Danske Bk A/S Bearer Shs

Good morning, everyone. Welcome to the conference call for Danske Bank's financial results for the first half of 2024. My name is Claus Enga Jensen, and I am head of Danske Bank's investor relations. With me today, I have our CEO, Carsten Ehris, and our CFO, Stefan Engels. We aim to keep this presentation to around 25 minutes. After the presentation, we will open up for a Q&A session as usual. And afterwards, feel free to contact the investor relations department if you have any more questions. I will now hand over to Carsten. Slide one, please.

Thanks, Klaus. And I would also like to welcome you to our conference call for the financial report for the first half of 2024. We're now six months into our new strategy period, and I'm pleased that we continue to execute on our strategic priorities according to plan. We're clearly making progress on our 428 strategy, and we see a satisfactory development in our financial performance, which clearly is on track to meet our 2026 financial targets. Our performance in the first six months of the year was characterized by an increase in customer activity that gained momentum in the second quarter. primarily from corporate lending demand and demand for investment products, but also from a broad increase in daily customer transactions. Our ability to leverage our strong position within debt capital market activities added to the positive performance in the first six months. This included continually strong traction for sustainability.

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24, we intend to distribute all of the net profit subject to continued delivery of continued strong financial performance and relevant approvals. Important to emphasize that our combined distributions will not exceed capital generated through net profits or real relief Sorry, we have some technical problems. Sorry, I think we've had some technical problems, but I will pick up and hopefully we're going live through and obviously we will take questions if there's something you missed. I was on the capital piece. This is similar to, and if I just pick up from the capital distribution piece, based on our strong performance in the first half of 2024 and our strong capital position, I'm pleased to announce that the Board of Directors has decided to distribute an interim dividend of 7.5 kroner per share, and that's based on net profit of 11.5 billion kroner for the first six months of 2024. And this is equivalent to a payout ratio of 56%. This is similar to the dividend payment schedule for the first half of 2023 and should be seen as a one-off event similar to last year's dividend payout following years with no or limited payouts. Please note that from the financial year 2025, this payout frequency will cease and we will resume annual dividend payments on the basis of the full-year result announced in February. In respect of the Sale of our personal customer business in our Norway business. It is our intention to distribute the release of capital of approximately five and a half billion through an extraordinary dividend. Once the sale to Nordea has closed in Q4. And then finally for full year 2024, we intend to distribute all of the net profit subject to continued delivery of strong financial performance and relevant approvals. Important to emphasize that our combined distributions will not exceed capital generated through the net profits or real relief from divestments before the end of 2025. So on this background, I'm pleased with the execution on capital distribution of 30 billion by year end. And this is slightly ahead of the ambition that we announced at our Capital Markets Day last year. We maintain a CET1 target of above 16% by the end of 2026. We do so on the basis of a prudent assessment that also takes into account the probation period that applies to Danske Bank until the end of next year. It's important for me to emphasize that with the current target, we believe that we strike a good balance between our ambition to grow the business and our ambition to distribute capital. For now, it reflects a prudent level of capitalization based on an ongoing and a constructive dialogue with our local regulators. And I'll now talk about the performance of our business units before I hand over to Stefan. And this is now slide two, please. At personal customers, we have seen improved financial performance driven by higher total income, which grew another 3% in Q2. The top-line growth in Q2 was driven by a resilient contribution from net interest income, and the positive trend in core banking income benefited further from higher fee income on the back of customer activity. Activity-driven fees therefore continued to improve, and investment fees also provided a solid contribution, a direct result of the strategic ramp-up within wealth management and private banking. The increase in income coupled with continually strong credit quality along with prudent cost management in line with our investment plan underpinned the satisfactory level of return on allocated capital and cost-income ratio in line with our targets. Looking at volumes in our core markets, the development in our deposit position remains strong, with positive inflow into both transaction accounts and savings products, as total deposits increased by 15 billion, of which 8 billion was attributed to our recognized savings products. Generally, we find that migration effects have moderated, and the positive trend should also be seen in light of an increase in retail assets under management of more than 10 billion. In terms of lending volumes, activity in the housing market started to recover, as many households are starting to experience real wage growth, and there is more clarity around property taxes and the path for policy rates. The stock of residential lending in Reitkredit Danmark was however impacted by redemptions and amortization, largely countered by our customers' preference for the Danske Boligfrih home loans, with another quarterly increase of 4% in Q2. And then at the same time, I also believe we have an untapped potential and need to regain our fair share of mortgage market in Denmark. In respect to our strategic KPIs, we see our improved position reflected in the traction we have with our existing customer base, along with a net inflow of new customers in the growth segments, combined with tangible progress in customer satisfaction and also reputational aspects in general. And now slide three, please. At Business Customers, our financial performance was supported by our enhanced product offerings and customer focus as well as higher activity with improved sentiment across our business. Core banking income benefited from sustained level of NII and a continued fee contribution related to daily banking activities as well as our subscription-based service model which is gradually taking hold. Profitability rebounded from Q1 as impairments also recovered, lifting the return on allocated capital back above our target. Also, with continually prudent cost management, we maintained a cost-income ratio ahead of our 2026 target, which altogether is encouraging when we are ramping up our commercial focus and investing in upskilling specialized advisors along with our analytical capabilities. In respect to volume development, the commercial momentum is also reflected in a solid uplift in lending growth, which was evident across all Nordic markets in Q2. Deposit levels were largely stable in Q2 as a positive development in Finland was offset primarily by Norway. We already see progress on the commercial ambitions we have highlighted as part of our Forward28 strategy. And while I continue to see a potential to further leverage our strong corporate franchise in the SME space, we're starting to see the growth potential along with more efficient ways of operating, for example, in our credit decision-making process. And ultimately, this should support the increasing number of customers that are highly satisfied with our advisory services. And then slide four, please. Turning to LC&I, where our market-leading franchise continued to gain momentum, highlighted by our ability to actively support our customers with advisory services, backed by our strong product offering and balance sheet. In the second quarter, we continue to deliver solid total income and strong profitability, also relative to our 2026 target, despite a lower contribution from net trading income. Core banking income benefited in particular from higher fee income, up 15% from the preceding quarter and 22% relative to the same quarter last year. The positive development was underpinned by strong activity and improved diversification, which in turn was supported by our leading cash management offerings that enabled us to win new house bank mandates. We also saw a sustained strong contribution to fee income from high capital markets activity as conditions have been attractive. And we continue to be the leading Nordic bank in both Nordic and European debt capital markets in terms of volume supported. In addition to the strong DCM activity, we also saw positive demand for lending in the quarter. Deposits were largely stable, and altogether the sound development in our volumes contributed to the uplift in NII. And then finally, our asset management business. It continued the positive trend, underpinned by a positive inflow of both institutional mandates along with net sales for retail customers. And this also contributed positively to the increase in assets under management, which further benefited from higher asset prices. And then with that, I'll hand over to Stefan for a detailed review of our financials. And then that's slide five, please.

Thank you. Good morning. So as Carsten just mentioned, we saw a strong improvement on our financial result. Relative to the same period last year, as well as the preceding quarter, profit before tax was up 18 and 3% respectively. Relative to the first half of last year, the improvement in total income was driven by stronger core income lines and a recovery in net income from insurance business, whereas net trading income in the same period last year benefited from extraordinarily good market conditions. Furthermore, other income was impacted by lower sales on assets related to our leasing activities. Operating expenses remained stable as prudent cost management mitigated the expected wage inflation. Loan impairment charges came in at a very low level and resulted in a net reversal due to continually strong credit quality. Relative to last quarter, fee income in particular gained momentum, driven by increased customer activity. Total income was slightly up, as the higher fee income more than offset the softer development in income from trading activities, insurance, and other income. The result for the period of 11.5 billion is equivalent to an ROE of 13.1% and 13.3 in Q2. Slide six, please. Let's take a closer look at the development in net interest income. During the quarter, we saw the first rate cut from the ECB and the Danish Central Bank, as the inflation outlook appears to be under control. While market expectations around timing and number of future rate cuts change frequently, our NII development remains constructive in line with our expectations. For the third quarter, we thus expect slightly higher NII, subject to volume growth and possible rate cuts. Importantly, I would like to highlight that NII showed the expected resilience in Q2 as our portfolio hedge and positive contribution from both lending and deposit volumes mitigated the impact on margins from lower market rates. The favorable development in deposit volumes was supplemented by a large inflow into our savings products, which offset the impact from policy rates, while our adjustment for deposit pricing have yet to flow through due to the timing of implementation. On the asset side, lending margins have stabilized, and together with the volume uplift, this contributed positively to the development in NII and Q2. As such, the sustained uplift in NII is expected to continue, and in terms of our NII sensitivity, we continue to expect around ±500,425,000 Points change in policy rates in the first year with an additional year two and year three effect of 300 and 200 million respectively, given our structural hedges and the portfolio fixed rate assets. Slide seven, please. Overall, the positive trend in fee income we have seen since Q4 last year continues to reflect strong customer activity and gain further momentum in the second quarter, supported by our attractive product offerings. As Carsten mentioned earlier, the fee income we have reported in the second quarter is the highest level for two and a half years. Relative to the same period last year, as well as the preceding quarter, fee income rose 13% and 10% respectively. The increase was driven by activity-related income, which also included a positive impact of 0.1 billion due to a non-recurring reduction in fee expenses in Q2. Investment fees continued its positive trend, and we also saw a strong contribution from capital markets fees in the quarter. The continually high activity in Q2 came primarily from our corporate customers, from whom we continue to see strong demand for our cash management solution. Investment fees benefited from an increase in assets under management, including positive net sales. Fee income from lending activities was both year-on-year as well as quarter-on-quarter, impacted by the subdued housing market activity, although we saw a gradual improvement towards the end of the period. Income from the refinings of adjustable rate mortgages in the first half of the year partly mitigated the low housing market activity. Income from our capital markets activities increased in Q2, was up 38% from the level in Q1 and 21% from the level last year. Our DCM business in particular was a strong contributor of income and all other business areas within capital markets saw a positive development in the recent quarter. Slide 8, please. Now, let me briefly comment on net trading income. Relative to last year, income came in lower due to exceptionally high customer activity in LC&I in Q1 2023 and a one-off gain of 0.3 billion. When we look at the quarter-on-quarter development, the contribution from LC&I declined from seasonally higher customer activity in Q1. The fall in activity in the second quarter was largely attributable to our fixed income and derivatives business in Sweden. For comparison, please be aware that most of our income from automated FX is now booked as fee income at LC&I. As such, trading income for the first half of the year amounted to 1.4 billion and was just slightly lower compared to our soft guidance for a normalized trading income of around 3 billion per annum. The higher contribution from group functions quarter on quarter came primarily from valuation adjustments on our currency portfolios within Treasury. That concludes my comments on the income lines. Let's now move on to expenses on slide 9, please. Reported expenses were up slightly from the level in the first half of last year and 2% higher compared to the preceding quarter. I'm pleased to see that we continue to manage our costs in line with our plans and guidance for the year between 26 and 26.5 billion. Relative to the first half of last year, staff costs were impacted by wage inflation, which was, however, partly mitigated by a 6% reduction in the number of FTEs. As a result of our stronger performance, performance-based compensation increased, whereas the expected decrease in costs for legacy cases had a positive effect. The increase in other costs in the second quarter related mainly to the ramp-up of investments, including our digital priorities and IT partnerships, as a key part of our Forward 28 strategy. Overall, I feel comfortable with the cost performance in the first half of the year, and on this basis, we reiterate our full-year cost outlook of between 26 and 26.5 billion. Slide 10, please. Let's look at our credit portfolio and the trend in impairments. Our well-diversified and low-risk balance sheet benefited further from the improved macroeconomic environment, which led to reversals from our macro models, although we continued to incorporate a severe downturn scenario. Actual credit deterioration remained very limited, and we saw net reversals of single-name charges in Q2, driven by recoveries from work-out cases. We continue to cater for potential tail risks and uncertainties not captured on a single name basis or through our macroeconomic models by carrying a sizable amount of PMAs. This buffer was kept stable at DKK 6.7 billion, equivalent to four years of a normalized through the cycle loan loss level. Let's continue in the next slide and cover our capital position on slide 11, please. Our capital position remained strong with a reported CET1 capital ratio standing firm at 18.5%. This reflects another quarter in which we have accumulated capital and saw a healthy contribution from retained earnings after accruing for dividend. In addition, due to a change in methodology for how Danica's solvency requirements are being set, we have seen a decrease in the group's statutory deduction for insurance subsidiaries. These positive contributions were accounted by a prudent front-loading of the majority of our anticipated CRR3 impact, adding 20 billion of RIA in Q2. In addition to an increase from credit risk RIA, we therefore saw a risk exposure amount increase of 37 billion in total to 846 billion by the end of Q2. Our CET1 capital requirement was at 14.5% at the end of Q2 and continues to include the retail exposures in Norway. As Garsten mentioned earlier, we have taken this opportunity to reaffirm our capital target of above 60, which reflects a prudent buffer to the regulatory requirement. Finally, with the announcement we have made today regarding distribution, we are also tangibly executing towards our targets with a capital distribution that is mindful of all our stakeholders. Now let us turn to the final slide 12, please, and the financial outlook. At the end of June, we revised the outlook for 2024 upwards to a net profit in the range of 21 to 23 billion from previously 20 to 22 billion. The upgrade follows our contiguous strong credit quality and net reversals of loan impairment charges in the first half of the year. As such, we now expect full-year loan impairment charges to be up to 0.6 billion. For the financial targets for 2026, we maintain our assumption for loan impairment charges of approximately eight basis points through the cycle. The outlook for income remained unchanged. Slide 13, please, and back to Klaus.

Thank you, Stefan. Those were our initial comments and messages. We are now ready for your questions. Please limit yourself to two questions. If you are listening to the conference call from our website, you are welcome to ask questions by email. A transcript of this conference will be added to our website within the next few days. Operator, we are ready for the Q&A session.

Thank you. To ask a question? please press star, 1, 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star, 1 and 1 again. We will now take the first question. One moment. The first question is coming from the line of Sophie Petersens from JP Morgan. Please go ahead.

Yeah, hi, this is Sophie from JP Morgan. Thanks a lot for taking my question. So I've got a quick question. First on net interest income, you were guiding that you expect net interest income to be slightly better maybe in the third quarter. But how should we think about net interest income for the full year? Are you still comfortable with the guidance of around 37 billion, which would kind of imply... a relatively strong growth in the second half. So maybe if you could just comment on this. And then I'd also relate to this, like how should we think about the hedge benefits still to come in net interest income, especially in 24 and 25. And then the second question would be, in the capital bridge that you provide, I can see that the Danica tailwind is quite big this quarter. It has been quite volatile in recent years. How should we think about the Danica deduction going forward and kind of the movement to go equity tier one from Danica? Thank you.

Sophie, let me take the first question, then Stefan, you can just talk into the accounting change in Dainica. From an NII perspective, we continue to feel comfortable with the trend and the guidance around the NII being roughly around consensus. Clearly, growth was a little bit more muted in the first half, but it has improved in the second quarter. And therefore, with the current sort of growth trajectory that we see, as well as sort of the general NII dynamics that we've updated on before, which are 500 year one, 300 year two, and 200 year three, We continue to feel comfortable with the NII and therefore we expect NII to peak sometime in the second half, obviously depending on timing of rates. Stefan, you want to talk on Danica?

Yeah, so Danica, as you may remember, changed to stochastic models like a year ago. We have now reviewed those and there is a component in there which creates losses which you can convert into DTAs. And if we apply these DTAs, which we haven't applied before, that reduces the deduction from the statutory capital of the group by roughly 3 billion. This reduction is permanent and defines basically a new level of the deduction, but it doesn't affect the volatility. So the volatility component will still be a bit with us going forward.

So we could see some kind of reversal potentially in coming quarters or potentially even fly.

Call it the effect that you saw in Q2 as the effect is a permanent one. Still, the deduction may fluctuate, but then on the lower level.

Okay, thank you. Just to be clear, this accounting change is a permanent accounting change, so it does not affect volatility. So ongoing volatility will be part of the business as usual, effects coming from investment results and other things.

But on a lower starting level.

Okay, thank you.

Thank you. We will now take the next question. The next question is from the line of Martin Ekstedt from Handelsbanken. Please go ahead.

Thank you. Martin Ekstedt from Handelsbanken here. So first question, in light of significant capital distribution near to medium term, why didn't you take this opportunity to tighten the dividend payout ratio target range, which remains at 40 to 60 percent? So large-cap Nordic banking peers of yours are generally at 50% or above, and you will remain above as well, from what I can tell. And then my second question, could you share your reasons for abandoning the interim dividend policy and moving back to an annual dividend?

Martin, thanks for that. So your first question. Look, we were very clear at Capital Markets Day last year. And that is also what we've showed that that in the planned period, we plan to pay at the upper end of the dividend range, 40 to 60 percent. So fair question on why we keep a broader range. But, you know, I think that just keeps flexibility going. as we go forward, but again, with a clear intention to pay at the upper side of that range. And then in terms of the semi-annual dividend, look, we did that last year. We're doing it this year. It's not common that that is done in Nordic banking, but we have decided to do it given both several years of not having distributed capital due to reasons you know well. And therefore, we wanted to send a very clear signal that we have a strong capital base, that we're very comfortable with where we are, and that we want to execute on this distribution plan. But in general, our policy is to pay an annual dividend. And that's why we're communicating clearly not to expect that we do that as we go forward.

Okay, that's clear. Thank you.

Thank you. We will now take the next question. From the line of Jan-Erik Gerland from AVGSE. Please go ahead.

Thank you for taking my questions as well. I have two. The first one was on capital. It was a little bit unclear because the line was sort of disrupted, etc. Could you just clarify on the capital side what you intend to pay for 2024, if I understood it correctly? You said you would pay out all of your earnings for 2024 in connection with your full year results in January, February 2025. Or did I miss something there? And then you would have this extraordinary dividend of $5.5 billion on top of it. Just to clarify what you intended to distribute for the full year and how and when we should see it. And then I'll ask back to the Martin's question, you're now moving back to an annual level of dividends after this last semi-annual one. So that was on the capital. On net interest income, you mentioned something, I think, on a savings product that wasn't fully into the numbers into the second half of this year. Could you just allude a little bit more to how much that is intended to contribute with and the peak in NII? how should we think about this second and third year changes to the 200 and 300 million versus the 25 basis point change? So if the interest rate is down 25 basis points, you would change your NIR by minus 500 for the first year and then 300 and then 200. That's how we should read it because of the hedges. So it's lower in the second and third year. Just to clarify this kind of deviation to the NIR going forward. Thank you.

Yep. Thanks for that. And yeah, again, apologies for the technical difficulties at the at the start of the call. But you're absolutely right in terms of the way you reiterated the capital plan. So, again, we plan to distribute all of 2024 earnings. And what we don't do as a dividend, we will do otherwise and we will announce that as part of the year end results. But again, that we will pay out all of 24 earnings. And in addition to that, we will distribute the capital from the sale of the Norway retail business when the deal closes, currently expected towards end of Q4, and we would do that as an extraordinary dividend. In terms of NII, I think on the first point, the point on savings products, I believe, was that The repricing that we've done on the savings products on the back of the last rate increase, those will come through in Q3 because of the time lag. And that then offsets some of the immediate downside, if you will, when the rate decrease happens. In terms of the NII peaks, we said there were peaks towards Q3. I said in general sometime in the second half, depending on timing of further rate decreases. I think the year two, year three, it's a bit more complicated than that, right? Because at the end of the day, again, it goes back to that we've got a hedge. It's roughly 150 billion. It's roughly an average term of just over three years. And it basically matures and then gets replenished on a rolling basis. And that's why you have the 500, then 300, then 200 hedge. So you can think about it as as linearly black and white, as you mentioned it there. But, you know, our I.R. department is happy to to go through sort of the dynamics on on how it works over the three years.

Very clear. Thank you.

Thank you. We will now take the next question. From the line of Martin Gregersberg from SCB, please go ahead.

Thank you. A couple of questions from my side. First question goes on, where do you see your risk exposure amount going from the 846 until 2026? And then sort of the second question also goes in the lines of that, because Carsten, I think you left a bit of a cliffhanger here by being very specific that For 2024 and 2025, you would only distribute earned capital. And in the light of that, do you see that once we go beyond the probation period, that there could be room or there could be room for capital distributions exceeding 100% and also in the light of your reaffirmed above 16% C21 target? Those are going to be my two questions.

Thanks for that. I think first of all on the risk earning assets on the real side of things. I would think about it this way. The sort of front loading of the CRR3 impacts of 20 billion is within what we said at the Capital Markets Day of roughly one percent of regulation and other effects that we gave in the summer of last year. And we actually believe we're roughly there. There might be a little bit more but it will be well within what we said last year in terms of regulation and other effects. So that's one piece. Then the other piece is, of course, what growth will look like when you think about the RIA development over the next couple of years. And we continue to believe that the growth rates that we gave last year, even though we've started out more muted, are still very well within reach. And in fact, When we look at annualized lending in Q2 in the corporate banking book more generally, we feel pretty comfortable about that. So again, to extrapolate RIA out, I would look at the regulation impacts that I just mentioned, and then I would just look at growth from there on. I think it's important in terms of sort of as we look out into beyond 25, to look at, first of all, the growth opportunities, because we would like to, of course, absorb the excess capital that isn't derived from ongoing earnings by growth in line with our strategy. And then to what extent there is further excess capital, we will update and talk about that when we get to that period.

But, Carsten, isn't it a fair assumption? I mean, also given how your asset quality is developing, I mean, your annual re-inflation is probably not going to be above 3%. And if you need to walk the talk on the 16.5%, then by 2026, I mean, plus 100% payout ratio should be the base case.

Yeah, look, again, I mean, I hope the growth will be somewhat higher than what you say there, right? Because you're talking, we said 3% CAGR over the period, which means there's a bit of catch up to do. And then we'll see when we get to that period, what opportunity there is on the capital side. But Just to be clear, I think the capital distribution that we're communicating today is entirely aligned with what we promised last summer. If anything, it's slightly ahead.

Okay, thank you.

Thank you. We will now take the next question from the line of Ricardo Rovere from Mediabanca. Please go ahead.

Thanks for taking my questions and good morning, everybody. a couple if I may. The 20 billion risk-weighted assets front-loading in this quarter, is this, let's say, front-loading the impact of Basel IV on January 2025? And if that is the case, could you please eventually shed some light if implementation at Basel for over the next few years is going to bring more RWA inflation in 26 with the FRTB and then going forward. And the other question I have is, the capital requirement that you have in mind, which was above 16%, that's going to stay more or less unchanged over the next few years. Because I remember well, if I remember well, At some point, you stated that for the moment, we want to keep it above 16% in the short, I don't remember if you said short or medium term, if you just could please clarify. Thank you very much.

Sure. Thanks, Ricardo. Yeah, I think, remember, we already had front loaded roughly 100 billion of RIA that have been in the numbers for the EBIT guidelines. So we largely had already front loaded what we saw the Basel IV impacts would be. And this 20 billion of RIA is sort of more or less the last piece of that. FRTB, we actually believe, will be largely neutral. So again, I think we're largely there on front-loading Basel IV for 2025-26. Then in terms of above 16% CET1 over the next few years, yeah, I think, look, there's three components to this. One is the fact that we want to ensure that we have a prudent capital structure. target to absorb growth, as I talked about before. Then there is clearly the probation period. We're roughly halfway through that. And we feel good about where we are in terms of the dialogue with the authorities and all the work we've done on financial crime. But again, about one and a half years left of that probation period. And then, of course, there is ongoing discussions with regulators on stress testing and the like. And there, as we continue to execute on our plans and show solid earnings and solid credit, then we will also, I'm sure, get to an even better clarity on sort of stress testing and ongoing excess capital. But for now, the above 16 percent is still is, I think, a good prudent place to be for the next couple of years.

Thanks. Thanks a lot, Gaston. Just as a clarification, it's very clear what you said on 24, 25, and 26 with regard to anything beyond when the output flows is going to be, let's say, 70, 72%, whatever. Is there going to be more impact going forward on top beyond 26, beyond FRTB?

I mean, not from what we know at this stage.

Okay. Okay, thanks.

Thank you. We will now take the next question from the line of Mathias Nielsen from Nordea. Please go ahead.

Thank you very much and congratulations on the decent results today and the share price reaction as well. Most of my questions have already been asked, but my questions go around the The margin pressure in the different countries, what do you actually see on lending margin pressure in the different countries? And then secondly, on Danica, what should we picture in as the expected run rate on income from the insurance business?

So let me start with margins, and thanks for that, Matthias. Margins, we expect flattish margins if you look at a net interest margin basis. And that is sort of if you decompose it, slightly increasing lending margins would be our expectations, and then slight pressures on the deposit margins. But overall, pretty flat net interest margins. And then from a Dainica perspective, I believe last summer we gave sort of an indication of roughly 1.6 billion of earnings from Dainica through the strategy period. So I think that's a reasonable amount to use. Sure.

And then on the market in the different countries, is there anything different between the different countries?

No, I think actually you would be fairly safe to use those, and obviously they're pretty high-level assumptions across the markets.

Forecasting is always difficult, but so far I wouldn't think that we should expect something that substantially differs between the market both on the deposit as well as on the lending side. It depends a little bit on whether we get back to a level that is called where demand and supply are in balance. If we get to that, I think pricing will be better, at least the margin should be better. Currently, volumes are still low, and there's a bit of fierce competition out there. So that is still a bit of a drag to the margin. But again, we expect that to improve. Thanks. Thanks a lot.

Thank you. As a reminder, if you wish to ask a question, please press star 1 and 1. We will now take the next question. From the line of Jan-Erik Gerland from ABGSE, please go ahead.

Thank you for taking my follow-up. Just on the capital side, last year you mentioned you aim for 170 billion in total equity at the end of your strategy period. and that was sort of taking it to above 16% corrected tier one. It's now today 178 billion. And is this 170 needed for the future business excluding Norway, or is this 170 being lowered with the sort of the excess distribution for Norway, if you can clarify? Thank you.

No, we believe, looking at, and again, we are talking 26 and growth assumptions, we still believe that 170 billion is probably a good basis for supporting the business and the balance sheet that we expect by then.

Okay, so nothing lower from exiting than the Norwegian business, as you then would have growth from, which we'll call that RIA industry.

The way I would look at this is at the capital markets day we had a clear expectation of amongst other things income lines and cost and the income lines should be supported by a balance sheet and we haven't cut the income lines because of the sale of Norway nor will we cut the capital requirement for 26 because of the sale of the Norway other than the release that we that we have seen.

Very clear. Thank you.

Can we have the last question, please, operator?

Sure, no problem. We will now take the last question from the line of Martin Gregersberg from SCB. Please go ahead.

Thank you so much. Perhaps just a quick follow-up here on loan impairment charges. When I read what your macroeconomists are saying in the reports and also in the Danish press, they seem to be more and more optimistic. And given that you have a 200 million DKK reversal and you still maintain your post-model adjustments, is that how it should be done? And why are you not reducing those post-model adjustments in a quarter where you also see net reversals?

No, thanks. And I think it's a fair question. You know, there is no question that so far, I think the the let's call it the soft landing has developed well. And there is no question that there is nothing in our asset quality that signals any significant deterioration anywhere. And, you know, if we continue to see that soft landing play out, then, of course, there is a lot of rationale in looking at the post-model adjustments also, and we'll continually do that. But I think it's still early days, right? It's still early days, both in terms of the you know, let's call it the final part of the transmission mechanism from higher rates. But also it's still early days actually to call when exactly those interest rates are in earnest going to start to come down and inflation rate in earnest coming down to a place where we all feel a little bit more comfortable. But something that we're watching closely. Thank you. Everybody, again, thank you for your interest. Again, apologies for the technical mishap at the start, but hopefully you still got the questions that you wanted answered done. And as always, of course, please feel free to contact our IR department if any more questions. Thanks again, everybody. Take care.