Danske Bk A/S Bearer Shs

Good morning, everyone. Welcome to the conference call for Danske Bank's financial results for the first nine months of 2025. My name is Claus Inger Jensen, and I'm head of Danske Bank's investor relations. With me today, I have our CEO, Carsten Eris, and our CFO, Cecile Hillary. We aim to keep this presentation to around 20 minutes. After the presentation, we will open up for a Q&A session as usual. 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, where I'm pleased to share the highlights of Danske Bank's financial results for the first nine months of 2025. This period saw solid financial performance rooted in our strategic priorities as outlined in our 428 strategy. Net profit for the first nine months came in at 16.7 billion, equivalent to a return on equity of 12.9% for the first nine months and 12.6% for the third quarter. On the macroeconomic front, the Nordic region shows promising growth, aligning closely with structural rates, and despite some downward revisions of GDP growth for Denmark, the economy remains strong. The support of low interest rates set by central banks in Europe are contributing positively to the business environment we are operating in. And our achievements can be attributed to a good performance across core income lines, prudent cost management, and while maintaining strong credit quality. We are pleased with the increased commercial momentum that we saw during the first nine months. This is in particular evident from an uplift in lending and deposit volumes of 4% and 3%, respectively. The positive traction for lending is mainly due to higher customer activity in the corporate segment, whereas the increase in deposits is driven by the retail segment, where our customers favor savings over spending. Our asset management business continues to grow, reaching an all-time high of more than $950 billion in assets under management, bolstered by strong net sales in both the private banking and institutional segments. Credit quality continued to be strong and was supported by favorable macroeconomic conditions. For the first nine months, the loan loss ratio amounted to two basis points, unchanged from the preceding quarter, and the PMA buffer is kept largely unchanged. And then just a few comments when comparing to the preceding quarter. Core income came in slightly better. NII was unchanged as a combination of lending growth and the contribution from our structural hedge had a positive effect that offset the impact of lower market rates. Fee income was higher due to a positive development in asset prices and continually strong momentum for net sales across all channels within asset management, which resulted in a solid increase of 6% in assets under management. We therefore maintain our guidance range from net profit of between 21 and 23 billion. However, we now expect net profit to be at the upper end of that range. The expectation is driven by better NII and an improved outlook for loan impairment charges, which we now expect to be no more than 0.6 billion. And then slide two, please. At personal customers, we saw stable financial performance supported by deposit growth and healthy customer activity while managing the impact of policy rate cuts on deposit margins in the first nine months of the year. In Q3, total income was supported by an 8% increase in fee income that reflected a positive uplift across all fee categories. Net interest income also benefited from an updated hedge, our updated hedge allocation framework. And Cecile is going to talk about that a little bit later. We continue to see strong credit quality and prudent cost management, which support our 2026 financial objectives. And the trajectory on cost income and return on allocated capital is in line with our 2026 targets. In terms of lending, the development in home loans generally remains stable, reflecting a somewhat subdued housing market when looking across the Nordic countries as a result of cautious consumer sentiment. In Denmark, housing market activity has gradually risen, and total home loans in PC Denmark grew modestly as the lending volume of our bank loan product, Danske Boligfri, increased by another 11% in Q3 and is now up more than 35% year-on-year. This is also a reflection of changed customer preferences, with customers substituting the more conventional ReelKredit Denmark mortgage product by bank home loans, which highlights our ability to offer flexible loan products through a rate cycle. And then simultaneously, we've adapted our pricing and our holistic advice to serve our customer needs and enhance Kredit Danmark's competitiveness. And then finally, while deposit volumes are typically affected by increased summer spending, we continue to see elevated cash savings and an overall 2% deposit growth year on year. And then additionally, our commercial traction within private banking was underpinned by another quarter of higher net sales and inflow to investment products. This, in turn, drove assets under management to record high levels and, again, shows our ability to expand offerings and support customers' financial planning, regardless of the market environment. Slide three, please. At business customers, we see the momentum building and our financial performance reflected continued progress on our commercial priorities. Core banking income was up 3% in the third quarter relative to the same quarter last year, supported by solid fee income driven by higher everyday banking fees, including FX activity, as well as finance-related fee income growth. Total income quarter-on-quarter was supported by stable fee income, despite typical seasonality, and NII benefited from the updated Treasury allocation framework. our growth agenda was supported by improved credit demand and our efforts to expand our customer base, resulting in increased market shares across all four Nordic countries. And this was underpinned by the growth in lending volumes of 1% quarter on quarter, and then 4% year on year, which again was largely broad based across industries. With a sustained focus on diligent cost management, the cost-income ratio continues to be in line with our 2026 target, and the robust credit quality and benign level of impairments further supported profitability, with profit before tax increasing 3% quarter-on-quarter and in line with our 2026 targets. Our strategy execution has been encouraging and clearly highlights the business potential, and we continue to focus on improvements to our digital offerings, coupled with targeted advisory services to support customers efficiently across the region, where complex solutions are in demand from our customers across the Nordics. And then slide four, please. In our corporate and institutional franchise, we saw a strong financial result for the first nine months of the year. Total income was up 8% year on year as we continue to leverage our strong balance sheet to the benefit of our corporate and institutional customers and saw strong customer demand for our investment solutions. In addition, we focus on executing our strategy to be the leading Nordic wholesale bank. Importantly, our leading solutions in product areas such as loan capital markets, debt capital markets and cash management see solid customer demand and help us continue to attract new corporate customers outside Denmark, in turn delivering on our strategy. Total income was up 1% relative to the second quarter, driven by solid customer activity in our markets area alongside continually strong credit quality. And this helped us generate a return on allocated capital of 25%, well ahead of our 2026 target. And then we continued to grow our corporate lending book. We saw lending growth of 12% year on year and 4% quarter on quarter. We were also very proud that as the only Nordic bank, Denske Bank was mandated as joint global coordinator in the largest ever capital raising transaction in the Nordic countries. Operating expenses, they grew 2% relative to the second quarter as we continue to invest in the business and selectively add competencies as needed to drive our advisory offering and execute the strategy. And then assets under management grew 6% in the third quarter relative to the preceding quarter to a record high level of 954 billion, primarily driven by strong net sales across channels and also a robust investment performance. And then with that, let me hand over to Cecile for a walkthrough of our financial results for the group. And that's on page five, please.

Thank you, Carsten. As Carsten just mentioned, our financial performance was solid in the first nine months of the year. Net profit for the group came in at $16.7 billion and was down 5% year-on-year, firstly due to the loan impairments line and secondly from lower insurance income. NII remained stable as the impact of rate cuts was mitigated by the growth we saw in volumes and the contribution of our structural hedge. Fee income benefited from higher customer activity and the growth of assets under management. The result for the third quarter came in at 5.5 billion, up 1% from the level in the second quarter, mainly due to lower loan impairment charges. Total income was slightly down as income from both trading and insurance activities decreased from strong levels in the second quarter. This decline was partly mitigated by stronger fee income thanks to the rebound in customer activity in the third quarter. Trading income saw a decline in Q3 mainly due to valuation adjustments in Group Treasury and a one-off in Q2. Trading income from customer activity at LCNI was on par with the level in Q2. Income from insurance activities came in lower in the first nine months of 2025 compared to the year before, partly due to an increase in provisions in the first quarter. In the third quarter, the result was lower due to return on investments and the result of the health and accident business. We continue to focus on repricing, preventive care and reactivation initiatives to improve the financial outcome of insurance contracts and respond to current market trends related to long-term illnesses. Operating expenses were almost unchanged relative to the same period last year, as well as the preceding quarter. And finally, as Carsten mentioned, credit quality remains strong with a net reversal in the third quarter. Slight slicks, please. Let us take a closer look at the key income lines, starting with net interest income. Overall, NII remained stable both year on year and quarter on quarter, despite the impact of lower rates on deposit margins. When comparing net interest income, not only with the same period last year, but also with the preceding quarter, NII has benefited from a continually positive development in lending volumes, particularly evident on the corporate side. The growth in deposit volumes contributed to an NII year-on-year with a stable quarter-on-quarter level. In addition, our deposit hedge has helped to mitigate the impact of rate cuts on deposit margins and the lower return on shareholders' equity. In this context, please be aware that as part of our ongoing focus on asset and liability management, we have increased our bond portfolio hedge slightly to approximately 170 billion. With respect to deposit margins, The increase that can be observed relates to changes to our fund transfer pricing framework implemented in the second quarter with the objective of allocating NII from the structural hedge to the business units according to their contribution. It is important to note that these are not driven by changes to customer pricing and do not impact Group NII. Our NII sensitivity, which was updated in the second quarter, remains unchanged. With respect to expectations for the full year, I would like to highlight that they are based on the current rent environment with forward rates as of the end of September and subject to balance sheet developments. We consider the current market view and consensus on NII to be a good indication for the full year of 2025. Now, let us turn to fee income. Slide seven, please. Our fee income grew by 2% relative to last year. Adjusted for a non-recurring item from last year and the divestment of PC Norway, fee income was up 3%. The increase mainly came from everyday banking transactions due to higher activity among existing as well as new customers. Relative to the second quarter, fee income was up 3% in the third quarter, driven by higher investment activity among our customers and the recovery from the sentiments we saw in the second quarter. Investment fees benefited from increasing asset prices and continued growth in assets under management with positive net sales for all types of clients. Income from financing had a positive effect in the third quarter, driven by higher corporate activity, whereas free income from everyday banking and capital markets transactions declined slightly from the second quarter due to summer seasonality. However, the somewhat muted transaction activity in ECM and M&A was offset by continually good primary activity in DCM and LCM. Next, let us look at net trading income. Slide 8, please. Net trading income increased 12% from the level in the same period last year. The increase was mainly due to positive market value adjustments in Group Treasury, partly offset by XVA adjustments. Trading income at LC&I improved from the level in the same period last year due to higher customer activity. In Q3, customer activity at LC&I held up well, despite the third quarter being a seasonally slower quarter. Net trading income was down 27%, mainly due to the positive one-off item booked in the second quarter, as well as valuation adjustments made in Group Treasury. This concludes my comments on the income lines. Let's turn to expenses. Slide 9, please. Looking at the cost development for the first nine months, our focus on cost management and improved efficiency continues to yield the expected results. Operating expenses are in line with our full-year guidance of up to 26 billion. And at 45.6%, the cost-to-income ratio is progressing towards our 2026 target. Relative to the level last year, costs were in line as structural cost takeouts and the planned reduction in costs for the financial crime plan mitigated the impact of wage inflation and performance-based compensation. The relatively modest increase in digital investments should be seen in the light of the significant ramp-up we made last year. Relative to the preceding quarter, costs were down by 1%, mainly due to lower costs related to financial crime prevention, which continued the trajectory towards a lower run rate by year-end, according to plan. While the cost discipline and trajectory during the year have been encouraging, we continue to expect full-year expenses to end close to the guided level, given higher quarterly costs in Q4 due to seasonality. Slide 10, please. Let us take a look at our credit portfolio and the trend in impairments. Credit quality continues to be strong, underpinned by a well-diversified and low-risk credit portfolio. The macroeconomic environment remains benign, with increasing employment and steadily improving household finances. Consequently, impairments continue to be below the normalised level. In the third quarter, credit deterioration related to a few single name exposures was offset by workout cases. In combination with the update of our macroeconomic models, we saw a small net reversal for the quarter. The update of the macroeconomic models included a small revision to the weighting of our scenarios towards a slightly more balanced approach, with the upside scenario now weighted at 25%, the base case scenario at 50%, and the downside and severe downside scenarios combined at 25%. In addition, we have kept our PMA buffer unchanged at 5.7 billion. The decreases in PMAs for CRE and agriculture have been reallocated to global tension. We continuously keep our macroeconomic scenarios under review in conjunction with the PMA buffer. Given the strong asset quality we saw in the first nine months, we have lowered our full year guidance for loan impairment charges from around 1 billion to no more than 0.6 billion. Slide 11, please. Our capital position remained strong in the third quarter and was further supported by another quarter of solid capital generation post-dividend accrual and lower REA as a result of lower market risk. At the end of Q3, the reported CET1 capital ratio was unchanged compared to the preceding quarter at 18.7%, despite a temporary impact from Danica of around 0.4 percentage points due to the call of a Tier 2 instrument. We continue to operate with a healthy CET1 buffer versus the regulatory requirements, now at 390 basis points, and we intend to progress steadily in the coming years towards our stated capital targets of a CET1 capital ratio above 16%. The ongoing share buyback program we announced in February is being executed and we continue to provide support throughout the year. Now, let us turn to the final slide and our financial outlook for 2025. Slide 12, please. As previously mentioned by Carsten, we reiterate our outlook for net profit to be in the range of 21 to 23 billion. However, we now expect net profit to be in the upper end of that range. For total income, we continue to expect slightly lower income this year than in 2024. Income will be driven by lower, albeit resilient, net interest income and will be supported by our focus on fee income. We will continue to drive the commercial momentum and growth in line with our financial targets for 2026. Income from trading and insurance activities remain subject to financial market conditions. We continue to expect operating expenses of up to 26 billion, reflecting our focus on cost management and cost-to-income targets for 2026. We have revised our full year guidance for loan impairment charges of around 1 billion due to continually strong credit quality. We now expect loan impairment charges of no more than 0.6 billion. And finally, our financial targets for 2026 also remain unchanged, subject to our current economic and market expectations. Slide 13, please, and back to Klaus.

Thank you, Cecile. 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, you will need to press star 1 and 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 go to our first question. And our first question today comes from the line of Shrey Srivastava from Citi. Please go ahead.

Hi there, and thank you for taking my questions. Two from me, please. One bigger picture and one sort of more technical. I want to ask about recent M&A activity that you've seen in the Danish market and how it affects your view on the competitive landscape across your various business areas and how you're changing your strategy in response to that, if at all. That's the first. And the second one is, it's going back to your comment on the deposit hedge. You've been increasingly using derivatives to manage the interest rate risk in the banking book. And it says in your report that you expect to begin use of derivatives in a hedge accounting format in the first half of next year. Can we get some more color around this decision and what sort of impacts we can expect to see, if at all, and rationale? Thank you.

Thanks for that warning. I'll take the first one and then I'll hand the second over to Cecile. M&A landscape in Denmark. We've obviously seen the news this week of the Sydbank and Arbeiderlandsbanken. I think this is very much in line with, not speaking to the specific merger, but the consolidation and acceleration of consolidation is very much in line with what we have been expecting. And I've said before that particularly the changes around the competition landscape on rail credit related to the total credit decision some time ago would make it difficult. more interesting, beneficial to consolidate. And so this is very much in line with that. We don't see any change to our strategy. We're focused on continuing to deliver our strategy, growing with our customers, taking market share. We're investing in technology. We're investing in advisory services. And we believe that we have a very good focus strategy and position in the Danish market. And yes, so no changes in strategy. Cecile, do you want to take the deposit hedge question?

Yes, absolutely. So in terms of the deposit hedge, Shrey, currently it includes the bond hedge, the loan hedge, but we don't use yet derivatives. That's in plan indeed for next year. So let me unpack these different components. The deposit hedge or structural hedge, as we call it, includes a bond hedge, which, as I've just mentioned, has increased this quarter from 160 billion to 170 billion, really reflecting the continued stability and strength of our deposit base. That bond hedge has got an average life of about three, three and a half year average life and obviously provides the NII support that we're aiming for. In addition, there is a loan hedge, which is about 200 billion. That loan hedge is not a perfect hedge from the point of view of deposit hedge in the sense that there are several durations. There is also a little bit of optionality with respect to certain loans. But, you know, we still see that as obviously a good hedge when it comes to providing NIR support. Going forward, Our intention is indeed, and we're very progressed in our capabilities now, to use derivatives in order to effect our structural hedge. And those derivatives would be, as you would expect, hedge accounted, meaning that effectively they will not create a sort of mark-to-market volatility, precisely because they will be effectively hedging our deposit book. So what will it do? It provides additional liquidity and an additional ease, effectively, of reinvesting the deposit hedge. However, what it doesn't do is it's not necessarily in itself going to increase the hedge. Effectively, the way it would be managed is that derivatives would slowly replace part of the bond portfolio that we currently have in place. So that's to give you a little bit more detail on this hedge.

Brilliant. That's very clear. Thank you very much.

Thank you. Your next question today comes from the line of Namita Samtani from Barclays. Please go ahead.

Thanks for taking my questions. My first one, do you expect net interest income to grow into 2026 now? And could you explain me how you think about the structural hedge going into 2026? Do you still expect it to be accretive? And my second question, in Danica, there was a health and accident provision in Q4 of last year. Will the same

Thanks, Namita. In terms of NII, we'll come with an updated guidance as part of year end. So I think I'll keep... my focus today on the quarterly results. But as you've seen, NII has stayed pretty stable, and rates have now stabilized. And at the same time, we continue, of course, to have a strategy where we're focused on growing our balance sheet, including our lending. And I think, again, you could probably think about the hedge accretion as being close to neutralizing as rates now are stabilizing at 2%. But again, we'll update on 26 and outlook as part of year end. And then on Danica, we do do model updates every year on the health and accident. And we continue to do that. And there is no question, as you've seen, that the health and accident continues to be under some level of pressure. But it's too early to say what the quarterly updates will show. But we continue to be focused on One, improving the operational management, which includes particularly being much more proactive towards our customers in terms of how we can help them. And then at the same time, of course, it is also correlated with health trends. And that includes mental health illness trends, which still are quite high in Denmark.

Thanks. Could I just have a follow-up? The fourth quarter 25 NII, do you still expect that to be flattish versus the third quarter?

I would say at this stage, of course, again, we don't want to give an outlook on Q4. But again, there are still some remnants of impact of the reducing interest rates that we've seen earlier and that offset by the volume growth that we're seeing. So we continue to feel good about the level of NII that we're seeing in Q3 into Q4. That's probably the way I would formulate it.

I would guide you to, if you want to think about the NII for the full year, actually we find that consensus and market expectations are actually pretty accurate.

Thank you very much. Thank you. Your next question comes from the line of Sophie Peterson from Goldman Sachs. Please go ahead.

Yeah. Hi, here is Sophie from Goldman Sachs. Thanks a lot for taking my question. So the first question would be the risk credit asset decline that we saw. Should we expect any further risk credit asset declines to come? And how should we think about any further capital headwinds or tailwinds in the coming quarters? And related to that, Given that you have the U.S. corporate probation coming to an end this year, is there anything that you think would restrict Danske from distributing over 100% of profits in 2026? What is the FSA's general thoughts around over 100% distribution? So if you could comment on that. around that. Thank you.

On the first one, RIA decline, you know, there's a particular sort of larger movement, if you will, on market risk. This tends to move a little bit up and down depending on market. So I wouldn't say that we should see any particular movements on RIA and more think about RIA as a function of growth So no particular sort of movements expected either way. And then on U.S. probation, you know, I think I've earlier said that we have before distributed over 100 percent of capital also in line with the sale of, for example, the Norwegian retail business. So that is not a constraint in itself. But we will update on the capital strategy and distribution strategy as part of our Q1 results, where we're also planning to give an update on obviously both 26, but also financial metrics targets for 28.

Okay. clear. And just going back to the risk-created asset growth, in the fourth quarter, should we expect any increases from the operational risk?

Not major. I mean, you're right, we do update it every year. And as you know, we're in standardized and it's a little bit of a function of income. And as you know, income has been pretty stable year on year. So I wouldn't see it as anything material. There will always be some movements, but nothing material.

Okay, thank you.

Thank you. Your next question comes from the line of Tarek Almayad from Bank of America. Please go ahead.

Hi, good morning. Two questions, please. First, on the corporate growth, can you maybe shed some light on what sectors or what area is growing? Because you're posting quite a healthy growth here and came up with a positive surprise. And the second one is on the cost of risk. I mean, you had releases without PMA releases. And I want to understand if there is a particular specific area where you had some releases on some files or is just a structurally lower cost of risk. Thank you.

Yeah. Thanks for that. On corporate growth, it's it's broad based. We've been looking at had exactly that question. And and there are no particular sectors driving that. You know, one would have thought, OK, maybe the defense side, the energy side. In fact, I think that those growth opportunities are yet to come at larger scale. And in fact, the growth we're seeing at this stage is pretty, pretty broad based and and again, broad based, but also driven by the fact that we see that we're taking market share in in corporate lending across the Nordics in line with our strategy. Cost of risk, nothing particular. Look, we've kept the PMA stable, as you've seen. And PMAs, I would say, are still at the higher end of what you would sort of expect through the cycle, a large part of it, as you can see in the breakdown also. sort of linked with general macro uncertainty. If you look at sort of the actual flows through stage one, two, three, I think nothing particular that we would call out. We continue to see strong asset quality and sort of stable flows.

And if I can maybe add to that the release and the impairment line that you see, indeed, we see without any changes to the PMAs, other than some redistribution from the CRE and agriculture line into global tensions. is really linked to two different things as well. So one, actually, if you look at the various divisions, we actually saw net reversals both in LCNI and BC. So we see some strong workout cases there and some recoveries. net-net positive in PC, but frankly, very minimal. So all in all, clearly a very strong asset quality all around. And then some moderate impact from the IFRS 9 models, where we have made a few changes just to obviously reflect economic assumptions, number one, and also the weighting of the scenarios has slightly changed to be more balanced with a sort of 50% base case instead of 55%, 25% upper case, and 25% combined severe downside and downside cases.

Okay, thank you. Can I squeeze in a very quick follow-up on the other treasury line? This is more for our models, to be fair. I want to understand what's the big negative there just for the future period. Thank you.

Is that on the trading income line that you mentioned? Yes. So on the trading income line, there are two reasons why this came down quarter on quarter. And again, just to be clear, this is not linked to LCNI. So the first one is the one-off in Q2, which was the sale of the export finance shares, which I think we mentioned in Q2. The second thing is, as you mentioned, indeed, is treasury, effectively market valuation adjustments. What it is there is as part of our hedging. So obviously, these are not open positions, but purely hedging of both interest rates and currency and FX risk. We obviously use derivatives. These derivatives are held at fair value in the center. So in this case, obviously, in Treasury. And clearly, they will fluctuate according to rates and effects considerations in the markets. And sometimes they go up, sometimes they go down. And this is effectively what it comes to. So I will reiterate, this is not due to any economic loss. And, you know, there is always some fluctuations up and down, you know, throughout borders.

Thank you very much. Very helpful.

Thank you. Your next question today comes from the line of Matthias Nielsen from Nordea. Please go ahead.

Thank you very much and congrats on the strong underlying results this quarter. So the first question goes, if we take a step back and look a bit into the next year, if you were to highlight the top three priorities, both strategically and financially in 2026, which three things would you then highlight as the most important? And secondly, maybe related to this, When I look at the lending growth in LC&I, it clearly looks like you're getting to a strong business momentum there. It also looks like the business customer segment is starting to look stronger and stronger and pretty strong as well. And then lastly, when do we see the personal customers? I know it's always easier to get business momentum with the big clients because you're closer to them than the small clients, but when should we expect the personal client segment to get even more on fire compared to where we see today?

Thanks, Matthias. Look, as we look into 26, it's really about continuing on our forward 28 strategy. We said that we wanted to be the leading wholesale bank in the Nordics, a leading bank for SMEs across the Nordics with sort of more complex needs, and then a leading private bank and personal bank in Denmark and Finland. And we continue to invest in both advisory capabilities and in technology and to ensure that we can really deliver a leading bank across those priority segments and focus customer groups. So, you know, that's what 26 and out to 28 is all about. There's no question that since the presentation of our strategy in June 23, technology has moved quite significantly in terms of technology. of what we're seeing in artificial intelligence more broadly. So no question that is a huge focus is how can we accelerate and augment our existing strategy by investing further in artificial intelligence and using technology to position us even stronger. You know, to be more specific, we're also investing in capital markets and advisory capabilities in Norway and Sweden across our private banking segments. And as you've seen here in Denmark, Mattias, very heavily in our technology digital solutions where we're investing heavily in both our district platform for corporates and in our mobile bank for personal customers. Your question on personal customers and when do we see as much clear green shoots and clear blue water in terms of acceleration and business growth? Look, I would say on the one hand side on personal customers where I would call out. strong traction is private banking and investments. You see us taking market share on the investment side in Denmark. That's closely linked with also good traction in private banking, where in fact we're also increasing customer inflow. We're investing in our family office in that area as well and see good traction. And then it does take longer to move the needle on the broader retail segment. Our focus is really on the customers that require more advisory-heavy solutions. And we do see customer inflows in those segments. And we continue to, again, invest in, for example, the housing, the mortgage area, where we believe that we need to do more. So hopefully that's helpful and gives you a few examples of what we're doing.

And if I may, let me add, you asked for obviously financial objectives and obviously Carsten gave you the strategic and financial combined. I would add that one of certainly my key objectives and the group's key objectives is also to ensure that the group is efficient. So our focus on cost will remain and our focus on cost to income ratio and that focus on ensuring that we balance obviously the need to be efficient and the need to continue to invest, both of which obviously can enhance each other. So that's on the priorities. On the PC side, the other thing I would add to what Carsten mentioned is that I am pleased to see that on the housing front, on the financing of the housing front, we have stabilised volumes. You know, that's particularly the case in Denmark. And we have done that whilst protecting profitability and returns. And given the competitive situation that we operate in, the fact that we managed as we obviously endeavoured to do To continue to balance, obviously, the competitive pressure we're seeing on the RD side with our progress that has been extremely significant on the bank lending side and protect, as I mentioned, profitability has been pleasing to see.

Thank you very much. So just to wrap up all your things you set up, the way I understand it is there's still some way to go to get to the peak performance of how much you can actually deliver in turn around after all these AML cases. That's fairly understood that you're not at a fully up-running state yet.

We absolutely see plenty of unrealized potential, not least in the PC segments, but certainly also in the corporate segments where we're still punching below our weight across the Nordic countries. We still have a challenger position in many areas in those countries and have much more opportunity to, again, grow market share.

Thanks a lot.

Thank you. As a reminder, if you would like to ask a question, please press star 1 and 1 on your telephone. We will now take the next question. And the next question comes from the line of Martin Greggers-Birk from SEB. Please go ahead.

Thank you so much. Just continuing along the lines of personal customers, I guess you are Q3 numbers is perhaps implicitly also another testament to your successful Danske Boligfri. Do you guys see a limit to that story and when does that dilute Arti too much? That would be my first question. Then the second question goes back to the M&A story that is unfolding in the Danish base. You have a useful bank that is increasingly talking to large customers, being attractive. You have a Nucleic, which has beefed up their own bank balance sheet after acquiring Spano. You have a Superbank now that is also getting a balance sheet that allows them to tap into this segment. Do you feel increased competition from this? And when does your role as a big brother in the Danish banking market, or let me rephrase this, when are the little brothers in the Danish banking market becoming too big and that forces you to act? Thanks.

Thanks, Martin. I think on DBF, so the bank lending side and then the real credit side. Look, I see this very much as being able to offer our customers a broad range of products based on both market situation. So where rates have been, it's been interesting to take out a bank loan given the increased flexibility around that. So I think we're very much focused on, you know, being able to offer the broad palette of products and services and then letting customers decide. So I see that we can both continue to grow in Dans Bolig Frih. but certainly also have a lot of focus on growing the rail credit side of things. And as you all know from Denmark, we're investing really heavily again in improving our rail credit offering, both digitally with the housing universe, with giving customers faster turnaround on decisions, with giving them more clarity on how much they can invest, borrow, as well as making targeted price adjustments where we think it's interesting. So again, much more opportunity there. M&A story, competition. Is there competition? Yes. Is that... Is it a very competitive market environment out there? For sure. I think we've been able to show that we can grow and take market share and that I'm not concerned about the consolidation in the Danish market. I welcome that consolidation. We have a strong strategy, which we think is very competitive, very compelling. And, you know, with the pace of change that we're moving and the investments we're moving with, we think that we can continue to grow in the market.

All right, thanks.

Operator, can we have the last question, please?

Thank you. Your last question today comes from the line of Jakob Kose from Autonomous. Please go ahead.

Hi, thank you for taking the question. So, firstly, You talk about being a challenger in some of the other markets. How do you view your sort of non-organic growth opportunities there? I think there's been clearly a lot of activity going on. And with respect to, I guess, the 13th of December, where you come off the probation period, does that immediately change something, or... What's the timeline there? And then secondly, just on the, you mentioned on the structural hedge, this replacement going into derivatives and an increase in liquidity. Will that have any effect on your NII or P&L? Thank you.

Thanks, Jacob. I think, as I've also mentioned before, that the Nordic markets, particularly Sweden, would be an interesting market to look at non-organic and will continue to do so. There is nothing sort of relevant at this stage. We continue to be focused on organic strategy, but we certainly are continuing to scan the market and looking at opportunities on the non-organic side as well. But again, very important to underline within the focus segments that I also mentioned before in terms of where our strategy focus is. No, I don't think that the post-probation changes. I mean, it changes that we will update our capital situation and distributions situation because we've always said that we would be – carefully looking at legacy excess capital during this period. And so we'll have that discussion. And again, our preference is that we grow and use our capital to grow at interesting return levels. But we'll also look at other opportunities. And then, Cecile, do you want to just talk about the hedge piece?

Yeah, I'll take the hedge piece. And thank you for your question, Jacob. Just to confirm, the inclusion of derivatives is effectively going to help us manage more effectively the reinvestment of the hedge. In itself, it doesn't add additional NII. Or it could, but I would say marginally, just because of the additional liquidity, the additional ease of effectively targeting a certain point, I guess, in the curve. So I would say any additional uplift due to derivatives specifically is more marginal. But just to take a step back, right, with the deposit hedge, the bond hedge and the loan hedge combined, we expect to continue to get a very good lift in the coming years, particularly next year. Before, as Carsten mentioned, in Horizon, a few more years, tailing off, right? But I mean, the lift will continue to be there to NII.

Thank you very much. Okay. Thank you very much, everybody, for your interest in Danske Bank. Very much appreciate the questions. And as always, please do reach out to Investor Relations and Klaus if you have any questions.