Nordea Bank Abp

Good morning and welcome to Nordea's first quarter 2024 results presentation. I'm Ilkka Ottola, the head of investor relations. With me here in Helsinki today are president and chief executive officer Frank Vangjensen and group CFO Ian Smith. We'll start off with a presentation by Frank, followed by a Q&A session. In order to ask questions, please dial into the teleconference. But with that, let's get started. Over to you, Frank.

Today we have published our results for the first quarter of 2024. We began the year strongly, continuing our good momentum, supported by a competitive offering and our advisors' proactive approach towards customers. Return on equity reached 18.1%, which is our highest first quarter return on equity since 2007. So a good start, despite the generally subdued economic environment and the ongoing high uncertainty in the world today. At Nordea, we have a strong business franchise with a resilient and well-diversified business model. So we are well equipped to navigate uncertainty and serve our customers. And as our first quarter results demonstrate, we continue to be one of the best performing universal banks in Europe. Some highlights for the quarter. Total income was up 6% year-on-year, driven by net interest income growth of 11%. Net fee and commission income was stable. Net insurance result was up 33%, while net fair value result was lower compared with a very strong Q1 last year. Operating profit increased by 19% year on year. Our good return on equity of 18.1% compared with a return on equity of 17.1% in the same quarter a year ago. The lending markets were slow. Still, we performed well, with our mortgage lending volumes stable and corporate lending volumes up 2% year-on-year. Our assessment is that we have defended our market shares during the period. Retail deposits were up 1% year-on-year, while corporate deposits decreased by 6%. Asset under management were higher for the quarter, increasing by 8% on last year. We saw a solid net flow in our Nordic channels. Cost development follows our plan, excluding regulatory fees. Our cost-to-income ratio was stable at 40%. Credit quality remained strong. Our loan losses were once again modest at 33 million euros or four basis points for the quarter. We have kept our management judgment buffer unchanged in local currencies at 505 million euros. Underlying capital generation remained strong and our CET1 ratio stood at 17.2% for the first quarter. That's an overview of the quarter. Let's now take a closer look at the numbers starting with the income lines. Net interest income increased by 11% year-on-year, driven by higher net interest margins and higher corporate lending volumes and offset partly by our deposit hedging. Activity in the Nordic housing markets remained slow in the first quarter. Demand for new loan promises was lower than a year ago. Still, we continue to be active in all markets, maintaining our first quarter mortgage lending volumes at a similar level as a year ago, and also maintaining our market shares with continued share gains in Sweden. Household lending margins were lower year-on-year, but we saw some improvement during the quarter. The corporate markets stayed slow, but still we increased lending volumes by 2% year-on-year. Net fee and commission income was stable year-on-year. Our savings fee income increased, driven by higher assets under management. The AOM increase was primarily driven by market performance with a mixed picture in net flows. While we continue to generate solid Nordic net flows of 1.1 billion euros in the quarter, our international channels, wholesale distribution in particular, continue to experience lower gross sales and consequently we had a net negative flow. Our outflows in the international channels halved in the quarter, and we are working hard to get them back to growth, which we expect will take some time. Over the past four quarters, our Nordic channels, which correspond to 86% of our total AUM, have generated net inflows of 6.8 billion euros. Income from payment and card fees also grew in the quarter, Brokerage and advisory fee income was lower year-on-year. Our lending fee income was up slightly year-on-year, while fee paid in relation to significant risk transfers we made to improve capital efficiency were higher. Net fair value returned to a solid level in the first quarter after a somewhat softer fourth quarter. Customer risk management activity remained at a good level, with FX and rate products most in demand. This part of the net fair value is a core part of our customer relationships, and it has been relatively stable over recent quarters. Market making was 35 million euros for the quarter, down from a very strong comparative 97 million euros. Treasury was positive, supported by improved valuations. We continued to manage our costs with strict discipline. Costs for the first quarter continued to develop in line with our plan, increasing by 5% year-on-year, excluding regulatory fees. The main drivers were salary inflation and the investments we are making as we build for the future. For Nordea, being a strong bank means being a resilient bank, and we are always working to strengthen, building on our robust financial position and developing every aspect of our operations. We are strengthening our technology foundation. We are investing in our digital offering to ensure we can offer our customers the very best services and experiences. And we are working to protect our customers and societies from financial crime. These are investments to help make Nordea a safe and strong bank for stakeholders. During a quarter, we also had costs related to the integration of the businesses we have acquired in Norway, that is the personal banking and private banking business from Danske Bank and Nordea Pension, the life and pension business in Denmark. Regulatory fees in the first quarter were substantially lower, as the Eurozone's single resolution fund fees are zero this year, and so our total cost decreased by 9%. Credit quality remains strong, and we continue to benefit from our well-diversified loan portfolio in the more challenging economic environment. Net loan losses and similar net result for Q1 was 33 million euros of four basis points. This was lower than the fourth quarter last year and also below the long-term average. A good position to be in given the uncertain economic environment and the rather dramatic increase in interest rates. During the quarter, we made only a small number of new individual provisions, mainly in the area of construction and consumer-related industries. Generally speaking, our customers continue to be resilient. But naturally, we are monitoring developments closely. We have a management adjustment buffer of 505 million euros to cover additional potential losses, and this is unchanged in local currencies from previous quarters. Capital duration and our capital position continue to be strong. At the end of the quarter, our CETI ratio was 17.2%. This is 5.1 percentage points above the current regulatory requirement and demonstrates our strong capacity to support our customers, shareholders and society. In March, our AGM approved the dividend for 2023, resulting in a total dividend payment of 3.2 billion euros to all 590,000 shareholders, including 570,000 private individuals and many pension funds in the Nordics. That's 3.2 billion euros that goes to further supporting economic growth broadly in the Nordic societies. We also completed our latest share-buy-back program of 1 billion euros. Our capital policy and our ambition to deliver market-leading shareholder returns remain unchanged. We continue to generate capital and expect to be in a position to provide an update on our capital plans, including buybacks, later this year, after the ECB approves our new capital models for retail exposures. Our four business areas all did well in Q1. In personal banking, we had good income growth and performed well in lending and deposits. Customers increased their savings and investment activity. During the quarter, we saw a 25% year-on-year increase in the number of customers beginning a new savings plan using our digital savings assistant. We also strengthened our offering by introducing new deposit products in Finland, Norway and Sweden. Deposit volumes increased by 2% year-on-year. On the lending side, we continued to experience slow Nordic housing markets. Mortgage volumes were stable while customer demand for new loan promises was slightly lower than in the same quarter last year. In Sweden, we further grew our share. The number of private app users and logins both increased by 7% year-on-year in the quarter. Total income for the quarter was up 8%, driven by 9% higher NII. Return on allocated equity was 20%, compared with 19% in the same quarter last year. And the cost-to-income ratio improved to 47% from 48%. In business banking, we created solid income growth and grew our lending despite the slowing corporate market. Lending volumes were up 1% in local currencies year-on-year, driven by Norway and Sweden. Deposit volumes increased by 1%, and we continued to see migration from transaction deposits to fixed-term deposit products, which offered customers higher rates. During the quarter, we were able to reduce waiting times when customers contacted us by more than 20% year-on-year. One of the reasons for that is our digital investments. We have gradually made more of our services available to our customers on a self-service basis so that they can manage their finances quickly and easily with a few clicks. For example, in Sweden, customers can now use Nordea Business, our corporate app, to apply for a green business loan. During the quarter, we also rolled out Nordea Business in Norway, and the app is now available in all our markets, all part of our plan to deliver the same recognized experience to our customers across the Nordics. Our net loan losses were at a moderate level of €20 million, or 9 basis points. Total income for the first quarter increased by 7% year-on-year. The increase was driven primarily by net interest income growth, supported by deposit margins and volume growth. Return on allocated equity was 18%, unchanged from a year ago, while the cost-to-income ratio improved to 40% from 42%. In large corporates and institutions, we continued to actively support our largest Nordic customers with their investment plans. We were very active on the advisory side and therefore had a solid quarter in what remained a challenging environment. The macroeconomic uncertainty has led to reduced levels of corporate activity, and this was still the case in the early part of the quarter. However, we did see a peak up in activity in March, with large business encouraged by the latest inflation data. Our lending volumes for the quarter were broadly unchanged in local currencies. Deposit volumes were down 13% year-on-year, Though quarter on quarter, we continued to see more stability. Debt capital markets activity also picked up in the quarter, and we arranged more than 200 transactions. As a result, our fee income reached its highest level for any first quarter in the past five years. In equity capital markets and mergers and acquisitions, we continue to see improved sentiment and momentum in the market, with deal activity slowly improving, including in private equity. We continue to work with our customers to support them in meeting their climate requirements and remain number one in the Nordics for corporate sustainable bonds. I was pleased to see Nordea recognized for its sustainability leadership, winning awards for being best in the world for sustainability-linked bonds and best in Western Europe for sustainability-linked loans. The credit quality of our LCNI loan book remains strong. Net loan losses and similar net result amount to net reversals of €12 million. Total income for the quarter was down 5% year-on-year, The decrease was driven by a drop in net fair value income relative to the elevated levels we saw in the first quarter a year ago. Net interest income increased 7% year-on-year, while net fee and commission income was up 5%, driven by capital market transactions. Return on allocated equity was 19%, down 2 percentage points on the same quarter last year. The cost-to-income ratio was 35% compared with 34% last year. In assets and wealth management, we also had a solid quarter with strong momentum in our private banking business, a key focus in our savings strategy. Total income was up 2%, driven by higher net insurance results and higher net interest income from improved deposit margins. The cost-to-income ratio remained stable despite cost inflation and integration costs related to the acquisition of Danske Bank's Norwegian private banking business. Total assets under management increased by 8% year-on-year to a total of 391 billion euros, driven by appreciating stock markets and positive flows in Nordic channels. In private banking, we grew the number of customers in Norway and in Sweden by more than 1,100 during the quarter, and total income was up 9% year-on-year. Customer activity remained high, and net flows were positive by 300 million euros despite seasonal headwinds. In international channels and wholesale distribution in particular, we continue to see outflows driven by the same dynamics as seen over the past year. The high interest rate environment continues to drive rotation from certain funds into money market instruments and deposits. While we are working to address this, we expect to see the same trend continue in the near term. In life and pension, we have continued to develop our offering and strengthened our position. Supported by recent acquisitions, net flows remain strong. Our market shares in Norwegian and Swedish pension transfer markets reached their highest level to date. Gross written premiums in the quarter amounted to 3.1 billion euros up from 2.3 billion a year ago. While most of that increase was driven by the Nordea pension acquisition in Denmark, we have also driven organic growth in Sweden and Norway. Return on allocated equity was 36% compared with 37% a year earlier. The cost-to-income ratio was stable at 42%. To sum up, we have started the year well, with high-quality income growth and strong profitability. We remain committed to delivering market-leading performance. We will do that by continuing to develop the customer experience, by driving focused and profitable growth, by staying firm on cost management, and by continuing to improve capital efficiency. Beyond that, we continue to take steps to ensure we are a strong, predictable and resilient bank for our customers, shareholders and society. Resilience is more than having a strong balance sheet and capital position. It's about having the right business model. It's also about investing in the many other elements too, being it digital capabilities, cybersecurity, financial crime prevention, or tackling climate change. Risks come from many areas and banks need to be strong in every area. You can therefore expect that we will continue to prioritize resilience as we deliver on our business plan. Looking ahead, we expect to achieve a return on equity above 15% for the full year 2024. And with our 18.1% return on equity for the first quarter, we are off to a good start. We also target similarly strong profitability in 2025 with return on equity above 15%. Our ambition is unchanged to be the preferred partner for customers in a need of a broad range of financial services. Thank you.

Operator, we're now ready for questions.