Jyske Bank A/S Ord

Hi everyone and thank you for joining us on Lyske Bank's conference call for the financial results for the second quarter of 2026. I am Simon Haubart from Investor Relations. With me I have Lyske Bank's CEO Lars Merck and CFO Bjørn Nielsen. Lars and Bjørn will walk you through our prepared remarks. Afterwards we will open up for questions. I will now hand over to Lars.

Thanks a lot Simon and thanks a lot for calling in. Earnings per share increased 12% year-on-year in Q2. That is a result of business momentum and positive markets, cost control and share buybacks. We've also seen an accelerating mortgage growth, not the least due to new successful product launches. And we see that we are taking market share in this area at the moment. We continue to see the benefits of increasingly customer satisfaction over the last couple of years. and we have again won best in private banking for the 11th consecutive year. But we are also seeing improvements across the bank and it's also worth noting here that we are improving in the CNI area and among institutional clients and have the best rating in that area that we've had ever.

Thank you, Lars. And going further on, looking into the numbers and figures for Q2, we've had a very supportive environment in Q2, strong quality of our customer base. We've seen slightly higher interest rates and money market rates, and we've seen good activity and risk on in the quarter. So that all led to a satisfactory result for Q2. We saw a rebound of earnings per share from 17 kroner in Q1 due to the market turbulence back in March, now back to 22 kroner in Q2, the highest earnings per share in Q2 ever in an ordinary quarter. In the P&L, the NII is almost on par with last year, up 2% quarter over quarter, and the fee income demonstrated Another good quarter on activity, 6% up over the year. We've kept a tight course base and exclusive of one-offs, we are at index 99 or 1% down from last year, so fully on track. Value adjustments saw a strong performance due to significant spread tightening of Danish mortgage bonds and loan impairment charges ended at zero basis points. Looking at the strategic metrics, our return on tangible equity was well above our 10% threshold for 2018 and the cost-income ratio at 47%, also above our long-term target of below 50. On the right-hand side, you can see the volume numbers, and they all showed an upward trend in the quarter. Asset under management significantly up 9%, supported by both Private individuals as well as institutional customers. Deposits grew 1%, bank lending grew 1%, mortgage lending 1% and leasing 2% up in the quarter, so a steady performance in all areas in the quarter. Looking at the expectations for this year, we are well on track to deliver the The 71 to 85 kroner which we announced for the full year and our expectations are unchanged as we speak. We have an earnings per share in the first half of 39 kroner, actually the same level as we had in the first half of last year.

And looking at mortgage lending, we've seen that that has doubled since the acquisition of BRF Credit back in 2014. But probably more interesting to the right hand side, you can see that our growth continues and we are at the moment gaining market share on the personal banking side and holding our position on the CIE and corporate side. The personal customer, The product that we've launched last quarter has come off to a flying start. It's a very, very popular product, both among existing clients and among external new to the bank clients. It's the first product that really mixes the benefits from the bank funded loans with the benefits from the mortgage loans from the traditional mortgage institutions. So you have both benefits. To the left hand side here, you can see some of the flexibility that we've built into the loan. This means that we are acquiring new to the bank customers to a larger extent than we've done recently. And this is contributing to the trend that we've had the last two years where our customer outflow has been smaller and our inflow has been larger so that we have a net positive inflow of personal clients. Not due to this product, but helped also by this product. Another positive is our customer satisfaction when it comes to private banking customers. We have now for the 11th consecutive year been rated best among the banks here. And contrary to the past, it seems as if we are now capitalizing on this to a larger extent. in terms of net inflow of new clients to the bank.

And if we look at the AUM development over the course of several quarters and years, you can see a significant uplift in our asset under management, and specifically here in Q2 we grew 9%, which was a result of inflow of both retail clients, but also institutional clients, and certainly very good supported by inflow of private banking customers. And if we look at the development, the long-term development from end 18 to the second quarter of 26, we've actually been able to deliver a per annum growth of average-wise 12% over that period. Then looking into net interest income in the P&L, it's an important turning point for us here in Q2 after several quarters of a drop in NII due to the development in interest rates. We have seen the first hike from the Danish Central Bank here on the 12th of June with 25 basis points and market rates and forward rates have been trending upwards for some time now. And if we look at the 2% growth in the quarter, it's driven by higher market rates, as I talked about, but also higher volumes, as I also referred to earlier. But the strongest contributor is certainly deposit margins, which has been trending upwards over the last couple of quarters. And the development in market rates and central bank interest rates are supportive also for higher NII going into Q3, where we'll get the full effect from the rate hike here in June.

Our customers in general are in good shape. And I think we see that clearly also when we look at the share of stage three exposures that is at a record low level for the bank. So we are seeing that the customers are generally in very good shape and that they are now to the lowest extent that we've seen ever at a stage three exposure. So, another positive in a world with a bit of uncertainty. We've had an extra eye on the agri industry and we've seen no negatives on our book so far.

Thank you, Bjur, and thank you, Lars.

We'll now open up for questions. If you have a question, please raise your hand or unmute your device. First question in line comes from Esbjørn Mark from Danske Bank. Please go ahead.

Yes, good morning. Thanks for taking my questions. So basically, three questions from my side. One on your NIH sensitivity. Sorry. With the rising rate environment, what do you expect in terms of deposit basis and what do you have as an assumption in your NII sensitivity, let's say for the 25 basis points we already got and for an additional 25 basis points? Thanks.

Yes, the NII sensitivity is around 700 million for 100 basis points. as we stated a few quarters ago and that still applies.

Yes, but what do you expect in terms of your ability to improve deposit margins on not passing on higher rates to your deposit base? What is sort of implied in that sensitivity?

In the short term as you saw here back in June we saw no significant reactions from market participants and that could also be the case in the next round if we saw another rate hike here in September. Going on from there of course it is more uncertain.

So would you expect So if you take the 700 million, would you expect that to be fading over the next 100 basis points? It's going to be a bigger sensitivity for the first 25 to 50 basis points, and then you will have to pass on more for the deposit side?

That would be an expected outcome, yes.

Okay, fair enough. Then on your guidance for net profit for the year. So basically delivered 2.4 billion already in the first half of the year, rising rates, strong AUM growth. It seems like you are entering at least the upper end or high end of the range, not exceeding it at some point. Normally, you've used the half-year report to revise your guidance if you've been on a trajectory towards the higher end. You decided not to do so this time around. Is there a reason for this? You don't think you're entering the high end of the range?

I think first and foremost there is no particular reason as to why we don't make any changes now. It's driven by the fact that the 71 to 85 interval is still relevant for us when we do a projection for the last two quarters of the year. And if we look at what happened in Q2, we saw another quarter of a strong performance on trading income, and it is uncertain as to whether we can just replicate that. So some caution is relevant to put in on that line. But in general, yes, we will probably end in the upper half of the range.

Okay, fair enough. And I guess the average trading for the first two quarters of this year is not that far off from what you have guided as a normalized range.

That's correct. That's fully correct. But the decrease in margins on mortgage bonds in the second quarter was very significant.

And then a final question from my side. You mentioned the new mortgage product, but when you look at market shares and volume growth, it seems like you might be losing a bit of market share in the corporate banking market. So what are you seeing there in terms of your client momentum and competition, etc.? Is it fair to assume that you're losing a bit of market share?

Yeah, it's fair to assume. I think that is a historical issue in the sense that we saw heavily increased competition more or less suddenly creeping in a bit more than a year ago. And I think some players in the market was very focused on volume. And we made a decision at that point in time that, especially when it comes to CIE, at low margins, we would accept not to be cheapest on all of those. So we decided to stick to our good clients, keep them in-house, and we basically lost no clients. We've received the same number of clients as we've lost, but not participate aggressively in particular new CAE lending. I think it came a little bit as a surprise for us how heavy the price, especially the price competition, Thank you very much. and credit standards and then I think we accepted in certain areas we could lose a little bit of the market growth or not take the market growth but I think we're well positioned to get back volume-wise on track here again at least what I'm seeing from the front book at the moment.

But that intensified competition, was that sort of in anticipation of lower systemic risk rates for CRE? Hence, that was just basically in advance, or should we expect another round of increased competition now that we have seen the actual risk buffer coming down?

Yeah, we are seeing a little bit less There is more competition or aggressiveness in the competition now than we did a year ago. And we can see that we can do well volume-wise and quality-wise without going to extremely low prices. I think it's a fair assumption that it might have to do with potential changes to the capital. You might be right on that. It can also be volume targets or other decisions that I don't know of. But it was clearly visible when we were looking at this in our credit committees and saw the cases coming in that like for like, credits suddenly were priced quite a bit lower. And we then decided, you know, on balance, we do not need low ROE CAE business to a large extent. We need good clients and we need long term relationships. And as I said, I think when looking at the front book, it actually looks OK.

All right, that was all from me. Thanks a lot.

Thank you, Asbjørn. Next question comes from Martin Birk from SEP. Please go ahead.

Thank you so much. I hope you can hear me. I guess, Lars, I'm sure just before this call you took a stroll through your credit department in order to prepare yourself for a couple of Q3 questions now that we are two months into Q3. Given everything that has happened over the summer with the short-term rates coming up somewhat, do you see Q3 so far as a continuation of Q2?

So you're talking about it from a credit perspective?

Well, credit and of course volume perspective.

Yeah, starting with the credit perspective, I think our head of credit is still looking tanned after the summer vacation and is not getting paid. He's in good shape and we think our book is in good shape. And I also think it's fair to say that looking at the area where we could be a little bit concerned, Danish agro, which is underweight in our book and We basically don't see our customers being under pressure, so we don't need to extend their extra credits or anything like that at the moment. So they've been in general cautious the last couple of years and they are in good shape. So I think our credit department is in good shape. I think they're happy and pleased with what they're seeing, and I don't think they are extremely concerned about a little bit of interest hike potentially in September. On the front book, I don't think that would change a lot either. I think we'll keep on growing in the personal banking area where we have strong momentum. And I think the momentum is building in the personal or in the business and corporate area also. So I'm not too concerned about those interest hikes.

Okay. Alrighty. And then just maybe Thank you for keeping a tradition at bay. You are not concerned about your credit book at all. You also talked to that you're not concerned about the peak exposure that you have in your balance sheet still and you report zero loan losses and still you maintain your management judgment roughly at 34 basis points. Do you have any Any feeling to when that will turn?

I think we are well provisioned. I think what I answered here was how the book is looking at the moment. I think some of the provisions we've done, we've done on potentially longer term issues related to international economy and so on. We've not seen that materialize yet. And that means we get a closer decision on what to do with this. So at the moment the book seems in good shape from all what I hear and see, but we have money to cover potential risks. If they do not materialize, we will obviously communicate what we do.

And closer to take a decision, does that mean full year results or is it a 27-28 thing or how do you see it when you look out of the front window today?

Yeah, some of it could be earlier and some of it could be later. It depends on what the reservations are done for. But we need to look at it at a yearly basis. They are done at different times during the year, when the reservations are made.

Okay. And then maybe a question for Biur, coming back to NII. Biur, could you In your head, could you please help us walk through the NII bridge going into Q3? I assume there's going to be a day effect and then what else? How much is going to come from money market rates and central bank rates going into Q3?

I think that question may be even more relevant for Simon. Simon, can you help us walk through your bridge into Q3?

So you're quite right, Martin, we'll see a day effect of approximately 14 million, and then depending on your assumption on the short-term interest rate, say three-month Kyber increases 25 basis points, then based on our interest rate sensitivity, then that could probably entail that we'll see an increase of more than 50 million Q and Q for the day effect and the change in interest rates. And then on top of that, of course, we could have a lag effect from repricing of bonds with semi-annual interest rate resetting and then hopefully also some continued volume growth.

And the plus 50 million from higher rates, what kind of beta does that assume?

We use our normal assumptions in that area, so that is historically entailed a deposit beta of approximately 50.5.

Okay. All right. And then perhaps a last question on NII. I'm still curious to hear your thoughts on it, NII growth. According to consensus, it's set to be up next year by 3.5%. The year after that, it's only set to be up by 1.1% on my numbers, especially pricing in the forward curve. I'm looking at a number which is just shy of 10 billion. How do you view your current consensus NIR run rate?

Yeah, I agree with what I think you're insinuating, that maybe there could be potential on the upside. I'm not sure all estimates currently are reflecting the current forward rates. I doubt that. And also, hopefully, we'll be able to grow the volumes also somewhat over the coming years. So, yeah, we'll have to see.

Alrighty. Okay. Thanks, guys.

Thank you, Martin.

The next question in line comes from Alexander Vilstro Bjørnson from BNB Carnegie. Please go ahead.

Yes, thank you for taking my questions as well. I have a few. So if we start with your bank lending growth figures in Q2, you delivered 2% quarterly growth or 2.3% year over year. So it's an improvement from the recent trend. So should we view this as a new normal for Jyske Bank or was Q2 somewhat of an outlier?

Yeah, it's always a little bit difficult to say exactly how the numbers look, but what we can see for now and also I think I alluded to in my answer to Asbjørn, we see that the business side is in good shape. and we think that they will contribute a bit more than they did last year. Then we have the effect of some of the mortgage loans coming from bank-funded loans to mortgage loans. That will obviously take the bank lending a bit down, but all together I'm slightly positive towards our momentum on the business side, also compared to the market.

Okay. I also see that you managed to improve your customers' satisfaction ratings. To what extent do you see this as a driver of future lending growth going forward? And would you be comfortable seeing bank lending growth at around the current level in the coming quarters?

Yeah, we follow the customer satisfaction fairly close, not in order to win different medals and so on, but in order to improve the way that we service our clients. And I think it actually supports the flow of business. We will realize if we don't answer the phone. If we are too slow and if the tone is not good enough and so on, faster when following it through these tools. So for us, it's a management tool to ensure that we deliver a good product to our clients. And if you deliver faster and a good product, then hopefully we will sell more. You know, we will not reduce prices to next to nothing to win medals here or doing other things that does not make sense from a business perspective. So we actually go about this in a way that is focused on the business we deliver and the potential business that the customers can give us. And I think the underlying improvements that we've had during the last couple of years has supported also the momentum shift for us. There's a lot of positivity within the organization and I've been around lately to a number of different areas in the bank, also geographically. and there's such a positive attitude everywhere and such a big belief in, you know, we have the right products, the organization is in great shape and we'll do good. So we're following this customer satisfaction because we think it matters in terms of turning business possibilities into business.

Okay, how do you see the competitive environment developing across both retail and corporate banking? Should we expect pressure on lending margins from here or do you see pricing discipline improving?

I think we've seen quite a bit of pricing competition during the last year, maybe five quarters. I think it has settled somewhat on the level that we've seen now for the last quarter. And we see less of those cases where we're looking at it and saying, you know, they're pricing this or they're doing this just to get the volume. We are seeing less of that panicking to get business in and we are seeing in general rational behavior in terms of pricing and also I think credit standards that has been affected to a lesser extent than pricing during the last year but we also see much less of that in our credit committee. So we believe that it has settled somewhat and Asbjørn could have a good point in that some of the pricing was done on expected changes to capital.

Okay, maybe just one last question. If we just touch upon your core expenses. So what about the potential scale benefits from bank data as Screwbale migrates to bank data over the next year? How should we think about the potential benefits for Jyske Bank?

The benefits we will get when the migration is done. And when it's done, we have a smaller share to pay. And the overall budget in bank data does not really increase significantly by getting new volume in. Which means that our like-for-like cost will fall somewhere around 17%, at least that was our initial calculations. We've not done new calculations on this. So that kind of benefit we'll get from 28 and forward. I think we've seen a little bit of benefits potentially already for rooting some of the trading from the new combined AL via bank data that was formerly on the other platform. But that's minor, minor, if anything. But the benefits we'll see later.

Okay, thank you. That was all for me.

Thank you, Alexander. Next question in line comes from Johan Ekblom from UBS. Please go ahead.

Good morning and thank you for taking my question. I just wanted to touch a little bit on the cost side. I mean, we saw better than expected cost development and you talking about kind of seeing declining underlying year-on-year costs. Can you talk us through what is driving that improvement? I think last quarter you made a point about kind of embedding AI in your organization. I'm guessing it's too early for AI to be the driver of that, but what's driving cost savings now? Should we expect to see declining costs going forward? And then just to come back on the bank data question, the 17% reduction, is that on your overall IT expense or what's the basis that we should apply that to? Thank you.

Yeah, if we look at the cost management in the group to a start, I think if you go back in history, I think we've tried to keep a tight cost base Quarter by quarter over several years now and that still applies of course. When we look into what has happened lately and especially in Q2, yes there was an uplift from low levels in Q1, but that was driven by some IT costs slightly up. Negotiated wage increases and then some rental costs going up. But the overall aim for the group is to try to mitigate to the extent possible inflation in the cost base. And I think that is what we are aiming for. And if you deduct one offs here in Q2, you end up one percent down. But it's also fair to say that if you replicate Q2, which was a very tight cost quarter, still you may end up in a bit too low longer term. So overall, the cost management is intact. Flatish costs to the extent possible, but don't take Q2 as a sole replicate for the coming quarters. And when that's said still, bear in mind that we also have formally articulated that if we saw some business potential, we would certainly like to invest and AI could be one of these areas where we could see potential for investments and of course to reap further benefits going forward. and asking about the AI activities. AI is certainly on the agenda, is being prioritized and we have put into place some very strong activities in the group, but the main chunk of benefits is still to be seen.

I think it's fair to say that cost is under control. And as you're also alluding to, we are doing some defined extra projects that we are putting on top of our strategy. I think you also write your hand in stating that the cost savings that we are seeing now is not AI related. They are normal cost savings. On the AI side, I would say that the savings that we have This is probably approximately the same as we are investing into the area, so that's probably close to net zero at the moment. Then I would like to add also that Birger and his team has been working the last couple of years to get a new kind of cost discipline into the bank, where we are focused on the total amount of cost that management at a certain level in the group can influence. and normally in a bank there's a heavy focus on the number of FTEs which is for good reasons because that's important and a big part of the cost base but sometimes you forget the other costs and we've seen inflation in the other costs in the market in general and I also think we see it with other banks and I think we've been able to mitigate that by the new ways of managing costs internally and I think that would also be effective going forward. So we'll keep a tight eye on the cost here but we will also make sure that we have what it takes to make good decisions on investments.

Thank you. And just maybe a quick follow up. I mean, if I look at the distribution of costs between the divisions, it looks like the mortgage business had a very large underlying cost increase. Is that just an allocation of expenses or is there anything going on, any bigger projects or anything there?

There is nothing in particular related to that. It's internal matters of distributing costs. OK, perfect. Thank you.

Thank you, Johan. And next question in line comes from Mathias Nielsen from Nordea. Please go ahead.

Thank you very much. And most of my questions have already been asked, but maybe just a bit of clarifications on the quite solid growth, both on bank lending, mortgage lending and bank deposits this quarter. What is it that all of a sudden is working for you like last quarter wasn't that fantastic and how much of that growth is led by new clients like new people coming into the bank compared to how much it's just more business with existing clients if you could give a bit of flavor on that that would be all for me thanks yeah i think what is working now is that we've been managed managing to change the organization a couple of years ago

into the two main business units and we've been working on getting the entire value chain to work across the bank and the organization in general have a year ago or something like that started to believe in this and when you get around there's so much positivity and so much belief in that we have the right position, the products, the decision power and so on in the bank, so that the self-confidence is at a very, very high level at the moment, which is, I think, very good. Then on the new clients, we've seen that with the new products that we've introduced and with the marketing that we've done earlier, particularly earlier in the year, and with the digital marketing that we are building, the digital sales we are building also, we see that we are getting increasingly good leads and we get that from employees where we get a lot extra applicants compared to what we did just two years ago. I think it was 60% up per job last year and it's some 30% up again on that. This year we see exactly the same on the customer side that we get more good leads coming in from the marketing and the work that is being done and from the new product. So in the new product here, I'll not give you the exact figure, but the number of totally new to the group clients is quite a bit higher than what we're usually seeing.

okay so so it is actually new customers actually driving a big chunk of the growth this quarter is that how we have we have a net positive development on personal clients yeah perfect and then uh like maybe if i can add one more uh given that next quarter will be halfway into your strategy period and if i look into um into how how you're performing on the numbers today and compare that to your targets like with midway strategy would that be a good time for you to Sorry, when did you suggest, Mathias? I didn't get that. So next quarter, I guess next quarter will probably be something in the midst of this strategy period and with the one that you're doing or performing at the moment. Should we expect you at some point, maybe next quarter already, to update your target or how should we think about that, given that it looks a bit unambitious compared to your performance now?

You should expect that we're keeping on focusing on this, but also that we would like to have fairly safe ground Thanks a lot.

Thank you, Mathias.

It seems as if there are no further questions in line. Thank you for participating in today's conference call. Please do not hesitate to contact us if you have any further questions. We appreciate your interest in Jyske Bank and wish you a nice day.