level as last year. The strongest development was once again in income from mutual funds. Fund-related commission income increased by 7% to 18.5 million euros, supported by the strong growth in assets under management. As I've said before, this is the core strategic item we follow and we are very pleased with the development. In this quarter, there were two items weighing on the commission income. First, income from cards and payment services was lower than last year and also dipped quarter and quarter. As per previous communication, the ongoing migration from MasterCard to Visa is having a temporary negative effect on card-related commission income during the year, and this effect was now very visible in Q3. Second, the income from asset management and securities brokerage amounted to 2.2 million euros compared to 2.8 million euros last year. The decline mainly reflects timing differences as the comparison period included higher income from structured products campaign, which was absent in the third quarter of this year, but will now be timed in Q4. Turning to net interest income, as I mentioned already, we continue to stand by our earlier statement that the core NII bottomed out in the first quarter, even though we reported 31.9 million in the third quarter. Looking at the components, net interest income from lending starts to show the positive development from higher interest rates, increasing both from the previous quarter and compared to last year. At the same time, there were some technical timing effects in the hedging side that made the Q3 number look somewhat weaker and Q2 look stronger than the underlying development actually was. So I would not read too much into the sequential decline from Q2 to Q3. The underlying development remains broadly consistent with what we have communicated earlier. So going forward towards Q4 and especially looking into next year, we expect net interest income to be increasingly supported by the higher interest environment. So to reiterate, our overall view on the NII trajectory has not changed. The first quarter level represented the bottom and we expect the benefit from higher rates to become increasingly visible going forward. Looking at costs for the first nine months, comparable operating expenses increased by 6% to 136 million euros. Personal costs increased by 4% and this was in the quarter due to contractual salary increases and also we increased variable compensation accruals for 2026, which show in this third quarter. Overall the cost development is in line with our plan and our expectations as we continue to invest very selectively in the capabilities required to support growth, AI and digital capabilities and strengthen our operational resilience and regulatory compliance. So nothing has changed also with our message on costs as we continue to balance disciplined cost management with measured investments needed to deliver our strategy. Moving on to asset quality. Credit losses for the third quarter amounted to 1.5 million euros, 59% lower than last year. Both individual impairments and model-based expected credit losses remained at low levels. For the first nine months, impairments had a positive impact of 3.5 million euros on earnings, including the 8.1 million transitional effect from the implementation of the new ECL model in the second quarter. Also excluding the transitional effect, the underlying credit loss development has been favorable compared to last year. Our annualized net credit losses were seven basis points remaining at a very low level. Overall, we are very pleased with the quality and the strength of our loan portfolio. And moving on to capitalization, our CT1 ratio increased from 12% to 12.6% during the third quarter, which we are very, very pleased with. The buffer above the regulatory requirement was 3.9 percentage points, bringing us back to the upper end of our target range of 2 to 4% points above the minimum required. The relatively large increase in CT1 in the quarter was driven by lower risk-weighted assets, which to a large part was due to FinFSA's updated guidance on certain housing association loans, which positively affected the risk weights of the so-called acquisition, development and construction, or ADC, exposures. Overall, our capital position is strong and back at the level where we want it to be, which together with the solid loan book quality puts us in a great position to continue supporting our clients with capital. Our liquidity position remained strong throughout the quarter. The liquidity coverage ratio was 223% at the end of September, at a very strong level, so no new long-term funding transactions were executed during the third quarter. We continue to monitor the senior preferred private placement market in preparation for upcoming refinancing needs. Aktia Life Insurance has also received the required approval from the FinFSA to call its inaugural Tier 2 instrument issued in November 2021. As planned, the instrument will be refinanced and replaced during Q4. Then earlier this week, S&P Global Ratings revised the outlook on Aktia from negative to stable and affirmed our long-term and short-term issuer credit ratings at A- and A2. According to S&P, the revision reflects Aktia's resilient strategic execution, ability to generate returns, strong capitalization and the successful stabilization of leadership. We are naturally very pleased with the decision. It provides external confirmation of the progress we have made and recognizes the resilience of our business model and our capital position and our ability to execute our strategy. Maintaining strong ratings is important for Aktia because it supports access to funding markets and contributes to competitive funding costs. So we continue to maintain our commitment to keeping our current strong credit ratings also going forward. Then to guidance. We again keep our full year guidance unchanged. Aktie's comparable operating profit for 2026 is expected to be approximately at the same level as or slightly higher than the comparable operating profit for 2025, that is 206 million euros. Recognizing that there is only one quarter left of the year, we would perhaps place a bit more emphasis on the wording slightly higher. But given the type of volatility we have seen in the markets already during the year, we believe it's appropriate to show some caution with forward-looking statements. Hence, we retain the guidance unchanged. This completes our review of the third quarter results. Thank you for listening and we're now happy to answer your questions. The Q&A session will be moderated by Oscar. Thank you.