Nordea Bank Abp

Good morning and welcome to Nordea's fourth quarter and full year 2024 results presentation. I'm Ilkka Ottala, the head of investor relations. As usual, we'll start with the presentation by CEO Frank van Jensen, followed by a Q&A session with Frank and CFO Ian Smith. Please remember to dial in to the teleconference to ask questions. With that, I'll leave the stage to our CEO, Frank van Jensen.

Good morning. Today we have published our results for the fourth quarter and full year of 2024. We achieved strong results in 2024. Nordea is resilient, highly profitable and growing. The past year has reminded us of how unpredictable the world can be. Geopolitical tensions have become part of our everyday reality, including here in the Nordics. The good news is that inflation has fallen back towards central banks, target levels and policy interest rates are coming down from the peak. This has brought some welcome relief to households and businesses in our region. There are also signs that economic activity is picking up and the Nordics may be turning a corner. At Nordea, we have stayed focused on what matters most, delivering on our priorities and fulfilling our role as a strong and resilient partner for customers, shareholders and society. That strength and resilience was evident in our financial results for 2024. We grew our business with full-year income up 3%, and that 16.7% full-year return on equity exceeded 16% for the second year in a row. Our sustained high profitability reflects the considerable progress we have made since our repositioning in 2019. Supported by our strategic investments, we have grown the business, driven sustainable efficiencies, improved customer experience and strengthened our franchise. Customer satisfaction is also up across the board. We are on the right path and was pleased to see us continue our good performance in the fourth quarter. Looking at some of the highlights for the Q4. Total income was up 1% year-on-year. The increase was driven by an 8% increase in net fee and commission income and higher net insurance and net fair value results. Net interest income was resilient in a declining rate environment, down only 5%. Operating profit was up 4%. at 1.5 billion euros. Our return on equity was 14.3% compared with 14.1% in Q4 2023 and impacted by usual seasonality. Lending and deposit volumes were both up supported by our acquisition of Danske Bank's Norwegian personal customer and private banking business, which we successfully completed during the quarter. Mortgage lending grew by 6% year-on-year. Corporate lending was up 1%. Retail deposit volumes increased by 5%, while corporate was up 8%. Asset management continued to grow, increasing by 11% in the quarter. Cost development in line with our operating plan Our cost-to-income ratio with amortized resolution fees was 48.9%, improving from the 50.6% a year earlier. Credit quality remains solid. Net loan losses were €54 million, or 6 basis points. Capital generation was strong in the quarter. We ended with our CET1 ratio at 15.8%, which is 2.2 percentage points above the current regulatory requirement. Our results and robust capital position support strong returns for Nordea shareholders, and today our board of directors has proposed a dividend of 94 euro cents per share for 2024, an increase of 2 percentage points compared with 2023. We are targeting a continued market-leading performance in the year ahead. We expect full-year 2025 return on equity to stay above 15%, With that summary, let's now take a closer look at the results starting with the income lines. Net interest income decreased by 5% compared with the strong Q4 of 2023, driven by lower deposit margins. This was in line with our expectations in the current rate environment, which saw rates decline at a slightly faster pace towards the end of the year. The decrease was partly offset by higher household lending margins and higher deposit volumes, as well as the acquisition in Norway. We also had a positive impact from our deposit hedging activity of 36 million euros quarter on quarter and 89 million euros compared with Q4 2023. Our deposit hedges are designed to support our net interest income as rates decline. Our net interest margin for the quarter was 1.73 compared with 1.83 a year ago. With rates coming down, we expect some increased activity in the lending markets, and there were signs of that during Q4. We increased mortgage lending by 6% year-on-year, with growth of 1%, excluding the acquisitions. The corporate lending market also improved and we increased volumes by 1% year-on-year. Deposit growth was strong with retail deposits up 5% and corporate deposits up 8%. Net fee and commission income was strong, growing by 8% year-on-year. Throughout 2024, our customers focused on strengthening their financial well-being, leading to strong demand for our savings and investment products, and we saw this trend continue during Q4. We also had higher activity in cards and payments. Savings-free income was supported by higher assets under management, which grew by 11% year-on-year to 422 billion euros. Net flows were strongly positive, amounting to 8.5 billion euros. In Nordic channels, net flows were 6.1 billion euros, following a not-so-strong performance in private banking and our life and pension business. After some quarters with negative flows in the international channels, we saw momentum and momentum shift in Q4. We returned to positive net flows of 2.4 billion euros driven by several large new mandates. Brokerage and advisory fee income was stable year on year. Net fair value result was up 31% year on year. Customer activity was high, especially in interest rate and foreign exchange hedging products. Market making was negative following high volatility in connection with the US election. Costs were up 1% year-on-year in line with our plan. The increase was mainly driven by the strategic investments we are making into, for example, technology, data and AI, digital services and risk management. We also had high levels of business activity in the quarter. As you know, in recent years we have stepped up our investments in technology and non-financial risk areas such as financial crime prevention and cyber security. The key aim for these investments is to build a stronger and even more resilient bank and unlock the benefits of our Nordic scale. better customer experience, more business growth and increased efficiency. Following a planned step up in 2024, our investments have now stabilized. Consequently, for full year 2025, we anticipate modest cost growth of about 2 to 2.5%. In the fourth quarter, our cost-to-income ratio with amortized resolution fees was 48.9%, compared with 50.6% a year earlier. Nordic households and businesses have felt more pressure on their finances in recent years. However, our customers have maintained stable financial positions We have seen this in our continued low credit losses and strong credit quality. Q4 net loan losses and similar net results was 54 million euros or six basis points, well below the long-term average. Similar to previous quarters, the losses were driven by a small number of individual corporates from different industries. We continued to reduce our management judgment buffer, releasing €21 million during the quarter. The buffer now stands at €414 million in local currencies, compared with €435 million in Q3. Our capital generation and our capital position continued to be very strong. The TET-1 ratio stood at 15.8% at the end of the quarter, 2.2 percentage points above our capital requirement. This was unchanged from Q3 as the impact of the Norwegian acquisition and share buybacks were offset by strong capital generation. We will continue to deploy capital to drive growth and return excess capital through share buybacks. As we have said previously, our aim is to trim excess capital by executing smaller and more frequent buyback programs, enabled by our strong capital generation. The current program will end no later than 28 February and we are already in close dialogue with the ECB about the next buyback. Following the strong year, our Board of Directors has proposed a dividend of €0.94 per share for 2024 compared with €0.92 per share for 2023. Our four business areas all performed well in Q4. In personal banking, we drove solid business volumes, supported by good levels of customer activity, especially in savings and investments. Deposit volumes were up 5% year on year in local currencies. Mortgage lending also grew and was up 5%. Our strong volume development included the acquisition of Danske Bank's personal banking business in Norway. The acquisition is a significant step forward for our business in Norway and has boosted our market share from 11% to around 15%. We have welcomed more than 235,000 new customers to Nordea. We look forward to serving them with our wide range of financial services, driving ancillary growth. The acquisition has also demonstrated our proven ability to successfully integrate large-scale businesses. In recent years, we have made several key bolt-on acquisitions to help us accelerate our growth in life insurance, pension, and personal and private banking. Our primary focus is to grow organically, but we will continue to target attractive bolt-on opportunities. During the quarter, we saw further signs that the Nordic mortgage markets are beginning to gradually recover after a couple of slow years. Demand for loan promises has increased for consecutive quarters. Customer use of our digital challenge remains high. And in Q4, we saw the number of digital active customers pass 5 million for the first time. Mobile users and logins Both grew by 7% year on year. We are continuously expanding our digital offering with the aim of providing an outstanding personalized customer experience. By the end of this year, we aim for all everyday personal banking needs to be met by our digital services, and we are on track to achieving that. During Q4, we were also proud to see Nordea named Sweden's Bank of the Year for the first time by Preveda Affärer, a leading national financial publication. Five years ago, we launched a long-term strategic initiative to strengthen our position in the Swedish market. Since then, we have made great progress, gained more business and market shares. Total income decreased by 1% due to the lower net interest income. This was partly offset by higher savings income and higher payment and card fee income. Return on allocated equity was 15% compared with 16% a year earlier. The cost-to-income ratio was 54% and improvement from 57%. In business banking, customer activity held up well and this supported solid business volumes. Declining interest rates and falling inflation have provided some relief to SMEs, even if the overall environment has remained challenging. During the quarter, deposit volumes increased by 4% year-on-year in local currencies. Lending volumes also grew by 1%, and we helped more customers secure funding through the bond market. During 2024, we continued to invest in improving customer experience. As part of that effort, we have increased the availability of Nordea Business Center advisors for our small corporate customers. And in Q4, we achieved further improvements in call resolution rates and waiting times. We also finished onboarding customers in Norway to Nordea Business and thereby completing the Nordic rollout of our digital banking platform. This is very much part of our broader effort to standardize our services and systems across our markets. Total income for Q4 was down 3% year-on-year, driven by lower net interest income. This was partly offset by higher income from savings, payments and cards, and dipped capital markets. Return on allocated equity was 15%, while the cost-to-income ratio was 43%, an improvement from 45% a year ago. In large corporate institutions, overall customer activity was at a good level, supporting growth in both deposits and lending. The uncertain macroeconomic environment was seen in muted loan market demand during Q4, although we increased our lending volumes by 1% year-on-year. Deposit volumes were up 12%. In investment banking and equities, we again delivered a strong performance and maintained our number one Nordic equity capital markets ranking. Debt capital markets activity remained high and was well diversified across the credit spectrum and currencies. During Q4, we arranged over 100 transactions, bringing the total for the year to more than 600. Net interest income was down 7% year-on-year, reflecting the impact of lower interest rates. The decrease was partly offset by the higher business volumes. Customer activity overall remained high, exceeding the level seen in Q4 2023. We saw robust demand for hedging products driven by both market volatility and event-driven transactions. Market making was negative for the quarter. Total income was also down 7% while return on allocated equity was 15% compared with 16% a year ago. The cost-to-income ratio was 41% compared with 40% a year ago. In Asset and Wealth Management, we finished the year on a strong note. We continued positive momentum in our private banking business. In 2024, we grew in private banking strongly in all home markets, supported by stronger customer relationships and the onboarding of new customers. Nordic net flows were very strong at 6.1 billion euros for the quarter. Asset owner management grew 11% year-on-year, bringing the total to $422 billion. Net flows followed an increasingly positive trend throughout 2024. This reflected both growing confidence among clients and effective business execution. In international channels, we were back to generating positive strong flows. During the quarter, we managed to win several large mandates for our global and European equity strategies. Total net flow was 2.4 billion euros. Our very good performance as an asset and wealth manager is well recognized. Nordea is a Nordic number one for overall performance in the latest Prospera survey. We were also recognized as the best private bank both in Sweden and in the Nordics overall in professional wealth management's annual awards. Performance in our life insurance and pension business was solid with gross written premiums reaching 3.1 billion euros compared with 2.3 billion a year ago. For 2024 as a whole, premiums totaled nearly 12 billion euros, up 36% from a year earlier, demonstrating our strong expansion in this market. Total income was up 14%, driven by higher assets under management and higher net insurance result. Return on allocated equity was 32%, up from 27% a year earlier. the cost-to-income ratio improved by 11 percentage points to 45%. In summary, this was a not a strong quarter, rounding off a not a successful year for Nordea. I'm grateful to our employees for the hard work and dedication throughout the year. I would also like to thank our customers and shareholders for their continued support and cooperation. We enter 2025 as one of the top performing universal banks in Europe, targeting further strong financial performance. We expect our full year 2025 return on equity to stay above 15%. Much of Nordea's strength and resilience today is built on the foundations we started laying five years ago. Since then, we have made significant progress in key priority areas. Our profitability has reached a new higher level, driven by lasting operational efficiencies and supported by our well-diversified business model. To build on this progress, we have recently refined our setup, including forming a dedicated group technology unit to accelerate our technology, data, and AI efforts. We have also just strengthened our group leadership team with four key appointments. I'm very happy about the strong team we have assembled. My colleagues and I will drive Nordea's next phase of development with energy, determination and very high ambition. We are now in the final year of our current strategy period. Later this year, we will provide an update on our strategy for the next phase, 2026 and beyond. This will emphasize continuity with our current strategy, building on the successful development of recent years. We will host a Capital Markets Day where we will share the concrete steps we are taking to 1. outgrow the market, 2. continue delivering market-leading return on equity, and 3. deliver superior earnings per share growth. Our growth plans will be built on both organic growth opportunities and Nordic bolt-on acquisitions to further drive growth. To take Nordea to the next level, we will also leverage competitive advantages that are uniquely ours. The power of our Nordic scale. All the past five years, we have simplified our structure, cutting through the complexity of operating four businesses across four countries. Now, we are entering a new era focused on turning our scale into a clear competitive edge. One that enables us to deliver the best customer experiences and one that is an engine for growth, cost efficiency and long-term value creation. This is an exciting time for Nordea. At our Capital Markets Day, we will show how we are positioning ourselves to make the most of the opportunities ahead. And in the meantime, we will continue to build on the strong momentum we have achieved so far. Thank you.

We're now ready for Q&A. And as a courtesy of others on the call, could you please limit yourselves to two questions maximum? Operator, please go ahead.