Nordnet AB (publ)

Hello everyone, and welcome to the presentation of Nordnet's fourth quarter of 2023. My name is Marcus Lindberg. I'm the head of investor relations at Nordnet. And with me today, I have our CEO Lars-Åke Noling and our CFO Lennart Kräm. Lars-Åke and Lennart will start off by presenting the results. And then as usual, we'll have a Q&A session. During the presentation, all participants will be on mute. And then when we come to the Q&A session, You have two alternatives to ask questions, so you can either raise your hand, press the raise hand button, then I'll mute you and call your name, or you can submit a question in writing through the Q&A button. So if you write your question, I'll read it out loud, or you can just email me. The presentation itself is available on our corporate website, node.ab.com. Okay, let's start the presentation. Lars Rokke, please go ahead.

Thank you, Marcus. We can go to, yeah. Starting with some highlights for the fourth quarter. Very strong financial performance, record revenue and profit. The best quarter ever. Also very good customer growth and positive net savings and considerably better than quarter four last year. And we also see that we're regaining positive momentum in our core fund and brokerage business, which has a growth quarter on quarter versus last year for the first time since 2021. Net interest income increased by 40% due to high interest rates, but also higher lending volumes. Continued good cost control with cost in line with guidance. Also very strong capital situation where we will have a dividend of SEC 7.2 aligned with our guidance of 70% on that profit. But also we decided to redeem and buy back the 81 as due in March. And we're also evaluating the buyback program. And our CFO will talk more about this point later in the presentation. And we also see very strong results in different customer satisfaction service across the Nordics, both EPSI and SGI, where we are number one in EPSI in 2021. Denmark and Finland, and that's like SGI. And number two in SGI, Swedish Quality Index, in Sweden. And we are the banks with the highest growth in SGI. And in some categories, we're actually number one, like product quality. So we're very happy to see that. And we're also planning to invest extra in marketing to capitalize on a strong position and a growth opportunity that we'll come back to as well. We'll go to the next. So some of the financial highlights in the fourth quarter, customer growth 9%, which we still consider good in this market. Savings capital up 15% of underlying growth in the savings market, but also net savings. Number of trades is slightly down from last year, but quite a bit up from quarter three this year or in 2023. Revenue is up 25%. And again, here, I would like to stress that now we see revenue growth in all revenue streams, both the fund business, the trading business, and net interest income, which we, of course, are very happy about. Good cost control, cost in line with the guidance of 7%, and still very good operating leverage in the business with a profit growth of 33% to $830 million. This is a full year figures, customers and sales capital is the same story. Trades is down 30% from a rather tough market last year with a lot of uncertainty and also overall low volatility in the markets. And revenues is up 35%. What we see then a drop in trading revenues for the full year, even though we were positive in quarter four, but then compensated by increasing net interest income from high interest rates. Cost for also the full year is 7%. And actually underlying with the excluding FX with the weak Swedish krona, the cost growth was actually around 6%. good cost control and again a very good profit cost of around 50% year-on-year. Go to next. And we see a continued growth in customers and net savings, despite on certain macro and on a full year basis, the growth in customers and net savings is about the same as in 2022. But if you look at quarter four versus quarter four, it's considerably higher customer growth and also net savings in 23 versus 22. Go to next. We also benefit from being a Nordic player with the geographic diversification that risks our business model, but also enables growth. And we see good growth in both customers and savings capital in all of our Nordic countries. Next. Coming in to talk a little bit about the different revenue streams, starting with trading. And to the left, you see the number of trading customers picking up in quarter four. And that's due to that we saw strong markets in November and December. So trading activity was higher. But still trading per trading customer up to the right there, you see, is still on a fairly low level. And following the VIX index, we've seen overall low volatility in the markets, especially in H2. But share of cross-border trades are on a stable high level, around 25%. And that's due to country mix that we've higher share of cross-border trading outside of Sweden. Go to next. So we see there in the graph to the left, in spite of considerably lower trades per trading or per customer per day, we see that the total number of trades per day has almost doubled since 2019. And that's due to we have doubled the customer base during the same time. And really with this big and active base, when market picks up, like we saw in November and December, we get a definite boost on trading. So hopefully with stronger markets going forward, that will enable higher trades per day for us. Also, the income per trade is higher in 2019 due to higher share of cross-border trading than from the country mix. Next, talking a little bit about the fund business, which we're actually very proud of. We have very good growth in the fund business, both down the loan, but also in the pension business. And we've increased now the fund capital to 185 billion SEK, and that's 28% up in one year. So it's two times the growth we have on average savings capital. And this is due to very strong net fund buying during the year of 23 billion. And especially we see very strong growth in the Nordic branded fund portfolio, which is now currently about one quarter of a fund capital, around 43, 44 billion SEK. Also would like to highlight a little bit the shift we've seen from active to passive funds. In 2020, the active share of the funds was 48%, but that's down now to 32% in 2023. And likely a big part of the shift from active to passive is behind us, also allowing for a more stable fund margin going forward. Over to next. So talking a little bit about the NII, net interest income, starting with the deposit development. And we have deposit to savings capital of 8%, which is historically low. Deposit volume decreased a little bit in the quarter due to customers that are not net buying funds anymore. equity and not fully compensated them by net savings and dividends but we also in this quarter had a pretty big currency effect because the corona actually strengthened of two billion sex so without the currency effect we would have been rather flat on deposits in the quarter we'll go to the next So I'm going to now walk through quickly the different components of the net interest income, starting with the liquidity portfolio. And as usual, we do a snapshot and we see that we can reach around 1.6 billion in revenue from the liquidity portfolio in 2024, assuming then the volume we had at the end of quarter four, 2023. and also the market consensus on IBO rates that you see down to the right. Currently, we have 43 billion SEC in the liquidity portfolio derived from 67 billion in deposits and some cash equity of 6 billion, and then you subtract the lending of around 30 billion. But clearly, you see that in the bar graph up to the right, that we have a sensitivity in, of course, deposits. If deposit volume would increase, and we are, like I said, a low level of 8% deposit to savings capital, if that would increase 1%, that would mean 300 million SEK additional revenue in 2024. Go to next. Then the lending portfolio snapshot around 1.5 billion in 2024, that's higher than 2023 due to higher lending volumes. But then this estimate is based on also four quarter volumes and the pass-through of Interest changes of 50% on modern lending, mortgage 100% and on secure business of 90%. And here we likely have a little bit upside because the volumes will probably increase during 2024 and some of the interest rate tags we now also call the four has not been taken effect yet either. We have overall a very low risk loan portfolio with loan to value of around 40% for modern lending and 45% for mortgage. And credit losses is only in the unsecured business, which is around 2% during 2023. It's a bit up from 2022, but still very good level in this market and the low risk portfolio. Then a deposit interest and cost snapshot is 500 million in 2024, assuming then the interest rates and volume per December 2023, with 100% then pass-through of changes or the raise that we saw on the previous pages, but also a stable volume of 13.5 billion on the savings accounts. We see the development on the savings account. The transfers are most pronounced in Sweden. It's considerably less in other countries, even though we now have competitive interest rates in all countries, not just Sweden. But of course, here we have a sensitivity with an increased volume on savings accounts and a smaller pass-through. If we go to 18 billion, for example, from 13.5 and a pass-through of 50% instead of 100%, then it's 100 million SEK higher cost here from 500 to 600%. But we have to remind ourselves also when we increase the savings account volume, majority of that volume is actually external deposits, which was also yield on the liquidity portfolio. So all in all for that, it is income, if you look at the snapshot, it is around 2.6 billion and same level as 2023. But in summary, resilient revenue streams are bolstered by, resilient revenue bolstered by diversified revenue streams. And we see that down to the left that we have good growth in all the revenue streams. Of course, most pronounced in net interest income lately because of the interest rate increases. But we also know that net interest income and trading is a bit communicating vessels when interest rates are high, market performance is a little bit worse and vice versa. Looking at the margins per product, of course, high now in deposits due to interest rates. We see the trading margin going down due to less trades per customer, but we see now that the fund margin has started to stabilize and was just one bit drop in 2023. And the main reason for this is that we likely now have the big shift from active to passive funds behind us. Go to next. So if you boil all this down to the P&L, you see that we've grown the revenues around 30% per year since 2019. At the same time, we had the cost fairly stable, only 4% growth. So that means almost entire revenue growth is ending up on the bottom line. So it's a good position of profitable growth and very good operating leverage. Next. There's some product highlights. Of course, we're doing a lot every quarter. We launch a new web version every second hour and a new app every three days. But just a few things. I mean, we've now started to include a lot more dynamic pages on our web, not least for inspiration. And we just launched a new stock inspiration page that's been very well received. We also come very far in the migration on Shareville from the old AppWeb into the Nordic AppWeb. We launched a number of nice features during the quarter, like onboarding and profiles and groups. But what I'm most happy about is that the migration has also been very successful. We've seen engagement in our post dramatically up in one year when people start using the new platform instead. With that, I hand over to Lennart to talk about the capital situation.

Thank you so much and we can go to the next slide. We have a strong capital situation and that is due to continuous good earnings and a very low risk business model with limited lending that puts up here. During the year, we have increased the own funds by almost a billion krona. Most of that is from the earnings, of course. But also the capital requirements have been lowered, both as an effect of SFSA's SREP, as they do every second year, but also lower deposit levels that mean our liquidity is down, but also the risk of the liquidity portfolio. So really, it's a joint effort, both increased own funds and reduced risk and capital requirements. Leverage ratio is still the long-term constraints. And even though it is up to end of year, 6.7%. This is mainly due to, of course, the strong capital situation we're doing funds, but also the low level in historical means of deposits according to savings capital, which is now down to 8.2%, as you saw earlier here. And that low level is mainly due to our customers during 2023 being net buyers of stocks and funds, actually. And we expect the deposit level to increase going back upwards in relation to savings capital, which will then decrease the leverage ratio, but also increase the NII, of course. Leverage ratio is the constraint also because that is harder for NodeNet to control. The risk and capital rated capital adequacy that we can control by invest differently in the liquidity portfolio. But the deposit which drives the leverage ratio, it is all the customer's choice and how they prefer to do. So that is what we have to have a buffer for both in the long term, how that is developing. but also having the buffer for very, very short and quick changes of it. As we saw in March 2020, when the deposit increased by 20 billion, almost 40% of that time within a quarter. So yes, the leverage ratio is still the constraint for us. But with this capital situation, we are continuing doing the dividend of 7% of earnings of net profit, sorry, giving in a dividend of seven kroner and 20 euro a share. But we also mean to reduce the capital and that we do by redeeming the 81 bond, which is for school 21st of March. We have received permission to do that from SFC. And for your knowledge, I mean, that is 500 billion on Stibor plus 6.75%. An annual cost of 60 million about. We're also evaluating a long-term buyback program, and that is to manage further excess capital, of course. This would not be one time. It will be long-term over a couple of years to slowly get us down to the proposed leverage ratio range, 4.0 to 4.5%, as was announced today. And then we have just those capital ratios. We have implemented those to be more transparent with you about our capital situation and the plans ahead. And that is to have this buffer to regulatory requirement, but also saying, yes, this is where the leverage ratio is sustainable. And this is where we want to be between 4.0 and 4.5%.