Nordea Bank Abp

Good morning and welcome to Nordea's fourth quarter and full year 2025 results. I'm Ilkka Ottala, Head of Investor Relations. As usual, we'll start with a presentation by Group CEO, Frank Magnese, 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 fourth quarter of 2025. We finished the year well with high fourth quarter profitability, higher business volumes and lower costs. It was a strong result, despite the uncertain environment and despite consumer confidence in our Nordic home markets remained muted. For the full year, we delivered a return on equity of 15.5% in line with the commitment we made three years ago. Our performance reflects the momentum we have built since we set out to reshape Nordea in the autumn of 2019. We have grown our business with existing and new customers and improved our customer experience. We are much more efficient today Back in 2019, we spent 57 cents to generate a year of income. Now it takes 45 cents. We are much more profitable. In 2019, we ranked near the bottom of the world's 100 largest banks based on return on equity. Now we are firmly in the top 20 and among the best in Europe. And we are creating sustainable value for shareholders. Total shareholder return over this period amount to 322% or 26% per annum. I was especially pleased to see us in 2025 on a high note on one other very important metric, customer satisfaction. Our scores are now 4 to 10 index points higher in all four business areas and performance has improved relatively to peers. Our results show that Nordea is performing well. By most measures, Nordea is stronger than it has ever been. We carry that strength into our new strategy period for which we have high ambitions as reflected in our new priorities and financial targets. I'll briefly return to those later. Being a strong and resilient financial services group, we also have the capacity to support our customers effectively in the current unsettled global environment. While the geopolitical backdrop remains uncertain, Our focus is on ensuring we are consistently there for our customers with advice, with our capital, and with a broad range of financial service and a very strong balance sheet. We're well equipped if conditions shift, no matter which direction they will go in. Our diversification is a key advantage. Among our Nordic peers, we are the most diversified financial services group. Income, lending and profits are well balanced across sectors and across our four home markets. We also benefit from operating in our home region with strong economies and fiscal positions and stable political systems. These features help us to navigate through volatility, and adjust to external shocks. The largest Nordic businesses are export-driven and will feel some impacts. Still, they distinguish themselves by their quality, innovation and deep tech and engineering know-how and, very importantly, by their agility and ability to adapt. That formula has enabled them to establish competitive positions in global markets, positions that are durable over time. For all these reasons, even while risks to the global outlook remain and impacts are difficult to assess, I'm confident that our region is well positioned to continue performing strongly. With that, let's return to the fourth quarter and look at some of the highlights. Our return on equity was strong at 14.4%, compared with 14.3% a year earlier. Earnings per share were 34 euro cents, up from 32. Corporate lending grew by 8% year-on-year, and deposits were up 1%. Mortgage lending increased by 1%, and retail deposits were up 6%. Asset on the management increased by 13% to a record high of 478 billion euros, partly driven by higher assets values. Net inflows were strong at 6.5 billion euros. Total income was flat against the previous year. Our net interest income continues to hold up well, supported by higher volumes and our deposit hedge. As expected, In the declining rate environment, it decreased by 5% year-on-year and by 1% quarter-on-quarter. Some of that due to the policy rate reductions in Sweden and Norway in Q3, which had a full quarter effect in Q4. Net fee and commission income was up 3%, with solid growth in savings fee income. Net fair value result was up 28% for the quarter. This was driven by higher customer activity and a stronger result in treasury and our markets operations. Cost decreased by 3% year on year, reflecting continued active cost management and stable strategic investment levels. Full year operating expenses were 5.4 billion euros, fully consistent with our guidance. The Q4 cost to income ratio was 46.2 excluding regulatory fees. Operating profit increased by 3% year-on-year to 1.5 billion euros. Our credit and asset quality remain very strong. Net loan losses and similar net result amounted to 49 million euros of five basis points. Once again, well below Nordea's long-term expectation. Due to continued strong credit quality, we were able to reduce our management judgment buffer by a further 17 million euros in the quarter. Our strong capital generation continued and our CT1 ratio was 50.7% at the end of the quarter. That puts us 1.9 percentage points above the current regulatory requirement. Given our strong 2025 performance, our board of directors has proposed a dividend of 96 cents per share for 2025, up from 94 cents per share for 2024. Today, we have published our outlook for 2026, which is the first year of our new strategy period running to 2030. For the full year 2026, we expect a return on equity of greater than 15% and a cost-to-income ratio excluding regulatory fees of around 45%. Following our strong Q4, we were able to close our strategy period having met or exceeded all of our targets. Our initial return on equity target was greater than 13%. As the environment shifted, we lifted it to greater than 15% and ultimately achieved 15.5% in 2025. We delivered on our guided cost to income ratio, even with a significant step up in strategic investments and maintained strong credit quality and capital generation. All of this enabled strong shareholder distributions Distributions over the four years exceeded 17 billion euros. This clearly surpassed our initial expectation and was right in the middle of the updated target level. Let's now return to Q4, starting with a look at our main income lines. During the quarter, net interest income continued to hold up well in the lower interest rate environment. Our NII was supported by both higher business volumes and our deposit hedge. The deposit hedge contributed positively to our income year-on-year, increasing NII by 99 million euros. As expected, the policy rate reductions affected deposit and equity margins. Our net interest margin for the quarter was 1.57%, quite stable following 1.59% last quarter. We saw an encouraging trend in business activity on the corporate side with lending up 8% year-on-year. Mortgage lending also increased but at a slower rate. The 1% year-on-year increase was driven by Sweden and Norway as housing market activity continued to slowly pick up. Retail deposits were up 6%, while corporate deposits were up 1%. Net fee and commission income was up 3% year-on-year, driven by savings and higher customer activity levels. The higher savings fee income was driven by higher assets under management, with positive net flows in all channels and higher asset values. The good momentum continued in our Nordic channels, with net inflows at €4.8 billion roughly equally split between retail funds, private banking and life and pension. Net flows from international channels were €1.7 billion, with positive net flows in both wholesale distribution and international institutions. Brokerage and advisory income was lower, resulting from lower debt capital market income. The clear positive in the quarter was a very strong income growth from our secondary equities business. Net fair value result was strong in the quarter, increasing by 28% year-on-year. That increase was driven by higher customer activity in foreign exchange and interest rate hedging. We also benefited from good performance in treasury and market making. Cost decreased by 3% year-on-year as planned and in line with our guidance. This reflected stable strategic investment levels and continued active cost management, including a reduction in the number of employees. During the quarter, we continued with our strategic investments in several areas, including technology, data and AI. At the same time, we are driving operational efficiency and increased productivity. This is our continued focus, and it is leading to more efficient ways of working and a leaner organization. For the full year costs were 5.4 billion euros representing a modest 1% increase despite the inflationary pressures. The fourth quarter cost to income ratio was 46.2 excluding regulatory fees compared to 47.9 a year earlier. For the full year it was 45% and we are targeting to take this down to 40 to 42% by 2030. Our credit quality continues to be very strong. Net loan losses and similar net result for Q4 was 49 million euros of 5 basis points, well below our long-term expectation of approximately 10 basis points. The provisions in the quarter were driven by corporates with no industry concentration or specific trends. To continue strong credit quality, we reduced our management adjustment buffer by a third of 17 million euros, and it now stands at 276 million. We continue to deliver strong capital generation and maintain a robust capital position. At the end of the quarter, our CT1 ratio was 15.7%, 1.9 percentage points above the current regulatory requirement. We continued to deploy capital to support business growth, and we also continued to use share buybacks as a way to return excess capital to our shareholders where we do not find profitable uses for it. During the quarter, we launched and completed a 250 million euro share buyback program, our fourth of the year. After that, in December, we launched a new 500 million euro program, which is expected to be completed by no later than the 8th of May. Given our strong 2025 performance, our board of directors will propose to shareholders at the AGM a dividend of 96 cents per share for 2025. compared with 94 cents per share for 2024. Additionally, the board has proposed a distribution of the mid-year dividend in 2026, corresponding to approximately 50% of the net profit for the first half of 2026. Let's now turn to our business areas. In personal banking, we continued to deliver business volume growth with customer activity, again highest in savings and investments. Households continued to prioritize strengthening their financial positions, increasing their deposits by 5% year-on-year during the quarter. Many customers also increased their recurring savings amount, and they put more money into investment funds. Q4 net flows in our Nordic retail funds were strong at €1.7 billion, up from €0.7 billion we had in Q3. With lower interest rates supporting confidence, housing markets continued to improve gradually. But the pace remained muted. We increased our mortgage lending by 1% year-on-year, In Sweden, we continued to grow our market share, capturing 27% of the market growth in the period from October to November, compared to a backbook market share of 14%. Digital activity continued to grow, with app users and logins up 3% and 5%, respectively. In our previous strategy period, we set a target to ensure all everyday banking needs could be met digitally by the end of 2025. We have now achieved this goal, and it has contributed to a stronger overall experience and a record high customer satisfaction level for personal banking. Social income decreased by 3%, driven by lower policy rates. The lower interest income was partly offset by continued net fee and commission momentum, especially in savings, payments, and cuts. Return on the allocated equity with amortized resolution fees was 15%. The cost to income ratio was 51%, improving from 53%. In business banking, we performed well, driving strong volume growth, with the support of our strong digital offering. Nordic SMEs continued to adapt well to the operating environment with stable interest rates supporting higher demand for lending. I'm quite pleased with the increased business activity. Lending volumes increased by 6% year-on-year, led by Sweden, but with growth across all Nordic countries. Deposits were up 5%, During the quarter, we improved customer experience by simplifying onboarding and introducing a new digital tool to enable customers to get started faster. We want to be the leading digital bank for SMEs, and a big part of that effort has involved making sure our customers' everyday banking needs are met by our digital offering. In 2022, around 40% of our customers' daily banking needs were covered by self-service functionalities. By the end of 2025, we stood at 80% in line with our target. Total income for Q3 was down 3% year-on-year, with higher volumes and higher net fee and commission income partly offsetting lower deposit income. Return on the allocated equity with amortized resolution fees was 15%. The cost-to-income ratio was 45%. In large corporate institutions, we had a strong quarter, driving double-digit lending growth and higher overall income. Lending volumes were up 10% year-on-year, with particularly strong growth, 20%, in Sweden. Deposit volumes decreased by 3% year-on-year. We interpret lower deposit volumes as a sign of increased risk appetite and greater willingness to invest. Debt capital markets activity remained high, if a little lower than in previous quarters, helping us maintain our leading positions for Nordic bonds and Nordic loans overall in 2025. During the quarter, we arranged close to 140 transactions for a broad range of issuers. That brought the total for the full year to over 600. Our secondary equities business performed strongly and income grew by 26% year on year. Nordea Markets delivered strong results driven by solid trading performance and increased client activity compared with a year ago. Total income was up 4% year-on-year, mainly driven by higher ancillary income. Net fee and commission income increased by 10%, driven by equities as management products and lending fee income. Return on adequate equity was 15%. The cost-to-income ratio improved from 42% to 40%. In asset and wealth management, we drove further strong momentum with growth in all our Nordic channels and strong investment performance. Net inflows in our Nordic channels were 4.8 billion euros with private banking contributing 1.6 billion of that. In private banking, we finished the year as we began with solid momentum and customer acquisition and high levels of customer activity. Overall, Customer satisfaction remained at a record high level. In our international channels, we had net flows of 1.7 billion euros, which was an improvement quarter on quarter. About half of that was from international institutions and half from the wholesale distribution channel. Net flows in life and pension were 1.3 billion euros. The performance was again strong across our four markets, and we further reinforced our position as Nordic's second largest player. Roswithin premiums in the quarter amounted to 3.3 billion euros, up from 3.1 billion a year ago. That took premiums for the full year to an all-time high of 12.9 billion. Asset management increased by 13% year-on-year to 478 billion driven by market performance and the positive flows in all channels. Our Empower Europe fund launched in June continued to attract interest during the quarter. It has now secured a net flow of more than 500 million euros. The fund invests in Europe's energy independence, industrial revitalization and defense. We also saw renewed strong interest in our sustainable investment approach. One of our new Beta Plus funds launched in the summer is already the largest actively managed sustainable ETF in Europe. Total income was down 2% year-on-year, driven by lower net interest income. Net fee and commission income was down 1% driven by customer preferences from lower risk and lower margin products. Return on allocated equity was 30%. The cost to income ratio was 48%. All in all, this was a good quarter and a year of success for Nordea. We now have two very successful strategy periods behind us and we are aiming high for our third. Looking across to 2030, our priorities are clear. To grow strongly in several attractive areas and drive faster than market income growth. To further strengthen our customer offering and to unlock the full potential of our unique Nordic scale. Our Nordic scale is a key source of competitive advantage for Nordea. We have already realized a lot of scale benefits. However, most of the gains still lie ahead. In this next phase, we will take a decisive step to unlock these benefits across Nordea. The priorities and targets we have set are ambitious and we are fully committed to achieving them. We are targeting a return on equity of greater than 15% each year through to 2030 and significantly higher in 2030 itself. We are also targeting a cost to income ratio excluding regulatory fees of 40 to 42% in 2030. We are at 45 today and coming down to our target level will be a gradual process. Accordingly, we expect to deliver a return on equity of greater than 15% for the full year 2026 and expect a cost-to-income ratio excluding regulatory fees of around 45%. Rest assured that our plan will be executed with the same rigor and focus we have applied over the past two strategy periods. We do what we say. We look forward to building on our progress and realizing our ambition to become the undisputed best performing financial services group in the Nordics. Thank you.

Operator, we're now ready to take the questions. And as usual, please, as a courtesy to others, could you please limit yourself to two questions, Max? Thank you.