Danske Bk A/S Bearer Shs

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

Thanks, Laus, and I would also like to welcome you to our Q4 conference call for the financial report for 2024. The year 2024 has been a remarkable and an important year for Danske Bank, with a net profit of 23.6 billion, slightly higher than our guidance of between 22.5 and 23.5 billion. Our financial performance was strong and highly satisfactory, at the same time as it clearly shows good traction on our strategy. The result is based on an increase in core banking income of 8% compared to 2023, taking total income to more than 56 billion, which represents the target for 2026. The macroeconomic backdrop, primarily in Denmark, developed better than expected in the beginning of the year. However, the operating environment was characterized by an overall muted lending demand. The key driver for our performance was based on expansion of customer relations and our share wallet. So in other words, we have succeeded in doing more business with our existing customers and thereby strengthened our market position. And this was primarily attributable to our corporate business and our investment activities, but also from a broad-based increase in everyday banking transactions. In respect to our strategy execution, on areas of progress we would like to highlight is our technology transformation, which has been and continues to be a key focus area of significant importance for our strategy execution. So, for example, tangible progress was made in 2024 with our cloud migration program, which runs ahead of schedule, and with prioritized investments in Gen-AI capabilities and solutions. In addition, our partnership with Backbase helped achieve tangible improvements of the onboarding process for new customers in Denmark. In the fourth quarter, where we delivered a net profit of 6 billion, we saw continued loan demand from corporates, mainly in Denmark, whereas lending growth remained subdued within our retail business. Deposits, however, increased across business units. In our large corporates franchise, our strong position enabled us to further expand capital markets activities, overall including a particularly strong performance in asset management, which led to a very high level of performance fees. Our cost-income ratio ended at 46% down from 49% in 2023 as we improved efficiency by keeping operating expenses stable. The planned cost takeouts has enabled our strategic investment ramp-up, where we continue to execute according to plan. A continuation of the strong credit quality led to net reversals of loan impairment charges from workout cases and provided further support to the financial result. And we continue to see reversals in Q4, including also the effect from a review of the post-model adjustments that we have. Net profit for the full year is equivalent to a return on equity of 13.4% and represents the highest annual return since 2018. And then capital distribution, where I'm very pleased to announce a distribution of all net profit for 2024. Total dividends, including the accelerated dividend for the first half, but excluding the special dividend paid out in December, amount to 22.2 kroner per share. or a dividend payout ratio of approximately 80%. And this is based on an ordinary dividend of 60%, in line with our dividend policy, and an extraordinary dividend of 5.35 kroner per share. So for the avoidance of doubt, our dividend policy remains unchanged, and the dividend payment is, of course, subject to approval at the annual general meeting. And then for the remaining net profit for 2024 of approximately 20%, we will be initiating a new share buyback program of 5 billion kroner starting next week. We maintained a strong capital and liquidity position. At the end of Q4, the CET1 capital ratio stood at 17.8%, and this includes the impact from dividends and the new share buyback program. Finally, on the financial outlook for 2025, which Stefan will comment on in more detail, we expect a net profit of between 21 to 23 billion, driven by slightly lower total income, stable operating expenses, and a loan impairment charge of around 1 billion. Let me comment a little bit on the business units, and then I'll hand over to Stefan for the financial results. Slide two, please. At personal customers, we've seen satisfactory financial performance driven by a higher total income up 6% in 2024 or 2% when adjusting for the 2023 provision related to the sale of PC Norway. Resilient net interest income supported the top line, despite lower policy rates and competitive pricing adjustments on saving products and home loans. The uplift in core banking income also benefited from a 14% increase in fee income on the back of stronger customer activity. Activity-driven fees improved and investment fees supported by higher assets under management also contributed. Speaking to our strategic focus also on private banking and wealth management offerings. We saw strong credit quality and prudent cost management underpinning satisfactory levels for return on allocated capital and cost income, both of which are on track to meet our 2026 targets. On lending, we saw positive traction for bank home loans. With our holistic offering, we can accommodate a broader range of customer needs, especially in the current interest rate environment. Danske Boligfri grew a further 6% in Q4, bringing the stock of bank home loans to almost 50 billion. Housing market activity remained muted, however, despite encouraging trends late in the year, as rates declined and households began to experience real wage growth. This impacted the stock of residential lending in Rehlkredit Denmark, as did redentions and amortization. And looking ahead, I believe we have the platform and we have the potential to regain our fair share of the mortgage market in Denmark. Deposit developments remained solid with an inflow from retail customers in Denmark and Finland. As rates on savings products declined, we saw customers shifting savings to our investment solutions. Looking at deposits, assets under management and assets under custody, total customer funds increased by around 50 billion during 2024. And this clearly shows our ability to expand our share wallet and offer the right solutions for our customer needs. As a whole, I'm pleased to see how we continue to expand relations with our customers. This is also reflected in our strategic KPIs, where customer satisfaction in Denske Bank's image has steadily improved. Page 3, please. At business customers, financial performance remained solid despite a decline in total income, predominantly related to lower income from our leasing businesses. Core banking income benefited from enhanced product offerings, increasing customer activities, and a positive development of our customer base in line with our strategy. As a result, we saw resilient NII and a continued uplift in fee income tied to daily banking and our subscription-based service model. And this is a testament to our customer penetration and increasing share of wallet. Return on allocated capital remained in line with our 2026 target of 21%, despite being impacted by the lower rates. Our cost-income ratio remained ahead of our 2026 goal due to prudent cost management while we continued to invest in and build our business. Our strong commercial momentum was further reflected in solid lending growth with evident traction across all Nordic markets and further driven by an expansion of new customer mandates in the more complex mid-sized segment. Deposit levels were largely stable year on year, with growth in Sweden and Finland offset by an expected decline in Norway from the repricing of less profitable deposits. We clearly see progress on the strategic KPIs that we set as part of Forward 28 with a tangible uplift in daily banking fees. Our ambition to increase the automation in our credit decision-making process also currently meets our target for 2026, which is directly supporting our efficiency and adding to the increasing number of customers that are satisfied with our advisory services. Slide four, please. For LC&I, I think there is ample reason for us to be very satisfied with the financial performance at the LCI in 2024, as we've seen strong customer activity broadly across the franchise, resulting in a 10% year-on-year increase in total income. We're particularly pleased that the positive development has been founded on a continued execution of our strategy towards our strategic targets. Notably, we have again in 2024 welcomed new large corporate customers as we continue to deliver on our strategic KPI to grow corporate banking relationships outside of our home market in Denmark. For instance, winning new house bank mandates across the Nordic countries. Furthermore, we continue to see good progress for our already leading capital markets franchise as customers have trusted us with lead roles in several landmark transactions across our product offerings within lending, equity, and bond issuance. And on top of this, asset management also performed strongly in 2024. AUM grew more than 100 billion or 14% in 2024, and our funds generated above benchmark performance, resulting in record high performance fees. Overall execution of our strategy resulted in capital efficient income growth that yielded a very satisfactory return on capital of 25% for 2024, which is well above our 2026 target of 18%. Moreover, both deposit and lending volumes at LC&I continued to grow 2% and 3% respectively over the year. Deposit volumes trended higher, supported by corporate customers' seasonal buildup of reserves, and lending volumes grew as we saw strong activity, for example, in our syndicated loans business. And then with that, let me hand over for Stefan's last quarterly result after many good quarters in the bank. Over to you, Stefan, and that's on slide five.

Thank you, Carsten. As Carsten just mentioned, we saw a strong and improved performance in our financial result. Relative to last year as well as the preceding quarter, profit before loan impairment charges was up 14% and 4% respectively. I will now start by giving you a brief overview of our income statement and reserve more detailed comments for the relevant slide. Total income for the full year came in at $56.4 billion, which represents good progress towards our financial ambitions for 2026. In Q4, total income increased 5% relative to the preceding quarter, driven by slightly higher NII and a strong increase of fee income of 35%. Trading income declined in Q4 mainly due to lower seasonal customer activity, whereas income from our insurance activities saw a negative impact from an increase in provisions related to the health and accident business. However, insurance income of 1.4 billion for the full year benefited from a sound underlying business develop and higher premiums as well as more stable financial markets and was in line with what we consider to be normalized annual income. Other income benefited from the transfer of PC Norway investment funds with 0.2 billion booked in Q4. Operating expenses amounted to 25.7 billion in line with expectation and slightly below our adjusted guidance for 25.8 from Q3. In Q4, expenses came in higher than Q3 due to normal year-end seasonality. Due to continually strong credit quality and improved macro environment, we had net loan impairment reversals for the third consecutive quarter. In Q4, net reversals of 0.1 billion, taking the total net reversals to 0.5 billion for the full year. Profit before tax came in 17% higher compared to last year and slightly higher than the previous quarter. Slide six, please. Let's take a closer look at the key income lines, starting with net interest income. In the fourth quarter, we continue to see NII trending up slightly. The positive uplift came in spite of the takeout of income from PC Norway's portfolio and the impact from central bank rate cuts. NII has benefited from the positive development in volumes as well as improved lending margins while funding costs are declining. This has particularly been evident on the corporate side. In addition, the expected benefits from our deposit hedge and more broadly from Treasury effects have mitigated the impact from rate cuts on deposit margins. We thus ended 2024 on a positive and resilient trajectory, while mindful that the exact quarterly development will depend on timing of rate cuts and our subsequent revising of both loans and deposits, as well as the balance sheet's development along with our bond portfolio role. Furthermore, this has always been anticipated as a very flattish peak that will level out from here on and into 2025. This also forms the basis for our view on NII going forward. I would like to stress that this is based on an as-is point of view with forward rates applied by the end of January and subject to our balance sheet's development. As market expectations around the timing and number of future rate cuts change frequently, Guiding for the full year is clearly subject to a high degree of uncertainty, but it continues to reflect our stated sensitivities and further benefits from our deposit hedge in 2025. As such, and as part of our announced net profit guidance for 2025, we therefore expect NII to be above 35 billion. Slide seven, please. Based on the solid progress we saw for customer activity during 2024, we are today able to present the strongest fee income in many years. Relative to the last year, fee income rose 16%. The increase was driven by investment activities and strong activity-related income, but also by capital markets activity where the DCM business was a strong contributor. Fee income from lending was stable, mainly reflecting a subdued housing market activity in the first half of the year. Investment fees represented the most significant uplift year over year, as well as compared to the previous quarter. Performance fees in asset management provided the main contribution, coming in at 0.7 billion against 0.3 billion in 2023, based on a strong performance in all type of funds and particularly in the fixed income funds. The percentage of oil funds with above benchmark returns was 65% in 2024 against 54% for the preceding three-year period. In addition, investment fees further benefited from a consistently strong performance in private banking. Looking at assets under management, we saw a positive inflow of $23 billion in net sales, taking the total increase to $110 billion. During Q4, income related to financing rose on the back of increased corporate loan demand and refinancing of mortgage loans. Finally, we continue to see a solid increase in income from capital markets business also on the back of significant ECM transactions. Slide 8, please. Now let us look at net trading income. For the full year, net trading income came in 2% higher than the year before. As it is shown on the slide, the uplift in group functions can be explained by the cost from unwinding the CET1 hedge for Norway in 2023. The decision followed the announcement of the exit of the PC business in Norway. The decrease in trading we saw at LC&I was due primarily to a normalization of market conditions following exceptionally strong activity in the first half of 2023. In Northern Ireland, income in 2024 was affected by a less positive effect from mark-to-market movements on the hedging portfolio compared to the year before. Trading income in Q4 came in lower than Q3, mainly due to lower seasonal effects primarily within the fixed income business. That concludes my comments on the income lines. Let's turn to expenses on slide 9, please. Looking at our cost development for the full year, I am pleased to see how we have managed our cost base as expected and largely mitigated the impact of inflation, supporting the improved cost-income ratio of 46%. The full year cost of 25.7 benefited from a one-off insurance reimbursement in Q3. However, we also had elevated costs related to the move to our new domicile, as well as costs related to the divestment of PC Norway. Furthermore, we saw the intended structural cost takeouts related to our financial crime prevention setup after finalizing the multi-year investment period in this area. We always envisioned that the digital and IT investments related to financial crime will drive cost lower post-completion, and we clearly see the path towards a steady-state operating level. Similarly, we saw a solid step down in legacy remediation costs, although we will still carry a tail into 2025. Altogether, this has enabled our strategic investment ramp up in digital solutions as outlined in our Forward28 growth strategy. In 2025, we will continue our prudent cost management and further investment in our business as we improve efficiency and free up resources. We therefore expect another year in which our operating expenses are kept largely flat with a new guidance of up to 26 billion. Slide 10, please. Let's take a look at our asset quality and the trend in impairments. Throughout the year, we continue to see our well-diversified and low-risk credit portfolio benefiting from the benign macro environment and improving healthy household finances. Impairments in Q4 led to another quarter of net reversals, this time 0.1 billion, which was driven by contiguous strong credit quality and additional PMA releases. Actual single-name credit deteriorations remain modest, and we continue to benefit from limited-stage migration as well as recoveries from workout cases. With reduced external uncertainties related to the personal customers, as well as the commercial real estate exposure, including better macro visibility, as tail risks related to the inflation shock have diminished, and along with the refinancing risks in the commercial property sector, our post-model adjustment updated results resulted in releases of 0.5 billion in Q4. Despite the revision of our PMA buffer, we continue to apply a prudent approach to cater for potential tail risks and uncertainties not evident in our portfolio or captured through our macroeconomic models. We will naturally continue to review the PMA buffer with specific assessment of the sectors that are currently applied for, as well as a prudent stance on the potential impact of the current geopolitical uncertainties. That said, it is important to emphasize that our new impairment guidance for 2025 of around 1 billion remain below our normalized level, but is not predicated upon further PMA releases. Slide 11, please. Our capital position remained strong and was consistently supported by the healthy capital generation throughout the year. At the end of Q4, the reported CET1 ratio was 17.8%, which include the special payout in December related to PC Norway, as well as the additional 40% distribution of the net profit for 2024 we announced this morning. The development in risk exposure amount in Q4 was predominantly driven by the release from PC Norway. Excluding this, we saw lower credit risk RIA offsetting slightly higher market risk, as well as operational risk RIA, which, as per normal practice, is subject to an end-of-year calibration that reflects our higher top line and profitability. We continue to operate with healthy buffers to the regulatory requirement as we steadily execute towards our capital target with a CET1 capital ratio above 16%. Finally, I also want to emphasize that we maintain our ordinary dividend policy of 40% to 60% of net profit, and this going forward will resume in the form of annual dividend payouts. Now, let us turn to the final slide in our financial outlook for 2025. Slide 12, please. And finally, I would like to comment on our outlook for 2025. We expect income to be slightly lower than in 2024. This will be driven by lower NII from lower market rates. However, the impact is subject to the timing of potential rate cuts during this year. Core income will continue to benefit from strong fee income and our continued efforts to drive commercial momentum and growth in line with our financial targets for 2026, whereas income from trading and insurance activities will be subject to financial market conditions. As mentioned earlier, we expect operating expenses to be up to 26 billion, reflecting our continuous focus on cash management and in line with our financial targets for 2026. For loan impairment charges, we expect them to be around 1 billion as a result of continually strong credit quality. We expect net profit for this year to be in the range of 21 to 23 billion, and our financial targets for 26 remain 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 call 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 answer your question, please press star 1 and 1 again. We will now take the first question. From the line of Mattias Nielsen from Nordea, please go ahead.

Thank you very much. And I'll try to limit myself to two, maybe two and a half questions. But like on NRI, like the dynamics during 25, how should we think about that? I think you already said that it should flatten out, but you also said that last time. And now we saw NRI grow quarter on quarter during Q4 again. Do you expect the same thing into Q1 when adjusting for the interest dates? And then secondly, that's my half question, on the total income, was it correctly understood that, Stefan, you said that 24 was looking like a normalized year, so moving into 25, it offers a good baseline where we can, as I noticed, just add the growth rate cuts, et cetera, and all those movements. And then lastly, on the capital distribution, Just to clarify, I think you made it clear that we should not expect interim dividends this year, but you also set the bar at 100% payout ratio this year. Would it be fair to assume that it could be 100% next year as well, or do you think that growth will be so strong that you would move too fast towards the CT1 ratio if you did 100% on payout in 2025? Thank you very much.

Thanks, Matthias. On capital distribution, I think we have, as part of our Forward 28 strategy, previously guided towards kind of our approach to distribution and the 100% distribution of in-year earnings this year is in line with what we've previously said. And you should also expect that we would distribute 100% of 2025 earnings. And by saying that, therefore, you should expect that we can absorb growth within existing capital buffers, which still is significantly above minimum requirements. NII dynamics for 2025. So we're guiding towards above 35, so slightly below this year. It is true we had expected Q3 to peak, and therefore Q4 comes out earlier. better than expected. And I think you should also see that in line with stronger activity than we expected. And when you look at the NII bridges in the presentation, you'll see it is driven both by volumes and margins. And, of course, that's pleasing to see that it is really robust underlying business activity that supports the NII piece. And then, Stephen, I'll ask you to comment on, I think there was a question around total income and normalized income. Yeah.

So again, the guidance for 2025 that we just gave is slightly lower total income, probably mainly driven by the NII component, which is subject to rate cuts. And then you can say plus growth, plus benefits from the portfolio role. Again, as Carsten said, above 35 billion is the level that we see right now. On the other lines, the question I sense a bit like is there anything one-offish in the total income line? By and large, I would say the total income pretty much reflects real performance. Yes, performance fees came a bit higher in Q4 than we have seen it historically. I would say historically we have seen something like call it four or five hundred ish. So there is probably something like two hundred that is above normal performance fee levels. which in total means that you can probably expect the fee line for 25 to be roughly the same, even if we get to lower performance fees, which is what we expect.

That was very clear. Thanks a lot for the answers.

Thank you. We will now take the next question. From the line of Tariq Al-Mijad from Bank of America, please go ahead.

Hi, good morning, everyone. Thanks for taking my questions. A couple of quick ones. First, I would like to come back on the capital distribution. Yes, you stick to your guidance. Now, we are closer to the end of the so-called probation period for post-settlement. Should we expect or hope for some acceleration of distribution above the 100% payout now that you kind of finalized remediations? and you run down the surplus capital a bit faster. And same question on, you touched on it a bit in the presentation, but maybe ask more about this on the impairments. So you still, you decreased a bit the post-model adjustments to 5.9 billion, but stock is still high. What could be actually, what should we watch actually to see if this stock of post-model adjustments should come down further from here or this level comfortable to keep given the global context. Thank you very much.

Thanks, Tariq. On capital distribution, look, I think that's more a question for 2026. What we've said is that the probation period, of course, ends at the end of this year. And then we would look again at our capital position with sort of the legacy capital, if you will, e.g. not the in-year earnings. But I think that our key focus is to grow the business and to ensure that we can grow the business in line with the strategy plan. That would sort of be plan A, and then we'll see what other opportunities there are. Then on the impairment PMA, You can see that the reductions in post-model adjustments this time around are driven by some slight reductions in our commercial real estate and our personal customer post-model adjustments. And that's really driven by inflation and rates coming down, which thereby lowers the unmodeled risks that we had been concerned about. So what should you watch for? You should watch for continued soft landing, continued sort of stability and predictability around inflation rates. But of course, also general uncertainties in the macro environment are the things that that come into play. So As we said, we've guided for an impairment of around $1 billion without any changes in post-model adjustments. And then we'll ongoing revisit the post-model adjustments as we've also done the last few quarters.

Thank you.

Thank you. We will now take the next question from the line of Namita Samtani from Barclays. Please go ahead.

Good morning, and thank you for taking my questions. My first one, could I understand the assumptions behind the NI Guide of Above 35 billion in 2025, a bit better. Like what exact terminal rate are you assuming? Because at the end of January, I see the one year forward curve in Denmark at 1.6. And what loan growth assumptions are you using? And secondly, I wanted to ask what about your strategy in Sweden? I see you pay 25 bps on savings accounts, which is less than the incumbent banks. You seem to be struggling to gain market share on the mortgage side. So would you consider disposing this business like you did with Norway? And if you wouldn't consider to dispose, what's the rationale for keeping it right now? Thank you.

Thanks, Demita. Let me take the Sweden strategy question and then Stefan, you can speak into the assumptions behind our NII guidance. First of all, Sweden is a very important market for us. We have a reasonably scalable and successful SME and large corporate and institutional business. which continues to grow well, take on new mandates and also, I think, showing a nice growth versus market. Then on the retail side of things, what we said in the strategy was that we would really refocus that business to be much more focused on mass affluent and higher end customer base, including leveraging the customer base and business customers. We said we would focus on getting that back towards a more acceptable return. We also said that that would take a couple of years. So we're in full focus on doing that. And then we'll continue to see what the opportunities are for the Sweden retail business. So at this point, the strategy is to get it back to a a good level of profitability. We believe we can do that. And then we will update in due course on what further opportunities there are.

Hi, Namita. On your two pieces around NII, let me start with the growth component. So as per stated strategy, we would expect a growth, call it around 3%. And I think the Q4 clearly points out into that direction in some of our more important businesses. On the rates, we just took the call it forward rate of end of January. And in that sense, I recognize you are 1.6 for the DKK central bank rate. But keep in mind, we are trading in a couple of other currencies as well. So also the euro, as well as the UK rates, the Swedish and the Norwegian rates have a role to play.

Thanks and good luck for the future, Stefan.

Thank you.

Thank you. We will now take the next question from the line of Sophie Petersens from JP Morgan. Please go ahead.

Yeah. Hi. This is Sophie from JP Morgan. Sorry for going back to the NII, but could you maybe also a little bit talk about when we should expect the net interest income trough? Because it looks like you had quite a lot of benefits in Treasury and other Will any of that kind of reverse of the 0.6 billion, and do you think, or one of your peers basically said NII could drop around six months after the last rate cut, do you think that would also apply for Danske, or how should we think about that, the kind of NII drop? And then my second question would be, How do you think about tariffs for Denmark? You have a quite big pharma industry. Also, there seems to be quite a lot of discussion around Greenland and the future. How does this impact, if at all, Danske? And how do you think about this in your provisions going forward? And also, if you could just let us know if you have any exposure to Greenland. Thank you.

Thanks, Sophie. I think on NII, I mean, you should expect, you asked about the sort of peak risk trough. I mean, again, you should expect that Q4 is a peak and then you should expect a slight reduction in overall NII into this year. But I would say marginally so, which is why we are guiding to above $35 billion. And really the dynamics that you allude to in the bridge, including the treasury pieces, is the income hedge, right, which is largely the income hedge. There's also other components. such as the income on equity and other pieces, but is largely the deposit hedge. Yeah, again, slight reduction from peak in Q4, but maintaining a pretty solid level of NII, again, driven by the fact that we expect growth, as Stefan mentioned, of around 3%, using assumptions of latest forward curves end of January, and then the income hedge that we have. So we don't have any exposure to Greenland. I think it is a political question. Largely, it is not something that is, I think... at a sort of more, let's say, broad base, a concern for business in Denmark. We still look positively on the Danish economy, a growth of around 2.5% as we look into 2025. I think businesses are relatively optimistic. Growth will be partly supported by as pickup in consumer spending, as inflation comes down, as interest rates come down. And given that we have seen real wage growth not only last year, but also expect that that's the case this year. So despite, you know, clearly uncertainty around trade wars and rhetoric, I think, largely speaking, we look cautiously optimistic on 25 when we speak with customers and clients.

Okay. And just on the net interest income hedge, is it still roughly 150 billion? And if you could just remind us how much the yield is on the hedge.

It is. We haven't given the exact yield on the hedge, but we could say that there is still some further pickup in that.

Okay, that's clear. Thank you.

Thank you. We will now take the next question from the line of Patrick Nilsson from Goldman Sachs. Please go ahead.

Hi, good morning and thanks for taking my questions. I was just wondering if you could elaborate a bit on the moving parts in your guidance. So you're given the net profit range of 21 to 23 billion So what are the scenarios there that could make you being in the top end versus the lower end? Is it more on the income side that could be better or worse than expected? Or do you see maybe provisions also potentially surprising in either direction? And then my second question was just if you've seen any impact on product pricing in Denmark recently following the recent M&A activity that took place in the end of last year with one of your competitors. So if mortgage pricing or if you've seen an impact on anything else. Thank you.

Thanks, Patrick. Look, I would say in terms of moving parts, when you look at the net profit range of 21 to 23, of course, impairment can always be volatile. No question about that. We've given our best view on the back of what we see in the economy and the asset quality as it is. So we feel fairly confident. But again, that is, of course, a component that can move. We all know that. Again, I would remind that we have a robust post-model adjustment in place that if there should be any more, let's say, unforeseen or unexpected changes, then that is clearly part of what those are there for. And then I think the other variability is how we will see growth, right? Particularly lending demand growth. Our expectation, as Stefan said, is around 3%, which I think is... It's something that we believe is very doable on the back of real GDP growth of 2.5% and with the dynamics on where rates and inflation are going, as I mentioned before. But clearly that is one of the question marks where we see those growth levels. Then you have a question on product pricing in Denmark. I mean, we have seen NYCredit go out with an increase in what they call their kundekroner, which is an increase in kind of their dividend back to the consumers, which therefore lowers the prices on real credit lending. Still too early to say how the market will respond to that. And obviously, I can't give any insights on future pricing. But so far, that's the main sort of dynamic is a more competitive pricing position from Nikredit.

That's very helpful. Thank you very much.

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

Thank you so much. Just a couple of follow-ups here. First off, if we assume that the US president is going to impose 25% tariffs on the EU, What would your first response be? Would this be an excuse to buckle up your PMAs once more, or how do you see it? And then second of all, the 170 billion that you guided for in equity in 2026, does that still stand firm? Thank you.

Hi, Martin. Thanks for that. I think it's difficult to say. I think if there was a broad-based 25% tariffs on EU, I think it would depend very much also on EU's response. I think it would depend very much on individual sectors as well. In general, if you look at, for example, Danish exports to the U.S., two-thirds of that is from local production in the U.S., and the last one-third, a lot of that is pharma, which currently typically is not included in tariffs. So, you know, if you sort of peel the onion on it, I think overall a full-out trade war is, of course, not good for global growth and not good for anyone, and therefore I think it would more be – a question mark around, okay, what does that mean in terms of some of the things we talked about earlier around kind of credit demand, investment levels, consumer spending, as sort of a very aggressive trade war would probably cause nervousness around investments and spending. But whether or not it impacts post-model adjustments, it could do on single sectors. But I don't think it would be sort of a broad-based approach. So those would be some thoughts, Martin. And then, Stefan, you want to comment on the equity assumption level?

Yeah. So I think, by and large, this still holds. And, yeah, that's the simple answer.

Okay. Stefan, is the 170, is that average equity over the year? Or is it sort of Q4?

No, it's average. It's typically average? Average, yes.

Okay. Even if you pay out 100% from here on, then it seems like you are a notch above that equity base, right?

And again, let's see how things develop. If then our income and profit lines work the same way, I think then I'd be happy if we get the capital employed. That should be a good thing.

Okay. All right. Appreciate it. Thank you.

Thank you. We will now take the next question from the line of Jan-Erik Geirland from ABG. Please go ahead.

Thank you, Jan-Erik Geirland from ABG. I have a question on the cost line. The first one is on the IT and investment side where you picked up a little bit speed here now with 300 million a quarter having 900 million roughly for the full year. Is the 300 the new baseline for your investments into 2025 and 2026 when it comes to your guiding up to the 26 billion? And secondly, the number of FTEs has come off a little bit in the personal customer areas, probably from the Norwegian, say, the Norwegian banking area. What should they expect going forward? And finally, just the two and a half question, the bank taxes and resolution fees, what do you reckon for 2025 on that line? Thank you.

So, first of all, on what you defined as IT investment, so call it core change, including our F28 agenda, I think you could expect that by and large the same. What you will also, or what we are also working on is increasing productivity in as many places that we can and in that sense IT or Gen AI and things around that will also play a quite big role in that some of these freed up resources we will invest in inverted commas also in probably frontline capacity and customer facing units so there will be a bit of repurposing. And in that sense, we expect that trajectory to stay the same or that dynamics to be the same. And that also explains a little bit what we expect on FTE. So I wouldn't see any larger FTE takeouts, but we will probably see some reallocation to more customer and income-driven components.

Bank taxes and resolution.

Sorry, bank taxes and resolution. Yeah, I think we know what has happened. So also the resolution fund is now completely filled up. So that gives the expected relief that we have all been looking for for 2025.

Also in Sweden or just Denmark? Denmark. Denmark. Thank you.

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

Good morning, everybody. Thanks for taking my questions, a couple if I may. The first one is on the capital distribution policy. So the dividend policy does not change, as far as I understand, 60 to 40, 40 to 60. But Carsten, if I understand correctly, at the beginning of the call, you stated that the 100% payout is something that you have in mind also for 2025. So I would imagine the rest should be a buyback. Now, does your thinking about the mix of the two changes depending on the share price of Danske Bank? So the more the share price goes up, maybe the smaller could become the SBB component, or does it make any sense what I'm saying? This is the first question. The second question I have is on the post-modal adjustments. Before COVID, you had four billions. Now you are at 5.9, if I remember correctly. Is the Delta 1.9 that you can really use or the 5.9? Because I imagine a portion of that should stay there in any case, I imagine. So the portion that was built after COVID was capital of billions or two billions and a half at some point. So just any thought on this. Thank you.

Hi, Ricardo. Thanks. I think on the distribution question, yes, our policy is still 40% to 60%. Yes, we do anticipate paying out 100% of in-year earnings, 25%. In terms of the mix between whether we do an extraordinary dividend above the 60 percent and how much that is versus how much a buyback is, I think will depend partly on where the share price is. It'll depend on discussions with our investors and with the board. So, yeah, I think there will be ongoing discussions around what the ideal mixes of the additional distribution above and beyond the normal dividend. On the question on post-model adjustments, How I think about it is, yes, there will always be a level of post-model adjustment. I think that level now is high compared to average. And I think it's high compared with what you would maybe over time see as averages because there is a high level of uncertainty out there that is very difficult to cater into the models. What that number is, I don't know. There is no accurate view on that. But I think that's the kind of guidance I would leave you with.

Thanks. Just a clarification. So implicitly, you're saying that the amount existing in 2019 may not be the floor.

Correct. Yeah, I can't say that that's the four, but I can say that I think we have a higher level of PMAs than what I would say would be an average level of PMAs if I was going to look longer term compared to total allowance and so forth.

Very clear. Thank you very much. Thanks.

Thank you. We will now take the next question from the line of Johannes Sormann from HSBC. Please go ahead.

Good morning, everybody. Just two follow-ups, please. First of all, on your mortgage business, what growth is really possible this year if rates continue to drop? Could we also see double-digit mortgage volume growth in Denmark, for example? And then probably on group strategy, what happens with Northern Ireland if there's probably... further talks between Ireland and Northern Ireland about reunification. Thank you.

Mortgage growth, I think double digit mortgage growth is probably pushing it. But will we see more growth in the mortgage business in line with rates coming down and inflation coming down? That is clearly our expectation. But I would expect it's more lower digit growth in the mortgage business. That's currently what we're expecting. Group strategy around Northern Ireland is that we like the bank, it's performing well, and we'll continue to manage it well within the business that we have, and then we'll see how things go.

Okay, thanks. And then, operator, can we have the last question, please?

We will now take the last question for Hari Sivakumaran from KBW. Please go ahead.

Hi there. I want to ask on the year two and year three and how relevant they are for where we are in the cycle. I think the main components are the bond portfolio and the three-year Swedish mortgages. Mortgage bonds are paying around 2.4%. I guess the Swedish mortgages are still rolling, but look about there. So if long rates stay where they are, would there still be negative impacts in year two and three? And then on the pillar two requirement, can you just remind us how much is still there for Estonia? Thanks.

So on the stated year two and year three sensitivities, they hold and they are unchanged. Again, I would want to remind you that the assumption for these sensitivities is a parallel shift of the curve, something that we haven't seen for a long time. So in that sense, It is the right number, but I think it still is difficult to convert that into a spreadsheet for forecasting. In that sense, we still expect the bond portfolio role and keep in mind its funding component as something that will produce the benefits that we have guided you for. And again, I think we have increased our guidance on a more regular basis to make your lives easier a bit on this as well. We don't as such hold a call it Estonia Pillar 2 buffer, but we still have a couple of smaller PMAs in the Pillar 2 buffers that are linked, call it, to some of our more recent and older history, but we are in constructive dialogue with our regulator about how to treat these.

If I may supplement, Stefan, on this, I think what you are referring to, Harry, is the $10 billion buffer that we achieved where the $7.5 billion were related to a potential fine, and that is gone. So what is essentially left of the buffer you are referring to is $2.5 billion.

Thank you. That's very helpful.

Very good. Well, thank you. Thank you once again all for joining us and for your interest in Danske Bank. Thanks for all your questions. And as always, please do reach out to our investor relations department if you have any more questions. Thanks a lot. Have a great day.