Norion Bank AB

Hello and welcome to Norion Bank's Q2 report 2024. My name is Martin Håsmån and I am the CEO of the company. If we go to page 2, there is a summary of the quarter. We can say that we have had a good activity this quarter. If we compare the first half of 2023 with the first half of 2024, we had a different pension situation. Now we feel that the pension level has stabilized. There is another optimism in the market. There is a need and a demand to do business. We saw that at the end of 2023, the customer dialogue started to come into play. The same with Q1. Now the dialogue has been materialized in new business. We have had a good stock development during the quarter. If we look at the numbers on the slide, we see that the profit is increasing by 13%. The profit is 947 million and a K1 rate of 28.1%. The share price has dropped to 416 million. We have a capital of 15.8%, which is a decrease compared to the same period before. We have accumulated 1.2 billion to our own capital. The total capital ratio is 16.4%. During the period, we have emitted a T2 obligation. If we go to page 3 and talk about our segment, the previous segment has been a lot of activity. A lot of customer dialogue has become business. Good activity in all countries, but especially in Sweden. We have chosen to put the balance in the segment where we have seen business as the best risk-based emission. We have seen good quality in business and good quality in the counterpart. We do not see any price pressure in this segment. We continue to maintain a good margin against our customers. We can also mention that a large part of the business has been done here at the end of the second quarter of our business. Regarding how the customers are, it looks good. We do not see any signs that the customers are having a hard time. No changes compared to the Q1 of this quarter. I think it looks good. We have a very good position in this segment where we can deliver financial solutions to medium-sized companies in the Nordic region. Our switchboard is 30-300 million SEK. I think we hold our position in this segment even in this quarter. We can go to page 4 and look at the properties. A little lower stock development. We increase with a little less than 400 million SEK this quarter between Q1 and Q2. We look at some valuations. No changes between Q1 and Q2. Very stable levels. Price pressure. We do not see any price pressure. We do not see it on our business segment. We continue to maintain the margin against our customers. A good quarter for the property is also where we have decided to take it a little calmer and use the balance in our business segment. We can go to page 5 and talk a little more details about properties. We look at the senior share. We have 58% in the senior share and 42% in the junior share. The average LTV on senior is 57 and the average LTV on junior is 73. So no major changes compared to Q1. Then we can talk a little about step shifts. We increase with 600 million SEK in step 3. Not unexpected for us. There are some customers who continue to pay. Therefore we see a certain increase there. On the other hand, we increase step 2 with 1.8 billion. So net we actually reduce the sum of step 2 and step 3 with 1.2 billion. And a little better than we had expected when we put in Q1. So a lot of things have been improved. And as I said, it is exciting that the sum of step 2 and step 3 decreases. Then we continue to agree that we have an increase in our commitment in step 3. But also in step 2. Then I think we have continued a good plan to solve them. We have a close and good dialogue with our customers to find solutions. Where you will get your pension payments or other alternative solutions. How we will solve this forward. We can also say that we look at the steps 2 and 3 commitment. We hear the absolute majority in both steps 2 and 3 senior credit. Which is very good. We go to page 6. And look at the private segment. We have talked about this for a while. We are talking about credit sharing for quite a long time. We think we are bearing fruit of that now. We are managing to have a good margin with the customer. But a significantly lower credit risk. The stock is growing quite well between Q1 and Q2. We have worked very hard. Partly with the credit quality. We have also worked a lot to create the flow of new business and own channels. We have some months over 50% of our own channel, which is very good. We will create a better credit quality. We will have lower credit loss over time. It will have lower revenue costs. It will have longer duration in the stock. So all of these things are very good for us. We look at how our customers are doing. This is starting to look a bit better. If you look at the first half of the year, 2024, to the first half of 2023, we see the same trends. That there are clearly fewer customers who get their first memory. Then it is still the case that when you get your second and third memories, you have difficulty getting into the cap. But that trend does not increase, but it continues to be at a stable level. So I think that looks generally a little better. We go in on page 7, also look at our payment rate. We continue to be challenging in the trade market in general. Thereby we increase the transaction volumes well. We increase, if you compare Q2, 2023 to this quarter, we increase with the entire 18% transaction volumes. In the case of Q1, we increase with the entire 18% between Q1 and Q2, 2024. So Wally continues to go very well. We have a lot of interesting and exciting customer dialogues. I think we have a very good position in Wally. We have a business that is very responsible for both finding new customers. We have a business that is on its own leg around the company. We also have a number of new traders who have been live the last few weeks. So I think we will continue to see the volume of transactions and improve it. And when the credit block loan book increases forward. With that, I hand over to Peter on page 8 and talk a little more numbers. Where are you Peter?

Thanks Eric. I start looking at the revenue side. We have total revenues of 947 million per the second quarter. It is a stable level. It is an increase of 2% compared to the previous year. And it is also an increase of 2% compared to what we had in the first quarter. Some different factors that affect the revenue level during this quarter. On the negative side, we are affected by the relatively high volumes in stage 3. As Martin talked about earlier. And our way to handle the revenue level of the following volumes. That is, we are paid for only the money when we actually get payments. And we have seen a lower level of payments during the second quarter. It affects negatively. Positive on the other hand is that we have a seasonal effect. We always have it in the second quarter. We have seen a clear effect of it here this year. Last year it was about 30 million. We estimated it this year to between 30 and 35 million during this quarter. So net after these effects, we have a NIMM of 7.3%. And it is unchanged compared to the level that we were at during Q1. If we go on to page 9 and look a little more at the NIMM in detail. We can see that we were benefited positively from a NIMM perspective. When the rents, especially the IBO-rents, which is our base rent for about 70% of our stock. When it was in an upward phase, we were benefited. We get the increases relatively and our funding costs have come with a certain lag. When we sat here in collaboration with the first quarter, we said that we expected the cost of the rent to rise here now under Q2. We can see that they have done. It is a small increase, as we see here on the right side of our funding costs. We expect that they will go down from this level forward. However, it is clear that from a NIMM perspective with IBO-rents that no longer increase but are on a decline trend, we expect a certain NIMM pressure from this level forward. If we go further to page 10, we start with the company segment. As I said, a very good volume development. The volumes increase with about 1.25 billion during this quarter compared to Q1. We have a NIMM at 7.6%. It is back on a more normalized level. You see a small drop there under Q1. It was, as we said, a good revenue level, 188 million here during the quarter. And as I said, a NIMM that is back on a normal level. Since page 11, the fastness. As I said, a slightly slower volume development than we have been used to during a time. The volumes increase with just under 400 million. As you can see on this page, the revenue level is developing at absolute levels. The NIMM is weak. This is a consequence of the stage 3 volumes and the customers who are after these rent payments. We have seen lower payments during this quarter. This explains the whole loss in revenues and NIMM compared to Q1. It is entirely due to this. We do not notice any underlying marginal pressure in our business and can take good pay compared to new business that we do in this market. Since page 12, the private segment. As I said, a good volume development. It increases with about 600 million private loans. The absolute majority of volumes in this segment continue to develop very well. As Martin mentioned, we have changed the distribution. We have a good risk-reward in the new sales we do in this segment. All curves are actually pointing in the right direction. We see a clear seasonal effect, for example here in NIMM. The Q1, which has been stable at .1% during the previous three quarters, increases to .4% during Q2, which is the same level as Q2 in 2023. We are very happy with the private segment development. Since page 13, the payment. A good development in the transaction volumes. They have increased 13% -on-year. Stock is up by 6% during the corresponding period. Stock is then approximately unchanged at 2.7 billion compared to where we were in Q1. In terms of revenue, it is good. The total revenue is 134 million. We maintain a good total revenue margin, which rises to 19.8%. We think we have a good momentum in payments. We have good profitability and it contributes in a very positive way to the total profitability and waste-saving. Since page 14, I look at the costs. We have total costs of 266 million during this quarter. It is an increase of 14% compared to the previous period. It is an increase of about 3% compared to the level we were at during Q1. We have talked about the drivers earlier. In terms of increased cost base, we have an increased number of employees in the bank. Invested now in Q2. A lot of compliance-related functions. New requirements that come into the market. It can be Dora, Basel 4 and similar projects. We have grown our own distribution capacity. We still notice a certain inflation pressure. Even if inflation has gone down, it hits us with a certain lag. You can have annual price adjustments, index adjustments and similar to many of our important supplier agreements. Despite all this, we maintain a good cost control and cost-based discipline in the bank. We have a K-input of .1% during the second quarter. Since page 15, a little about our profit-loss reserves. They have risen to 265 million during the quarter. A profit-loss level of 2.3%. We continue to do what we have always done. We reserve conservatively. If we go in and talk a little about the different parts. Martin is on the payment pattern on the private side. We notice that there are fewer customers who get their first reminder. If you have received the first reminder, it is still more likely that you will get another and so on. But this has been positive for us and the payment pattern we see. The second quarter, which is seasonally strong, is difficult to draw large conclusions from. We have chosen to reserve conservatively despite the strong seasonal effects we see on payments. On the other hand, on the corporate and the private side, we have talked about the reserves. The reserves are much lower than on the private side. It is more model-oriented. On the corporate and the private side, we look at the individual engagement and the underlying securities. We can see that in this quarter, we are reducing the total of the Stage 2 and Stage 3 balances with 1.2 billion. In addition, we are making small reserve changes of 39 million. We are increasing the reserve degrees. We are reducing the amount of loans in Stage 2 and Stage 3 compared to the whole stock. On the 16th side, we have a stable result. It has risen to 416 million on the level we have been at in the last two quarters. The profit per share has increased to 1.59 billion. We no longer have any outstanding AT1 that we make a contract for. We have a capital outflow of 15.8%. As Martin said, we have almost 1.3 billion more capital in the bank than we had a year ago. On the 17th side, we talk about the capital position. During the second quarter, we have had a strong volume growth. The stock has increased by about 2.2 billion. This makes the core capital level decrease somewhat compared to Q1. It is still strong. We have a core capital relationship that has risen to 15.8%. This gives us a buck on about 650 points compared to our capital requirements. During the quarter, we have also emitted 300 million in T2 capital. We have said for a longer time that we intend to be emitters in the hybrid capital market. This is the first step to start the hybrid capital market. We have bought back the previous AT1 in the beginning of 2024. This emission makes us strengthen the total capital coverage. It rises to 16.4%, which gives us a 300 point buffer compared to our regulatory requirements. That is what I was going to say. We go to page 18 and return to the market. Thank

you Peter. Summar and look forward. Summar Q2. Good profitability, starting at the absolute level and creating a return on equity. We have a good balance. We have had a good activity here, especially in private and companies, also at Walli. I think it will continue to be a good activity in this quarter. We continue to have close dialogue with the customers, especially in the engagement we have in stage 3. We have a good plan forward. We continue to be conservative in our reservations. We also want to continue to be selective about which areas we are dealing with. We want to create the best risk-based We are not looking at the private sector, and we do not want the customers to have a bad time. We want to have a little bit of a better sentiment. I think it is a good and stable quarter. We also see that this activity we have had during this quarter can hopefully continue during the coming quarter. With that, I thank Peter for us and open the question.

Next question comes from Jakob Heslevik from SEB. Good morning.

The growth in loan volumes was very strong, but the internet did not develop as much. Is it mostly due to increased volume in stage 3, or is it only a timing question?

Hi Jakob, welcome. There are two things I said. We have a lot of business that came in from the volume increase that came in at the end of the quarter. The other thing is that we choose not to be responsible for the credits we have and share of stage 3. So it is a combination of both.

Okay, thank you. But the volumes are stable in the housing segment, where you decreased. Did you get large volumes late in the quarter?

No, you see a fairly stable volume development for the housing segment. It is more about the company segment that you have there with the development. If I was to be more specific, we have seen lower payments during this quarter on volumes that are in stage 3. The way we handle the income management makes that we get a negative effect from that during this quarter. And

then there were no larger volumes when the business came in. The flow has been more in the company segment. There has not been any big increase. There was less than 400 million increase in the housing segment.

But within the company segment, you got the volume up quite strongly despite the late income volume. Or something specific to Q1 that made it a bit lower?

Yes, that was it. It was mainly related to the factory segment within the company segment in Q1. We had a small seasonal variation. It has not been as clear every year, but it was quite clear here in Q1 2024. So I would say that the NIMM goes back to a more normalized level despite the late income flow.

Thank you very much. If we look at the competition on the SPA account in Sweden, how do you feel about that? Have all the shares dropped by 25 bips after the Swedish Bank? Or is it still a hard competition?

It is still a hard competition. It is always in this market. I don't think there have been any major changes during the second quarter. But it is clear that we benefit from the fact that the Riksbank has lowered the interest rate. And there has been a consistent behavior from the most of the shareholders in the

market. It can be a bit easier competition compared to when we look at the previous quarter.

That is positive. You did a T2 in the quarter as well. But how come you didn't do an A3? Is it still a question of price?

Yes, you could say that. But also if you look at the structure and composition of our capital base. We are the strongest in the capital level and have the lowest buffered levels in the total capital. So step one is to work up the total capital and to do that in a more cost effective way. That means to imitate T2 before A3.

We intend to continue to imitate different instruments in the future. That is our plan during the fall.

Great, thank you very much. I wish you a nice summer and semester.

Thank you, Samman.

Next question comes from Emil Jonsson from DNB Markets. Here you go. Emil Jonsson, DNB Markets, your line is now open. Here you go.

Hello, good morning. I wanted to start by asking about the real estate net. If we were to assume that there will be more moving to step three next quarter, would you expect that the net in that segment will remain closer to where it was in Q2 or that it will be closer to where it was in the previous quarter?

Hello Emil, welcome. If there are more commitments that end in step three, we choose not to pay more for them, which will pressure the NIMs. That's what it will be.

To add to that, the answer is that it is very difficult to predict because it depends on how many volumes we have in step three in combination with how much in-payments we actually see on the commitments. The way we handle the income management makes it what we see this quarter, that it creates a potential volatility in the income for the property segment as long as it looks like it does.

Okay, I understand. We also saw some recovery in corporate loans volumes compared to the previous quarter. Was there anything else that drove it other than the factoring volumes coming back?

It was the company that drove the dock reduction. That's what we said. We have had a lot of dialogues from the beginning of December 23, the whole quarter, and it's the dialogues that have been materialized in real business. It's corporate loans, and above all in Sweden, that drives the development.

I was going to ask about consumer. We have had the intention to deviate from that segment before. But now we have had five quarters in a row that volumes have increased. What makes you think it looks attractive to grow on consumer?

I would not say that we are a private property segment. We want to have different segments, that we have more diversified activity. Sometimes companies grow, and sometimes private property grows. That's what we think, that we are not monoliner. But what we have done in private is to make the credit distribution very much. We have a bank, and we can not lend money to people who can not pay. It's not just the owners of the property either. We have done that. In 2019-2020, the credit quality is completely different. We have managed to maintain a good margin, but with a lower risk, the discursive distribution is improved. I would not say that we do not want to be in that segment. We have done the segment a lot in credit distribution, in the channels in general. We have also chosen to slow down the private segment in time when the interest rates went up. Some others have now returned a little. So we have perhaps got a better competition situation than we have seen before. That's the situation. I hope you get the answer to

the question. That's the answer to the question. I will also come in a little on the move. The corporate real estate loans that have been moved to the third in Q2, are those loans more tailored to senior loans or junior loans compared to the new portfolio?

Yes, it is more senior. The absolute amount of money that is in third and second is senior.

Is that also the loans that were moved to third in Q2?

Yes, absolutely.

What do you see as the reason for the increase in the sum of third and second in corporate real estate?

I would not speculate. We sat in Q1 and thought that the sum of third and second would be quite high. Now we have an improvement of just over one billion. That was a little better than we had expected. It is difficult to say how the move up and down will be. We have control over the matter. We have a dialogue with the customers. We have good plans to improve, to reduce the cost over time. Then it is close to time. That is what we are working on. Then we have some rents that make it easier for customers to move forward.

I wanted to ask a more conceptual question that is not directly related to the quarter. You are a junior lender in the real estate segment. I am wondering if there is another senior lender who wants to call the PANTH or for some reason to do a forced sale. Do you have any way to prevent them from doing that?

It depends on case to case. If there is, we always have a discussion with the senior lenders. How we act to the best for the customer in general. It is always discussion and dialogue. We have the best for all the inhabitants.

You should be in the senior lenders interest to not take advantage of your interest. It should not be their

main interest. I do not think it is good for anyone if you accelerate something too fast. I do not think it benefits anyone at all. Neither senior nor the senior lenders. It is my personal opinion. It is clear that the senior lenders act in their own interest.

If we compare with the beginning of 2024, are there any significant engagements in corporate and real estate that have developed worse than you expected?

What did you say? In 2024?

Compared to the beginning of the

year? Compared to the beginning of the year? It has not been a pleasant plan. Some things have been done faster and some things have been done longer. It is a bit of both.

One last question. If you were to assume that you will imitate the T2 sometime in the year, so that the capital and the capital will come up, is there anything that would be appropriate to start with?

We have to get to the point where we will first imitate. We have plans to do more and imitate more obligations. We have only been discussing this for half a year. We have an ambition to continue to

imitate. That was all my questions.

Thank you very much. Thank

you Emil.

The next question comes from Peter Benson from Affärsvärlden. Here you

go. Hi, I had a few questions. I can start with the degree of reservation, step 3. I assume it was around 55% a year ago and now 40%. How should one think about that development and how do you see it going forward?

Hi Peter, welcome. Of course, you can't see the degree of reservation on the same page as if you look at a private loan. You have a model-controlled reservation. Models are controlled by reservations. For companies with disabilities, it is from taste to case. We take every business and see where there is a risk in this business. Then the degree of reservation can be reduced between periods. If you look at this quarter, I think it was .4% in step 3 and it has decreased to 20. There was an engagement in step 3 that was fully reserved. Then new engagements were moved up to step 3, which has a lower degree of reservation. So the degree of reservation is reduced automatically. When you move things from step 3, which has 100% reservation, the whole nominal loan is resolved, then new business or new business with a lower degree of reservation is added. Then the degree of reservation is changed.

What do you think? What would be the normal number in 55% or 40% or what? It depends on

what kind of engagement it is. What kind of security is it, what is the value, what are the things we have in the different steps. It is easier to say what the reservation is for a private loan. You have a model-controlled reservation. But this is much more from case to case. What kind of engagement is it that ends in a step 3?

I thought about Stockholm and not on the part of Skilda. What kind of

engagement is it? It depends on the step 3 and how we see the security and engagement. Then we reserve case by case, which is the sum of the cases that is reserved. So it depends on the step.

I don't really agree, but we can move on. Can I ask if you could read a little about Oscar Properties and Norions engagement there? It seems that you have not been completely successful. How would you describe it there? Are there any lessons or something like

that? I don't mind if we have had an engagement or not, because it is a clean bank.

You can't even comment on what has been done with the payment proposal, the cash flow or things like that.

No.

In the year before the presentation, the number of businesses had increased from 600 to 2 billion. This is visible in the interest sphere around Balder. How big is this interest sphere? Is it inclusive of DOXA? How should you describe it?

Number one, we don't talk about what kind of engagement we have or not. That is one thing. The other thing is that if it is close, there can be different engagements that are close. We talk about the quality of the things we have done. We have seen a higher quality generally. We have seen the parts we do that are close to very good quality. And with the same market value as we do with all others.

You have to comment on the close-stay transaction a lot. How do you define close-stay and interest sphere?

That definition is very clear in the regulations. The limit for close-stay is when someone in our close-stay has 10% of the ownership or more. Then we can add information that there is a good spread of the engagements that we have classified as close-stay.

Finally, the Klarna checkout business where Klarna unlocks the checkout part. How do you see it with the volley and the interpretation and the impact forward?

That is a good question. I wish I had a good answer on that. I don't have it right now. It's not that Peter has something. That is our main competition, Klarna. What that will mean for us, I don't really know. We will have to see what the plans are and what happens. I agree.

We will have to see what the business will be like and what the conditions are. We don't know more than anyone else how their actions in the market will be. We will see what happens in the future. It is clear that this is both interesting and exciting. Hopefully it can create opportunities for us in the future. It is a bit early to say what the consequences will be.

It can be both good and bad.

How bad would it be?

I don't know how to put effort into this new business. I don't know which customers we will have the same geographical locations.

Interesting.

I think they are rewarding this quite hard. It is a run-off feeling on the whole project. It will be so hard.

You can tell me more about that, Peter. I can tell you more about the financial situation.

Thank you very much.

Goodbye.

Thank you. Good morning. I have a follow-up question. If we look at the deposit funding, it is much faster in Euro than in SEK. Is there any difference in price? What is the difference in price between these two currencies?

Hi Andreas. We fund a bit cheaper in Euro than we do in SEK. There are no dramatic differences. It also depends on where you look at the run-off curve. One reason we have increased in Euro is the increased diversification. If you look in the back, we had our Euro financing in Germany almost at the end. We have reduced the German part of our deposits and built up a meaningful We have also reduced our Dutch deposits. Despite the increased Euro, the diversification has improved.

If we look at SEK's strength the next year, is it a Euro funding headshot or would it reduce funding costs?

We are trying to secure as much as possible. We want to be neutral as much as possible. There we do not have a underlying battle between the asset-laying side and the

other side. I understand. Last question. You talked to OneOp on the consumer side or does it also affect the corporate side? That's what I thought. Can you repeat the

question? What is the question, Andreas? Is there a season effect on payments?

Are you a payment consumer but is there also a season effect on corporate?

There is no season effect on corporate.

That's good. Thank you.

Thank you,

Andreas. Have a good

one. We have no more questions so I will leave the floor to the speakers for any closing comments.

Thank you all for listening in and thank you for your questions. Have a great weekend.