Nordea Bank Abp

Good morning and welcome to Nordea's first quarter 2026 results. I'm Ilkka Auttala, head of investor relations. As usual, we'll start with a presentation by Group CEO Frank Vangiesse, 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 first quarter of 2026. It has been an unsettled start to the year once again. The conflict in the Middle East that escalated in March has created further geopolitical uncertainty and is driving volatility in the financial markets. It also has implications for short-term energy supply and inflation. Sustained disruption to global energy markets may dampen economic activity, including in the Nordic countries. While the situation continues to evolve, it's something we are monitoring closely. Fortunately, the Nordic countries have a strong track record in navigating uncertainty. The stability, fiscal strength and global competitiveness of our home markets make them some of the world's best places to live and do business. This is something I have talked about a lot in recent quarters. It is, in addition, worth noting that our region is also structurally well positioned in terms of energy resilience. This is due to its substantial renewable capacity and Norway's role as a major energy exporter. We clearly saw the benefits of that stability during the last energy crisis in 2022. As for Nordea itself, we are uniquely diversified across these attractive Nordic markets. Years of relentless strategy execution have made us stronger and more resilient than ever and leave us very well placed to support customers. That strength showed again in our first quarter performance with solid growth in business volumes and high profitability. Return on equity for Q1 was 15.4%. The implementation of our 2030 strategy has started well. One of our key strategic priorities is growth, and here our agenda is focused on six distinct growth areas. We are seeing good early momentum in private bank, life in pension, small businesses, and cross sales. We are also encouraged by the steady progress we are making in Sweden and Norway. Our two other strategic priorities are to strengthen our customer offering and make more effective use of our Nordic scale. And execution on these is likewise off to a good start. During the quarter, we launched a unified Nordic corporate credit and lending platform. We also took further steps in our deployment of a more scalable and resilient payments platform, all part of our drive to enable outstanding customer experiences and superior efficiency. Let's now take a look at the first quarter and some of the financial highlights. Our return on equity was strong at 15.4%. Earnings per share were 36 euro cents, up from 35. We were especially active in our corporate customers, with our corporate customers increasing lending by 11%. Corporate deposits went up 2%. Households were active too, though to a lesser extent. Mortgage lending was up 2% and retail deposits were up 5%. Asset under management increased by 9% to 464 billion euros. Net fee and commission income was strong, up 6% driven by growth across fee types. Net fair value result was down due to lower market making income. That followed the sharp increase in interest rate expectations during March as the Middle East conflict intensified, which led to exceptional losses across certain desks. Total income was resilient, with a 2% decrease primarily reflecting lower net interest income due to policy rate reductions and lower market-making income. We continue to manage costs with discipline. First quarter operating expenses were flat before foreign exchange effects. Our credit quality remains very strong. This quarter we fully deployed the remaining portion of the management judgment buffer we created during the COVID-19 pandemic. We reallocated €160 million to further strengthen our model provisions and we released the remaining balance of €160 million, which was deemed surplus provisioning. Excluding the release, net loan losses and similar net result for the quarter totalled €61 million or 6 basis points. Our strong capital generation continued and our CET1 ratio was 15.7% at the end of the quarter, which is 1.9 percentage points above the current regulatory requirements. With a solid start to the year, and despite the increase in uncertainty in the latter part of the quarter, our full year 2026 outlook is unchanged. We expect a return on equity of greater than 15% and a cost-to-income ratio of around 45%. Our Q1 net interest income was lower as expected, reflecting the policy rate reductions and lower lending margins. Importantly, we moved beyond the low point in daily NII and returned to growth during the first quarter. This was supported by both higher business volumes and our deposit hedge. Among corporates, we increased lending by 11% year-on-year, with all countries contributing. This was the first time we have had double-digit year-on-year growth in any quarter since 2022, and it underlines how Nordic businesses are very adaptable to the changing environment and are showing willingness to invest. Corporate deposits were up 2%. That's modest growth, which we likewise interpret as a sign of increased risk appetite. Household customers also increased their activity, with mortgage volumes up 2% from still-muted levels. The housing market is picking up, though only gradually. As in previous quarters, households have been more focused on strengthening their savings and investments. Retail deposits were up 5%. The deposit hedge, meanwhile, continued to provide support to our income year on year, improving NII by 55 million euros. Our net interest margin for the quarter was 1.57%, unchanged from Q4. Net fee and commission income was up 6% year-on-year, driven by growth across different fee types. The higher savings fee income was driven by the higher average assets on the management and the positive net flows in investment products of 1 billion euros, even with nearly 2 billion euros of outflow related to dividend payments. In our Nordic channels, we continued to see very good customer intake in private banking with solid net flows. In our international channels, we delivered positive net flows again, despite increased investor caution. Brokerage and advisory fee income increased, supported by stronger debt capital markets activity and strong income growth 11% from our secondary equities business. Higher customer activity also drove growth in payment and lending fee income, and we were particularly pleased to have driven good performance in the strategically important cash management area. After a strong start to the quarter, March brought extremely volatile market conditions, driven in particular by the developments in the Middle East. The resulting sharp increase in interest rate expectations resulted in losses in our market-making operations in March, undoing the strong start to the year. Consequently, net fair value results was down 22% year-on-year, reflecting the impact from those March market-making losses, which we consider to be an isolated one-off. Customer activity was strong through most of the quarter, particularly in FX and interest rate hedging, as clients actively managed risk. Activity in equities and securities financing also held up well. Cost development in line with our plan and we're flat year on year, excluding foreign exchange effects. Our strategic investment spent was stable and we are managing costs with our usual disciplined approach, taking the market environment into account. Including FX, costs were up 2% year on year. The first quarter cost income ratio was 45.5%, which was slightly higher than planned due to the exceptional market-making losses in March. The underlying cost income ratio was below 45%, and there is no change in our guidance that we expect to be around 45% for the full year. During Q1, as part of our 2030 strategy, we announced restructuring initiatives to change the composition of our workforce. With our Nordic scale and with the impact of AI and process optimization, we expect to have fewer employees in the future than today. The restructuring initiatives are set to affect around 1,500 employees across the group during 26 and 27, and from 28 should deliver annual cost reductions of at least 150 million euros. This is a part of our 2030 strategy and is in line with the target we communicated at our Capital Markets Day to deliver structural gross cost reductions of 600 million euros by 2030. In connection with these initiatives, we booked restructuring costs amounting to 190 million euros this quarter. This has been reported as an item affecting comparability and is excluded from our 2026 financial outlook. Our credit quality continues to be very strong. This quarter, we fully deployed the remaining portion of the management adjustment buffer we established six years ago during the COVID-19 pandemic. All this period, the buffer has been continuously assessed in light of the macroeconomic conditions and in the knowledge that our loan portfolio performance has been consistently strong. Risk has been assessed to be largely reflected in our model provisions without the need for additional management overlays. As a result, the buffer has been gradually reduced and is now fully deployed. On the remaining balance, we reallocated €160 million in the quarter to further strengthen our model provisions, while €160 million was deemed surplus and was released. Consequently, net loan losses and similar net results amounted to a reversal of €99 million. Excluding the release, net loan losses and similar net result for the quarter totaled 61 million or six basis points. We continue to have a strong capital position. At the end of the quarter, our CET1 ratio was 15.7%. 1.9 percentage points above the current regulatory requirement. Our strong capital position and continued robust capital generation support lending growth and continued shareholder distribution. During the quarter, our AGM approved a dividend of 96 cents per share for 2025, which was paid to shareholders in early April. Additionally, The AGM granted the board authorization to decide on the distribution of a mid-year dividend in 2026, which would correspond to approximately 50% of the net profit for the first half of 2026. Turning to our business areas and starting with personal banking, where we maintained solid business volume, momentum, and customer activity. Despite the market volatility, Customer savings and investments activity remained at high levels, and households prioritized strengthening their financial positions. As a result, deposits increased by 5% during the quarter. Net flows were €0.2 billion, still positive despite the market turbulence, though lower than in the previous quarters. Housing market activity continues to gradually peak up, but remains slow. Even in this environment, we increased mortgage lending by 2% year on year. In Sweden, we further strengthened our position in the quarter, capturing mortgage market growth well above our own backbook market share. Customer engagement with our digital services continued to increase, supported by our expanded offering of self-services features in our mobile app and online. App users and logins were up 4% and 6% year on year. And we are also seeing a growing share of savings and investment activity through digital channels. One of the areas we are targeting for growth is cross-sales. And we are seeing good traction supported by successful product launches in savings and by more automated processes for account opening and onboarding. Net fee and commission income increased by 6%, driven by higher payment, card and savings income. And net insurance result increased by 46%. Total income decreased by 5% year-on-year, driven by lower net interest income in the lower policy rate environment. Return on allocated equity with amortized resolution fees was 16%, and the cost-to-income ratio was 53%. In Asset and Wealth Management, we maintained solid business momentum and delivered resilient investment performance in difficult markets. Custom acquisition remained strong, reaching record highs in both Denmark and Finland, and supporting net flows of 1 billion euros in private banking. In our international channels, we recorded positive net flows again in the first quarter, despite increased investor caution due to the Middle East conflict. The wholesale distribution business has shown resilience since the middle of 2025 and positive flows in the current environment testify to the attractiveness of our product offering. Net flows in life and pension were 1.7 billion euros. We maintained good momentum across our four markets and further reinforced our position and are Nordic's second largest player. Gross written premiums in the quarter amount to 4 billion euros, up from 3.7 billion a year ago. as the management increased by 10% year-on-year to 185 billion euros. This was ruined by market performance and the positive flows despite the sharp decrease in investor confidence in March. We continue to progress with our strategic ambition to offer an outstanding savings and investment experience across the region. Among other enhancements made in Q1, we are now using AI to provide timely and relevant information to our customers about the investments they hold. Total income was up 1% year-on-year, with net fee and commission income rising in line with the higher asset under management. Return on allocated equity with amortized resolution fees was 38%. The cost-to-income ratio improved by 1 percentage point to 43%. In business banking, we maintain good business momentum and grow strong volume growth. Lending volumes increased by 8% in local currencies year-on-year, led by continued growth in Sweden and Norway and stronger activity in Denmark. Deposit volumes also grew by 8%, with all markets contributing. We continue to strengthen our digital offering across the Nordics a key enabler of our growth ambition in the small business segment. During Q1, we launched a digital onboarding platform in Denmark and Norway, making it faster and easier for customers to get started with Rodere. a wider Nordic expansion is planned for the coming quarters. We also kicked off the Nordic rollout of our new business Insight Service, which helps small businesses manage liquidity and cash flows more effectively. In Sweden, this was fully launched in Q1. The launch was well received and the service will next be rolled out in Finland, eventually to all countries. Total income was unchanged year on year as higher volumes and ancillary income were offset by lower deposit income. Return on allocated equity was 18%. The cost to income ratio was 45%. In large corporates and institutions, we drove strong business volumes as we supported our customers in the volatile market environment. It was a solid quarter on most income lines, but extreme market volatility in March negatively impacted our market-making result, driven by the unexpected sharp increase in interest rate expectations. That impact, which we considered to be an isolated one-off, led to a lower net result from items at fair value, year on year, even though customer activity in advisory and risk management was otherwise strong. Lending was up 14% year on year with all markets contributing, strong demand from our secondary equities offering and higher lending fees and bond issuance activity supported a 14% increase in net fee and commission income. Deposit volumes decreased by 5% year-on-year, but increased by 2% compared with the previous quarter. Debt capital markets activity remained high despite the market volatility, and we maintained our number one position for Nordic bonds and Nordic loans year-to-date. We have arranged more than 190 debt capital markets transactions so far this year, so off to a strong start. Primary equity market activity remained subdued, but our secondary equities business grew by 11% year on year. Total income was down 9% year on year, driven by lower net interest income and the decrease in net fair value result. Return on allocated equity was 15%. The cost to income ratio was 41%. In summary, this was a solid start to the year, despite challenging financial markets later in the quarter. While there is uncertainty around global growth, confidence among Nordic businesses has not wavered, underlining the resilience of our region. Resilience is a critical asset and one that Nordea also demonstrates. As a large and well-established group, we are continually investing in capabilities that makes us even stronger, including in digital services, technology, security and risk management. We are also very well equipped to support customers and all stakeholders thanks to our unique market position and presence, leading offering and strong balance sheet. The higher business volumes in both lending and deposits are likewise encouraging and will support our income. Our outlook for the full year 2026 is unchanged. We expect to deliver a return on equity of greater than 15% and expect our cost to income ratio to be around 45%. Our vision is to become the undisputed best performing financial services group in the Nordics. Thank you.

Operator, we're now ready to take questions.