Nordnet AB (publ)

Good morning and welcome to the presentation of NONET's second quarter of 2024. My name is Marcus Lindberg. I'm the head of investor relations at NONET. 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 we will 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 click the raise hand button in Zoom. I'll then unmute you and call your name. Or you can submit a question in writing through the Q&A button. The presentation itself is available on our corporate website, nonetab.com. Okay, let's start the presentation. Lars Våke, please go ahead.

Thank you, Marcus. We can go to the next slide. Starting with the highlights. So we're all a very strong quarter with an all-time high revenue and profit with growth across all of our revenue streams. And the majority of the growth is coming from our core business, the trading and the fund business. And we also see continuous strong growth in customers and net savings due to positive market sentiment. Also a very healthy trading activity and strong brokerage margin from a high share of cross-border trading and also a high share of retail trading. And very good also growth and progress in our fund business, where Nordnet funds are now growing by 60%. But overall, we have a good growth in the fund capital and also good growth in the fund revenues. Net interest income outlook looks stable. It's about the same as last quarter. We see a slight decline on the interest rate paths, but we have a little bit higher volumes on deposits and lending. And cost growth is expected to train the line with guidance for the full year. And we expect the second half cost growth to be a little bit lower from ongoing savings initiatives. Also a very strong capital situation where we have the dividend and also the buyback process is ongoing, waiting for approval from the SFSA. And we're done also with the migration of Shareville. So it sounds like the old Shareville classics. Shareville is now fully integrated in our Nordnet web and app and integration has also been very successful. Looking at the numbers, also good numbers, customer growth 11%, quickly closing up to 2 million customers across an audit footprint. Savings capital also very strong growth, 21%, both from underlying growth in the market, but also very strong net savings. And here we have record numbers now, 960 billion, and we're approaching also 1,000 billion second savings capital on the platform. It was very positive. Also, now we see that we have a positive growth in number of trades. And that's why, since we saw that. And of course, from positive market sentiment and momentum. Revenues up 20%. We have a record revenue of 1.3 billion, close. and especially strong growth in the fund and the trading business. Cost is growing 10%, but if you exclude the increase in marketing cost, the underlying growth is 7%. But as I said in the beginning, we expect to land on the guidance of mid-single-digit growth for the year. Also, continuous strong operating leverage in the business with profit growing 24% to all-time high of $904 million. And also customer growth and net savings is very strong. I mean, for the quarter was 54,000 customers. We have almost 100,000 customers for the first half. Net savings, 19 billion in the quarter and 37 billion in the first half. And that's considerably higher growth rates, both in customers and net savings versus last year. And our geographic diversification, the risks of business model enables growth and we see good development in all our markets. Sweden a little bit lower on customer growth, but we see very strong savings capital growth and Denmark is of course sticking out with both very high customer growth and savings capital growth. Next, looking a little bit on our revenue stream, starting with the trading revenue. We see a number of trading customers is about the same as last quarter. Trades per trading customers is also about the same. We still see, though, that the volatility in the market is low. So the VIX index is low. So a little bit high volatility. I think trading can pick up more. But what's very positive is the cross-border trading is very strong, and it's almost 30% in the quarter from both the country mix, where we have a lot of cross-border trading outside of Sweden, but also that the US markets overall have been strong and attracting a lot of trades abroad. Looking at trades per day in total, in the graph to the right, to the left, we see that almost double number of trades per day from now versus in 2019, even though that the trades per customer has been going down. And that's, like we said before, that's because we have a double customer base from 900,000 customers to close to 2 million now. But what we also see now in this year, first half, is that the actual trades per customer is actually going up a little bit. We've broken a negative trend, which is positive. And we also see that income per trade is considerably higher now than in 2019, and that's due to the country mix where we have high share of cross-border trading outside of Sweden. And also here we see an increase in the first half of the year on margin. That's because the cross-border trading is even higher and also that the retail share of trading is high. Going to the fund side, very strong development in funds, very strong net flows. We have 229 billion SEC now in fund capital overall and fund capital growing twice as much as total savings capital and especially strong growth in our own Nordnet branded fund with half of the net buy goes into our Nordnet fund family. And we have now almost half of the customer base owning funds. And we also look at activity on fund buy and sell down to the right, where we see that 25% give or take of the customer base buy or sell a fund each quarter, and that's around 500,000 customers. And we also see that the active to passive share is stable with an active share of around 30, 31, 32%. Going into net interest income, we're still on a fairly low level on the deposit versus savings capital of 7%. But we see a slight uptick in deposits from 66 billion to 68 billion in the quarter from both strong net savings, high dividends. But we also see that customers continue with very high net buy in both equities and funds, which is, of course, good for our core business over time. What's next? So looking at the liquidity portfolio snapshot, it remains at around 1.6 billion. Let's assume that the volume is on quarter two and also the interest rates pass, you see, down to the right. And they are a little bit lower than last quarter, like I said. But we're a little bit higher than the deposit volumes than we saw last quarter. And the main sensitivity here is, of course, how deposit volume develops over time. And we likely will see an upside as we are on very low levels on 7% deposits versus savings capital, where we historically seen 12 to 15%. On to next, looking at the lending portfolio, then snapshots here, also about the same as last quarter. And assuming the second quarter volumes and the IBOR interest pay pass we saw, but with a pass through a mortgage and unsecured, close to 100%, but margin lending 50%. And we see that in the graph to the left there that we grow marginal lending very healthily while we're stable lending volume on mortgage and and personal loans according to plan. And we really want to grow margin lending. It's a core lending product for us. It's used for leveraging the portfolio. It's high margins, but it's also less rate sensitive. We don't expect 100% pass-through. We expect 50% pass-through of interest rate changes going forward. You can move back. Also, still a low risk on the lending portfolio. Loan-to-value is around 40%. Credit losses is only on the unsecured. A little bit higher levels, 2.5% first half. A little bit higher than last year, but that's due to the market climate. And I think it's still good in this more challenging high interest rate climate. But all are not realized losses. It's also a lot of accruals in this. And looking at the deposit, the last part, then the snapshot here is 600 million. If you see the volumes on the savings account at the end of quarter two and the pass-through of the interest rate changes 100%. And sensitivity here is, of course, the growth in the volumes on the savings accounts. But we have to remember also that the majority of the growth coming into savings account now is external money and it's not internal transfers. So that means that we also will get an upside on that money on the liquidity portfolio. So all in all, looking at the full revenue picture, we have a very stable and good revenue development. And we really benefit from having three revenue streams. We see good growth in all of them. But as I said, especially strong growth in our core business funds and trading. And also looking at savings capital, like I said, approaching 1,000 billion. We're all-time high right now in quarter. And looking at the margins as well, down to the right, we see them, like I said, a pickup on the trading margin from high share cross-border trading, also high share retail trading. And we see a stabilization of the fund margin. So that means that the entire volume increase we see in funds, we get also on the bottom line since we have the margin stable. And we see the active to passive shifts is slowing down. But also when the customers buy passive funds now, they mainly buy Nordic funds where they have a higher margin compared to other passive funds. And all in all, business model with great operating leverage. We've grown the revenue with 30% per year since 2019, while the cost has only been growing 5% per year. So it's a very scalable business model. So that means that we are in a two position of profitable growth with almost entire top line growth ending up on the bottom line. Go to next. Some product highlights and the big thing is that we, like I said in the beginning, that with Sunset Shareville, the old app and web are closed and we fully integrated our shareable into our Nordnet app and web. And the migration has been successful. I'm going to comment that on the next slide. But also continue very, very high release rates on the app. with 24 new versions during the quarter. We're building more and more functionality into the apps so that customers should be able to live their entire life in the app. And looking at the travel migration, we see quite increasing engagement as was our aim as well when we integrated this in an ordinate app and web. We see the posts in the different forums is increasing almost three times. And also a big pickup in signups to Shavell. And we know that Shavell is something that differentiates us in the markets. No one else has this. But we also see that the Shavell customers are more active with more trades and also higher commission levels. It's an important product for us. Then I hand over to Lennart to talk a little bit about capital and liquidity.

Thank you very much. And with those results, we still maintain a very strong capital situation where we have a capital ratio of 25% and a CET ratio of 20-21%. So it's far beyond the requirement and we feel very comfortable with that. Also, the leverage level ratio is 6.5%. Those are unaudited results, and thereby we do not report those to SFC. You see to the bottom right where we have the regulated reporting, not very much difference, still very, very strong. But that is how we made it this time. We also have a good and solid liquidity position with a liquidity in relation to deposits over 60%. And we have less than 50% in lending out of the deposits. So we feel very comfortable with that as well. And it's very important for us to maintain that level. That is why we do not extend the lending part too much, but rather focus on the margin lending. So, yes, sorry. So now we're looking into the replies from SFSA so we can start the buyback of stocks here in the fall. We expect that to be in the late summer. They have four months and we submitted the application in April. So we'll soon receive it and then we will start off with it.

A little bit on a strategic focus on the next... As you know, we have four main strategic ambitions, starting with having, of course, very satisfied and happy customers. We want to be a one-stop shop for savings and investments with a really outstanding customer experience. And to get there, we are then building the best platform for savings and investments. We also know that we will never be able to have happy customers unless we have really passionate and talented staff with an upward trend on engagement and satisfaction within the employee base and also that we can attract and retain key employees. We are in the trust business. We need to earn that trust every day. So driving a sustainable business is key, that we manage our risks in a good way and we overall trust in a like brand. And last is profitable growth. We have a fantastic growth potential in the Nordics and we want to capture that and continue to take market share and go in savings market, but also ensure that we continue a very scalable business model and good cost control. And we used to see in this slide, we have a very strong long-term development in customers and savings capital. We have now a critical mass of customers in all countries to drive word of mouth growth, but also that the customers really like our platform with a high NPS. And we see savings capital growing more than customer basis. That's also online market growth, but also from strong net savings. And we're taking market share in a growing savings market. We have 7% of the Nordic population on the platform and 6% give or take of the addressable market, which is biggest 14,000 billion SEC or 14 trillion SEC. And that's up from 3% in 2016. So we're taking market share, but we also see that the addressable market is growing both from underlying market growth, but also that we launch new products. And the big one that's to come is a leave-rent pension product in Denmark. And we see to the right where we have highest market share in equities and low market share in funds and pension. And we put a lot of effort to grow fund and pension. And we have a positive development in market share there, but a long growth run rate also in those areas. And also very stable cost development. I mean, we double customer base since 19 from 900,000 customers to almost 2 million customers now with stable costs. So we have a very strong cost control, but also a very scalable business model overall. Partly from that we have a very modern cloud-based platform. We can onboard a lot of new customers without trying to cost. We work a lot with automation, which is win-win, works better for the customer and we scale better. Also very efficient customer growth, a lot of word of mouth, PR. And also that we work very actively with our third-party vendors. Looking at the financial targets, I mean, the actuals this quarter is in line with all the financial targets we have. So that looks good. We can go to next. Key priorities for 2024 then, since we now ticked off share will, we updated this a little bit, but what we're working very a lot on now is the Danish Liberent pension product. So we'll open up a two trillion second market for us in Denmark. And we have now a branch insurance branch established in Denmark with the branch manager in place. And we aim to launch end of this year or beginning of next year. We also have a very strong offering for the high-end segment, the traders and the PB. We have exciting features on the roadmap to even enhance that offering even more during the fall. We also have a pretty good business working with financial advisors and local wealth managers. But the platform here has been old and now we're rebuilding that entire platform. It's going to be a fully new web portal. So we can be more attractive for financial advisors and local wealth managers, not only Sweden, but in the Nordics. And that can attract new capital to the platform via B2C. And also continue to strengthen brand position. We're working now with a new brand concept. We're going to increase marketing, as I said, to drive awareness and ultimately customer growth. But also, of course, we maintain a focus on cost, on both scalability and cost control overall. So with that, I hand over to you, Marcus, for Q&A.

Great. Okay. It's time for the Q&A session. So as a reminder, if you want to ask a question, just click the raise hand button in Zoom or send a written question either in the Q&A function here or shoot me an email. So the first question comes from Jakob Heslevik from SEB. Please go ahead.

Good morning, everyone. My first question is on your capital situation. You're 200 bits above your financial target on your leverage ratio. if we go with the performer numbers. How should we think about this going forward? Will you only use buybacks to optimize your position, or is there a regulatory framework in the horizon that would drive and change it in your ratios? So I'm basically trying to figure out how large buybacks you can do here going forward.

You want to answer that, Lennart?

Yes, I can answer that one. I mean, first of all, the main priority for us is to be able to handle the leverage ratio in respect of deposit. And deposit is nothing that we can control. So yes, we have those 4.5 to 4.5 as a target for leverage ratio. But we also look upon this in the respect of the deposit level. And that is very low at the moment in relationship to savings capital. But we are looking now for, I would say, about 1% of buybacks for the coming year. That is where we are aiming. We want to adapt and gradually go down to those 4.0, 4.5 over the couple of years. So the aim is to do that on a continuous basis, I would say.

Okay, that's very clear. And then second on your NII, the liquidity portfolio was very strong during the quarter. Is it only due to the Finnish forward rates was at a higher level than you predicted in Q1? Or has there been any mixed shift within the profit volumes between client types, i.e. between retail and private banking and pro?

So was that the margin you were asking about? Yeah, the margin is that you have only starting and closing balances. So if you look upon it on a more granular basis, you will see that the margins are about the same throughout the period compared to the last quarter.

It says deposits came down a bit in the end of the quarter. You probably have a bit lower than the actual average.

Okay, so due to May being slightly higher than increasing.

Yeah, yield was about flat Q on Q, and then our deposit volumes were a bit higher towards Q1, so that's why you had a slight increase in absolute terms.

Okay. Yeah, that makes sense. And then just one on your products. I mean, the new web portal for financial advisors, what is the potential here? Which country do you see the largest upside, basically?

Yeah, I mean, the biggest business on the partner side is in Sweden, but we definitely have an upside, not least in Norway and Denmark going forward and perhaps a little bit in Finland. But we see a big potential in both Norway and Denmark, but also a more upside in Sweden. I think it's around 12-13% of our sales capital is coming from financial advisors. But I think we can grow this business with a better service and a better portfolio going forward. So that's an area we're going to focus more on in the future.

And the key is that this is basically not addressable capital today. So since we don't do advice, this is capital that needs advice and get it through a financial advisor. And this is a way to get the capital on the platform. There's no other way to do it. So it's all upside, actually.

Okay. But the increasing cost for marketing during HQ this year, will that be included in this as well? Or do you think you're going to have to expand your cost?

No, not for this. This is more that we work with the actual financial planners and local wealth managers and they drive in the customers, not us.

Okay. Thank you.

Okay, great. Next question comes from Ermin Kirk at Carnegie. Please go ahead.

Good morning. I hope you can hear me. So the first question would be on the commission rate on the brokerage. It looked a bit higher here in Q2. You mentioned higher cross-border trading, but I think it's fairly flat versus Q1. Is it just the higher proportion of retail trading? And if so, how much? And do you think it's sustainable for the coming future?

But it's a combination of the high share cost border, but definitely also that retail is trading more. I mean, it depends on market sentiment. I would say if you continue to have a positive market sentiment, I think we're going to see more cross-border and also retail trading more. If you get a really lousy market, I think, then the heavy traders is going to be a larger share of the trading. So the answer, it depends a little bit on the market sentiment. But we foresee still with the interest rates going down now and with not a hard landing, that should fuel also the market sentiment.

Got it. Thanks. Dan, you mentioned in the report that you enhanced digital transfers of pensions from other providers to the platform. Could you tell us a little bit about how the transfer process looks in different geographies? How seamless is it? And I know it's not solely dependent on what you're offering, but also kind of the regulatory framework.

Yeah, so in Sweden, what we've done, I mean, we've done as much as we can when it comes to automation. But still, you need a signature from the old employer, which is a little bit of hassle that slows down the transfer process. But we help the customer with that. But we build a pretty good flow on the web. And now we also enable that flow in the app. So that's a big thing this quarter. In Norway, as you know, that is a very automatic transfer. It's an external party having a transfer hub. So you basically can go in and see what pensions you have and you can basically click a button and one week later it's basically transferred. It's almost like number portability in the operating world. But also in Denmark, it's not all the way to Norway, but it's fairly automatic in Denmark as well. And we work with also players there that enables automation in a good way. So we see transfers there also becoming more and more automated there. And then Finland with the endowment wrappers, you mainly transfer cash there. So it doesn't need to be so automatic.

Perfect. So just if I understood it correctly, then when you launch the leverant account, it shouldn't be friction in the transfers. There should be a hurdle per se to get volumes on that one.

Yeah, so it should be a more frictionless transfer process we see in Sweden. Sure, not all the way as automatic as Norway, but definitely better than Sweden.

Great. And then last question, just the Finnish endowment wrapper you launched earlier this year. Could you give us any update how that's progressing?

It's around 2,300 accounts and say 800 million SEK it would take in that savings. And it's building nicely with time. The problem, as you know, is that the transfer side here is small because it's a tax event. If you transfer your money from one wrapper to another wrapper. So we mainly take new flows on the market into our wrapper. But a very positive reception, and I think it's going to be a very important product over time for us, and also important to have in our portfolio, not least versus private banking.

Excellent. That's all for me. Have a nice summer. Thank you.

Thank you, Armin. Okay, the next question comes from Potik Platelius at ABG. Please go ahead.

Thank you. Can you hear me? Yeah, we can. Good. Perfect. Thank you. So my first question is regarding fund income. So if you look at the fund capital relative to savings capital in Denmark and Finland, it's way below the level compared to Sweden and Norway. So the funding contribution from these countries are quite low. So why is this and do you have any strategy in order to improve this the coming years?

Yeah, I mean, we work with the fund business across. I mean, it is, of course, strongest in Sweden where fund savings started, so to say, but also very good growth in Norway. But we see now very good growth in Finland and Denmark as well, not least from the monthly savings product we have, especially then in Denmark, that's very popular. And margins in Finland and Denmark has been a little bit lower since there's been a lot of passive funds. But also here with our Nordnet portfolio, we can also increase margin a little bit on the passive side. So we see good potential also in Finland and Denmark on the fund business. And of course, Livremte will also contain a lot of funds for sure.

So the amount of funds on the Swedish and Norwegian platforms, do they differ in comparison to the amount of funds offered in Denmark and Finland, or is it approximately the same?

Yeah, I would say Sweden, Norway and Denmark is roughly the same. In Denmark, you know, they have those almost like ETFs, these investeringsföreningar, where you have a lot of local funds in that kind of instrument, which they're used to in Denmark, but they also buy normal funds as well. Finland has been mainly our own funds on the platform before, but now we opened up also funds from other banks onto the platform. But that's the least wide offering in Finland. But if you see our Nordnet portfolio, they really like Nordnet funds in Finland. And the Nordnet portfolio has been very well received. Before, they bought more the super fund, the free fund, that we don't earn any money. But now they shifted to buy a lot of our other Nordnet funds where we have a good margin.

Okay, thank you. So my next question is regarding the resolution fund fees. What is your expectations for the fee levels in 2025 and 2026? Will any of these fees disappear?

I think that's for you, Lennart.

Yeah, no, I don't think so. And it's very hard to say I haven't. No, I think those are the same as they are today, I would say.

Okay, fair enough. After my last question is regarding the credit losses. It's up sequentially quite a lot despite the consumer loan book falling. Will this impact the transaction in any way or?

No, it will not impact the transaction. It's mainly due to new forward flow agreement. We get a little bit less pay for non-performing loans. But that was part of the setup with Econo. So that's a known entity. And then it's on our side that we have reserved a little bit more from the non-performing loans we have on our balance sheet that we're not going to fully offload. So no impact and no big surprises really.

And can you remind us again when the expected close of this transaction is going to occur?

It's going to be in H2, but likely hopefully in the beginning of quarter four. But in H2, we still need some approvals and we work on our side to build the servicing. But it's progressing well.

But Q4 is your expectation, it sounds like.

Yeah, Q4. Okay, perfect.

That was all for me.

Thanks. Thank you, Patrik. Next question comes from Nicholas McBeath at DNB. Please go ahead.

Thank you and good morning. So I had a question first on your deposit volume. So as you mentioned, Lars Håkje, you still seem to expect that the current level of cash in relation to savings capital is at the depressed level. So I was just wondering, i mean this ratio continued to fall in the quarter despite the positive markets and higher activity um so would it be possible uh that there are reasons to expect customers on a sustainable basis will have lower cash allocations uh in in relation to the savings capital uh albeit you know it could still be at the high level in nominal terms or what makes you confident that we should anticipate a bounce in the in the cash allocations within the customer base

I think somewhat probably less deposits versus saving capital because we see more, I mean, the fund business growing very healthily and that's a little bit more sticky. You don't trade as often in funds. But that said, we have trading in funds as well. And we are, I mean, 7% versus the 12 to 15% we've seen before. So even with that trend, I think we are on low levels. But of course, it remains to be seen in the coming years. But We saw a slight increase anyway in quality from high net savings and also dividends. But of course, it's market dependent. I mean, now it's been a strong market for a while. And customers are not buying a lot, both funds and equities. If you have a little bit of a shakeout in the market, we...

only increase deposits very quickly and that's why we also need to be prepared on the leverage ratio side for that event and if you look if you zoom in on each type of customer the trading customer and the customers that do mainly funds and so on even though fund customers tend to hold less cash on average all customer types including fund customers have much less deposits over savings capital than they have historically so probably all types of customers are at some kind of cyclical or some kind of trough, even if there is some long-term downward trend, we should be able to come back to some kind of normalized level.

But what is supposed to drive that return to normalization? I mean, of course, if we get a severe market downturn, yeah, that I understand, but... But previously, I think your reasoning was more that we should anticipate this ratio to go up as customers start to trade more and that risk appetite gets back on. But now we're seeing that it is still not translating into higher cash, rather the opposite cash is actually in relation to savings declining. Just not sure what should change from here to drive up that cash allocation.

Of course, it's two parts of this equation as well. I mean, the savings capital has also increased quite a bit in the last year. So, of course, affecting the deposit versus savings capital. So, I think, of course, it's a relation, but it's also an absolute term you need to look at.

Yeah, so that's my thinking. Maybe we should look more at the absolute term and recognize that the absolute level is actually quite high. And therefore, we may not see the increase in the percentage. But yeah, let's see how that turns out.

But I still think we're on a fairly low level, if I put it that way. But it remains to be seen in the coming years if it goes up.

Right. And then if you could say anything about the cost outlook for next year, if we should expect a slowdown in the cost growth as you get rid of the cost from the consumer lending business, or that we should think that you should use these resources to invest in other parts of the business so that we should still expect maybe the kind of 5% cost growth or somewhere around that level, despite the resources that you free up when you divest the consumer loans.

Yeah, so I think for us... I think we see that we're going to invest that in other areas because we have a lot of interesting stuff to do. So we will not take that out of the cost base. But it's also, I mean, we changed the business model to earn money in different ways on that liquidity and that is a more efficient way. So that makes also that we can invest that in other areas.

Okay. And then final question on net inflows in particular in sweden where uh you're still lagging your other regions and then also lagging advancing sweden and you previously said that the low inflows have been partly due to uh some withdrawals from uh wealthier customer segments so just wondering if this is still the case or some other insights on the net savings and what is required for them to pick up I guess the most upside where from the current level I guess the upside potential seems to be mainly in Sweden from yeah given how relatively low the net inflows are in the Swedish business

Yeah, but we still see some volatility in Sweden. I think the inflow is good, stable from all segments, but we have a little bit of volatility on outflows for different reasons, but it can be fairly big tickets. If this will slow down, it might be quarters where you don't have it and you will see then a very good net savings and the other quarter you have some volatility. But we don't lose any money We haven't lost any money to really impact revenue, but it's been large chunks. It can be people sitting on shares from an IPO or things like that. But since we have some very big customers in Sweden, it can be a bit volatile when they move out to do other transactions.

uh okay perfect that's all my questions thank you thanks thank you next question comes from michael mcnaughton from ubs please go ahead hi good morning can you hear me yeah good morning great um yeah just first question is on the net brokerage income per trade so that was as you mentioned it is up overall. But I think it was down about 8% in Sweden, even with cross borders trading continuing to increase as a percentage of total trades. Any comment on the trends there? Is that just based on the customer basis that was trading or how you see it?

Yeah, but it's more, I don't have the exact figures for Sweden if you have markets, but it's likely the trading customers versus retail customers where retail has been really strong outside of Sweden, but also, you know, we have the traders mainly in Sweden and they've also been trading quite a bit now in these markets.

Yeah, quarter on quarter you see the portion of the trades in Sweden is a bit more skewed toward heavy trader versus retail, which is not the case in the other countries.

Anything particularly driving that? That's different between the trading groups? Is it just because of the historical mix?

No, I think the historical mix where we have the main portion of the traders in Sweden, and if they trade a lot, which they've done, of course, they out-trade the retail. But overall, I think retail in Sweden is also trading more, but definitely retail outside of Sweden has been trading more.

Okay, fair enough. And then just another one on the kind of marketing expenditures. You've done about 9 million in the first half. I think you mentioned in Q1 that majority of that was focused towards Sweden. Yeah. Any initial impacts of that spending or is it still too soon?

It's a bit too early and still mainly tactical marketing on product marketing and digital channels. So we're working on a broader brand concept that we're going to roll out in border channels during the fall. But it's too early to tell. But we're going to pick up the spending rate in H2. But we probably won't reach the full 80 million this year, probably more likely around 60 million. But from next year, it's going to be full on.

Okay, great. That's all from me. Thank you very much.

Thank you, Michael. Next question comes from Alex Medhurst from Barclays. Please go ahead. Alex, please go ahead. Hi, sorry, I didn't see the unmute option pop up there.

After all those years, Alex.

That's why I remind everyone every call.

Just had a quick question on the FX fees and the mix of overseas dealing fees in the period. Have you ever given an indication of what proportion of your brokerage revenues are made up by FX fees? And then also potentially a follow-on. I mean, we've seen peers launching currency accounts for certain customers and Do you have any plans to follow suit on this?

Yeah, I think you can find in the reporting was the FX part. Yeah, we split it out. Perhaps even in the Excel matrix, you can see that. I don't have the number right now. But when it comes to currency count, I mean, we already have a currency count on the depots in all countries. And then there's a discussion in Sweden to also introduce from some competitors currency content on the wrappers. And of course, with competition is something we look at as well. But that might also be an upside because mainly the traders and the high-end private banking, they use currency accounts. If they want to trade on wrapper, they've done that elsewhere with currency account, not with us. So it's likely volume we hopefully can attract back to us if we introduce a currency account on the wrappers.

And I just looked, it's about a third or 30% of the brokerage income is FX in the quarter, similar last quarter. But it's a tidbit on that too, is that that's the vast majority of that is driven by retail. And so we're clearly, if you look at the cross-border trading, retail does about three times as many cross-border trades as the heavy traders do. and they have much more heavy trade or cross border as percentage of their trades. And that tells us not that heavy traders do trade less cross border. It just tells us that they do it elsewhere. So we think by making that a bit more attractive on other accounts types, we can actually boost the brokerage business and get business that competitors have today. And it was probably with these more niche type players.

Gotcha. That's a useful color. Thank you. Maybe a separate question then on the yield dynamics, just pushing a bit further on that liquidity profile question. I mean, it looks like even after accounting for the spike in deposit balances in May, it still seems like the yield on the liquidity portfolio is sort of significantly north of 4%, which is higher than the average market weight rates weighted by your geographic exposures. Can you just comment on whether there are any other dynamics we should be paying attention to, such as any ways you're enhancing the yield or any sort of maturity profiles we need to consider and how those will develop over coming quarters? Thanks.

I would say that the average yield is in line with previous periods. And it's the fluctuation of what you see. It's more that you have this opening and closing balances rather. And it's been fluctuating quite a lot within the months, I would say.

And so rate changes is not overnight either. I mean, it's normally three months papers. So the full interest rate impact is taking force within three months.

Got you. Thank you very much.

Thank you, Alex. The next question comes from Enrico Bolzoni from JP Morgan. Please go ahead. Enrico, it looks like you're unmuted. I saw that you're unmuted, but we can't hear you, so maybe it's your microphone. Okay, we'll try Enrico again later. Let's go to Nicolas Vassilier from Exan. Please go ahead.

Can you hear me?

Yes, we can. Great, thank you very much. Three questions for me, but the first one is coming back on your funds business. I think you mentioned in the presentation that half of the flows were going into your norm net index funds. I was just wondering, in terms of revenue margins uh you're anything that it's accurate give to to to the margin i wondered by how much and then if i put myself on the customer side what makes it then more interesting to go with a non-net index fund rather than a third party

Yeah, I mean, the reason we're having higher margin in those funds is that we have a lower cost on our side. This is more margin to us. When we sell an external passive fund, you know, you split the distribution fee 50-50. Or you get the distribution fee, you split the management fee 50-50. So that's lower than we get if you buy a similar non-net fund, even if as a customer pay the same price. But we also try to be creative on the index funds to stick out a little bit. We have a tech index, which you don't find elsewhere, where we can charge a bit more. We have some leverage on our global, or we have one global fund with leverage. We also can charge more. We have our funds on funds. which are very popular, are one funds where we can also charge a little bit more. So overall, we have both from that we have a higher margin, but also a little bit higher price on some more creative products in our base. So overall, I can't comment on exactly how much higher margin, but it's definitely higher margin than selling external passive funds.

Okay. So yeah, very clear. That's interesting. Then coming back on your initiatives on private banking and pro customer segments or heavy traders, in terms of enhancing the offering, what initiatives more concretely are we talking about? yeah sorry sorry and as well i was uh wondering about uh how does the revenue margin for these segments of customer compared to the more retail customers um is it possible that you both have like a higher volume effect due to their higher wallets but also maybe the share the mix of the products they use on your platforms on your free revenue drivers can be different and then you also have higher margins overall?

Yeah, we're looking at them and product-wise, I mean, what we mentioned is currency account on wrappers, but we also look at a little bit more interesting information on our instrument pages. And we also... look at the different kind of order types, like WeWOP and things like that, and some other exciting features also that we're currently thinking of. So it's a palette of new functions. But that said, we already have a strong offering for at least a trader segment. When it comes to revenue, Martin, I mean, it's... lower, especially in the trading segment. But again, they do a lot of trades. So the absolute income is, of course, higher in the high-end segment, but margin is not necessarily not higher versus savings capital.

And finally, my last question is, we saw during the quarter you announced a partnership with EQT to distribute their retail product, Nexus. I was just wondering if you are aiming at adding other products like this in your platforms from other alternative manager providers. And if you can tell us more about the economics for you, how does it generate revenue? I guess it's some sort of a distribution fee.

Yeah, so it's a distribution fee on Nexus, but I think Nexus is well served towards the non-advised space that we have. It's a fairly simple product. It works like a fund, but not that many extra fees in that fund business that they're driving. So it's easy to explain. And also you can buy it in smaller tickets and also sell at least quarterly products. So I think it's a product that suits the PB base, the non-advised PB base. If you're going to go with other products, we haven't seen any that's simple enough basically to do this. We're of course evaluating, but I think EQT has found a really good packaging of that product with a fund of the good funds, but also priced in a good way, but also like it works like a fund that you can buy and sell like a normal fund.

Okay, thank you very much. Have a good day.

Thanks. Okay, we're going to give Enrico another try. He's calling on the phone, so I'll unmute you. Try now, Enrico.

Hello? Hi. Yes, we can hear you.

Great.

Thanks, sorry. A couple of questions.

I think you need to shut off your...

So Juan, going back again to the opportunity within the financial advisor, can you just remind us please of whether at the moment they just bring close to the platform but they don't generate an additional layer of revenues for you and And if there is any way you can change that and try to monetize it a bit more, I'm thinking just a couple of examples. You seem to be doing very, very well with your funds. You could maybe offer them some managed portfolio services that they can use to invest in their client assets or alongside that some ancillary services like reporting or tax filling. So anything else you can do to monetize this segment a bit more. And related to that, There seems to be quite a lot of interest at the moment in this space, and so by that I mean for well managers. Have you ever considered maybe some inorganic expansion, not necessarily large deals, but maybe also smaller ones just to ramp up and boost a bit your well management capabilities? Thank you.

I think with the financial advisor or local wealth managers, we definitely have a fairly good revenue on them, both from a platform fee on the fund, but also we get the transaction fees on trading. So I think what's important now is basically we have a lot of untapped potential here. We can onboard a lot of new capital customers on the platform that needs advice, basically, that we don't access today. Of course, you can probably add some more products over time for sure to increase more than even more. But I think now it's more to get the really good platforms. We can expand that business across the Nordics. when it comes to own advice so far we are not doing any advice and if you do it we need to find a way that really scales in a good way if that means buying someone or building it our own that's a question of course but it's an area we investigate but we also need to see that it really scales in an efficient way and you know the Nordic markets are very self-served as well so yeah it's a balance

Thank you.

Okay. Thank you, Enrico. Next question comes from Ian White from Autonomous. Please go ahead.

Hi there. Thanks for taking my questions. Just a few short follow-ups from my side, please. Just first of all, I think you said earlier that you think that the increase in marketing costs had no impact on client acquisition in 2Q specifically. Can you just explain that in a little bit more detail, please? Obviously, the gross CAC sort of simply measured did increase quite a lot in the second quarter. So just interested to understand thoughts in a bit more detail there. Secondly, in terms of the cost outlook for 2H, again, can you just explain in a bit more detail what you're expecting from to drive the cost growth lower, you know, a couple of percentage points lower year over year to get you down to the mid single digit growth guidance, please. And just finally. I wondered if you had received any sort of customer feedback, particularly I'm thinking from some of the higher volume customers around the changes you've made or haven't made in light of policy rate cuts. In particular, the margin lending rates have remained unchanged. Has that prompted any significant incoming from end users or sort of too early to tell there, please? Thank you.

Yeah, I think the marketing costs, I mean, like we said, this is going to build awareness over time and then ultimately convert into customer growth. So it's hard to see that. I mean, if you just push a little bit, one quarter, and it's not that much more than we had before that you get immediate effects. Yeah. But now so far it's been more a little bit tactical marketing. I think what we really want to, what we are after is this new brand concept we were working on now and rolling out that in broader channels starting from this fall. When it comes to the cost level, I mean, it's different streams there. I mean, we have a long list of savings initiatives, both on automation procurement, and we also have a slight upside on the deduction on VAT that we've been working on. So it's no main factor. It's a mix of a number of initiatives, basically, that makes us anyway quite confident that we can meet the guidance X, the increase in marketing cost. And the customer feedback on rates has been no feedback, basically, especially not on mortgage lending rates. We know it's less sensitive, but to remind ourselves, we didn't increase them all the way either with 100% pass-through, and we were not low with them with 100% pass-through either. But it's probably the lending product which is least sensitive to interest rates. Of course, the mortgage customers asked directly, are you going to decrease, which we have. But otherwise, no. We also changed the savings account rates, which the market did. There was no comments there either. So, no, it's been calm.

I appreciate that. Thank you.

Thanks. Thanks, Ian. I think we have another question from Nicholas McBeath from DMB. Yes. Yes, thank you.

So just a clarification, perhaps a quick one on the buybacks. I think you mentioned, Leonard, that you were looking for 1% buybacks over the coming years. So if you could just clarify, please, does this mean that you're referring to 1% of the share count over the coming four quarters? Or how should we interpret that comment, please?

We haven't yet decided. I mean, first of all, we await the reply from SFSA, of course, but we have not set the terms for this one. I would say 1% for the coming nine months and the number of shares is what I say then, yes.

Okay, so for... To give you a ballpark and then, you know, obviously we'll decide when we have the final decision, but that's to give you a sort of an idea of sort of where we're aiming.

And that aim, where does that come from? Is that... I mean, it seems like you could do more.

That's more of a gradual adoption over the years for coming down to the 4.0, 4.5 leverage ratio level that we aim for.

And we've said we don't want to do just a one-year buyback. We want to have a multi-year buyback. I think that's better. But we also need to see then where the leverage ratio evolves. But we don't want to burn everything year one, to be frank. So it's around 1% per year.

Okay, perfect. Thank you.

Thanks, Niklas. Okay, I think we have one question left.

This question comes from Johan Karlström from Syska Dagbladet. Go ahead.

So the question I'll translate is about operating margin, which is 70%. Yes, if that is a reasonable margin.

Yeah, you know, I mean, our price is very low, both for commission and also very competitive on funds. So it's a low margin business, but it's a scale business. So as a digital platform, if you do this correctly, you scale very well when you reach a certain number of customers and a certain number of savings capital on the platform. And we have reached that breaking point. So we are now in a business of very good scalability, even though the margins are low per se.

But what does that high operating margins say about the competition in your industry?

Yeah, but overall, I think it's a very strong competition in the industry, both from big banks, from other platforms like Avanza and other players in the other countries, and also new startups as well. So it's a very highly competitive business. And I think what we want to differentiate is that we want to be a one-stop shop for savings and investments. So you as a private investor should be able to find everything that you need on our platform when it comes to savings and investments. and and also coupled with a really good customer experience and of course overall a very good price also for products but but given your high margins i mean shouldn't you lower your fees and interest rates to benefit your customers yeah but looking at the entry i think we already have very low uh prices and if you look at the interest rate specifically i mean we we We have a 3.3% rate on this savings account in Sweden, which is one of the highest. And we're also one of the absolutely lowest rates on mortgage in the market as well. So I think we are very competitive on prices in Sweden and really on the low end.

How does your model work? Is there room for customers to negotiate, try to negotiate down their fees and interests that they pay?

But normally we have standard rates, especially mortgage, since we're already basically lowest in the market. So we try to be clear on our list rate so the customer knows what they get. So normally we go with the list rates, but try to have low list rates instead of negotiating things like perhaps other banks.

If customers think that you're making too much money and that your operating margin is too high, what should they do?

Yeah, I mean, it's a competitive market. I mean, so if you're not happy with our prices, you can look elsewhere. But like I said, we are absolutely in the low end when it comes to prices, both on commissions and also interest rates and on mortgage and also very good rate on the savings accounts. I think our offer stands very well in the market. Thank you.

Okay, thank you, Johan. I think this is the last question for today. So thanks a lot, everyone, for listening in. If you have any questions, feel free to reach out to me. And of course, all material can be found on our corporate website, nord.ab.com. Okay, have a great summer, everyone, and bye-bye.

Thank you. Bye-bye. Thank you all.