Nordea Bank Abp

Good morning and welcome to Nordea's third quarter 2025 results. I'm Ilkka Ottala, Head of Investor Relations. As usual, we'll start with a presentation by Group CEO Frank van Jensen, followed by a Q&A session with Frank and Group CFO Ian Smith. Please remember to dial into the teleconference to ask questions. With that, Frank, please go ahead.

Good morning. Today we have published our results for the third quarter of 2025. Again, it was a very solid quarter for Nordea. The past few months have reminded us that the world economy is delicately balanced. Political shifts and rising global tensions mean the operating environment can change quickly. Still, After the turbulent first few months of the year, the third quarter felt more calm and settled. Some of the earlier uncertainty around tariffs receded when the new EU-US trade agreement was struck. The Nordic economies also continued to benefit from low inflation and interest rates – conditions that helped lift confidence. During the quarter, Nordic Corporates signalled a renewed appetite to invest. That translated into increased demand for lending. Household activity also showed clear signs of picking up, though lending demand was still at muted levels. While customers main focus was on growth their savings, we also saw continued activity in investments. In this environment, Nordea delivered higher business volumes and very solid results. Our performance again demonstrated that strength and quality of our pan Nordic business. Looking at some of the highlights for Q3. Our return on equity was strong at 15.8% in line with our financial target. We have now delivered a return on equity of above 15% in 10 out of the past 11 quarters. Earnings per share were 36 euro cents. Mortgage lending increased by 6%. And retail deposits were up 8%, supported by our business in Norway and Sweden. Corporate lending grew by 6% year-on-year, and deposits were up 1%. Asset management were up 11% to 456 billion euros. Total income was resilient, decreasing by 3%. As expected, net interest income was lower following thirds of policy rate reductions, decreasing by 6% year-on-year and by 1% quarter-on-quarter. Net fee and commission income was up 5%, rebounding after the market volatility seen in the previous quarters. Net insurance result grew by 10%. Net fair value result was in line with our expectations and fairly typical for the quarter, though was down 14% when compared with the unusually high level a year ago. Costs were stable year-on-year and quarter-on-quarter, supported by stabilized investment levels and careful management of headcounts. Full-year operating expenses are expected to be around 5.4 billion euros and well within our guided range. The cost-to-income ratio with amortized resolution fees was 46.1%, operating profit was 1.6 billion euros, 2% lower than a year ago, and stable quarter-on-quarter. Our credit and asset quality remains exceptionally strong. Net loan losses and similar net result amounted to a net reversal of 19 million euros. This quarter, we released a third of 50 million euros from our management judgment buffer. The release was driven by strong credit quality, reduced uncertainty, and lower credit risk due to low rates and inflation. Our strong capital generation continued, and at the end of September, our CT1 ratio was 15.9%. That put us three percentage points above the current regulatory requirement. Today, we announced that we will shortly launch a new 250 million euro share buyback program in line with our commitment to regularly trim excess capital and return it to our shareholders, all part of maintaining an efficient capital structure. Our 2025 outlook is unchanged. We are well on track to meet our guidance for the full year, that is, a return on equity of above 15%. With that summary, let's now take a closer look at the results, starting with the income lines. Net interest income remained resilient in the lower interest rate environment. Our NII was supported by both higher lending and deposit volumes and the contribution from our deposit hedge. The deposit hedge contributed positively to our income in the quarter, increasing NII by 127 million euros year on year. Our net interest margin for the quarter was 1.59%. This compares with 1.64 last quarter and 1.77 a year ago. The difference was due mainly to a lower deposit and equity margins, as expected, given the policy rate reductions. Mortgage lending grew by 6%, driven by strong growth in Sweden and our Norwegian acquisition. Excluding the acquisition, mortgage lending was up 1%. Corporate lending was strong and picked up further, increasing by 6%. Retail deposits were up 8%, while corporate deposits were up 1%. Net fee and commission income increased by 5% year-on-year, supported by growth in all our main lines. The higher savings fee income was driven by higher assets under management with positive net flows in all channels. In our Nordic channels, we had strong net flows of 4.4 billion euros driven by continued strong performance in private banking and our life and pension business. Net flows from international channels were 0.6 billion euros with net positive flows of 0.4 billion in wholesale distribution. Brokerage and advisory fee income improved this quarter, driven by higher debt capital markets activity. Card, payment and lending fee income grew on the back of higher customer activity. Net fair value result was solid in the quarter, although lower compared with the unusually high figure a year ago. We benefited from good levels of customer activity in a seasonal soft quarter, especially in foreign exchange and interest rate hedging products. And our market's making result was strong. Costs in the third quarter were stable year on year. That development reflects our strategic investments spent in technology and other key areas leveling off as planned. It also comes from our usual cost discipline. We continue to actively manage our costs according to the operating environment and headcount is lower. Looking at the full year 2025, our expectation is that operating expenses will be around 5.4 billion euros, which is slightly better than previously anticipated. The third quarter cost to income ratio was 46.1% unchanged from the second quarter. Our credit quality continues to be exceptionally strong. And it has meant that net loan losses and similar net results for Q3 were again favourable, amounting to a reversal of 19 million euros. Loan loss provisions and write-offs have been low, well below the long-term average. That stems from customers' stable financial positions as well as our diversification and prudent credit policies. Given the lower provisioning requirements and continued strength of our credit portfolio, we have released a further 50 million euros from our management adjustment buffer. The buffer now stands at 291 million euros, compared with 341 million in Q2 and 435 million a year ago. Our capital position is strong, supported by continued robust capital generation. At the end of the quarter, our CT1 ratio was 15.9%, 2.3 percentage points above the current regulatory requirement. We continue to use share buybacks to secure an efficient capital structure and focus on shareholders' returns. Our next 250 million euro buyback program will be our fourth this year. We will launch it on or around the 20th of October. Let us then turn to our business areas. In personal banking, we delivered solid business volumes. Customer activity increased during the quarter, especially in savings and investments. This was visible in the strong growth in deposits up 8% year-on-year. Many customers still feel somewhat uncertain about global developments. However, there are signs that confidence is improving This was visible in higher activity in the housing markets, although the pace is still slow. We saw a further increase in demand for loan promises. And mortgage lending increased by 6% year-on-year. Here growth was driven by Sweden and Norway. Excluding our Norwegian acquisition, mortgage lending was up 1%. Households also continued to put money into investment funds. Net flows in our Nordic retail funds were €0.7 billion during the quarter. Demand for our digital services remained high. App users and logins grew by 6% and 8% respectively. We also received more external recognition in this area, winning Best Nordic Digital Bank in both the Euromoney and Global Finance awards. The work we have done in digital has really moved us forward and means we have some of the best digital services in Europe today. Total income decreased by 3%, driven by the lower policy rates. The decrease was partly offset by the higher income from payments, cards and savings. Return on allocated equity with amortized resolution fees was 16%. The cost-to-income ratio was 52%. In business banking, we performed well and delivered volume growth supported by higher customer activity. Demand for lending grew in all markets led by Sweden and Norway. That showed increased confidence among our small and medium-sized business customers who continue to settle in to the new operating environment. Lending volumes overall increased by 5%. Deposits were up 9% year on year, also with growth across all Nordic countries. Our investments into developing our customer experience and digital capabilities are clearly resonating with our SME customers. We performed well in the annual EPSI industry survey, improving our customer satisfaction results relatively to peer across all markets. In Sweden, we achieved the highest rating among peer institutions. We also received external recognition for our digital offering for SMEs, winning the titles of Best Corporate Digital Bank and Best Mobile Banking App in the Global Finance Awards. Total income for Q3 was down 5% year-on-year, driven by the lower rates and net interest income. The decrease was partly offset by the higher net fee and commission income, where we had higher income from lending fees and debt capital markets. Return on allocated equity with amortized resolution fees was 16%. The cost-to-income ratio was 46%. In large corporate institutions, we continue to use our expertise, Nordic scale and strong balance sheet to support our customers with their investment and growth plans. Even as broader market uncertainty persists, Nordic large caps continue to be cautiously optimistic in their outlook. We saw a pickup in event-driven transactions and related financing and robust demand for additional liquidity. That showed in strong demand for lending, with our volumes up 6% year-on-year, up from 4% growth in Q2. Deposit decreased by 7% year-on-year. This was mainly driven by a few larger customers in Denmark and Norway. Debt capital markets activity remained high, with broader base transaction volumes among both corporate and institutional customers. During the quarter, we arranged more than 120 transactions. That makes it more than 500 for the year to date and reinforces our leading position in the DCM space. One of the highlights of the quarter was a green bond for the Kingdom of Denmark valued at 7 billion Danish crowns. Market conditions remained volatile for equity capital markets and mergers and acquisitions. However, several M&A transactions were announced and the ECM activity showed signs of recovery. Social income was resilient, decreasing by 2% due to the rate reductions. Net fee and commission income was up 4% due to event-driven business. Return on allocated equity was 16% and the cost-to-income ratio was 41%. In asset and wealth management, we drove solid business momentum in our private banking and investment performance was strong. We continued to perform very well in private banking with 1.5 billion euros of net flows. The third quarter is typically quieter on account of the holiday period. However, customer activity was at a record high. We were very proactive towards our private banking customers through our advisors and across various special events during the quarter. In Sweden, we drove high investment activity, including helping our customers take part in several IPOs across the Nordics. The steadier markets and more positive sentiment also help after the volatility of spring and early summer. In our international channels, net flows were positive as well, amounting to 0.6 billion euros. Wholesale distribution was continued to stabilize, contributed 0.4 billion of that, with the remainder from international institutions. Net flows in life and pension were 1.2 billion euros, which was a record high. Ross Whitten premiums amounted to 2.9 billion euros compared with 2.6 billions a year ago. Asset owner management increased by 11% year-on-year to 456 billion, driven by the positive flows and strong market performance. We were pleased to see strong interest in our new Empower Europe fund that invests in the drivers of Europe's transformation, energy resilience, reshoring, and defense and cybersecurity. Social income was down 1% in the quarter, driven by lower net interest and net fair value income. Net fee and commission income was up 1%, driven by the higher assets under management. Return on allocated equity was 33%. The cost-to-income ratio was 44%. In summary, this was not a good quarter for Nordea. We are well on track to deliver on our target of a full-year return on equity of above 15%. Our performance so far this year clearly highlights our strength, our strong customer focus and offering, our highly profitable and well-diversified pan-Nordic business model and our scale and efficiency. Nordea also has the advantage of operating in the Nordic markets, all of which are globally competitive, innovative, resilient, low risk and highly digital. All that makes the Nordics and Nordea well equipped to navigate the current global shifts. Finally, we have our Capital Markets Day in London coming up on 5th of November. There we look forward to presenting our plans and financial targets for our next strategy period. We will share the concrete steps we are taking to build on our successful foundation with continued focus on our four home markets. These will enable us to drive above-market business growth with improved cost efficiency through our Nordic scale. They will also position Nordea to continue delivering market-leading return on equity and achieve superior earnings per share growth. Thank you.

Operator, we're now ready to take the questions. And as a courtesy to others, just a reminder, if you can limit yourself to maximum two questions, please. Thank you.