Avanza Bank Holding AB (publ)

Welcome to our Q3 results presentation. My name is Gustav Unger. I'm the CEO of Avanza. And with me, I have Anna Kasselblad, our CFO, and Sofia Svavar, our head of IR and communication. And I'll start off by going through some key highlights for the quarter before handing over to Anna and the actual financials. And then we will spend the majority of the time with our new strategic priorities and long-term financial targets for 2030. I am very happy about the quarter. We saw strong growth, both in terms of inflow. Actually, the first nine months, we had the best year since the record year 2021. And when it comes to customer acquisition, the inflow during the first nine months is already in line with the full year 2023. We also saw high inflows to funds. And we took roughly 20% of the marketing flow. We had some more volatility in the quarter, which helped keeping trading activity up. And actually, the revenues for the quarter were the best ever. And I think we're making good progress within our prioritized areas. And to mention two examples, we have launched unlisted assets for our private banking customers. And we have entered into an exclusive collaboration with Apache VAD and to strengthen the decision support and analysis to our customers. We were also ranked as one of Sweden's most attractive employers by Universum. And this is great news for us since we are dependent on attracting the best talent. In August, our new CTO Fredrik Broman started, for which I'm very happy. We have also signed up our new CTO, Olof Eriksson, who will start 1st of April hopefully earlier. As you may have seen Gunnar Olsson, our deputy CEO, will leave the firm by the end of the year and a recruitment process is initiated to replace him. Anna.

Thank you Gustav and good morning everyone. That was quick but I look forward to the strategic update soon. In the meantime we continue to focus on our results. As Gustav said, we record another strong quarter today and record high results for the nine months period. Also in this quarter, we had two items affecting comparability. Other income was negatively affected by customer compensations related to interest and ISK of 10.5 million, 5 million lower than last quarter. And we anticipate compensations to decrease further in Q4. The other one-off is related to changes in our media company, Placera, and the exclusive agreement with Faschweben that Gustav just mentioned. And this affected personnel expenses to increase by 10.6 million due to the termination of our own editorial team. And the expense had been estimated to 8 million. Adjusting for one-offs, Placera and IMY last quarter, costs for the nine-month period increased by 9%. and we are still comfortable with our communicated 9.5% cost guidance for the year. ROE is above target and EPS grow by 9% for the nine month period. Net brokerage income was positively affected by seven more trading days in the quarter, although the number of brokerage generating notes and turnover for trading day decreased. The number of brokerage generating customers was unchanged, so were gross brokerage income per brokerage generating turnover, which also was in line with last quarter at 11.2 bps, and continued to be positively affected by high foreign trading, which as in last quarter stood for 21% of the trading activity in the quarter. This is the highest share since 2021, which is also reflected in the 4% higher currency-related income compared to last quarter. And as mentioned, other income was also this quarter negatively affected by customer compensation. These were lower than last quarter, as I said, but which together with higher income from avancer markets made other income increase by 39% compared to Q2. Taking a closer look at fund commissions, we saw continued strong inflows to funds in the quarter and volumes grew by 5%, which is key for revenue growth. In the last few quarters, we have seen the fund margin stabilizing. In Q3, for the first time since 2021, the margin increased, and this was despite the continued growing share of capital in index funds. and it's the result of the overall fund mix during the quarter, which showed no clear trend. But this resulted in an all-time high fund commission in Q3, and fund commissions for the nine-month period increased by 23 percent. Moving over to MII, we saw a decrease of 3 percent compared to Q2 due to lower market interest rates. The policy rate was lowered by 25 bits in May and August, which of course negatively affected cyber. That was down by 32 bits in Q2 and 62 bits in Q3. The main part of the treasury portfolio is tied to cyber three months. The risk bank forecast is at least two more rate cuts before year end, one which may even be a double decrease of 50 bits. It will continue to put pressure on the NII. Although credit spreads are higher on the bonds we buy today compared to the bonds that mature. Income from the treasury portfolio decreased by 7%. Average volumes were more or less stable. The lending portfolio increased by 4% in a quarter. although average interest rate decreased to 4.30%, resulting in interest income from internal lending of 233 million. The interest rate on the mortgage portfolio is tied to the policy rate and was consequently lowered by another 25 bps in the beginning of October. However, we will raise the mortgage rate by 10 bps in November, And since April, we have had an extra discount of 17 bit on the mortgage that is now partly being taken away. Margin lending was cut by an average 17 bit in August. Interest expenses on deposits decreased 271 million due to lower average rate on deposits and despite higher volumes on our own savings account. And going forward, our intention remains to follow the policy rate cuts But that's always taking customer behavior and competition into consideration. And the definitive decisions will be taken in connection with the policy rate cuts. And as already mentioned, costs are on track with our full year guidance. Personnel costs are always lower in the third quarter due to summer vacations, which is also the case this year. And that is also despite the one-off costs related to our media companies, Asera. Other expenses were lower, and that was mainly due to the one-off effect in Q2 related to the final 15 million. Marketing costs were seasonally higher due to summer campaigns in Q3, where we even did some TV commercials in Sweden in connection with the Olympics. Cost-to-savings capital ratio decreased to 15 bits for the nine-month period compared to last year. And Gustav will, in his strategy, actually come back to our new cost target for the coming years. As mentioned many times before, I think these numbers speak for themselves. We have a very strong capital position, and we have just set the updated strategic priorities for the years to come. And the strong position will give us room to maneuver. But when it comes to capital requirements, I would like to emphasize that the leverage ratio is sensitive and our main priority to handle. The leverage ratio is affected by customer activity and how they choose to allocate their portfolios. And also bear in mind that the deposit rate ratio is at historically low levels, around 7% of the total savings capital if you exclude external deposits. Also recently, the Swedish FSA came with new requirements on credit institutions, which use deposits as hours for funding. And all things equal, this means that our offering of external savings accounts will not be as attractive to these payers going forward. And we are having some discussions with them, but I think it's too early to draw any conclusions on how the new requirements will play out. There are, in other words, a few uncertainties around our need for capital, and we will therefore need to come back with how we will handle our strong capital position going forward. And with that, I would like to hand back to you, Gustav.

Thank you. So we have spent quite some time to decide upon our strategic priorities looking into 2030. And I want to start with Sweden, where we see attractive long-term growth prospects. And if I start with the markets, it is the largest in the Nordics with some 12 trillion in asset under management. Sweden has higher growth projections than most European markets. And it is a very advanced market. I would say it's the most advanced in the EU. It's exemplified here with the fact that 7 out of 10 Swedes saving mutual funds. It's the highest ratio in the world. One out of four Swedes are invested in stocks, and the share of total assets invested in single stocks is actually twice as high as the European average. On top of that, we see ongoing structural changes that will put even more responsibility on the individual for his or her financial well-being. And this is of of course, good for players like Avanza. If I zoom in on us, Avanza, we see a large potential for continued market share growth. And here I have illustrated that by the delta between the front book, i.e. our market share of the net flows, and the back book, which is our market share of the stock, which differs a lot. I mean, we have a market share of the stock of 7.5%, and we take a little bit north of 20% of the net flow, i.e. the front book. Now, just illustrated, should we do as good of a job tomorrow as we do today and continue to take north of 20% of the front book, we will have to fight way beyond 2040. with a strong growth, taking the stock up to the 21% front book. When we look at our customers, we see that the average customers hold roughly two-thirds of his or her financial assets with other institutions. So we see a great potential to capture more of these customers' share of the wallet. And with the areas where we compete today, some of these pockets are not addressable, like collective occupational pension, but at least half of it is money that we should capture. And as you may know, our customer base is quite young. It's 10 years younger than the average suite. And you know that When you are in 30s, you start to accumulate wealth and then you get richer as you grow older. So there is a big potential as our customer base grows older. And of course, in the intergenerational wealth transfer. And given the attractiveness in Sweden, we have set a target to grow the savings capital in Sweden by 15% annually. Now, if I break down this 15% to give some more granularity, let's assume that the market depreciation on average is 5%. Our savings capital is not 100% equity. We have some deposits, which takes down the average market depreciation number. And then moving one step further, the Swedish market is growing. And assuming that we take our fair share of this growth, we will grow with another three to 4%. And as we continue to do as good of a job as we do now, we should continue to take market share from our competitors by increasing share of wallet and attracting new customer, which would add then another six to 7%, adding up to the 15% growth target. Now, with that, we have set five strategic priorities for sustained strong growth towards 2030. And the first one is about to develop and grow our leading position in our core business, and that is savings and investment in Sweden. We have no intention today, here, now, to venture into payments or salary accounts. We want to achieve market leadership in private banking. We want to achieve market leadership in occupational pension. And these three strategic priorities will help us deliver on our top line growth, growing savings capital with 15% per year, reaching them just north of 2000 billion in 2030. We will also increase our efforts to become more lean and mean, and that includes a migration to the cloud and further automating our manual processes. And this will lead to improved flexibility, cost efficiency, and scalability that we so much desire. And last but not least, we want to establish Avanza in at least one additional European market during this period. And this will lead to additional long-term growth opportunities. Now, if I go through these files one by one, with the first one to strengthen our core business, there is a particular focus on increasing share wallet, which I motivated earlier. We have a starting point with over 2 million customers. We have a very low churn of around 1%. We have a young customer base that will accumulate wealth over time. We have significant opportunities in the intergenerational wealth transition. And we have many customers with a significant share of their savings capital with other institutions. What we want to do now is to develop and personalize the customer experience. We want to put further focus on data-driven development and systematic A-B testing. Now, these two combined shall lead to more tailored decision support and information to our customers. And this should lead to better investment decisions from their point of view and that they entrust Avanza with more of their wealth. And the ambition is to strengthen our number one position and to take a larger share of our customers using us exclusively for their savings and investments. We have historically been very strong in the do it myself segments to the far right and over the last decade been much better to help customers who want some help but want to do some of it themselves. Where we are weak today is in the do it for me segment and we want to become more relevant for those who have less interest in savings. and we will develop products to attract this segment while remaining fully digital. And this cuts across different customer segments. So this is an ambition we have not just for the core business, but also for private banking and for occupational pension, which I will come to in a minute. We want to grow in the private banking segment. Our starting point is that we have a very strong digital customer experience and competitive pricing. We have roughly 15% market share measured at number of customers, not measured at AUM. It's number of customers that we can measure in Sweden. It's hard to compare with the market when you look at AUM. And this 15% market share corresponds to being the fourth largest We see a strong willingness to recommend us among our customer base. But few associate the Avanza brand with private banking. And what we want to do here is to improve the investment decision tools and create inroads into the do it for me segment that I'd mentioned before. We also want to further strengthen and differentiate the private banking offering. And we need to increase our market visibility and become even more proactive towards our customers. And the ambition is to be the number one player in private banking in terms of number of customers. And we want to substantially increase the private banking savings capital that today is just south of 350 billion Swedish. occupational pension is probably the most dysfunctional part of the Swedish savings and investment market and here we want to accelerate our growth we today have a competitive offering both when it comes to price user experience and the broad investment universe and we have a Swedish pension system that is perceived difficult by the savers and where the individual will have to take great responsibility for their own financial well-being in the future. Now Avanza has the capability and the experience to make difficult things easy enjoyable and inspiring and we are today number five in this market in terms of premiums and when I say this market it is where we compete here and now which is outside the selection center and outside traditional pension. Our action plan is to make the experience for the individual pension customer more intuitive and improve the offering for the do it for me segment. So I hope you see the red thread here when it comes to making inroads into the do it for me segment. We will also improve the administrative processes interfaces for the corporate it's actually the corporate who decides if they will use Avanza or someone else as their pension provider and we actually have a new development team up and running since two weeks focusing solely on the corporate experience we also want to grow our we want to grow through our own sales force and we want to strengthen the pension brand we do not plan to go through intermediaries in this market. And the ambition is to be number one compared to the number five today in terms of premium inflows by 2030. To manage all this and to secure that we are in a favorable position in the future, we will improve our flexibility, cost efficiency, and scalability. And our starting point is that we have a sector leading cost efficiency with a cost to savings capital of 15 basis points. We have a uniform and modern tech stack with one programming language, Java. We have one API framework, i.e. one way where our microservices communicate with each other. And we have one way to build and distribute services. And this creates efficiencies in the cloud migration that we want to do. And our data platform is already migrated to the cloud and over 85% of our systems are built in cloud ready technology. Another starting point is that we have a scalable customer front end, but we have opportunity to improve our internal processes. Now the action plan is we will accelerate our cloud migration with new development in the cloud from next year. We will improve our operational efficiency and we will have a stricter prioritization of activities and development. And the ambition for 2030 is that we have improved our customer value through enhanced technology driven development and innovation. And we want to be as scalable and digital internally as we are externally towards our customers. and we want to see decreasing cost to saving capital over time. Last but not least, we want to expand into new geographical markets. Avanza is today the clear market leader and by far the most successful digital savings and investment platform in Sweden, which is the most developed and competitive market in Europe. We have democratized savings and investment in Sweden, We have leading user experience, broad product range, and a unique customer-led development process. And our action plan is that we will closely monitor and evaluate acquisitions, partnerships, and greenfield opportunities, and also deepen our understanding of the different European markets and how we rate their attractiveness. And we will start our internal readiness preparation now, which includes when we recruit and when we develop. And our ambition is that we want to be established in one or several European markets outside Sweden before 2030. We want to create additional long-term growth opportunities, and we want to have further diversified our revenue base. And as a result of these five strategic priorities, we have set new 2030 targets to illustrate our ambition. We leave our customer satisfaction and employee engagement targets unchanged. They are critical to our success. We want to accelerate future growth and set the target to grow our savings capital in Sweden with on average 15% per year. We want to decrease our cost to savings capital ratio over time. And we will have an annual average cost increase of 8%. Now, this includes the full cost for the cloud migration that we estimate to cost 300 million Swedish kronor in total over the whole period. It also includes the investments we are doing in our core business, in private banking and in pension. The increase will be higher in the beginning of the period and trending downwards to reach 5% as we increase our scalability. It will be higher in the beginning as we accelerate our cloud migration and ramp up our efforts in private banking and pension. I will revert with a cost guidance for 2025 at the Q4 presentation But the cloud migration is estimated to increase the 2025 cost with roughly 3.5%. And the private banking and pension efforts with roughly 2%. And we intend to take as historically our costs over the P&L and not capitalize on the balance sheet. Our return on equity target of at least 35% is unchanged, and we maintain our dividend policy of 70% of our net profit. And here I want to highlight that we paid out over 90% earlier this year, and we have no ambition to become overcapitalized. To summarize our journey towards 2030, we want to sustain our number one customer satisfaction position, We want to maintain our unique corporate culture and high employee engagement. We want to strengthen our position as the number one savings and investment platform in Sweden. We want to more than double customer savings capital to north of 2 trillion. We want to take the leading position in both private banking and occupational pension. We want to expand in at least one additional European market. and we want to retain the industry-leading cost position. And with that, I open up for questions.