Nordnet AB (publ)

Okay, hello everyone, it's 10 o'clock so let's start. Welcome to the presentation of Nordnet's financial report for the third quarter of 2023. My name is Johan Tidestad and I'm the Chief Communications Officer at Nordnet and with me today I have our CEO Lars-Oke Norling and also our CFO Lennart Krän. Hello, guys. Good morning. We'll start off by presenting the results and then we'll have a Q&A session. All participants will be on mute during the presentation. And when we come to the Q&A part of this presentation, you have two alternatives to ask questions. You can click the raise hand button. And I will then unmute you and call your name. And you can also submit the question in writing through the Q&A button. Just write your question and I will read it out loud. And the presentation itself will be available on our corporate website after this session, NordnetAB.com. All right, then let's start the presentation. Lars Åke, please go ahead. Thank you, Johan.

You can go to the next page. So some key highlights for the third quarter, very strong financial performance overall with revenue growing 42% and profit 64%. And overall also good customer growth and positive net savings in spite of challenging markets. We have the uncertain macro environment and low volatility is an overhang on trading activity, which is still on the lower level. Net interest income more than doubled due to higher interest rates. We have good cost control with costs in line with guidance. And we also launched the Finnish endowment wrapper, which is an important step to become a one-stop shop for savings and investments in Finland. And overall, a very strong capital situation that provides optionality. And Leonard is going to talk more about that, the CFO. And we also initiated a strategic review of our unsecured lending business. This business is becoming... Smaller and smaller part of our overall business and it's also not naturally linked to our core business. And this was a product, it was a good product in a low rate environment that provided yield on a liquidity. But now we are in a different market with a high yield environment where we can find returns in other ways. And we're going to come back to the market when we're done with the strategic review and we look at the potential sale of the business or as an alternative that we limit the lending and reduce the portfolio over time. What's next? Overall, a very good quarter. Customer growth 9%, which is good in this market climate. Savings capital is also up from also because we had a bottom in the market last year, end of September, but also due to net savings. A number of trades down 4% due to very uncertain markets and overall low volatility in the markets, both in the Nordics and in the US. The revenues are up with 42%. We have a slight down on trading revenues, but considerable growth in net interest income. When it comes to expenses, we have good cost control and the cost growth is in line with the guidance of 7%. But if you look at underlying cost growth in fixed FX, we know that the Swedish krona has weakened considerably. That underlying growth is 5.5%, so 1.5% less. And still very good operating leverage in the business. And the profit is then increasing with 64% year on year. Go to next. Also, continued growth in customers and net savings in spite of this uncertain macro. We see that the customer growth in the quarter was higher than last year, which is good. Net savings is also higher. Net savings in the quarter, both versus quarter two, but also versus last year. And we see continuous good net savings from the retail segment and less volatility in the private banking segment. So we're all... good net savings in quarter to three. Go to next. And we benefit for being in four markets with diversified revenue streams. We have okay growth in Sweden, but we have even higher growth outside of Sweden when it comes to customers and savings capital. And with the highest growth overall in Denmark, both in customers and savings capital. Go to next. Looking a little bit more on the revenue stream, starting with trading. We have more trades in quarter three compared to quarter two. Slightly less trading customers, but the trades per trading customer is higher. But they're still on a low level. Volatility, we see the VIX index there is on a very low level in quarter three. And also, of course, on certain markets that might make our customers hesitant to do trades. But the share of cross-border trading is keeping up on a good level. And that's also due to the country mix where we have now a lot of customers outside of Sweden that trade more outside of the home markets. Go to next. Looking at the trades per day in a historic perspective, even if we have a lower number of trades per trading customer compared to what we've seen before, we almost doubled the number of trades per day. We doubled the number of trades per day since 2019, due to that we almost doubled the customer base during the same time. When the market turns more positive again, we are, of course, very well positioned with a large customer base that will trade more in a positive market climate. We also see that the income per trade is higher than historic levels, and that's more cross-border trading is due to our country mix. What's next? A little bit about our fund business. And here we're very proud of the development in the fund business. And as we talked about, this is a strategic focus area for us. We put a lot of effort into funds, coupled also with the pension business that also drives the fund business overall. And we grow on the fund capital with 30% in one year versus 15% when it comes to the total savings capital. And if you look at the Nordnet funds, they've grown even more. We have 170 billion SEC of fund kept on the platform now, where of 40 billion is Nordic branded funds. And also good growth in customers taking up the fund products with 850,000 fund customers now, which is an 11% growth in one year. And looking at the graph up at the top in the mid there, you see the allocation of funds of different fund categories. And here we see a slight increase in fixed income funds, which is natural in a high yield environment. And then we have the red, which is the growth of the Nordnet funds. And then the dark blue, which is index funds. And at the bottom is active funds. But Nordnet funds is mainly index funds as well. So the total share of index funds is around now 50%. And the active share has been going from 48% in 2020 to 33% in 2023. So it's a massive shift from active to passive funds. Also very good net buy in the fund business overall last 12 months. Go to next. So now we're going to talk a little bit about net interest income, starting with the deposits. And as before, we are on a rather low deposit level versus savings capital of around 9%. And that's lower than historic levels, which is around 11% to 15%. And we see, even though the customers are not trading a lot, they're still net buying the market, both equities and funds, 12 billion in quarter three, and that's not fully compensated by net savings in cash. And thereby we reduce the deposits somewhat down to 70 billion in a quarter. We can go to next slide. Looking at the liquidity portfolio and the snapshot that we've given now in a number of quarterly reports. And the snapshot for this year is 1.7 billion, assuming then the volumes we have in quarter three, currency allocation, credit spreads and market consensus for the IBO rates for the rest of the year. The main sensitivity here is, of course, the development of the deposits in quarter four. Looking at the liquidity portfolio, that's currently or end of quarter three at 45 billion. It's derived from that 70 billion in deposits, 6 billion in cash equity, and then reduced by the landing of 31 billion. So 45 billion in quarter three. And we have continuous growth from the return in the liquidity portfolio. So in spite of slightly lower volume in liquidity portfolio, it's still growing due to higher interest rates. Go to next. The loan portfolio snapshot is 1.4 billion in 2023, assuming then quarter three volumes and interest rate as per October 1. And looking at the lending portfolio to the left, we have a stable development in the personal loans business. In the mortgage business, we are stable in Sweden and up in Norway. And then we are growing the mortgage lending business in spite of pretty tough markets. But it's also partly due to the FX effect with the big Swedish coronavirus. And we have, of course, good growth also in the loan portfolio, in terms of revenues, both from increased lending, but also, of course, from increased rates. But overall, a low-risk portfolio, the model lending and mortgage is around the loan-to-value of around 40%, and basically no credit losses there. So the only part where we have credit losses is in the unsecured portfolio, which is a little bit higher than last quarter due to more challenging macro, but it's still a very low-risk credit portfolio. We can go to next. And looking at deposits then, so the interest we give on our savings account, we estimate that to be around 400 million SEC in 2023. Assuming the volumes of the savings account, we see an end of quarter three and a currency and customer account mix. Of course, the big sensitivity here is the transfer to the savings account, migration to savings account from other accounts. Currently, 31% of customers' deposits are eligible for deposit interest. And we see up to the right that it's mainly in Sweden where you see a transfer to the savings account from other accounts. And it's a much smaller development than the other countries, in spite of fairly high interest rates, both in Norway and in Denmark. And one reason for this is that we have a lot bigger customers in Sweden. That, of course, if you have a lot of money and part of that is cash, you want to have as good yield as possible. And down to the right, you see net savings also. We don't see any clear correlation between net savings and the interest rate we have on the savings account. We have the highest rates in Norway and Sweden and lower rate than in Finland and Denmark, but still we have considerable net savings in Finland and Denmark. go to next so all in all then resilient revenues bolstered by our diversified revenue streams we see of course that net interest income is growing and we have a lower volume of trading revenues, but a pickup in the fund revenues. But as we talked about last quarter, we see net interest income and trading revenues as communicating vessels in a high rate environment. Of course, you have good net interest income, but then you have negative markets and that will impact trading and vice versa. And the revenue per market per product on the process, of course, going up with the higher interest rates, the trading revenue is continued down due to lower trades per customer. And the fund revenue is also a little bit down and that's due to the mix shift from active to passive. You can go to the next. So all in all, If you look at the revenue development, we have had 30% CAGR since 19. It's a very good revenue growth, but also a very scalable business and good cost control. Cost has only been growing 4% per year. So that means basically the entire top line growth ends up on the bottom line, which is a true position of profitable growth. To next. Also a little bit on the product side, we launched a new fund recently at Nordnet Global Index 125. It's a global fund with leverage. It's around 25% leverage. And it's been very well received. It's a similar product to the AP7 product, the very popular fund in the Swedish pension scheme. And we also had a lot of new versions of our app. On average, we launch a new app version every three days. Both the new travel features, but also a lot of initiatives to improve the onboarding and the conversion of customers coming in and making them active. Then the big launch is, of course, the Finnish wrapper, which is, like I said, an important step to be a one-stop shop for savings investments in Finland. And it's a very good product for private banking. And over time, this will grow considerable capital on our platform. It's a 400 billion SEK market in total. And the differentiators for us is that we have a fully digital solution, also very flexible. You can trade both the equity ETFs and funds. And of course, we have low and transparent fees as well. And for the customers, this is a good product. There's no capital gains when you trade in the account. It's just when you take the money out. And also, it's good for inheritance. Beneficiaries don't need to pay capital gains tax, but only inheritance tax. On other accounts, you need to pay both capital gains tax and inheritance tax. Overall, a very good product, and we're very proud of this launch. So with that, I hand over to you, Lennart, to talk about the capital. Thank you very much.

Yes, you can go to the next slide, please. First of all, I mean, Nordnet has a very solid underlying capital position with also very strong liquidity and good credit quality, we are risk avert to say. With a total capital ratio of 26.4 and a CT ratio, one ratio of 18.7. have increased their own funds by almost a billion this year. But in addition to this quarter, we also received the new SREP, or Pillar 2 requirements, which was significantly lower than the ones that we had before, by giving us a greater buffer than previously. So this total capital ratio, 26.4, compared to the requirement of 15.5, gives us a great optionality to see how to optimize the capital situation for us. But as you can see, the credit quality in the portfolio is still triple AA and single A, very few others, and a good maturity on the investment as well. We have a liquidity reserve that is in relation to deposits of almost 65%, so a very solid liquidity position as well. We can take the next slide. This new Hillary 2 requirement gives us, as I said, a great buffer, and we are now looking into how to optimize this one, this situation, where we, of course, first of all, need to see the growth possibilities we have and what requirements we need for that, because that is the main thing for us. In addition to that, we also look upon the level of outstanding 81 bonds. As you all know, we have a bond with the first call in March of 500 million. but then also there are other aspects of the capital situation or tools for us of course if that would be considered and that is of course buybacks and dividends and things like that but first of all we have to maintain a capacity for growth and then secondly we look into the 81 level of course and then the other tools are used in in