Avanza Bank Holding AB (publ)

Welcome to our Q2 presentation. In the room here in Stockholm, we have Sofia Svavar, Head of Communication and IR, and Anna Kasselblad, CFO, and myself, Gustav Unger, the CEO of Avanza. My general view on the quarter is that we had a positive momentum in Q1 that continued in this quarter. I'm quite impressed by the level of innovation produced by the team when it comes to new features, especially for our trading active customers.

And to the right you see one of the innovations, which is the new analysis tab where customers can get better support in fundamental analysis. We were ranked the number one financial company in a reputation index, which I think is a good testimony. On the growth side, we saw a net flow of 17 billion, which is pretty good. And together with 34,000 new customers, I hope to welcome the customer number 2 million after the summer, which is something to celebrate for us. Although not specifically related to this quarter, I want to underline our consistent focus on the user experience, which is one of our unique selling points. And combined with the data-driven approach, we engage closely with our customers to understand their needs and to prioritize and to fine-tune new features. And our customers are more than willing to engage and participate in our developments. And especially for the non-Swedes who cannot easily become customers, we have updated the presentation on our IaaS site, giving you a tour of this user interface, which I recommend.

And alongside our very engaged customers and world-class user experience, I think the strong Avanza brand is a key asset. And to the right, you can see that we're more well-known than financial services players massively larger than us. As a result of this, our customer acquisition costs are kept low, and our customer acquisition is mainly driven by word of mouth. And apart from customer satisfaction, I think that net inflow is the best leading indicator for future income. And I'm happy to see another strong quarter making the H1 inflows 18% higher than the same period last year. And as you can see, also the customer acquisition was strong in the quarter. What I think is even more comforting is to see the monthly recurring inflow climbing towards pandemic levels. And if I just annualize these almost two billion per month that just automatically flow into our platform, that's 24 billion a year, something that a lot of incumbent would just dream of. One of the things that I'm mostly proud of in the quarter is our funds business. We have actively worked to make it more easy for our customers and broaden our offering in the fund business.

And it's also important for us to diversify our income streams. The net inflow in the first half year of 2020 is all time high. So it's about 300 billion of fund capital on our platform, and this now represents one third of our total savings capital. When it comes to market share, we don't have the Q2 market numbers, so we don't we cannot compare the 17 billion of inflow with the market inflow. But in Q1, we attracted 22 billion, which then represented 21% of the quarterly inflow and 22% of the 12 months inflow, giving us a 7.5% market share of the total savings capital in Sweden. And I think that last quarter I made a back of the envelope calculation showing you that extrapolating the market share gains that we made in Q4 made our 2025 target of 10% of the savings market looked like a stretch. If I do the same calculation today, We have 7.5% market share in Q1. That was an increase with 0.4 percentage points compared to year end. And we then, after Q1, we have seven quarters until we hit end of 2025. That's seven times 0.4. If I add that to the 7.5% that we had end of Q1, that would yield a 10.3% market share end of 2025. Just want to highlight that this is just pure extrapolation.

Moving to the brokerage side, one of the important drivers of brokerage income is, of course, the number of trading customers. And there we saw, as you see on this slide, an increase also this quarter, despite having an unfavorable low volatility. And worth to mention is also that the activity in the quarter was higher in the first half compared to the latter part. Some of you have had questions around seasonality in our trading business, why I show this slide. And to me, it's a bit hard to see any clear patterns. If any, I could say that Q3 may be slightly weaker than the other quarters, but it's not a clear pattern. We also on this slide see a strengthening over the last quarters. When it comes to market share on the trading side, still high, but slightly lower in the quarter when it comes to turnover due to increased share of institutional trading in Sweden. And in the beginning of the year, we did set out five prioritized areas. And if I walk them through one by one, starting with the improvements we wanted to make for our most active customers. I think we've made great progress.

We have introduced new tools for fundamental analysis, for technical analysis. We have delivered new functionality to improve orders. And I think that's pretty much the tick in the box, even though we have more interesting things coming in the second half of the year. When it comes to the second prioritized area, activating new customers, customers coming in to Avanza but not taking full advantage of our offerings. I think we have done some good things. We have made it more easy for customers with no fund exposure to make decisions and invest in funds. But I think we have much more to do there. The third one when it comes to improving our pension offering, I think we've made great progress and we've been proud of. of one of the releases which is the ability for customers in the age of taking out money to keep single securities in their pension which was not possible before you had to go over to funds only And the fourth one, internal efficiency, we have done a bit. I think we have a lot still to do there. And on the stable platform, I mean, that's a hygiene factor. We have done a lot. We now have two quarters behind us with very high availability, but that's something that we just need to keep high on the radar all the time. From my perspective, I'd say we have a positive momentum. We show continued strong growth. We're making good progress with our prioritized areas. But we have more to do on some of them, as I mentioned. I'm very proud of the pace of innovation in the organization. And I'm currently in the recruitment process to find a new CEO. And after that, Our management team will be complete, which I much look forward to.

And then we spend time on the strategic overview, which I talked about last quarter, but we're not finalized, so I will not be able to answer specific questions. But I want to underline that Avanza's main priority today is, and tomorrow will be, to foster and develop our strong savings offering here in Sweden. And with that, I hand over to you, Anna.

Okay, thank you Gustav and good morning everyone. We are reporting strong quarterly results today and not the least the strong first half year. However, we had two items affecting comparability in the quarter, both when it comes to income and expenses. Other income was negatively affected by customer compensations of 15.3 million SEK related to interest on the ISK account. and other expenses increased due to a fine from the Swedish authority for privacy protection, EMI, of 50 million, as we have previously communicated. Consequently, operating profit for the quarter decreased by 9% compared to Q1, and adjusting for the one-off, it was a decrease of 4%. Comparing the first half year, net profit in 2024 increased by 9% despite the negative effects this quarter. We continue this quarter with solid trading income.

We saw an uptick both when it comes to brokerage and turnover per trading day. But total net brokerage income decreased slightly compared to last quarter as a result of three fewer trading days in Q2. Gross brokerage income per brokerage generating turnover was positively affected by a higher share of trading in foreign markets and increased to 11.2 bits from 11 last quarter. The number of brokerage generating customers increased by 2%. High share of foreign trading is also positive for net currency-related income. Brokerage generating turnover in foreign markets kept increasing and accounted for 21% of total brokerage generating turnover, which is the highest it's been since. Other income was negatively affected by customer compensation of £15.3 million related to interest on ISK accounts with unutilised credit. and about how during the years paid too high interest rates on ISK due to a mistake when the ISK law was changed in 2016. And that now will be corrected as of next year. And we cannot say how much more should have received their final tax notices over a month ago, and we are seeing a slower rate of income in claims. A weaker other income was also impacted by decreased commission income from the market and from external mortgages. Taking a closer look at fund commissions, strong net inflows and growing volumes compensate well the lower margin, and we have reached an all-time high in the quarter. At the graph to the left, it's clear that income per sec of fund capital has been decreasing as the share of index funds has increased. It was just over 46% by end of Q2.

However, in the past few quarters, the fund margins have been showing signs of stabilizing, clearly decreasing at a slower pace. The average in Q2 was 25.9 bits, which was unchanged from quarter end Q1. And at the end of June, it was 25.8. And as Gustav said, we have had a fantastic half year when it comes to net inflow to funds. Fund flows are already in line with full year 2023 levels and higher than H1 record year 2021. And also important to mention is that Avanza have since the beginning worked to reduce prices in the savings industry and to put focus on how fees impact the savings capital. And although this puts pressure on the margin, this has been successful in building volume, which in the end is key. Growing our fund business also increases recurring income and makes us more resilient, also in less active markets. Moving over to MII. We saw a decrease of 3% compared to Q1 due to lower market interest rates. And with further rate cuts in the second half year, which the Riksbank forecasts, we have seen the NII peak for some time now. The policy rate cut of 25 bps in May affected surplus liquidity negatively by 2%. Surplus liquidity decreased to 43.6 billion at the end of the quarter, However, average volumes during the quarter were more or less stable.

Despite a growing lending portfolio, income from lending decreased by just under 1% due to mortgage rate decrease in both April and May. Margin lending rates were less unchanged and we saw volume grow by 9%, showing increased risk willingness among customers. Interest expenses on deposit peaked in April, but for the full quarter, expenses were in line with Q1. We lowered all our deposit rates except for the pro-customer segment with 25% in May. Although the average interest rate on deposits increased slightly from 186 to 188%. And please note that these figures are calculated on the quarterly in and out going balances. And if you look at the balances on a weekly basis, average deposit interest rate decreased to 185% in the quarter. Going forward, and when further policy recaps will be seen, our intention is to continue to follow taking customer behavior in competition into consideration. The administrative sign of 50 million from IMY, of course, had the largest negative impact in the quarter compared to Q1. Also, personnel costs were higher, negatively affected by management changes, but also more hourly employees. As mentioned in Q1, internal efficiency is one of our main focus areas for this year, and this will be increasingly important going forward to be able to free up time in operation units so that we are able to further strengthen development resources and focus on innovation. And Our communicated estimated cost increase of 9.5% for the full year stands. I think these numbers speak for themselves. We have a very strong capital position and low risk in the balance sheet.

the total capital and the leverage ratio were well above the requirement. And just like Q1, the quarterly results have not been audited, meaning profit generated in the first half year has not been added to own funds. To conclude, I am very proud of all we have achieved in the quarter and the improvements we have made on the platform. Customer satisfaction is our most important target, which in the end is what drives volume and revenue. Therefore, I once again want to emphasize the importance of the Avanza brand. The strong growth and the activity among our customers have resulted in another strong quarter. Increased fund savings gave all-time high fund commission despite last year's increased allocation towards index funds. This and the customer activity bodes well for coming policy rate cuts, which will affect net interest income. However, it's unlikely that we will return to a negative or zero policy rate environment in the foreseeable future, while NII will still give a good contribution to results. We will intensify our work on internal efficiency to ensure resilience in different market conditions and toward increased competition. which we hear a lot about, but don't really see yet. And with that, I would like to open up for questions.

Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star 11 on the telephone keyboard and wait for a name to be announced. To return a question, please press

and now we're going to take the first question and it comes from line of Jacob Haslevich from STB. Your line is open, please ask your question. My first question is on NII. During the quarter, the average analyzed rate on deposit increased despite the rate cut from the Riksbank. You said something regarding this on the call, but was this purely due to the mixed shift within deposits in the town? So could you help me understand this movement? Thank you. Yeah, you're right. To one extent, since we have seen a little bit of growth when it comes to the savings account. So, of course, that's contributed. But as I said, the spend on deposits peaked in April and has then turned down. But the reason why I think that is It's going up because we just take the average of the opening and closing balances. And we saw some adults by the end of the two weeks in the clusters as well. All right. Thank you. Continue on the MAI. You did cut your mortgage offering by 25 bps on the 15th of May, but you cut your savings account with 25 bps first two weeks later at the 27th of May. So why do you not protect your NII anymore? I mean, it's not a very high multiple income line, but every share you earn goes towards your dividend by the end of the year. we would like to have lowered the rates on the savings account immediately but we have an agreement with all our savings account partners that we have a little lagging when it comes to that so that's the reason But is it due to competition where you couldn't match those two tests at the same rate?

Jakob, I don't fully get your question. So we lowered the rates on our own mortgage. That was driven by a sense in the organization that we were not competitive enough.

and then your question was why didn't we lower could you say that again yeah the the rate on the savings accounts i mean savings account is an interest expense for you while you actually earn interest income on mortgage offering so you cut your margins on on your income line but you keep the margins or the keep the low margins on the savings accounts i mean you would have a higher nii if you did those two cuts on the same date true i mean you're right but but but

But I mean, on the savings account, we did lower in general deposit rates after the rate cut.

It was only the savings account that had a lag. And as Anna said, that is due to agreements with our partners on the external savings.

Okay. Thank you.

And then my final question is actually a repeat from last quarter. Gustav, you have now been slightly longer at Avanza. So could you help us today better understand your vision for Avanza going forward? Is it those five areas you mentioned earlier on the call or what developments could we expect going forward? And will you take a look at the current financial targets or the current ones? Thank you.

We're in the middle of the strategic overview, which I think is natural when you come in as the new CEO. It's not done, and more importantly, it's not signed off with the board. I mean, strategy is a board question. But let me say the following. The five prioritized areas, they are tactical. They are for... 2024. I mean, they could continue, but that's something that we actively need to decide upon. When it comes to the vision for Avanza, I think that's very related to what path you want to take, namely the strategy. We have a super fine business in the savings industry in sweden and almost 2 million customers so i mean whatever we decide to do adjustments wise or on top of that core business will be priority one two three also tomorrow And I will get back as soon as we have something potentially new on the strategic side and if that would impact the financial targets that we have. Okay. Thank you. That's very clear. I wish you all a great summer and a vacation. Thank you. Now we're going to take our next question. And the question comes in the line of Nicholas Macbeth from DNB. Your line is open. Please ask your question. Thank you, and good morning. So first question on your comments in the CEO words that your goal is now to move the development environment into the cloud. So could you elaborate a bit on this place, about the scope and timing of this migration and any cost estimates that you could share? Would you expect this ambition to have a meaningful impact on 2025 costs? Good question. Good and relevant question, Niklas. So today we have our data platform in the cloud.

We'll move our workspace, so the whole environment that all employees in Avanza work with, to the cloud end of this year or early next year. I mean, both of these are things that we do with our existing resources, so nothing strange with that. And then I'll stick out my head and say, I want to move the production environment also to the cloud. We have not decided in what pace. And so it's hard to answer that question here and now. We will not do that to lower our operating costs. We will do that to be part of the innovations that we think will happen in the cloud. We think that the actual cost in the cloud will be higher than the cost of having our servers on-prem. But on the other hand, we think that we can be more efficient and save on other parts when going to the cloud. Now, then the further question is, what does it cost to go from on-prem to the cloud? And I think that depends a lot on how swiftly you want to do it. And we haven't decided on that. I mean, one strategy is that, I mean, first we need to build a platform in the cloud so all our developers can work there instead of on-prem. on-prem servers that we have today and that's one cost. But then the cost to move the code, one strategy is we only do that when we anyway want to rewrite the code and then the additional cost is essentially none.

If you want to go faster, you could argue that you have some cost of rewriting code that you wouldn't do if you stayed on-prem. I know it's not a hard number that you want, but that's the best I have right now, Niklas. All right, and would you expect any such investments or costs to be taken to be activated or to be taken over the P&L We have been quite reluctant in this firm to take costs on the balance sheet. I think that's always the question on giving you and other investors the best view to make up your mind about the business and if it's cost that you have that you are taking today that will give you a lot of benefits tomorrow, then you could argue it's better and more transparent to take them on the balance sheet. I don't have a perspective on this particular potential cost item, I mean, migrating to the cloud. All right. And then a question related to pricing and your offering. So you announced in the second quarter that you are looking to introduce currency accounts to your pro and pro-banking clients in the second half of this year. So just wondering what is driving you to do this now and why? and what are the implications do you expect from this move? It's driven by a clear client demand And you know that if you do a lot of trades in securities in a foreign currency, it's quite frustrating to have to go back and forth to dollar six, dollar six, or euro six, euro six all the time. So it's for the convenience for these customers, but also for...

The reason is a clear client demand. All else equal, of course, we will earn less on FX fees on these customers, but we firmly believe that this will be compensated by bigger volumes, given that our offering improves.

All right, but don't you see the similar... client amount from all your clients or is it only related to or mostly related to your private banking and pro clients or should we expect this to be rolled out eventually to your entire customer base?

We have not decided to roll it out to the whole customer base. I mean the ones who benefit from that from these currency accounts is the one who are very active in trading foreign securities and that is mainly private banking and pro customers. I think the need the true customer need for regular customer is much lower. There is a lot of convenience to not having to worry about the effects which is the case if you don't have currency accounts. So there is no plan today to roll it out broader.

All right and then reflecting more broadly on your commission rates. I think I mean you have your commission classes which I think makes comparisons with other other platforms somewhat difficult but I think the overall conclusion would be that you are in line or even somewhat above what most other platforms charge today for equity trading.

So what is your reflection on your current pricing? I mean, this is something that you, as a CEO, have obviously discussed. Do you think an update is due anytime soon or are you content with the current pricing structure? I think when it comes to the level we have this guiding principle in Avanza that we want to be cheaper better and simpler for our customers. And then the question is how to view cheaper. And I view it as we should be more price-worthy because you cannot compare a Ferrari with a Skoda. So I've been with a different bank in the past where we tried to have much lower prices than Avansta on trading, but it didn't work because our offering in general was not good enough. So I think one has to compare price with quality. The other side of your question is simpler. Is our brokerage classes simple enough for the customers? And that's maybe a little bit of a question mark for me. I don't have a strong opinion. It's just we should aim to be simple. Could you really claim that you are cheaper? I mean, quality, of course, is also important, but I mean, I wouldn't expect anyone to think that Ferrari, as you mentioned, as an example, is cheaper than Skoda. It might be better value, but I mean, this type of... I mean, when most people think about cheap or expensive, I think the price someone would pay for a particular service, that's what comes to mind. Is it actually aligned with your customer promise to have more expensive or... in line with more expensive brokerage trades. No, but I agree with you.

And that's what I try to argue, that I think it's important to compare price with quality. And that ratio should be superior at Avanza. And I think it is superior today. Then the question is, is it simple enough for customers to understand? Question mark.

All right. Thanks for that. Thank you.

Thank you. Now we're going to take our next question. And the question comes from Erman Carrick from Carnegie. Your line is open. Please ask your question.

Good morning. Thanks for the presentation and for taking my questions. Maybe first a follow-up on Nicolas' question. Just like for like, how much do you expect to forego in income from this change introducing currency accounts? I mean, disregarding that you might get more volumes

It's marginal. I'm not worried about the top line effect. I think it will be swiftly compensated by activity and volume.

Okay, excellent. Then, I mean, you've talked a bit about these internal efficiency focus you have. Could you talk a bit about the major levers you see that you could further improve to further enhance the operational efficiency?

I wouldn't need to go on for hours then, to be honest. I mean, is our corporate actions process automated enough? No. Is our settlement process automated enough for foreign securities? No. Is our credit process automated enough? No. Is our patching process automated enough?

No. I mean, we need to chew through all this we have my personal view is that Vamsta has focused its development resources for good reasons on pushing out great customer experiences but I think we need to balance that with using our development resources to make sure that we are as digital in-house as we are to the outer world so for me it's more you know which of these areas to prioritize where are the lowest hanging fruits and then chew through them okay that's very fair but maybe just on how you see the pace of this. Given how much opportunities you see for improvement, could it be worth it to actually increase investments in the short term, increase costs to just really enhance the internal efficiency and then you can benefit from it for many years to come? It could be. Or no, the clear answer is yes. But it's even better if it's possible to get more out of the machine and be able to do both. And that's at least what I'm trying to do here and now. You'll have to judge me in a few quarters if that's the right strategy or not. That sounds good. Then the last question will just be on the cross-border trading. Could you say anything about how broad-based that's been, or is it very concentrated to a few single stocks? Also, maybe on the customer side, how broad-based it is. The interest for security is actually quite broad. It's not like it's just the upper segment. It's really the interest seems to be across all customer segments. When it comes to turnover, you see well-known names on the top of the list, like Tesla, like Nordisk.

I think Nvidia was not highest up on the turnover, but it was the single most bought share in June, for example. So it's well-known names up there, and it's

interest for foreign securities is broad excellent that's all for me thank you thank you thank you now we're going to take our next question and the next question comes line of martin extat from shb your line is open please ask your question hello and thank you for checking my questions so

First one to you, Gustav. You mentioned at Q1 there was a comment around taking potentially a step back from the technological edge, I think you said. Have these discussions evolved anything internally now that you've sunk your teeth into the business a little bit more? Or is this an ongoing discussion where also, for example, the CTO being recruited should weigh in where we could expect it to come back to us later on?

I will listen a lot to Fredrik when he joins. I started talking to him already, but I need to give him a little bit more time to make up his mind. But in general, I think we should be in the forefront, but we should not necessarily be first with new technology. And I think we actually discussed that at some point. Of course, it's a balance because my colleagues, they want to work with the newest and shiniest and so on, but it's also less proven technology.

So we need to find a good balance there. And I stand with my statement that we should be careful to be the very first in new technologies. Thank you. Thank you. So I had a question on index funds and the share of total funds. This is slowly approaching 50% now. Do you see this trend naturally plateauing somewhere or potentially tapering off? or standing at a natural equilibrium or is this something that will just keep going basically? If you look at it historically, if I go back maybe two years, it looks like it's kind of evenly spaced by a percentage point, so just below a quarter, basically. That's the share of index funds as the total funds comes up. I think customer will be cost-conscious also going forward that speaks for index funds. On the other hand, the more conviction a customer has, the more likely that he or she would It's a hard one to estimate, but I think the share will increase going forward, but I think the pace will be lower. I know it's basically saying nothing, but it's hard to predict. Thank you. And then just a final one from me. Did you have an updated cost guidance for the full year for us, also including the $50 million and any other information that you might during the first half of the year. No, we said that excluding the 15 million from the IMY. Because if I look at that, I think if you add the 15 million, you get 10.8%, I would say.

Yes, I'm incorrect. But even if I skip out the 15 million, it looks kind of ambitious with 9.5%, but you stick to it.

Yeah, we do. Well, we have some additional costs with the changes in the management group. As you know, that is a little bit costly in Sweden. And we had the fine that you talked about, and then Q1 costs were too low, and that hits us a bit in Q2 now.

Understood. Understood. That's all from me. Thank you, and have a good summer. Thank you.

Thank you. Now we're going to take our next question. And the question comes to the line of Ian White from Autonomous Research. Your line is open.

Please ask a question.

Ian, your line is open. Please ask your question.

Hi. Sorry, the line broke. Sorry, can you hear me okay?

Yes.

Okay, great. Thanks for taking my question. Just a follow-up, please, on this ISK interest remediation point that you've flagged. Can you just explain... explain that issue in a bit more detail. My read of your description of it in the statement is that it's not something that necessarily just relates to the last tax year. Is there perhaps a risk of further claims arising from customers who maybe become aware of this issue and start looking at their tax notices from prior years?

Is there a figure that you'd be prepared to commit to as a maximum amount there that you think you absolutely would succeed? It sounds like the 15.3 million is not all of it, but you think it's most of it. Is there an upper limit there that you'd give us, please? Our firm understanding is that all customers affected by a higher tax rate has gotten that information from the tax authority in Sweden. have paid out 15 million in Q2. We see a much lower pace of customers coming to us. But I don't dare to say it will max be X, Y, Z. It's not an item that worries me a lot. going forward, but I don't dare to put a hard number to it because I just don't know. Okay. When you say that everyone has now had the information, they all received that information of June this year or they could reasonably have known about it. from previous tax information, for prior year tax notices, for example? All these customers got the information in May and June for the last year and years previously. Understood. Okay. Thanks. Thanks for clarifying. Thank you. Now we're going to go to the next question. Hi, good morning. Starting off with a question on private banking, where we see that the net flow turned negative in the quarter and you previously talked about

the initiatives you're taking or about to take there in terms of improving your mortgage offering and also the currency accounts. Starting off, what is the reason for the negative flow here? Is it due to increased competition or something else?

I never like when we have outflows. We actually had that in this segment in the quarter. I'm not worried about it. There was a few one-offs and it's... I don't think it's from competition. When we lose customers in that segment, it's typically because we have a lower risk appetite for credits compared to some competitors. In this quarter, the flows were related to customers wanting to get exposures in assets that we do not provide. I see it more as one-off in this quarter. I mean, the longer term is positive.

And regarding the improved customer offering that you have talked about in the private banking segment, would you say that these two new sort of improved product offerings, is that it? Or do you expect to launch more news here for the private banking segment?

No, it's definitely not it. They're two important ones, but they're much more in the backlog.

Some of them are being worked on right now, so this customer segment can expect future improvements. And then turning to the trading activity, which you commented that it's slowed down during the second half of Q2. Could you comment if there is any discrepancy in the sort of what segments that are where you're seeing the slowdown? Is it broad based or is it in some particular customer segment that's taking down their activities? I don't have that number for the weeks of June, it was just a reflection that we actually saw that and it coincided pretty much with the development on the equity market with

not favorable volatility and the side going or even slightly declining equity markets in Europe. I think it's more related to that.

And then the final one, on the strategic update that you're working on, how do you expect that to be presented? Would it be in the shape of a capital market, say, or is it more small that you'll just bake it into one of the interim reports? I think it depends on what we decide upon. If it's no changes at all or minor changes, I think it makes more sense to just talk about it as a country report. If it's something bigger, then I think it makes sense to make a bigger fuss about it, so to speak, in the C&C. Yeah. Okay. Thank you very much, and have a good summer. Thank you. Thank you. Now we're going to take our next question. And the question comes live of Michael McNaughton from UBS. The line is open. Please ask your question. Hi there. Can you hear me okay? Yes. Yeah. Good morning, yeah.

Just one question on the strategy and the management changes you've had. The new CTO joined and then you also made comments about the Chief Business Development Officer joining as well about how he will have an eye on potential future deals. Am I reading into that too much or is there any specific kind of ideas that you have or areas that you want to build on or is this an inclination of potential geographical expansion?

I think it's more the typical role description in such a role. That's what I expect of such a person to keep his or her eyes open for potential to develop the business hence head of business development. I don't think you should read in More to that I worked with Eric both at SEB and Nordea and we have a very good and tight working relationship and we complement each other and that's why I'm very happy to have him on board.

Fair enough. Okay and then on the kind of follow-up from one of the last questions as well you mentioned how activity is slowing and you know but on the margins and the trade, do you see any differences in the different months of what the net brokerage margins were looking like? Was it slowing down as trading activity slowed down in June? Just try and get an idea of what the run rate looks like into Q3.

I'm looking at Sofia and Anna. I don't have that number intra-month.

No, I would say... It was a little bit lower in the beginning of the quarter and it rose during May and June.

Okay, thanks. And then another one just on the pricing as well. You made some comments that looking to simplify the pricing model would be a potential priority.

kind of automatically change the brokerage class depending on the size of the trade. Do you have any idea of would that be something that you would look at and if so what kind of impact that would have on commissioning I imagine that if it's more automatic you potentially lose out on some sort of inertia from the customers in changing classes or any No, not more than I mentioned that I think we have a fair price to quality offering when it comes to trading but i have a question mark about around the simplicity so if we could do something to make it even simpler for customers i think that's good the thing that you mentioned i need to look into okay fair enough thanks very much Just a moment.

And the next question comes from from JP Morgan. Your line is open. Please ask your question.

Hi. Good morning. Thank you for taking my question. So one question, going back again to what you said in terms of the need to potentially improve efficiencies and also with respect to the migration to the cloud. I perceive it's too early to quantify that, and it depends on how quickly you want to do it, as you mentioned. But I was just trying to understand what is the timeline we should expect. Will a decision be made by the end of the year and before we will see in the cost growth guidance for 2025 already the planned investment to complete the migration to the cloud and all these other initiatives? Or potentially we're going to hear something sooner, maybe in 2024, let's say this year. So that's my first question. The second question, again, going back to the dropping the effects charge while introducing the multi-currency accounts for the proper banking customers.

Can you give us an idea of what proportion of the total cross-border volumes come from this court of clients? And then related to that, I wanted to ask you, you said that this came directly from the clients, so the request came from them. Through what vehicle? So how did you collect the feedback that eventually led you to the decision to introduce this functionality? And would non-private banking clients have the same channel to voice their maybe desire for a similar offering? Thanks.

Thank you, Enrico. I'll start with the last question so I don't forget that one. So we have several ways for customers to engage with us and our customers in general, extremely engaged. And if we do something that they don't like, I can tell you they let us know and they let me know and they swamp me with emails and phone calls and vice versa. But we, for example, have something called the feedback buddy. We actually get so much feedback that we use generative AI to see patterns in what do most customers want us to do. That is general, irrespective of which client segment you belong to.

But in the price banking segment, they have an even closer relationship with our customers. is on our side. But apart from that, the feedback system and navigation from customers is the same irrespective of which client segment you're in. How big proportion of the foreign exchange business will this segment that will now have the possibility to get this currency account? How much is that? I'm looking at... of course we do that before we launch stuff and it's not something that I'm worried about I think the increased activity and volume will more than cater for the lost effect income on the trade. Your first question was So when do we expect the decision? I think it would be great to have a decision on this side of the year. I know that it is a big decision. It is a very regulated decision. It is a poor decision. We need to go through all the risks. take a decision this year. But it is a very formalized process, as you know. It's very significant outsourcing in the eyes of the regulators. So with that caveat, I cannot promise that we want to take a decision soon. Thank you. Thank you. Now we're going to go to the next question. And the question comes from Marcus from . Please ask your question. If I can follow up on costs as well.

If you look back, you have had a very steady development of your costs. Is that driven by that's what your capacity is to take on new projects every year or is it more that you try to maintain your return on equity or what you're steering on? That's my first question.

You need to help me there, Marcus, again.

could you rephrase the question see if i can yeah yeah i mean you you have a very steady development of costs from year to year yeah and i was thinking is that driven by that that is what your operating capacity is to invest i mean you don't have more people than you have so that's what you what you can do basically in a year to develop or is it more that you say that okay this is what we can afford to invest this year if i start to answer

who do not have the history, and then I can hand over to Anna and see if she has a different view. But I think the, first of all, it's my reflection from the outside is why do we need, why does Avanza, before I started, need to increase costs in this space being fully digital? And I know that many of you on this call have that question mark as well.

When I look at the cost increases that we project for this year, we have staff inflation pressure given the that we had until recently that's part of the answer the other one is the weak dollars and the suppliers on the tech side I think who have done a good job to try to increase their prices not just towards us to others Can we be better on procurement and negotiating and making sure that we have alternatives to push down prices? Yes, I think so. I think we can do a better job there. But I don't know, Anna, at least from my point of view, we should not have higher costs than we think it's needed to produce what we want to produce. But I don't know the history of this. I would say that we all, if you would ask the age, our development teams, they would like to have even more resources because they have so much ideas and interesting things in the backlog. So they want to do a lot of things in order to make sure that our customers are having the best offering. So it's it's a balance, but could we run a balance with lower costs? Yes, I'm convinced that. But I think it's the balance that we want to invest in in future growth. And that has also been important for us to be thinking Thank you. And then secondly, in your other income, except from the one-offs, it was all stood down quite a lot. You mentioned Stabilo and Avanza Markets. I saw Cleo just took down the value of Stabilo quite a bit this quarter. Can you give us a bit more on what's happening with the other income, except from the exceptions? biggest driver apart from the customer compensation the stock lending program where the demand for our shares in the market in Q2 was lower than previously and hence the income from that program was down.

Yeah and we didn't see a It was you who came to that conclusion. But it's driven by lower volumes when it comes to the mortgage partners.

Okay. Thanks.

Thank you. And now we're going to take our next question. Just give us a moment. And the question comes from Andrew Lowe from Citi. Your line is open. Please ask your question.

Hi. Thanks for taking the question. I have two. The first question is just on the flows in the quarter. My understanding is that customers get their annual rebates from tax-deductible loan interest, which is paid in April and May, typically. And you would think that they'd be quite significantly higher year on year given the higher interest rate environment.

So the question is, to what extent do you think that affected the flows in April and May? And then the second question is just on your deposit balances. So if I look at your non-savings deposit balances for now, 3.7% is your total savings capital, which is far below your other DTC pairs across Europe. pairs favorably is similar to professionally managed assets. So as an example, HFL's advisor platform is between 3% and 4% cash. So how much lower can this realistically go given the need for liquidity in trading? inflows and outflows, et cetera. And do you expect this to normalize at a higher level? Thanks. So, Andrew, if I take your second question, I think it is around how much cash as a percentage of their AUM or stakes capital. And that was down to 6.9%, if I recall my numbers correctly, in the end of the quarter, and that is low in historical comparison. And I think it is a little bit a result of response. So people have less dry powder. So if you believe in some kind of mean reversion in how you manage your portfolio, I think that percentage will likely go up in the future. So the flows affected by tax repayment. And that is, I think, normally, historically, when we're looking at our inflow, it's always lower in Q2 due to that fact that we are getting... The market share is getting refunds from the tax authorities and you cannot get them directly from the tax authorities to our platform. So it always goes to one of the incumbent banks where you have your salary accounts.

And it's hard to say whether or not that is one of the reasons why the flows were lower this quarter.

I guess my question is how long does that typically take to make its way onto your platform? If I'm a customer and I've got a significant rebate and I like your platform, then presumably I might think that I want to put those savings capital to work on your platform. Does that just take a while to happen?

Andrew, I would love to have that answer. But the theoretical answer, it takes way too long because there's so much capital sitting where it shouldn't sit. And we're every day working to get that capital to us. But I think with your last question, Andrew, I think we time it up. And I would like to thank everyone for this Q2 report and have a good day.