Nordea Bank Abp

Good morning and welcome to Nordea's third quarter 2026 results. I'm Ilkka Ottala, Head of Investor Relations. As usual, we'll start with a presentation by Group CEO Frank Vaniese, 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 2026. Nordea performed well again this quarter. We grew total income year on year. We further expanded our customer base and delivered strong growth in savings and investments. Fee and other ancillary income were strong. Net interest income rose both year-on-year and quarter-on-quarter, despite lower mortgage margins and foreign exchange effects. This was a solid performance in a seasonally slower quarter. The result underlined the strength of our business and the good progress we are making with our strategy execution across all key initiatives. Geopolitical uncertainty and volatility remain high. However, European countries in general and the Nordics in particular are navigating higher energy costs and other challenges well. Growth expectations for our four-hole markets have improved. Structural changes on the way in Europe's economy are creating significant opportunities. And Nordic corporates are well positioned to capture them. Growth is being driven by substantial investment in areas including artificial intelligence, defense, infrastructure and energy transition. We expect continued economic growth by corporates and gradually improving household consumption across the Nordics. It is encouraging to see growth now also picking up in Finland. At the same time, we are mindful of the recent sharp increase in forward rates and the potential for higher rates to affect consumer confidence in the month to come. In this environment, Nordea is uniquely placed to serve our customers with our sector expertise, enhanced customer offering, including digital services and our strong balance sheet. In short, by leveraging our Nordic scale. And we continued to do just that in the third quarter, supporting our customers and driving business growth. Let's take a look at the highlights. Beginning with our return on equity, which was solid at 15.1%, amid seasonally more subdued activity levels. Earnings per share were 35 euro cents, broadly stable year on year, Total income was up 2%, driven by a 9% increase in net fee and commission income. We continued to see high demand for our savings and investment products, which together with strong investment performance increased our assets under management by 13% to a record high of 509 billion euros. Net interest income continued to steadily improve in line with our expectations and was up 1% both quarter on quarter and year on year. Strong volume development was the main driver with corporate lending up by 8% and deposits by 7%. In households, mortgage volumes increased by 2% year on year and deposits were up 4%. Net fair value was down 19% due to the extraordinary interest rate volatility late in the quarter, while customer activity was solid during the seasonally slower period. Our cost performance is strong with costs flat year-on-year, excluding FX effects. Our credit quality is also strong. Net loan losses and similar net result corresponded to seven basis points, well within our long-term expectation of around 10 basis points. The losses were driven mainly by a limited number of individual provisions on corporate customers. Our CET1 ratio was 15.8%. At the end of the quarter, 1.9 percentage points above the current regulatory requirement. This reflects Nordea's strong capital position and capital generation and supports our strategic priority to deploy capital for profitable growth. Nordea's strong balance sheet and Nordic scale play an important role in the growth of its customers and Nordic societies. Our performance is reflected in the full year 2026 guidance, which is unchanged. We continue to expect a return on equity of greater than 15% and a cost to income ratio of 44 to 45%. Let's now look at the results in more detail, starting with the income lines. As mentioned, net interest income increased in Q3 despite lower lending margins. During Q3, lending and deposit growth continued to be strong among our corporate customers up 8% and 7% respectively. This demonstrates the close relationship we have with our customers and means that we are at the table when opportunities arise. The development also reflects higher activity and confidence among Nordic businesses and the progress we are making in implementing our strategy. Household customers are also increasing their activity as they have experienced real wage increases and a more moderate inflation rate. This combination has increased their willingness to consume and invest. The impact of the conflict in the Middle East and the resulting higher energy prices has so far been rather mild on Nordic consumer confidence. Across the region, households strengthened their savings and investments and that contributed to higher retail deposits, which were up 4%. Mortgage volumes in Q3 were up 2%. This was driven especially by Sweden and Norway. Finland is performing well in a slower market and we are seeing early signs of improvement in Denmark. Our net interest margin for the quarter was 1.53% compared to 1.59% in Q3 last year and 1.54 in Q2. Net fee and commission income was up 9% year-on-year driven by 14% growth in savings income This is encouraging as higher cross sales and savings in particular are key priority areas of our 2030 strategy. Demand for savings and investment products remain strong and our expanded advisory coverage is delivering good results. We welcome that significant number of new private banking customers across all four markets, driving strong net flows. Asset management were up 13% to a record 509 billion euros, which was driven by the strong net flows as well as good market performance. Activity remained high during the quarter in debt capital markets, and we helped customers raise capital and execute strategic transactions amid signs of improving sentiment in equity capital markets and M&A. Turning to net fair value, our result was down 19% year-on-year in Q3. Customer hedging activity was solid during the seasonally slower period in FX and rate products. The lower market making result was due to the extraordinary interest rate volatility late in the quarter, which negatively impacted asset values in our market making. Cost management was strong, with costs flat year-on-year, excluding FX effects, despite heavy strategic investments in growth, resilience, technology and AI. This would not have been possible without our structural improvements to support productivity and efficiency across the group. Under our 2030 strategy, we are continuing to simplify processes, improve productivity and drive our Nordic scale agenda. A particular focus is expanding the use of AI to redesign our core processes and improve the customer experience. The realized savings give us the capacity to absorb inflation and continue making focused investments towards our strategic growth priorities while keeping overall cost growth under control. We are in a strong position to continue delivering positive jobs. The Q3 cost to income ratio was 45% and we are on track to meet our full year guidance of 44 to 45%. Our credit quality continues to be strong. The resilience of the Nordic economies is clearly reflected in our customer base and our underwriting and credit management approach has remained consistent and prudent. Household finances remain strong, while corporates are generally well positioned, funded and capitalized. Net loan losses and similar net result corresponded to seven basis points for the quarter. This was driven by a handful of provisions for individual corporate customers and a small increase in collective provisions. The quality of our credit portfolio remains strong and loan losses are well within the Group's long-term guidance of 10 basis points. Our capital position and capital generation is strong and supports our strategic priority to deploy capital for profitable growth. Given we are the largest financial services group in the Nordic region, we play an important role in supporting the growth of the Nordic economies. At the end of the quarter, our CT1 ratio was 15.8%. 1.9% is points above the current regulatory requirement. As we have communicated previously, in 2025 Nordea submitted an application to the European Central Bank for approval of new IRB capital models for corporate lending portfolios. Nordea has been in active dialogue with the ECB on the application and the most recent discussions have indicated that additional conservatism in our model outputs will be required. This would increase Nordea's REA and is an update to our earlier expectation of a neutral outcome. The timing and impact of any supervisory decisions related to this matter remain subject to our ongoing discussions, and we understand that no decisions will be taken before 2027. In the meantime, we think it is sensible to pause share buybacks pending clarification of the REA impact. Importantly, there is no change in the risk or credit quality of the loan portfolios concerned. Nordea's business model and performance is robust and resilient, and our portfolio is very well diversified across the strong and growing Nordic economies. Our credit quality is strong, as evidenced by the very low loan losses over Nordea's 25-year history. And now, let's turn to our business areas. In personal banking, we delivered solid lending growth and generated strong fee income. Customer savings and investment activity remained at high levels across the Nordics. Mortgage volumes were up 2% year-on-year. This was driven by Sweden and Norway. In Sweden, we took 21% of the market growth year-to-date in August, and we continued to grow our market share. Finland is performing well in a slower market and Denmark is showing early signs of improvement. We continue to manage the competition for mortgages carefully while capturing opportunities to grow. Deposits were up 4% driven by growth in Norway, Denmark and Finland. Investment product AUM increased by 15% reflecting the high levels of customer savings and investment activity. The share of customers with recurring savings have been increasing over the past three years, and during the quarter, recurring savings in Israel were up 14% year-on-year. In Norway, we delivered a 20% year-on-year increase in savings fee income. This was supported by a stronger integration of savings and daily banking into the onboarding journey for new mortgage customers. This is a good example of Nordea's strength. As customers choose us for a broader range of financial needs, it creates opportunities to offer them a deeper range of products from across the group. Net fee and commission income increased by 4% year-on-year, mainly driven by a 12% increase in savings income. Total income in the third quarter was broadly stable year-on-year as growth in the fee and commission income offset lower net interest income. Return on allocated equity was 15% and the cost-to-income ratio was 51%. In assets and wealth management, we continue to drive robust growth in income and assets under management. In private banking, a strategic growth area, we made strong progress across the region in the quarter, with net flows amounting to €0.9 billion. We delivered a 14% year-on-year increase in net fee and commission income, with clear growth in all four countries. This was driven by strong assets on the management growth supported by continued high customer inflow and positive net flows. We continue to progress with our strategic ambition to deliver leading digital savings and investment experiences, further strengthening our digital offering to make investing more straightforward for customers. In life and pension, and not a strategic growth area for us, we made 30 strong progress in the quarter across our home markets. We are supporting customers with their long-term savings, pension and protection needs, while making these solutions a natural part of the broader Nordea relationship. Life and pension assets under management increased 20% year-on-year, while gross written premiums in the quarter amounted to 3.3 billion euros, up from 2.9 billion a year ago. Wholesale distribution net flows returned to positive at €0.5 billion, supported by inflows each month of the quarter. In business banking, we continued our strong momentum and delivered solid business volume growth across our home markets. Customer growth accelerated in the quarter, and we further invested in our digital capabilities to make Nordea the leading digital bank for small and mid-sized businesses in the Nordics. Lending volumes increased by 6% in local currencies year-on-year, led by Denmark, Norway and Sweden, while growth also picked up in Finland. Deposit volumes grew by 2% and were also up in all markets. We made good progress in our focus on entrepreneurs and small businesses with the number of new customers joining there increasing by 58% year on year. Our focus is on making the onboarding process more user-friendly, leaner, and more automated, harmonizing our offering across the region so entrepreneurs and small businesses get up and running more quickly. During the quarter, Nordea Business and the mobile app won global finances award for best corporate digital bank and best mobile banking app in each of our four home markets. This is the fourth consecutive year that we have gained this recognition. Total income in the third quarter increased by 5% year-on-year, driven by volume growth and higher ancillary income, while assets under management were up 18%. Return on allocated equity was 15%. The cost-to-income ratio improved to 44% from 46% a year ago. In large corporate institutions, customer engagement remained high, and we drove further progress in our strategic growth areas. We strengthened our customer offering in investment banking and payments, streamlined processes and scale AI adoption across the businesses. Lending growth remained strong across all four countries, increasing by 13% year-on-year and reflecting higher investment activity among large corporates in the Nordics. Deposits were also up 13%. Net interest income increased 7% driven by higher lending and deposit volumes. Net fee and commission income increased by 6% with particularly strong performance in lending and asset management fees. In debt capital markets, we arranged more than 150 market transactions in the quarter, significantly higher versus a year ago. Activity also showed signs of picking up in equity capital markets and M&A, where we continued to help customers raise capital and execute strategic transactions. Secondary equities continue to deliver year-on-year growth. Total income was down 6% year-on-year despite solid customer activity, as the extraordinary interest rate volatility late in the quarter adversely affected our market-making business. These type of large moves have a negative effect on the inventory of the bonds we hold to facilitate our customers' businesses. Return on allocated equity with also amortized resolution fees was 11%. The cost to income ratio was 43%. To sum up, Lodea performed well in the quarter. We grew total income year on year with high lending and deposit activity in both corporate and household segments and delivered strong growth in new customers and across our products and services. The results underline the strength of our business and we are progressing well in our strategy execution across all key initiatives. We go into the fourth quarter with good business momentum. We continue to expect a return on equity of greater than 15% and a cost to income ratio of 44 to 45%. The Nordic economies are showing their strength and resilience and Nordea, with its unique presence across the region, is well equipped to support our customers and the societies in which we operate. Our 2030 ambition is to become the undisputed best performing financial services group in the Nordics. We are moving in the right direction. Thank you.

Operator, we are now ready to take questions. And if I could remind, please, everyone to restrict yourself to two questions so we get through the queue as well. Thank you.