Skandinaviska Enskilda Banken AB (publ)

Good day and thank you for standing by. Welcome to the SCD Financial Results Q3 2025 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Johan Torgeby, CEO. Please go ahead.

Good morning, and I'd like to extend a warm welcome to all of you today for SEB's Q3 financial results. Going to our first page with highlights, we today post a solid financial result. in a quarter which is seasonally slower but we've also experienced less volatile and stable financial markets. Noteworthy is that investment banking activity has held up and showed resilience and we saw an increase in capital markets activity to the later half of the quarter. Customer satisfaction and employee engagement continue to show relative strength and it has been decided to continue the 2.5 billion share buyback program per quarter by the board as we announced today. Flipping to the next page we have some recent events and the first one is the infrastructure of payments which is now being disrupted to some degree by new technology coming from blockchain. We have together with eight other European banks launched a consortium with an initiative to see if we can launch a euro denominated stable coin on the chain targeting the first half of 2027. Also, Airplus has now been used as the new brand for our previous euro card. And this is an example of the a marketing campaign particularly towards the Scandinavian countries where EuroCard has been a long prevailing brand within the corporate card segment. It has now been rebranded under the headline green is the new gold and if you haven't already you will soon get an Air Plus instead of your EuroCard in the color scheme represented here on the slide. Turning to page 4 we have over the last couple of quarters updated you on our progress within AI. We have shown you the internal projects that we're running, about 130, which is funneling in in different categories of areas we think we can improve, but also gone through the recent investment that we've done together with a consortium to get compute capabilities available to us. Today, I'd like to introduce the third corner of this triangle, which is actually SEB, not only working with offering better products, integrating it in the products, not only running the bank using AI, but actually enabling banking in the AI community, which is the core business we do. We speak a lot about different business units in the bank, but this is probably one of the lesser known ones. In 2022, we created a business unit called SEB Growth, where we now have an offering tailored for fast growing companies with high innovative content and companies that plan to raise capital and or lift or sell themselves in the future. This is an attempt to combine corporate banking with investment banking, with private banking for those entrepreneurs and these fairly young companies as they begin their journey. We've also included a few of the logos which we have recently supported, such as Lovable, Sana, Modal and Legora. All these are well-known, fast-growing companies in the AI space in Scandinavia. The next page, we can then look at the development of our credit and lending portfolio. As all of you are aware, we've had a little bit of a sideline movement in recent years. However, both last quarter and this quarter, we have some growth, albeit modest. Lending year on year for the corporate book is up 4% FX adjusted, and the total lending portfolio is up 3% FX adjusted, with households and Swedish mortgages just shy with half of that growth in the third quarter this year. Looking on the next page on the JAWS slide we can see that the trajectory of costs is tailing off and we are roughly back to trend that we had prior to the elevated profits generated by the interest increase with a CAGR here represented from the time 2016 to 2021. And with that, I'd like to end this part and hand over to the CFO, Kristoffer Malmer.

Thank you, Johan. I would now like to turn to financials on the next slide. Operating income for the third quarter declined from the previous quarter, reflecting typical seasonal patterns, notably within net fee and commission income, where the second quarter performance was particularly strong. Net financial income was impacted by market valuations of our strategic holdings during the quarter, which had a positive contribution in the second quarter. This valuation effect accounts to around 500 million of the delta in net financial income between the quarters. Net interest income increased slightly despite continuously downward trending interest rates, explained in part by the higher day count in the quarter, some positive effects from FX, slightly lower deposit insurance guarantee fee and a lower short-term funding cost. Operating expenses declined slightly from the previous quarter, also following the usual seasonality. As the Swedish krona has continued to strengthen in the quarter, we are providing an updated FX-adjusted cost target for the full year of 32.6 billion, compared to the original cost target of 33 billion. We maintain our range of plus minus 300 million around the cost target level which is primarily related to the ongoing integration of AIR+. Here we see some potential scope for possibly accelerating that implementation program a little bit further. As mentioned at the start of this year and reiterated also here in the second quarter, we're now in a phase of consolidating recent years of investment, which is resulting in a lower cost growth. We also maintain our external hiring pools for non-business critical positions to facilitate this consolidation and to make room for continued investments in selected areas, notably within technology and AI. The full year cost target does imply that there are some effects to expect in the final quarter of the year. Net expected credit losses of around 200 million or three basis points reflect an underlying stable asset quality as also reflected in the continuous decline of stage three assets. We added around 100 million to the portfolio overlays in the quarter and we also had some sizable reversals. Imposed levies came down in the quarter as expected, reflecting the development of our Baltic levies and our full year guidance for imposed levies now, also including Riksbank's introduction of the interest-free deposit, now amounts to 3.6 billion. So that's up from the 3.5 billion communicated in the second quarter. Tax rate of 21% in line with guidance, net profit for the quarter of 7.7 billion and the return on equity at 14%. And we ended the quarter with the CET1 ratio of 18.2%. On the next slide, we turn to the development of the net interest income. On a divisional basis, the NII in corporate and investment banking declined by around 200 million. primarily reflecting a lower net interest income within investor services which was elevated during the second quarter and that was a dividend season as we mentioned at the time. NII also within our markets business was a little bit lower as customer activity came down for the season. From a volume perspective lending within CIB declined in the quarter as some of the event driven financing volumes generated earlier in the year rolled off and that together with FX effects explained the majority of the move in the loan book compared to the second quarter. Now year on year lending to corporates within CIB increased by 3% on an FX adjusted basis. Within business and retail banking, NII declined by around 100 million compared to the previous quarter and that's primarily reflecting the impact from lower interest rates on deposit margins. Lending volumes were largely unchanged in the quarter Following two strong quarters of market share gains in the Swedish mortgage market, Q3 volumes grew a little bit less than the market. Year-to-date, our net sales of mortgages represent a market share of around 13%, which is in line with our share of the stock. Competition in the market remains firm and mortgage margins moved largely sideways in the quarter, remaining at historically low levels. Within our Baltic banks, net interest income was largely unchanged as the impact from lower interest rates was partly offset by higher lending and deposit volumes across both private and corporate customers. Loan growth in the Baltics remained robust with mortgage growth around 9% and corporate loan growth at around 8% compared to last year. Within Treasury, NII was positively impacted by the yield curve as well as favorable funding conditions within short-term funding. Looking forward, we continue to expect our net interest income to bottom out some three to six months after the latest or the last rate cut. Bear in mind that that is based on how our balance sheet looks today, so volume growth and any proactive repricing could impact those dynamics. We turn to the next slide and we look at the fee and commission income in the quarter. Total fees and commissions declined by around 400 million compared to the previous quarter. And if we look on a divisional basis, we effectively see three developments behind this. Firstly, within corporate and investment banking, fees are seasonally softer in Q3 across most capital markets related businesses, including issuance of securities and advisory, which was also particularly strong in the second quarter. This is also true for lending fees and combined these effects accounted for around 400 million in CIB. Nonetheless, CIB generated the highest net commission income on record for a third quarter. The second factor related to card and payment fees within business and retail banking and again seasonal patterns impacting activity levels primarily within corporate cards and Airplus. And this affects around 100 million compared to the previous quarter. And thirdly, going in the other direction, we saw about 100 million increase in fees and commissions in wealth and asset management as a result of higher assets under management and continued business momentum. Net new money across the group amounted to 8 billion in the quarter. And on fees and commissions, when we close the second quarter, we refer to a more constructive fee environment. While Q3 will see or should see some usual seasonal patterns which we've seen we said that if the market backdrop doesn't change dramatically Q4 should see a continuation of this more constructive trend and this comment we think remains valid which is encouraging going into the last quarter of the year. If we turn to the next slide, we set out the development of net financial income. This quarter, NFI from the divisions was largely unchanged from the previous quarter at 1.9 billion. The decline in the headline NFI versus the previous quarter is, as I mentioned, largely explained by valuation effects related to our strategic holdings, and that's primarily in Euroclear, which also paid a dividend during the second quarter affecting that comparability. These effects were partly offset by XVA going the other way, and we continue to look at the long-term average of around 2.5 billion per quarter. Turning to the next slide, we look at the development of the CET1 ratio in the quarter. We closed the second quarter with a management buffer at 290 basis points. During the quarter from left to right as usual we received an updated SREP update from our supervisor and as you will have seen in our separate disclosure on that topic this resulted in a lower pillar 2 requirement related to lower capital impact from IRRBB interest rate risk in the banking book. Then we had a 41 basis points reflecting the net profit in the quarter after deducting our dividend accrual, while lower risk REA contributes about 14 basis points reflecting positive risk migration in the book during the quarter. Under REA Other, you will find a combination of other developments on the balance sheet, so the FX effect, the overall REA size, market risk REA and also a positive impact from us applying the SME factor to some of our CRE exposures. These factors in total added 22 basis points and largely evenly distributed between them. Finally, the decline of 18 basis points reflects the facing in of the REA increase in the Baltic banks that we announced in the second quarter and that is related to the ongoing work with our Baltic IRB models. This takes the CET1 buffer to 360 basis points at the end of September. And we also highlight that the remaining impact from the Baltic RIA increase is around 70 basis points. So in line with the communication at the time of the second quarter. And we expect to face this in over the coming three quarters. So that means that our buffers in effect on a pro forma basis stands at 290 basis points with the Baltic RIA fully faced in. other effects to bear in mind as we go into the end of the year is the impact from operational risk area in the fourth quarter when we do review that level on the next slide we summarize our capital liquidity position at the end of the third quarter our capital as well as our liquidity measures have all strengthened during the quarter reflected in rising LCR from 130 to 136 percent and a higher NSFR from 112 to 116 and the CET ratio is as we just discussed on the previous slide. Finally, I would like to conclude with our financial targets, which remain unchanged, including a 50% payout ratio, a management capital buffer target of 100 to 300 basis points above the regulatory minimum, and a return on equity competitive with peers with a long-term aspiration of 15%. Return on equity year-to-date stands at 14.1%. So with that, I hand the word back to you, Johan.