Jyske Bank A/S Ord

Hi, everyone. Thank you for joining us on Jyske Bank's conference call for the financial results for the fourth quarter of 2024. This is Simon Haubart from Investor Relations speaking. With me, I have Jyske Bank's CEO, Lars Marks, and CFO, Bjørn Nielsen. Lars and Bjørn will walk you through our prepared remarks. Afterwards, we'll open up for questions. I'll now hand over to Lars.

Thank you, Simon. I would also like to welcome you to this conference call for Q4 2024. We had a strong end to a good 24, reaching the very top of our net profit guidance for the year. The positive operating performance is supported by significantly higher assets under management and inflow of funds from customers. On the back of this, net fee income grew a full 18% year-on-year in Q4 to the highest level on record. In addition, the underlying cost development is flattish and credit quality remains very solid. And today, We also announced the historical capital returns to our shareholders. We expect to distribute our largest dividend so far of 24 Danish per share, in addition to our largest buyback of 2.25 billion Danish. The capital distribution sums up to 3.8 billion, equivalent to nearly 11% of Jyske Bank's current market cap. In the second half of 2024, we improved momentum with our personal customers on a wide range of metrics. Most notably, customer satisfaction has increased substantially following more and increasingly proactive interactions with customers. This reflects very intentional efforts and has helped boost in volume development as Q4 mortgage growth reached the highest level for more than five years. For 2025, we expect to continue delivering a strong operating performance with a net profit in the range of 3.8 to 4.6 billion and continue implementation of our currently launched strategy. The net profit range reflects significantly lowering of the Danish policy rate, which on the one hand will lower our deposit margin and on the other hand could help activity levels. The guided range also reflects a slightly higher cost base due to targeted strategic investments and continued low level of loan impairment charges. And Buur, I'll hand over to you.

Thank you, Lars. And as you may well know, we announced back in October higher earnings for 24 and here by year end, we reached the very up end of that interval of 5 to 5.3 billion after tax. The main driver was Higher net fee income up 18% year-over-year due to the higher AUM and inflow of private banking customers. Looking at the full year and the Q4 numbers, they are all aligned with a good start to the strategy periods towards 2028. Return on tangible equity around 12%, about 12% for the year. Cost income ratio at 47 and for Q4 at 49, below 50. Cost of risk around zero basis points both in the quarter and for the full year. Earnings per share 80 kroner and around 20 for Q4. And finally, CET1 ratio of 17.6 above our announced target of 15 to 17. Looking at the left hand side, you can see that earnings per share has been very steady going for four quarters in a row, with the exception of Q3, where positive financial markets lifted the value adjustments to a high level. The profit and loss statement. One comment on the net interest income. You see a slightly downward movement during the course of the year, and also here in Q4, driven by lower interest rates and therefore lower margins. And in Q4, the uplift from lending margins was outpaced by a fall in deposit margins. And on top of that, we made a preferred senior issuance of 500 million in November. When I look at the right-hand side and look at volumes, you can see that there's been a steadily upward trend in asset under management due to markets, due to new customers, and also due to business with existing customers. And the second line, the mortgage business is up 1% in Q4, driven by both private individuals and corporates. On the other hand, deposits are more fluctuating and large exposures have taken out time deposits in Q4, leaving slightly lower levels in Q4. But no worries whatsoever, because it's volatile deposits. The next line is leasing, which was hit by one large exposure leaving in Q4, but otherwise growth in the business for operating lease. And finally, when I look at the banking exposures, they are lifted by 2% here in the fourth quarter, and that is especially driven by corporate business. Going into 25, There is, of course, uncertainty, especially relative to macro, the macro environment, but also financial markets, of course. That being said, we expect a more normalized value adjustment line in this year versus a very strong 23 and a strong 24. And we will, of course, to the extent possible, mitigate the negative implications of lower interest rates. And finally, for 25 we are in a positive momentum for um aum and that could of course trigger a decent development on that line in 25. looking at core expenses we have demonstrated as we see it over a very long period stable course developments we could however see a slightly higher level in 25 compared to 24 the inflation and strategic investments could outpace lower integration costs and other cost initiatives and slightly lower average FTE levels. When I look at the customer base in general, it's a very resilient customer base. We demonstrated that with a zero on loan impairments for the quarter and for the year, and a more or less unchanged post-model adjustment buffer of 1.8 billion, and also stable loans in stage three. Net profit for the year 3.8 to 4.6 billion mirrors the uncertainty just mentioned, and that replicates 60 to 73 kroner per share. Looking at the capital levels, we expect to stay in the lower end of 15 to 17 post Q1 and the implementation of Basel IV. And we will target going forward still buybacks, giving the capital levels we have on top of a 30% dividend. We expect Still, another three rate cuts in 2025, so that the policy rate in Denmark will go down to 1.6%. And looking at the chart, you can see that in the period with negative interest rate, we had on average a deposit margin of well below 1.9%. Then it peaked. in 23, 24, around 1.4, and then it's been decreasing a bit with falling rates here recently, and we can still see a slight compression of these margins in the next few quarters due to the lowering of policy rates in Denmark. We have now for three quarters in a row seen a positive growth momentum on nominal mortgage lending to personal customers, which is a positive and a turn if you do a comparison to the long period since 2019, where we have been struggling with the development in that segment. We have restructured our private individuals business. We have merged with Handelsbank and PFA Bank. And we have then recently over the course of this year seen higher customer satisfaction and therefore also higher volumes in the business for doing mortgages. We've also seen net inflow of customers in our focus segments of private individuals. So a strong and good momentum going into 25. Looking at the fee income and AUM business, AUM grew 17% year-over-year in 2024. So also a very good momentum there with existing and new customers. The recurring fee income is certainly on the rise here by the end of 2024. Looking at the activity-driven fee income, it's more moderate. We still see low levels of loan application for mortgages, and sector-wise, we are still one third below the last decade's average of loan applications. What we actually saw in Q4 was an uplift in our mortgage refinancing, and we expect that to also give a good momentum into 2025. So, both the recurring and activity rate fee is certainly on a good note. The core space, as I mentioned before, fully aligned with our 28 targets, going into 25, we see inflation on the rise with more than 3% in the first half of this year and below 3% in the second half. On top of that, average wise, FTE numbers, should go low in 25 versus 24. And we also have lower integration costs and will, of course, execute still a stringent cost management. And in relation to stringent cost management, if you look at the graph from 2014 to 2022, we were more or less flattish nominal-wise during these nine years, and then we acquired Handelsbank and PFA, and we now are around 6.5 billion, which we will do our utmost to keep relatively stable, but with a risk of slightly higher cost in 2025. Looking at the risk side of the business, very solid buffer, and especially supported by lowering interest rates. The customer base has shown very great resilience over the last many quarters. 0% in impairments during the year and the quarter. Stage 3 exposure stable at 1.1% unchanged from Q4 23 to Q4 24. And if we look at the post-model adjustments of 1.8 billion, it is four times normalized impairments, but it's also four times total impairments booked in the last decade. And going into 2025, we certainly expect low cost of risk for the year. We have announced a historical dividend and buyback program of in total 3.8 billions, which is in alignment with our strategy of 30% dividend and the buyback program possible given the capital levels. And as you can see on the right hand side, 2025 is more or less double of 24, which was the highest level of payouts in the last decade, nominal wise. And we have today started a program which will run until the end of January at the latest, servicing the need for and the possibility to buy back shares of up to 2.25 billion. I think that ends my comments.