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%.

Thank you. Thank you, Leonard. So a little bit about the recap of our strategic focus. We can go to the next. As you know, we have four key strategic ambitions, starting with having the most happy customers, being a one-stop shop for savings and investment with an outstanding customer experience. And to get there, we build them on our platform for savings and investments every day with a high speed in development. But we also know we can never have happy customers unless we have happy employees with the upward trend on engagements and also that we can attract and retain top talent, which we can. Then a sustainable business. We are in a trust business. We need to earn that trust every day and work extensively with risk management, both compliance risks and other risks, and also ensure that we are trusted and like brands. And the last area is profitable growth to capture the Nordic growth potential to continue to take market share in the growing savings market and also ensure scalability and cost control going forward. can go to next. And as you know, we've had a very good long-term growth in both customers and savings capital, both from dramatic improvement in customer experience that we continue to enhance basically every day. But also that we have a critical mass of customers in all countries. We have now more than 400,000 customers plus in each one of the countries driving and fueling that word of mouth growth. And of course, a good net savings during that period as well. What's next? And we're taking market share in a growing savings market. We have 6% market share of the population, 6% of the addressable savings capital. That was in 2022, 13 trillion SEC. And that was up from 3% in 2016. At the same time, we know that the market is growing both from underlying growth in the savings market, but also that we launched a new product like the endowment wrapper we launched in Finland this fall and the live rental product we're going to launch soon in Denmark. So the investment market is, we estimate it to increase from 13 trillion to around 20 trillion second 2026. And to the right, you see we have highest market share in equities and lower in funds and pension. Thereby, we also put a lot of effort in those areas. And we're also really happy to see that development coming now with very strong growth in the fund business. Next, cost and cost focus is also really important to us. We've had a rather stable cost development since 19, in spite of doubling the customer base from 900,000 customers to 1.8 million customers during the same period. So very scalable business and overall very good cost control. Key drivers is that we have a very modern, scalable cloud-powered tech platform that can onboard a lot of new customers without driving costs. We work with automation and simplification when it comes to processes, which is a win-win. It works better for customers. We scale better. Also very efficient customer growth, low acquisition costs, mainly driven by PR and word of mouth. We plan to increase this a little bit now and come back to that, but it's still a very efficient growth, even without spend. And also that we manage the third-party spend in a good way. Next. So looking at the medium-term financial targets, if you look at the actions in 2023 versus the targets, we are in line or above on all targets except for customer growth. We're slightly below with 9% versus guidance of 10% to 15%. But we still consider this as good in the rather difficult market during last year. We made two changes to the medium-term financial targets. One is, like Leonard talked about, we added the capital ratio targets to set some kind of boundary for a share buyback program. And when it comes to cost, I mean, the underlying cost is still mid-single-digit growth, but then we plan to invest an additional 80 million SEK per year in marketing, which I'm going to talk about now. And we want to capitalize on the position that we have. We have a very strong market position in the Nordics. We have a good platform. We have very happy customers. And we hopefully also will see a little bit more benign market going forward with better macro and a little bit better performance in the markets. So we think it's a good time to do an extra investment now. And the investment we announced is up to 80 million SEK extra per year from the level of 45 million SEK. So last year we spent around 10 million SEK in marketing per country, which is a low level. And now we plan to increase that to roughly 30 million SEK per country. And what we want to achieve with this, of course, is to increase the customer growth. So from the 9% where we are to the upper band, 10% to 15%, or upper part of 10% to 15%, which is our guidance. Of course, this will take some time. You build this over time. But to do this, then this investment will allow us to drive brand awareness, but also increase the pool of customers that can consider Nordnet as a platform. But we will be very transparent. So we will disclose and track the market costs separately. And of course, if we over time see that this is not efficient, we can also scale back. But it takes time to see the full results of this. And it's not a thing you can just do for one year and scrap. It takes a couple of years before you see the results. Yeah. And just running off the priorities for 2024, we're working extensively with the Danish Livrent, the pension product. We have a branch manager in place. We're going to hand in the branch application during 2021. We aim to launch at the end of this year or beginning of 2025. We continue to expand our Nordic brand fund offering. It's a new exciting launch coming up now mid-Feb. So watch out for that one. And as I said, also the integration and migration of Shareville app and web to the Nordic app and web is going really well. And we're likely going to be done with that work during the summer. And then we're going to close the old platform. Yeah, brand position we've talked about is to strengthen brand awareness to extra marketing spend. But overall, of course, you're going to continue to focus on cost control and ensure that we have a scalable business also going forward. I think I'll stop there, Marcus, and hand over to you.

Great. Okay, so it's time for questions. So if you want to ask a question, please use the raise hand button and I'll unmute you. And you can, of course, submit a question in writing if you want to. So the first question comes from Jokka Pestlevik at SCB. Please go ahead.

Good morning everyone. So my first question is on the increased advertisement. I think you said during your presentation, but could you reiterate if you have already begun with the campaigns and have seen an effect already and also which market you see the biggest potential in?

Yeah, so we haven't increased spend yet. What we're doing now is working on the concepts. We're going to do that together with the external party. When that concept is done, then we're going to start rolling it out. And it's likely going to be from, I would say, end of quarter two. How we spread the spend, we haven't fully decided. It is likely that perhaps a little bit less spend in Finland since we are number one and the only platform there and a little bit higher in the other countries. But I say, I think we have a good potential in all of our countries with an increased marketing spend. If you do this right, of course, in an executed one.

And just related to the customer growth target of 15%, if you get to that point, should we expect to see it already in 2024 or is it rather 2025?

2024 is too early. It takes time to build brand awareness and consideration within the customer base. We're likely going to see a sign of that in 2025.

Perfect, very clear. My second question is then on buybacks. So first of all, do you have a mandate from last AGM in spring of 2023, which is something you will request in the upcoming AGM?

We do have the AGM mandate. However, to buy back also requires a mission from SFSA, which we have not, we do not have at the moment.

So likely, I mean, the buybacks is going to be from H2. So likely we start to buy back from H2, both to have a new approval from AGM, but also an approval from the SFSA.

That's very clear. So we should expect you to use buybacks then to get down to 4.5% or is 4% an alternative then in the leverage ratio?

Over time, yes. Over a couple of years. I think it's important to know that over a couple of years we do also see additional earnings where we'll add on to own funds during those years and we'll also watch closely the development of deposit, of course, so we don't jeopardize anything.

That's very good. Mark, I think. And just one very last question. Do you have an update on the unsecured lending portfolio?

No, it just is ongoing. So either a sell of the book or that we set it in runoff. But we come back as soon as we have something to communicate.

Perfect. Many thanks.

Thank you. The next question comes from Patrick Bratelius at ABG. Please go ahead.

Thank you. Can you hear me?

Yes.

Perfect. I would like to start regarding the comment where you mentioned that you expect a deposit base to savings capital to increase the coming years, given that it's below average historical levels. Can you please share with us some of the reason why you believe that will occur?

I didn't say it will increase, but it's of course a likelihood that we see a little bit stronger deposits over time since we are right now on very low levels. Of course, a little bit market dependent on that one. If it's more volatility, I think we will see more deposits. Also higher customer growth will also probably lead to more deposits. A bit stronger market, for example, will probably do that. Also increase the inflows to the platform. So I'm just saying that we are on a historic low level. So there is a likelihood that we have an upside. And I just wanted to share the sensitivity on that upside. So 1% increase is about 300 million seconds.

I think one aspect of deposit levels that's sort of underappreciated is the effect of higher transaction levels. So right now we see net buying, which reduces deposits. But when you have buying and selling across 1.9 million customers, you have that transactional cash that's kind of missing now. Back in 2021, when we were at sort of 13% deposit today, that was all transactional cash since there was no savings account to park your cash in. So once trading activity comes back, that should actually help with liquidity and deposit levels.

Thank you. Because we have seen increase in equity markets during Q4 and deposit has fallen despite that quite sharply in November. How is your strategic thinking about raising deposit rates to attract more deposit to offset this drop in deposits?

If you look at quarter four in total, we actually were flat if you exclude the FX effects. We clearly saw, especially in November, December, when it was more volatility in trading, that the deposit held up very well. You got more trading deposits there. I think we have competitive interest rates in the markets now to at least keep the deposits we have on our platform. If we should increase that further to attract even more capital, that remains to be seen. There's of course a cost to that as well. We have a pretty interesting model in Norway where we have differentiated a little bit between private banking rates and retail rates to track private banking capital with very good interest rates and see how that plays out.

Thank you. And then a question on the buyback, a little bit of a follow-up. According to my calculations, it looks like your overcapitalization then adjusting for this 81 would be roughly 1.5 billion, but then you build capital giving your high profitability. And then you talked about maybe the exposure also falling. Can you share with us some of your thinking about the run rate buyback level, given that you wanted to have it on a long-term, not just a short-term buyback program?

I think that's not what we want to see. We see the development of both the earnings and the deposit levels, how they line out during the years. But also, I think it's important to see that it is within the range of 4.0 and 4.5. And if you go to 4.5, that's a billion, a little bit more than that of excess capital. So it's a little different there. But the range is to be within 4.0 and 4.5 within some years so that we have those tools to work with.

Okay, that is fair. And then I squeeze in just the last question. Can you talk about any impact in Finland from the tax wrapper launch, given that it launched here in the fall? Has it gone according to plan and were you expecting a bigger impact or a smaller impact? Can you please share some details here, please?

I think the product builds very steadily, not least in the private banking segment. It's been very well received. And we are approaching close to 1,000 customers and close to 500 million SEC and net savings. But the activity overall in the customer base is higher than expected. So all in all, I would say we have a good start. But this will build over time like any insurance product. But we see the feedback from customers and from the market has been very, very good.

Fair enough. Thank you so much. Thank you. Next question comes from Nicholas McLeese at DNB. Please go ahead. I think you need to unmute on your end, Nicholas. Try now. I think you're unmuted. Nicholas, can you hear us? Okay. Hopefully, Nicholas can come back. We'll go to admin kick at Carnegie place. Go ahead.

Hi, do you hear me? Yes. Perfect. Hi, thanks for presentation and taking the question. So starting maybe on the increased marketing spend. Have you made any analysis on kind of the payback period or the conversion rate you usually have on on marketing spent on the marketing spend you've had previously?

Yeah, I mean, you know, right now we have acquisition costs around 700 SEC, but lifetime value to acquisition costs is 24 turns. which is very high so with this investment we're likely going to increase the CAC to perhaps around 1100 but still have a very good LTV to lifetime value to CAC so I think it really makes sense to fuel growth with a low LTV to CAC that we have and a strong position we also have in the markets but Of course, we're going to fall off to this over time to see that we get the facts that we want. Otherwise, of course, we will scale back. But it will take some time before you see results here, especially when you build brand awareness and consideration. That takes definitely more than a year, probably two.

Got it. And maybe just following on the cost topic. So marketing, I suppose it could be seen as a normal running thing you need to have in your operation as well. Is there other parts that aren't included kind of in the cost guidance that could come up in the coming years to make you actually on a reported basis have an overrun compared to your cost target?

Not as we see it. And this was a considerate investment. I mean, we had good growth also with low spend. I mean, we spent 10 million per country last year and we still had 9% growth. But I think there is a clear opportunity for us now to push a little bit with the strong position that we have and increase customer growth. Because all the time was really fueling our business is customer growth and net savings.

I 100% agree. I think for the long-term franchise value, it makes a lot of sense. Then just on your NAI sensitivity as well, you assumed 90% pass-through on lower rates on the consumer lending. Given that you anyhow kind of want to churn out that portfolio, why would you pass on anything of lower rates to those customers?

it's probably somewhat regulated in agreements so you need to pass through some of the interest rate decreases okay let's work there then thank you thank you let's try Nikos again let's see let's try I think you need to accept to be unmuted

Nicholas. Right. Okay. We'll, we'll move on to Michael McDonald at UBS. Hi there.

Can you hear me? Yeah. Great. I just had another follow-up in the marketing. I think most of the questions have already been asked, but just thinking about the sequencing in 2024, should we expect that to be kind of front loaded or evenly spread out across the year?

No, I mean, like I said, right now we're working on a concept together with a third party. So, of course, there's going to be some costs related to that. But we won't stop the marketing, external marketing push until end of quarter two, end of quarter three, quarter four. So, probably a little bit skewed to later in the year. But like we said, we're going to report the marketing costs separately. You will see it in Excel sheet. So, it's going to be very easy to track as well.

Okay, great. And then just another follow up on the start package in Sweden. Just wondered if they'd seen any impact of that in Q4. And then also you saw some pricing competition in from some competitors in Denmark as well. Any comment there on how that's affecting your pricing?

Yeah, but I think in Sweden, since now we're really competitive on the start-offing and also you can change commission class, that's really... We see some positive effects, but not least on also NPS score and customer satisfaction. Of course, not just due to this, it's of all everything we do on the platform, but this counts as well. So we have a very positive trajectory in customer satisfaction. We saw that in SGI as well, Swedish Quality Index. What we still need to work with in Sweden is awareness, brand awareness. So that's why I think some extra push also in Sweden on marketing spend makes sense. When it comes to Denmark and the Saxo lowering prices, we haven't seen any effects. They did this in the beginning of January, but we have an extremely strong start in Denmark with both the customer goals and that savings. And we position ourselves to be at this one-stop shop with a great customer experience. We don't necessarily need to be cheap at every single price point. Of course, overall, a good price, but So far, no effects. Of course, we'll monitor the situation and see how it plays out. But I have to remember that Sachs has always been cheaper than us, basically. And they've been moving their prices a little bit up and down. They were down quite a bit in 2021, 2022. And I think they raised the prices and now they moved back again.

Great. Okay. And then just one final one on the level of net inflows. I think in Q3, you mentioned that it was the reduced levels still because of reallocation of capital from private banking clients. Is that still what you're seeing in Q4, or are there any other trends that are emerging?

No, I mean, the retail trend is still very strong and stable. It's still allocation, especially in all the cohorts of private banking, which is quite a lot of money. But again, hopefully, if the interest rate starts going down and the markets are performing a little bit better, that we will see quite a lot of that capital coming back to be invested also in equities and funds. Great. Thank you very much. Thanks.

Thank you. Let's see. I'm not going to try Nicholas again, but I'll try a colleague at D&B, Emil Jonsson. Let's try. Let's see if you can hear Emil. Here we go.

Hi, it's Nicholas here. I'm using Emil's.

That also works.

Great, great. So yeah, follow up on the increased marketing spend and the potential communication between higher marketing and customer growth. So Looking back since the IPO, you've kept your customer growth target largely intact. Actually, you even reduced it slightly from the 15% you had for some time as well to now it's doing 10 to 15%. While the cost growth guidance has increased, from being flat for many years ahead that you stated in the IPO later raised to 5% and now you're going to be probably above 10% for 2024. So is it fair to conclude that it is more expensive than you previously assessed to reach your customer growth ambition? And secondly, how can we be confident that your cost growth will indeed go back to the 5% in the medium term given the trend with accelerating cost growth we're seeing now from 0% to 5% to now Yeah, around 11%.

I think you see a little bit different factors. A lot has changed since the IPO. I mean, I think no one could dream about the growth in customers and net savings and overall in the business that we've seen. And in spite of that, we have a very stable customer development. We increased cost per year on average 4% per year since 2019. At the same time, we doubled the customer base from 900,000 to 1.9 million customers now. So I say overall, we have a very scalable business and a very good cost control. I think we showed that also last year, even in a very high inflation environment, we managed 7%. But the underlying, if you exclude FX, it was actually 6% in line with our guidance. So underlying what we see that we can maintain mid-single digit is just that we see an opportunity for an extra push in marketing. Of course, if that doesn't give effect over time in the way we want, we can step that back. Like I said, we report it separately. We'll be able to track that cost item specifically.

Okay, but what has... triggered you to reassess the yield you get from marketing expenses right now. So traditionally, you've been more targeting more growth through branding, using savings economists, podcast events, and also word of mouth. So does it suggest that you see higher customer acquisition costs in the future?

Not really. I think we, I mean, like I said, our acquisition cost is around seven a sec now versus a lifetime value of, what is it, 20,000. So lifetime value to acquisition is like 24 turns. It's extremely efficient customer growth. And I think that makes an opportunity to push a little bit extra marketing and increase acquisition costs a little bit, but still have a very good LTV to cacken. Of course, we want to reach as big a part of the market as possible. We want to be strong in the investor-trader segments. We want to be strong also in the service segment. But to fully get there, we need to build additional brand awareness that we don't necessarily do in those segments with the savings economists and word of mouth. So I think it makes sense to build a more generic brand awareness in the markets where we are and also then increase the pool of customers that can consider Nordnet as a platform.

All right. And then how much additional net inflows do you expect the kind of incremental 5% higher customer growth to bring? So let's say you go from 9% to upper end of the 10% to 15% interval. So all these customers you hope to gain from more marketing expected to be minor customers in terms of AUM or substantial drivers of incremental net inflows.

Yeah, well, we see, I mean, when we grow as much as we've done in the last years, I mean, the new cohorts have been traditionally very strong, both when it comes to activity and net savings. Of course, we can't match the fully heavy trading segment that we had before when it comes to trades per customer, but it's been very, very good and active customers and also putting a lot of good net savings over time on the platform. So we don't see that necessarily cohort is going to be worse going forward. It's just that we want to have a higher reach.

All right. And does that then suggest that the slide you showed with trades per trading customer should continue to trend down?

I mean, I think, like I said, with the new cohorts, if you look at trades overall, the number of trading customers, that's equal between the cohorts. It's just number of trades per trading customers, a little bit less in the new cohorts due to the old cohorts, due to that we have more heavy traders than in the old cohorts. But I don't say it will dramatically push the level down. I think why we see the level now is more market dependence. And I think with a customer base of 1.9 million and some more activity in the markets, we have an upside on trading going forward.

And I think especially in Sweden, especially where you have seen that trend where we started with having mainly heavy traders and then expanded to more to the broader market. Outside of Sweden, we have all kinds of customers. We are the number one platform and have a very broad segment of the market. So incremental customers are generally sort of part of the average there. You don't see that same sort of obvious dilution outside of Sweden. And we've grown outside of Sweden for a number of years.

Yeah. And then on the net interest income, so I appreciate the NAI snapshot for 2024, but clearly it's a bit speculative given the uncertainty regarding rates and volumes. So could you say something more specific on what your snapshot suggests for Q1? I think you mentioned, Lars-Ocke, that you still expect some further tailwinds to the yield on the liquidity portfolio from previous rate hikes. So do you see potential for higher NII Q1Q and Q1?

I think... What we need to see then is how deposit plays out. And then also we see additional upside. It was not on liquid. It was on the lending portfolio where we had announced hikes, which were not in the snapshots and also likely a higher volume. And then we see, of course, on the downside a little bit and how much transfers we get to the savings accounts. But again, a majority of the inflows to savings accounts we know come from external deposits that would also then drive yield on the liquidity portfolio.

So did I understand correctly that you have some announced rate hikes to to you on the lending that is not included in the snapshots.

Exactly. That will come in play in quarter one. It's not dramatic, but it's like across like 25 points dips on some products.

How part of the lending book does that... I think Marcus can come back to that.

Denmark and Norway. I think all lending products there.

I'm filming where we do an adjustment on the individual rates of modern lending in China as well, so that will also play out.

Okay, perfect. Thank you. Yeah, I think Arne and I clearly like you to make sort of assumptions on your own assumptions, but with the way we laid out the snapshot with what we know now, if you look at sort of where the The risk is if it's topside or downside, I think the market rate curve prices in to a rate starting to come down in H1, about a total of 100 dips and change across the markets for the year. I think that sounds fairly reasonable that rates cuts would be more aggressive than that. It's probably not likely. And on the volume side, that's of course tough to know, but Jone Peter Reistadler, And we are an all time low when it comes to to the process to am and long growth should likely continue to grow so i'd say that the risk there. Jone Peter Reistadler, And it's more to the to the upside, too, but of course it's it is it's hard to know so we lay out sort of a snapshot, so you can you can apply your calculations to it.

Jone Peter Reistadler, Yes, understood.

Great. The next question comes from Rickard Strand at Nordea. Please go ahead.

Hi, and good morning. Starting off with a question on capital. You have announced that you have the intention to buy back your 81. There are 500 million SEC. But going forward, would you be interested in issuing new 81

capital if you see tighter spreads or is this should we see this sort of shift here that as permanent I think we should we do not consider any issues at the moment we have excess capital but if that will be a good alternative we can always look upon it but not in the plans as of today definitely not to replace this one that we redeem at the moment.

But if you do something, we can be optimistic as well. It depends on the market development, the rate development, etc.

And then coming back to the cost increase there in terms of marketing spend, just interested to hear, is there any, is it something particular in terms of timing that inspired you to take this action now in terms of product launches, trading, change in trading sentiment, etc.? ?

Yeah, but two things I would say. One is, I mean, that we get a platform that's really appreciated by the customers. We are a one-stop shop now in all countries, but we also see, of course, you measure your customer satisfaction ourself by MPS, but what we see also in the external benchmarks that we're very strong, that we're Very strong pick-up in the SGI in Sweden. Key number two on the bank that's growing. Also number one on product quality on that one, for example. We're number one in similar measurement, EPSI, in Denmark and in Finland. So, of course, we want to leverage the strong customer satisfaction, a strong market position we have, and I think it's a good time. The other part is also macro a little bit. Hopefully, we have a little bit more benign macro in the coming years. Hopefully, that will drive a little bit higher growth in the markets as well, a little bit more activity in the markets.

Yes, thanks. And then we heard one of your main competitors talking about improving their offerings to more active customers. And they mentioned specifically that they could potentially lower FX fees for cross-border trading. Is that something you see could impact Nordnet's brokerage income from cross-border? Or do you think that your customers are happy across the Nordic countries?

Yeah, I mean, if you look at why they choose us as a platform to start with, it's this one-stop shop that you can find everything that you need. And of course, a couple of the outstanding customer experience. Then, of course, we need to overall be competitive on price, but we clearly see that we don't need to be cheapest on every single price point. We've seen that with De Giro coming in with zero, basically. We've seen that commission. We've seen that with big banks lowering commission. We've seen it so far with Saxo as well. So, of course, you're going to monitor at all time competition and see how this plays out. But we also know from experience that we can rely also on the strong position and a very good platform that we have.

Thanks. And then one final one from me. Lars-Oke, you mentioned it sounded like you're getting a little bit more optimistic about flattening out the margin pressure on funds. Is that something you see sort of the trend leveling out or is that just sort of an hope for getting back to...

Tremendous shift from 48% active in 2020 down to 32% active in 2023. I think it's likely that the majority of that shift has happened because there is clearly room for active funds as well.

Yep. Thanks. That's all for me. Thank you. Next question comes from Enrico Boltoni from JP Morgan.

Let's go ahead. Hi, good morning. Thank you. Just one clarification on the marketing costs to start. The previous span of 45 million you mentioned, that will still be reported together with the operating costs, right? So it's just the 85 million that will be on a separate line or are we going to see the entire marketing costs? So you see the 45 plus 80. So the entire will be on a separate line.

You have it today in the Excel that's on the website. You can see it. We have split it out already and you have all the history there too.

Okay, thank you. That's helpful. And related to that, I know it's early because you said you're going to start in 2Q. I was just wondering whether, is there any seasonality we should be aware of? So for example, in the UK, a lot of firms usually increase marketing around the Isis season, so the first quarter. Is this going to happen as well in your markets or actually...

it's going to be more evenly spread out once you once you start yeah i think of course there's some seasonality for with us as well especially during summer vacation probably we won't feel that much for example and when people get back to work in and august september i think it's a good time for for example but then can be a little bit market dependent as well but but but we we

rather spread out anyway but of course we will try to stay a little bit during too so we don't spend too much in the quiet periods okay thank you um then i had a question on uh just on on the regulatory pressure again read across here in in the uk there's there's been a lot of regulatory pressure on on trading on nai i was just wondering if you could give us just your take in terms of how um how the regulators in the markets you operate are seeing the margins that the platform has generated on cash. But also, I would say, more recently, the FCA has been a big concern about the gamification of trading. So, you know, the advertisement around trading shares for retail customers, which clearly is relevant to you. So I was just keen to hear your thoughts on this. Yeah.

Yeah, I think when it comes to NRI, it's more been the big banks, which have been a little bit scrutinized. I think we are very competitive. We have high interest rate on savings account and we have good lending rates. And we are a bank. We have a bank license, so we can run the bank business, which is a little bit different from any of the UK platforms. So no real pressure to regulate or have some windfall tax on NII in any of the countries. When it comes to gamification, I think we are a long-term savings platform. We promote long-term savings, diversified savings, and also to save regularly. Most customers actually do this, and we're also very careful on marketing. We have There's been a number of marketing surveys, one in Denmark, I think in Norway, etc. And I think the one in Denmark has been closed and we came out without any comments, basically. But we really try to be careful and adhere to regulation, of course, when it comes to marketing.

Thank you. And one final question, please, on the pass-through rate in terms of the remuneration and saving accounts as rates start to fall. You put that sensitivity table, which is useful. What are your thoughts here? what are the chances that actually you'll be able to pass through not 100% of that I'm just thinking from probably a competitive dynamic does it really matter what the other players will do or are there other considerations I think outside of Sweden we are more the price setters since we're the number one in Sweden we need to see a little bit what Alonso is doing and

And they might be bound a little bit on the interest rate on their external accounts that they provide. But let's see how that plays out. But we need to, as a number two anyway, follow competition in Sweden.

Okay, thank you.

Okay, a couple of last questions before we wrap up. So we have Pano Salinas from Morgan Stanley. Please go ahead.

Yeah, hi. Can you hear me?

Yeah, you can.

Yeah, I think most of my questions are answered just maybe to put everything together. So marketing spends going up, as you mentioned, acquisition costs going up as well. So you need to spend more to grow the customer base to your targeted 10 to 15%. Is it specific type of customers you're looking at, especially in Sweden maybe, are you aiming more towards private banking type of customers? And then tied to the marketing spend, You also touched upon the competitive landscape and the pricing likely coming down in brokerage and effects and stuff. But also on the rates, I mean, as my colleague also mentioned on Avanza and the postponement of the rate hikes in Sweden, you also gave some sensitivity on the deposits for 100% and 50% pass-through. So does this suggest that you likely delay repricing once rate cuts commence? And is it more likely to be towards a 50% than the 100%? Thank you.

I think with customer marketing and customers, we target all of our three segments, investors, traders, and savers. But of course, I think these investor-trader segments are big, and we want to build as high awareness as possible in all of those segments, because I think we have great growth potential in all. So it's not just going to be directed to one specific group like PB. It's going to be a broader brand awareness campaign than that. When it comes to the rate cuts on deposits, on savings accounts, like I said, here we are more the price sector outside of Sweden where we can change probably With 100% pass-through. In Sweden it's different. We need to also look at what Avanza is doing. So that's going to tell the game a little bit how it plays out in Sweden.

That's clear. Thank you.

Great. I think the last question from Andy Lowe at Citi. Please go ahead.

Hi, guys. Can you hear me? Yeah, great. And just I would love if you could provide any thoughts on throughout 2024 sort of mix shift from your savings deposits to your mixture of deposits savings. You've obviously seen a big step up and that's increased throughout 2023. So do you think that mix shift is done? And then maybe another way to think about that is if you take your non-savings deposits as a share of your savings capital, that's about 5.6%. Do you think we're close to the lower bound or do you think there's scope for that to go lower? Thank you.

I didn't quite get it. Did you understand, Marcus?

I think the one question of what sort of savings account balance is, it's I think it's hard to know where it's going to stabilize. It's at 39% of deposits now, but it makes sense that it would start to stabilize once rates come down because the rates have triggered it to come up and rates are starting to come down. We'll see where it lands.

Then we'll also need to market pick up so more money moved into transacting instead of saving.

Exactly. And then that's sort of what I talked about before, that transactional cash, which as Andy pointed out, is at at some kind of close to an all-time low now. And what would trigger that to come back is sort of markets to be a bit more investable. This sort of trading instead of just net buying. So I think that the risk is clearly to the upside there. And the trigger of this coming back a bit more this transactional cash is markets being a bit more investable, which would make customer growth come up. Customers bring new cash. That cash even though it's meant for investing, it sits for a day or two or a week, take that across 1.9 million customers, you have some constant liquidity, take the private banking sort of allocation away from markets, coming back a bit, that markets are now more investable, some of that cash trickling in and coming back, that would also help deposits and that would be cash coming back to be invested, that sort of transactional cash. So I think There are a number of factors, clearly, that will help deposits come up in a direction to the upside. The question is, of course, sort of timing, how fast it goes and at what point. But I think it's clear that it's heading in that direction at some point. Thank you. Great. I think that is the last of the questions for today. So thanks a lot for attending this presentation. You can visit our website, nonetab.com, or reach out to me if you have any questions. So thank you for your interest in Nonet. Have a nice day and goodbye, everybody.