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 Håkenåling and our CFO Leonard Kramp. Lars Håke and Leonard 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 Håken, please go ahead.

Thank you Marcus, we can go to the next slide. Starting with the highlights, so overall a very strong quarter with the 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. 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 high share of cross-border trading and also high share of retail trading and very good also growth and progress in our fund business where NONET 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 SFFA and we're done also with the migration of Sherwood so we sound that the old Sherwood classics, Sherwood is now fully integrated in our NONET web and app and integration has also been very successful. Looking at numbers, also good numbers, customer growth 11%, we're quickly closing to up to 2 million customers across an audit footprint. Savings capital also very strong growth 21%, both from underlying growth and embark but also very strong net savings and here we have our record numbers now 960 billion and we're approaching also 1,000 billion seconds savings capital on the platform. It was very positive also now we see that we have a positive growth in number trades and that's why since we saw that and of course from positive market sentiment momentum. Revenues up 20%, we have a record revenue then 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 -single-divided growth for the year. Also continuous strong operating leverage in the business with profit growing 24% to all-time high 904 million. 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 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 then markets of course sticking out with both very high customer growth and savings capital growth. We go to next, looking a little bit on our revenue stream starting with the trading revenue. We see 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 foreign or cross-border trading outside of Sweden but also that the US markets overall have been strong and attracting a lot of trades. Looking at trades per day in total, in the graph to the right, to the left we see that we 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 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 we actually trades per customer is actually going up a little bit so 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 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 with very strong net flows. We have 229 billion sekna 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. We have now almost half of the customer-based owner funds and we also look at activity on fund buy and sell down to the right where we see that 25% give a take of the customer-based buyer-seller fund each quarter and that's around 500,000 customers. And we also see that the active to passive share is stable around the with an active share around 31-32%. Going to net interest income, we're still on a fairly low level on deposits 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 the 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. That's assuming the volume is so in 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 the 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 12-15%. What's next? Looking at the lending portfolio, then the snapshot here also about the same as last quarter and assuming in the second quarter volumes and the Ibor interest pay pass we saw but with the pass through a mortgage and unsecured close to 100% but more lending 50%. And we see that in the graph to the left there that we grow margin lending very healthily while we're stable lending volume on mortgage 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 also less rate sensitive. We don't expect 100% pass rate, we expect 50% pass rate of interest rate changes going forward. We can move back one also still a low risk on the lending portfolio. Loan to value is around 40% and credit losses is only on the unsecured a little bit higher levels .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 is also a lot of accruals in this. And looking at the Tobasus last part then the snapshot here is 600 million if you see the volumes on the savings account and according to and then the pass through the interest rate changes 100% and sensitivity here is of course the growth in the savings 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 transfer 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 good revenue development and we really benefit from having free revenue streams and 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 the approach on the capital is very similar to the 1000 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 pick up 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 fund we get also on the bottom line and 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 we great operating leverage we grow under that revenue with 30 per year since 2019 while the cost is only been growing five percent per year so it's a very scalable business model so that means that we are in a position of profitable growth with almost the entire top line growth ending up on the bottom line move to the next some product highlights and the big thing is that we like I said in the beginning that we sunset shovel the old app and web are closed and we're fully integrated in our shovel into our Nordnet app and web and the migration has been successful I'm going to comment that slide but also continue very very high release rates on the app with 24 new versions during the quarter with the we're building more and more functionality into the absolute because we 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 the Nordnet app and web we see the posts in the different forums is increasing almost three times and also a big pickup in signups to shovel and we know that shovel is something to differentiate us in the markets no one else has this but we also see that the shovel 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 the capital 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 percent and a CET ratio 20 21 percent so it's far beyond the requirement and we feel very comfortable with that also the leverage level is ratio is 6.5 percent those are unordered results and thereby we do not report those tests if say 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 percent and we have less than 50 percent 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 we're 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 then we will start off with it

so we're a bit on a strategic focus on the what's next as you know wherefore main strategic ambitions starting with having of course very satisfied and happy customers we want to be one stock shop for savings and investments with a really outstanding customer experience and to get there with them building the best platform for savings and investments we also know that we will be able to have happy customers on this we have really passionate about the staff with an upward trend on engagement and satisfaction within the employee base and also that we can attract and retain key employees and 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 risk in a good way and we're all a like brand and last is profitable growth where 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 see in this live 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 as also online market growth but also from strong net savings and we're taking market share in a growing savings market we have of the Nordic population on the platform and six percent give or take of the addressable market which is big is 14 000 billion SEC or 14 trillion SEC and that's up from three percent in 2016 so we're taking market share but we also see that the address market is growing both from underlying market growth but also that we launch new products and the big one that's to come is the leave rent a 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 that's where 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 and part of from that we have in our very modern cloud-based platform we can have a lot of new customers large 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 and looking at the financial targets I mean the actuals this quarter is we say in line with all the financial targets we have so that looks good we can go to next and 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 Librerent 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 this year or beginning of next year we also work with I mean we have a very strong offering for the high-end segment the traders and the PB but 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 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 spring and also continue to strengthen brand position and 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 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 would you only use buybacks to optimize your position with the 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 Leonard?

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 one percent of buybacks for the coming year that is where we're aiming and 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 yeah 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 finished forward rates was it a higher level than you predicted in Q1 or has there been any mix 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

I says deposits came down a bit in the end of the quarter you probably have a bit of a a bit lower than the actual average

okay so yeah due to may being a slightly higher than and then yeah

yeah yield was about flat Q on Q and then our our deposit volumes were a bit higher in Q towards the 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 in Denmark going forward and perhaps a little bit in Finland but we see a big potential in both Norway and Denmark but also more upside in Sweden I think it's around 12-13 percent of assay's capital is coming from financial advisors but I think we can grow this with a better service and a better portal going forward so that's an area we're going to focus more in the future

and the key is this is basically not it's not addressable capital today so it's since we don't do advice this is this is a capital that needs advice and get it through a financial advisor and this is a way to get the capital on the platform that you know there's no other way to do it so it's all upside actually

okay but the the increasing cost for marketing during HQ this year will that be excluded in in this as well or do you think you're gonna have to expand your cost

no no no not for this so this is more that we work with the actual financial planners local wealth managers and they drive in the customers not us

okay thank you

okay great next question come 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 is it do you think it's sustainable for for the coming future

well it's a combination of the the high share of cross-border but definitely also that retail is trading more and I mean it's hard I mean it depends on market sentiment I would say if they if you continue to have a mark 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 they have a trade this is going to be a larger share of the trading some yeah 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 with not a hard landing that that should fuel also the market sentiment

got it thanks then you you mentioned in the report that you enhanced kind of digital transfers of pensions from other providers to 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 with the council automation but still you need a signature from the from the old employer which 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 internal party having a transfer hub so you basically customer can go in and see what pensions you have and you can basically click a button and a one week later it's basically transferred it's almost like number portability in the in the operator world but it also in Denmark it's it's not all the way to Norway but it's fairly automatic in Denmark as well and we work with players there that enables automation in a good way so we see transfers there also becoming more and more automated and then Finland with the endowment wrapper is you mainly transfer cash cash there so it's yeah it doesn't need to be super automatic

Okay, 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 and we see in Sweden for 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 yeah

it's around 2300 accounts and say 800 million sek you would take in that savings and it's building nicely with time the problem is you know is that the transfer side here is small because it's a tax event if you transfer your money from 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 I'm in okay the next question comes from Porthix Plathelius at ABG let's go ahead

thank you can hear me yeah we can good perfect thank you so my first question is regarding fund income so if you look at the the fund capital relative to savings capital in Denmark and Finland it's way below the level compared to Sweden and Norway so the the fund income contribution from these countries are quite low so why is this and do you have any strategy in order to improve this the 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 Denmark has been a little bit lower since there's been a lot of passive funds but also here with our nonet portfolio we can also increase more a little bit on the passive side so we see good potential also in Finland and Denmark on the fund business and of course Livremt 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 in almost like ETFs the investeringsföreningar where you have a lot of the local funds in that kind of instrument which they're used to in Denmark but they also buy normal funds as well in Finland it's been mainly our own funds on the platform before but now we open up also funds from other banks onto the platform but that's at least a 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 superfund the pre-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

for the future. Okay thank you so my next question is regarding what regarding the resolution fund fees what is your expectations for for the fee levels in 2025 and 2026 and 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

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 the KANA 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 now are 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? It's going to be

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

But Q4 is the 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 volumes so as you mentioned Lars-Okje you still seem to expect that the current level of cash in relation to Sengs 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 so would it be possible that there are reasons to expect customers on a sustainable basis will have lower cash allocations in relation to the savings capital 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 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 rapidly 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 seven percent versus the 12 to 15 percent 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 in any way in quarter two 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 people or customers are not buying a lot both funds and equities if you be shake out in the market we want to increase deposits very quickly that's why we also need to be prepared on the depreciation side for that event.

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 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 previously I think your reasoning was more that we should anticipate this ratio to go up as customers start to trade more and you know that risk appetite gets back on but now we're seeing that and it's still not translating into higher cash rather the opposite cash is actually in relation to savings declining so just not sure what should change from here to drive up that of course it's too part of this equation

as well I mean the savings capital has also increased quite a bit the last year so of course affecting say the possible savings capital so I think we of course it's a relation but it's also an absolute terms you need to look there 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 in the percentage but yeah let's see let's see how that turns out yeah but I still

think we're on a fairly low level if I put it that way but remains to be seen if in the coming years if it 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 you know to invest in other parts of the business so that we should still expect maybe the kind of you know five percent 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 and we will not take that out of the cost basis but it's also I mean we change the business model to earn money in different ways on that liquidity and that is in more efficient ways so that makes also that we can invest that in other areas

so okay and then final question on net inflows in particular in Sweden where you're still lagging your other regions and then also lagging advanced in Sweden and you previously said that the low inflows have been partly due to some withdrawals from 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 for most segments but we have a little bit 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 that 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 have been 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

okay perfect that's all my questions thank you thanks

thank you

Nicholas

next question comes from Michael McNaughton from UBS please go ahead

Hi good morning can you hear me? Yeah. Okay good morning. Great yeah just first question is on the net brokerage income per trade so that was as you mentioned is up overall and but I think it was down about eight percent in Sweden even with cross borders trading continuing to increase as a percentage of total trades and any comment on the trend is there is that just based on the customer basis that was trading or how would you see? Yeah

but it's more the 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 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 trades in Sweden it's a bit more skewed toward heavy trader versus retail which is not the case in the other countries.

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

Yeah I think the historical mix what we have the main portion of the traders in Sweden and if they wish they're done of course they ought to trade the retail but overall I think retail in Sweden 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 expenditure so you've done about nine million in the first half. I think you mentioned in Q1 that majority of that was focused towards Sweden. Any initial impacts of that spending or is it still too soon? I think it's too early

and still mainly tactical marketing on product marketing and digital channels so we're working on the broader brand concept that we're going to roll out in broader channels during the fall but it's too early to tell so 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 the full from next year is going to be full on.

Okay great that's all for me thank you very much.

Thank you Michael. Next question comes from Alex 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.

I 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 a new currency accounts for certain customers. 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 it'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 then the traders and the high-end private bank in the use currency accounts and if they want to trade on wrapper they've done that elsewhere with currency account not with us so it's a likely volume we hopefully can attract back to us if we introduce a currency account on the wrappers.

Then I just looked at it's about a third or 30 percent 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 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 account types we can actually boost the brokerage business and get business that that competitors have today and it was probably with these more niche type players.

Gotcha that's very useful Kala 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 is sort of significantly north of four percent 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 develop over coming courses.

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.

Gotcha thank you very much.

Thank you Alex the next question comes from Eriko Bozzone from JP Morgan please go ahead. Eriko looks like you're unmuted. I thought you're unmuted but we can't hear so maybe it's your microphone. Okay we'll try and go again later let's go to Nicolas from Exxon please go ahead.

Can you hear me?

Yes

we can. Great thank you very much. Three questions for me but the first one is a question from 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 you're inting that it's accretive 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 norm net index fund rather than a third party?

Yeah I mean the reason for having high margin those funds is that we have a lower cost on our sides 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 then we get if you buy a similar norm net fund even if as a customer pay the same price but we also try to be creative on 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 globals or we have one global fund we leverage we also can charge more we have our funds and funds which are very popular our 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 traders in terms of enhancing the offering what initiatives more concretely are we talking about sorry and as well I was wondering about how does the revenue margin for these segments of customer compare to the more retail customers 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 what we're looking at them and the product wise I mean what we mentioned is currency 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 we walk and things like that and some other exciting features also that we've been currently thinking of so it's a palette of new functions but that said we already have a strong high offering for and at least a trader segment when it comes to revenue margin 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 we saw during the quarter you announced partnership with a with eqt to distribute their nexus from yeah their retail product their 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 some sort of a distribution fee

yeah so it's a distribution fee on on nexus but I think nexus is well served towards the non-advised space that we have is a fairly simple product it works like a fund but not that many extra fees in that fund of 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 so I think it's a product that suits the 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 of course evaluating but I think eqt has found a really good packaging of that product with the fund of the good funds but also the price 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 thank you okay we're gonna give Enrico another try he's calling on the phone so I'll mute you try now Enrico

Hi, yes we can hear you great thanks sorry

I think you need to shut off your laptop no you know

what channel on my end so one 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 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 these segments a bit more and related to that there seems to be quite a lot of interest at the moment in the space and so on 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 to ramp up and boost a bit your management capabilities thank you

yeah I think with the financial advisor local wealth managers I 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 it was important now is basically we have a lot of on tap potentially 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 over time for sure to increase more than even more but I think now is 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 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 doesn't the 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 thanks for taking my questions just a few short follow-ups from my side please and just first of 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 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 to drive the cost growth lower you know sort of a couple of percentage points lower year over year to get you down to the -single-digit growth guidance please and just finally I wondered if you had any 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 you know margin lending rates have remained unchanged has that prompted any you know significant incoming from end users or also 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 it 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 than we had before that you get immediate effect so 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 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 savings initiatives both on automation procurement and we also have a slight upside on the deduction on on VAT that we've been working on so it is no main factor it's a mix of a number of initiatives basically that makes us anyway quite confident that we are going to meet the guidance x the increase in marketing cost and the customer feedback on rates is being no feedback basically and especially not on modern lending rates we know is less sensitive but to remind ourselves we didn't increase them all the way either with 100 percent pass-through and we will not lower them with 100 percent pass-through either so but it but it is a product probably a lending product which is least sensitive to interest rates of course the mortgage customers are directly are you going to decrease which we have but otherwise no no no we also changed the savings account rates which the market did was no comments there either so no it's been calm

appreciate that thank you

thanks thanks ian i think we have another question from nicholas macbeth from dnb the because do you have another question yes

thank you so just a clarification perhaps a quick one on the buybacks i think you mentioned that you were looking for one percent buybacks over the coming year so if you could just clarify please does that this mean that you you're referring to one percent 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 we waited the reply from ssa of course but we have not set the terms for this one i would say one percent of of for the coming nine months about that is and the number of shares is is what i say then yes

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

that aim where does that come from is that i mean i it seems like it's more gradual

adoption to to over the years for coming down to the 4.0 4.5 leverage ratio level that way we aim for and

we 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 so but we also need to see them if that where the leverage ratio evolves but we don't want to burn everything year one to be frank so it's around one percent per year

okay perfect thank you

thanks niglas okay i think we have one question left this question comes from joan from go ahead so the question i'll translate is about our operating margin which is 70 yes if that is a reasonable margin

yeah you know i mean our prices 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 savings capital on the platform and we have reached that breaking point so we are in a in a business of very good scalability even though that the margins are low per cent

but what does what what does that high operating margin 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 us private investors should be able to find everything that you need on our platform when it comes to savings and investments 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 prices and if you look at the interest rate specifically i mean we we have a 3.3 percent rate on this savings account in sweden which is one of the highest and we also one of the more 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 on the list rate and so the customer know what they get so normally we go with the list rates by trying to have low list rates instead of negotiating things like perhaps other banks

if customers think that you're making too much money that your operating margin is too high what should i do

yeah but i mean this is 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 the commissions and and also interest rates and very on mortgage and also very good rate on on the savings accounts i think our offer stands very well in the market thank

you okay thank you joan 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 to reach out to me and of course all material can be found on our corporate website norad.com okay have a great summer everyone and bye-bye

thank you bye-bye you all