Skandinaviska Enskilda Banken AB (publ)

Good morning everyone and welcome to SEB's financial results presentation for the full year of 2025 and Q4. I'll take this opportunity before we go into the material just to mention a few highlights of 2025 that we are particularly proud about. First, it is the very strong position in customer satisfaction surveys not at least within financial institutions and corporate and investment banking. Even though we're not at the very top of private banking, we still made a meaningful improvement. Secondly, the employee engagement hit a new all-time high compared to our peers. We are now solidly placed in the top decile of happy employees within the financial industry. Also very constructive is to see our market position within CIB when it comes to league tables that we record a top level, particularly now as we've seen an activity pick up within this area. A meaningful symbolic event is that we've also established and opened our Amsterdam office. And lastly, after more than 10 years in the making, We achieved an upgrade by S&P to a weak AA rating, and we now join a very small group of banks in the world that has this formidable position when it comes to credit quality. Now flicking to page two and the highlights for Q4. First, we saw a pickup in fees and commission across all divisions, offsetting the continuation of net interest income headwinds. As I mentioned, we got an upgrade by S&P. We are meeting our annual cost target and AirPlus is in line with plan. We have set the new cost target for 2026 to 33.4 billion plus minus 250 million, particularly to have some room for variable compensation and other unforeseen events. The board has proposed an ordinary dividend for 2025 of 8.50 per share, plus a special dividend of 2.50 per share. In addition to this, the board has proposed a 1.25 billion share buyback program for the first quarter of 2026. Clicking to page three, we have now received the full suite of the major customer satisfaction service and We can conclude that we have maintained our position on large corporates as number one in the Institutional banking segment. We were number one in Sweden Finland Norway number three in Denmark and number two just like last year in total and we achieved a first position in syndicated loans private banking improved from position six to four and and we also got an award for the best Swedish equity fund of the year. On the next page we go through the loan and exposure development and we continue to see a predominantly sideline movement during the fourth quarter with some signs of improvement. Corporate lending on an FX adjusted basis increased 3% year on year and the total lending for the group increased by two percent compared to last year flicking to page five just a very short update that we can now conclude 25 that we have adjusted or excluding all restructuring costs a positive contribution from air plus and therefore this is eps accretive we are also now very well placed to grow our fee income from european payments industry given our exposure that we get with airplus we also on track to be eps accretive including implementation cost in 2026. flicking to page 6 our business plan update for 2026 we divided in three simple areas wealth and asset management, corporates and financial institutions and retail banking. And here is a selection of particular focus areas for the next year. In WAM we want to improve our digital capabilities and we have formed investment and trading solutions unit to faster develop these capabilities. We want to have more international distribution capabilities and improve our position within the pension market. For corporate and financial institution we will continue to maintain a position which is very strong in the Nordics and continue to selectively carefully grow outside the Nordics. We will have targeted efforts around the private capital markets and As I previously mentioned, we expect Airplus to contribute a bit more meaningfully during the year for the corporate payment area. In retail banking, it's focused on digital transformation, use data to increase sales, and also go back to basics and have a simplified way of working. Flicking to page seven, we just double click on technology where we divide it into two areas. One is to work with what we have. We call that modernization of the tech stack. We have several core infrastructure transforming projects this year and together with efficiency initiatives we also need to increase speed of development and technological capabilities build out. We also want to embrace new technologies and particularly they're going to be around AI tools both for the people that works in the bank, but also to try to get AI capabilities in front of our customers. And two particular projects we will focus on in the years to come. One is Spherical AI, which is the NVIDIA consortium. The other one is Kivalis, which is the Stablecoin consortium with other European banks. Next page is just to say that whatever we design now in this business plan and for the future, we aim to come back to a medium to long-term positive jaws. The last two years after the extreme uplift of profits coming from the sharp rate increases, we now see that we will have a different future. And whatever we do in the planning period right now, it is to at least have cost control in order to achieve positive jewels, but we do not dictate income, albeit we see some tentative signs of improvement in the year to come. With that, I'd like to hand over to Kristoffer.

Thank you, Johan. I'd now like to turn to the financials on the next slide. Before we look closer at the results for the fourth quarter, I'd like to comment briefly on the full year performance 2025. I think the year is a good example of how our diversified revenue mix provides stability over a business cycle. Lower rates continue to weigh on net interest income, and net fee and commission income increased both organically and as a result of the consolidation of Air+. The impact from the stronger Krona on our operating income has been meaningful during the year and the stronger Krona has had an impact on our operating income of about 1 billion affecting negatively both net interest income and fees and commissions. As a result of the stronger Krona, the 2025 cost target has also been adjusted downwards by around 500 million during the course of the year. and the final FX adjusted cost target came to 32.5 billion plus minus 300 million. The reported operating expenses for the full year of 32.6 billion is hands in line with our FX adjusted cost targets and this includes the impact from the accelerated implementation program of AIR+, which we mentioned as a potential action already in the previous quarter. This acceleration has added around 100 million compared to our initial implementation cost guidance and took the total charges to around 800 million for the full year. We'll come back to the annual cost target for 26 in a moment. The return on equity for the full year adjusting for those items affecting comparability came to 14% with a cost income ratio of 42%. Turning to the next slide and the results for the fourth quarter. The operating income of 18.9 billion increased somewhat from the previous quarter, despite lower interest rates continuing to weigh on our net interest income as fees and commissions increased by 8% or around 500 million quarter on quarter. Compared to the same quarter of last year, the increase in fees and commission was 5%. and 8% in constant FX. Net financial income in the quarter of 2 billion is somewhat below our historical quarterly average. Operating expenses for the fourth quarter came in at 8.5 billion taking the full year cost base to 32.6 inside our FX adjusted cost target as I just mentioned. We can see that our efforts to continue consolidating the cost base as stated earlier in the year are having effects. The total number of FTEs declined during 2025 for the first time since 2018 and we will maintain the external hiring pause to continue challenge our need for external replacement hiring across the bank with continued exceptions for business critical roles. So as such, our strategy to make room for investments in prioritized areas through consolidating prior investments remains intact. This means that even though we expect to see higher FTEs in a number of focus areas in 2026, the total FTEs in the group should remain stable. net expected credit losses of just under 400 million corresponds to five basis points and overall asset quality remains stable and the development in the quarter follows the pattern from earlier in the year with a handful of counterparties requiring provisions in specific portfolios imposed levies at 812 million just under our full year guidance of around 3.5 billion for the year And for 2026, we expect levies to decline slightly to around 3.4 billion. So under items affecting comparability that I mentioned previously, we report a negative 400 million attributable to the outcome of our annual impairment test of intangible assets. More specifically, this write-down relates to an acquisition within the Norwegian consumer card business back in 2002. And it is continued pressure on returns that has triggered a revaluation of the asset. The goodwill is written off in full. We do not see any other intangible assets at the risk of impairment at this point. This particular asset was highlighted in our annual disclosure last year as an asset at the risk of impairment. The tax rate for the fourth quarter at 17.2%. This is, as you notice, below our normal tax rate of around 21%. And it reflects a positive tax effect that occurred in connection with the full year closing. And going forward, we expect that the tax rate should revert to around 21%. ROE for the quarter in isolation at 13.6%, excluding those items affecting comparability, i.e. the goodwill write-down. On the next slide, we take a closer look at the development of our net interest income for the quarter. Average cyber rates declined by around 20 basis points over the period, which impacted our rate sensitive deposits, particularly in corporate investment banking and in business and retail banking. And as Johan mentioned, FX adjusted lending volumes in these two divisions were moving largely sideways. in the quarter the results of the lower lower cyber impacted those divisions by between 150 to 200 million respectively this delta also reflects the impact from fx headwinds within cib the net interest income in our markets business performed well and benefited from favorable market conditions partly mitigating the negative effects from the lower rates and effects In the Baltics, average euro rates remained largely unchanged during the quarter, and net interest income in local currency increased slightly from Q3. So this represents the first quarter-on-quarter increase in net interest income in the Baltic division since 2023. Now, due to the stronger krona versus the euro, the NII for the quarter in krona was largely flat. The NII in the Baltics was supported by continued strong volume growth, offsetting some of the lagging headwinds on deposit margins that has been triggered by rate cuts earlier in the year. And the volume growth innovation is broad-based across all three countries and spans both retail, mortgages, and corporates. Mortgage sales in particular continue to be strong, up 43% from the same quarter of last year in local FX. The contribution from our treasure operations, including some of the benefits that we enjoyed from short-term funding during Q3, remained largely unchanged and supported NII in Q4 as well. Looking forward, we continue to expect the impact from lower rates on our NII to bottom out some three to six months after the last rate cut, which then, based on current rate expectations, should occur sometime in the first half of this year. also bear in mind that the first quarter have some technical headwinds for example a two day lower day count and we also expect a slight increase in our cost of the deposit insurance guarantee for seasonality and of course the fx effects will continue to monitor Turning to the next slide and fee and commission income, the fourth quarter saw an increase of just over 500 million compared to Q3, and this increase is broad-based with all operating divisions reporting a positive development. Within CIB, the increase was notably driven by corporate finance, equities, and debt capital markets. Within BRB, the business and retail banking, card fees in particular represented the strongest increase quarter on quarter partly seasonality but also a pickup both in the SEB quotes traditional markets as well as in the markets of Airplus which of course has an emphasis on continental Europe and Germany. In wealth and asset management there was higher asset values and also performance fees which drove the increase quarter on quarter. Net new money for the quarter came in at six billion with a largely even distribution from wealth management, retail, and the Baltic divisions. Fee and commission income in the Baltics continue to develop positively and remains on a positive trajectory supported by a number of different savings initiatives. Turning to the next slide, we'll look at the net financial income. The income came at 2 billion for the quarter, which is, as I mentioned, below our 16-quarter average rate. but still inside the standard deviation that we have seen movements around in the past. During the final quarter, we saw good performance from both FX and commodities, and fixed income was more in line with its seasonal pattern of a stronger first half and a lower second half. We also had some lower market volatility impacting income in NFI. On the next slide, before we go on to the cost target for 26, just coming back to some of the AI developments and priorities that Johan mentioned briefly in the business plan presentation. In the last quarter, we introduced the SEB AI triangle that we use more as a framework as to how we engage with AI in a couple of different dimensions. We're talking about billing AI into our offering, Secondly, to build it into our business and running our operations more effectively. And thirdly, importantly, also supporting the AI community and growing together with AI related companies in our part of the world. During 25, we did scale up some of our early use cases from pilots to production tools. And at the same time, we continue to roll out general purpose AI tools. So GitHub for developers and Microsoft 365 Copilot for non-developers. to help our employees integrate AI into their everyday workflows. As we now head into 26, we'll put emphasis on a few areas where then building on the experience that we had from last year, we look to implement at larger scale and get AI powered automation as a result. It's early days, but it is looking encouraging and the areas in particular are the process heavy parts of our value chain. and on the other hand, customer-facing capabilities and ideally looking to apply AI where we get a combination of productivity gains and enhanced customer experience. Some examples include some of the customer service processes, onboarding, KYC, and also parts of the mortgage process. And then finally, we'll continue to support the AI community through offering both scale-up products and services like venture debt in CIB everyday banking, and also supporting both founders and entrepreneurs in the WAM division. On the next slide, we'll look through the cost targets for 2026. And when we arrive at the number for the year, we take a couple of factors into consideration. First, we expect inflation to add around a billion to the cost base. We expect part of this increase to be offset by efficiency gains around 700 million. This is a combination of the effects from our continued external hiring pause, efficiency gains that we've achieved through increased degree of automation, as well as improved ways of working through closer integration between operating divisions, technology and business support. Now turning to investments, we make here a distinction between the ongoing investments in the business. They include the continuous work on our technology roadmaps, the regular system upgrades, selected hiring, incremental product development, etc. And this is expected to amount to about 400 million. So if we add these factors together, the increase from inflation, efficiency gains, and those investments will come to an underlying cost increase of around 2%. And this is then also excluding the positive effects we're going to get from lower implementation charges at Air+. Now, in addition to those ongoing operations, we plan to take a couple of dedicated investments in AI, regulatory and technological resilience, and also building out our digital asset capabilities. So this is expected to around 500 million for the year. And some of these investments we've already communicated. And a couple of them include, first of all, initiative to secure access to sovereign compute, as Johan also mentioned, the spherical initiative that we're expecting to ramp up during the year. Secondly, we're also investing in AI specific tools for specific initiatives that I mentioned previously, where we're looking to scale up our activities. Thirdly, also ramping up our IRB roadmap initiative and here to obtain regulatory approval from relevant authorities as swiftly as possible addressing the capital add-ons that we currently carry. Fourthly, we're also looking to invest in our operational contingency, considering the geopolitical uncertainty and the backdrop we're operating in. And finally, also the build-out of the digital asset capabilities, and notably our initiative that Johan also alluded to, to launch a Euro-denominated stablecoin in a European banking consortium. So these are the prioritized investments which we have wanted to make room for through our ongoing cost consolidation and the restrictive external hiring. And this, we expect, will allow us to enhance operational efficiency over time. So in total, it takes the full year cost target to 33.4 plus minus 250 million for the reasons Johan mentioned. And we expect some of these additional investments to have a peak year in 2026. So the cost trajectory for the coming three-year period should taper out. On the next slide, we turn to the development of our capital position. We closed the third quarter at the end of September with a CE21 buffer above the regulatory minimum of 360 basis points on a reported level. We also showed that we are at 290 basis points on a pro forma level taking into account the announced, but not yet fully phased in, impact from our Baltic IRB models. During the quarter, we then added around 20 basis points from our retained earnings, and FX contributed positively by roughly the same amount. While going the other way, the continued phasing in the Baltics had a negative impact of around 20 as well, and other REA movements had a total impact of negative 15 basis points. Now that includes the operational risk area that we flagged in Q3, which actually in the end came in at seven basis points, so lower than our initial estimate. So to finish the year back at our target capital range of 100 to 300, we deduct the approved buyback program of 1.25 billion, which corresponds to 13 basis points. and then the special dividend of 250 which is another 50 basis points. So that takes us to the 300 basis points above the minimum and implying a buffer of 250 basis points on a pro forma level adjusting for the remaining phase-in in the Baltics. On the next slide we are looking at our financial targets and this is a familiar picture and the targets remain unchanged. So from left to right, the payout ratio with an ordinary dividend of 850, the ratio comes out at around 54%. So in line with our target of around 50%. Secondly, the 100 to 300 basis point management buffer. We remain committed to operate within this range. And as we've said, to take action if the buffer exceeds 300 basis points and Therefore, just like this year, we use a combination of continued buybacks and a special dividend to ensure that we arrive at the management buffer in line with our target. From an ROE perspective, our ROE came to 14% underlying, which is below our 15% ROE target, and we are committed to enhancing our returns going forward, including some of the actions that Johan presented as part of the upcoming business plan. In the context of our ROE development, it is worth noting that the surplus capital in our defined benefits pension plan has continued to expand. And at the end of the year, that surplus was substantial and there is some 24 billion deducted from our CET1 capital, but included in shareholders funds. So we have for 2025 increased the upstreaming of capital from the pension fund to the bank. to around 2 billion, and this compares to between 1 and 1.5 billion over the last couple of years. This additional contribution will become visible in our capital base gradually during 2026, and we'll be adding around 10 basis points. Nonetheless, the impact on our ROE from the pension fund surplus, which is, as I mentioned, part of our share as equity, is around 1.2 percentage points on our stated ROE. So bearing in mind this impact was effectively negligible up until 2021 when the surplus was considerably smaller. So therefore for comparability of the development of our underlying profitability we quantify this effect. So with that, we're concluding our prepared remarks and we are happy to take your questions and I'll hand over to the operator.

Thank you.

As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To answer your question, please press star 1 1 again.

We will now take The first question. From the line of Namita Samthani from Barclays, please go ahead.

Good morning, and thank you for taking my questions. The first one, what percentage of the workforce do you think AI will take the place of? And secondly, just on the risk-weighted assets, when you're writing new business particularly on the corporate side. What type of risk densities are these at? Are they lower than the average ratio rating of the corporate lending book? Thank you.

Good morning, Namita. Thanks for your questions. On the percentage of the workforce impacted by AI, I think we come back to our previous comments on this topic. I think it's a bit early to conclude. As we mentioned, we have during last year rolled out a number of AI initiatives both for developers and non-developers with very encouraging developments. We have as part of our hiring pools, external hiring pools, also made sure that in the conversations we're having about replacing in the event of an exit, that we have the conversation around the possibility to introduce more efficiency gains or productivity enhancements through the use of technology, including AI. But to put a number on this at this point, we do think it's a bit early, but the outlook remains encouraging for broader productivity gains. And then, of course, Namita, we also have to take the question whether we want to see more productivity from our existing resources, or if there are areas where we do think that we could do the same amount of work with less. On your second question, it will very much depend on the type of business that we are adding. So the risk weight on our corporate business will then depend on the type of counterpart, the risk class, et cetera, that dictates the risk weighting. On our mortgages, as you know, that's another very transparent risk weight, which of course is based on our risk weight scores. And across the book, it's the risk weight of the business that we're growing into that decides. As we've highlighted in this particular quarter, it has been a relatively stable development, particularly within CIB. So you'll see that there is no meaningful impact from any RIA density deviating from the average of the book.

Thank you very much.

Thank you.

Thank you. We will now take the next question from the line of Magnus Andersson from AVGSC. Please go ahead.

Yes, good morning. I just had a question on volumes as corporate lending remains rather sluggish quarter on quarter and it looks I know you don't want to talk about the statistics, but if the numbers tell us anything, it looks like you've been losing market share in Sweden for a while as well. So just if you can tell us anything about what you see here, if there are any signs of a potential pickup in bread and butter corporate lending during 26 or how you expect to grow back into your previous market shares. Secondly, on volumes, just in the only area that actually seems to be growing, which is the Baltics, where you grow by 10-11% in Latvia, Lithuania, year-on-year local currencies, 8% in Estonia. How do you see the sustainability of the re-leveraging process that seems to be ongoing? Thanks.

Thank you, Magnus. So, if I start with the first question on the CIB, I think you're right to say that it is hard looking at the numbers from SCB, I guess is what you're referring to, and we are trying to find better data to follow this more numerically to be able to conclude exactly on your question, what is our actual market share and how is it developing? Now, since we have seen in the SCB data the same numbers, trend that you've seen. We're also, of course, in discussions with CIB whether there are any such developments. And I think a couple of things to highlight. We have a sense that we're doing the business that we like to do. So we don't get the feeling that there's a lot of business going around that we would have liked to do that we're not in. So I think that's from our perspective of our activity level. And I think the second thing could be worth highlighting is that we have had, towards the back end of the year, very high activity levels. It has now, as you see in the numbers, translated into a pickup in fees and commissions in the advisory and the markets-related business, but not yet in the balance sheet-related business. So I think our best conclusion is that we are in the areas where we want to be. We are active in the dialogues where we want to be. And as the volumes start to pick up, this should materialize in increases in our balance as well. But we're monitoring this closely and would love to get better detailed numbers on exact the market share rather than relying on the SCB data. Your second question on the Baltics, you're right. That's the standout performer in terms of volume growth. And it has been a stable pickup and, of course, partly reflecting the strong macroeconomic backdrop. And I think our sense right now is that there continues to be a constructive outlook for Baltic growth with the broader momentum and the sentiment in all of the three countries. And in areas that you're referring to in terms of leveraging and home ownership, there are indications there from a structural perspective that suggest that there's room to grow.

Okay. Thank you.

Thank you. Thank you. We will now take the next question from the line of Nicolaas Markberg from TMB Carnegie. Please go ahead.

Thank you. Good morning. First a question on the capital distributions here in the quarter. So why the decision to make the extra dividend combined with the slowdown in buybacks? If I annualize now the buyback pace that you're running with your latest buyback program, it's around $5 billion annualized, which is $5 billion less than last year. But if you wouldn't have done the extra dividend, I guess it couldn't have continued at a similar pace. So, yeah, why that decision to shift more to dividends from buybacks in terms of your capital distributions?

Thank you, Nicola. So the main point here is to solve for our 300 basis point management buffer. And with the ordinary, we're at the payout of 54%. So we're sort of in the upper end of our around 50% guidance. And then the blend of the other two. If you look historically, we have had buybacks between 5, 7, and 10 billion annual pays. And we're conscious to maintain ongoing buyback track record. And as you know, we're also one of the banks in Europe that have had the longest suite of consecutive buybacks. So we want to maintain that. At the same time, we want to ensure that we maintain maximum capital flexibility, and in that context, we propose to the board a mix of special dividend, buybacks, and ordinaries. And we've also taken impact, of course, and conscious from the conversation we had around this last year, that there are preferences in some camps for buybacks over dividends, and in some camps, their preference is the other way around. So we're trying to put together a balanced mix of capital distribution. And in this quarter, we wanted to, for this year, want to maintain buybacks, but also put a blend and a mix together to the 300 base.

All right. Then I had a question on your NFI line, which has been now below 2 billion for a couple of quarters, which is closer to the levels we saw prior to the 2022 rate hikes. And any reason to update your guidance of normal NFI? And is the NFI level impacted by interest rate levels or the yield curve? If so, how?

Yeah, so on the NFI, you're right that we have been fluctuating around that $2.5 billion. And this is, as you know, by definition, a difficult line to predict. And looking at some of the structural elements that you refer to, the tightening of credit spreads, the way that rates have moved, of course, there has been for some time a favorable development that has supported the level of NFI. But also bearing in mind that the fourth quarter, particularly in fixed income, is the seasonally weakest quarter of the year. And if you look at fixed income in isolation, it's not that different from where it was in Q4 of last year and in Q4 of the year before. So I think we need to see a little bit how the seasonality plays out as we go into next year to see if there's a reason for us to revisit the level and the range that we are within at the moment.

Okay. Thank you. Cool.

Thank you. Thank you. We will now take the next question from the line of Sophie Petersen from Goldman Sachs. Please go ahead.

Hi, this is Sophie from Goldman Sachs and thanks a lot for taking my question. My first question would be around the Baltic risk models. You note that the impact will be around 50 basis points, but there were some headlines a few weeks ago that the ECB had identified some deficiencies in the Baltics. Are these fully captured by the current models, or do you need to do any additional work on that? And then my second question would be on the share buybacks. So just a follow-up. So is it fair to assume that the share buyback will be 125 billion quarterly run rate throughout 2026? And why didn't you ask for the full year share buyback with Q4, similar to what you did last year? Thank you.

Thank you, Sophie. So for the Baltic development, We maintain our guidance, our expectations of the impact on capital for facing the IRB impact in the Baltics. So no change to that. And we also provide those performance numbers in the slide. On your second question, I'll come back a little bit to what I said to Nicola. This is for us, together with the board, of course, to come up with a mix of getting us down to 300 basis points. And in coming up with that mix, we take into account, of course, the dividend component, the special, and the size of the buyback. And, of course, last year, we were at a point where we were a much more elevated buffer level. I think we were at 460 basis points prior to distribution. And there, you remember, we took a sizable one-off deduction to a full year buyback program. And this year, we are around 360 basis points prior to distribution. And then solving for the 300 together with the board, this is the mix that we suggest and that we came up with. So I think that's the color that we can give you on that.

But basically, it's fair to assume that you will continue with a quartered issue or buyback?

Well, as always, we take a quarter at a time, and it's subject to both board and regulatory approval as we go along.

but yeah you're right it implies a five-year run rate for the full year okay thank you sorry thank you thank you we will now take the next question from the line of martin exted from hondish mountain please go ahead thank you good morning and thanks for taking my questions

So first, I just wanted to ask one on dividends. So you do a reversal back to annual dividends from previous announcements of semi-annual dividends. I'm sorry if I missed part of this answer before I was a bit late onto the call. But you do this as a result of what you call in the report feedback from market participants. Could you just share a little bit more of that feedback with us and what in the end made you reverse this decision? Thank you.

Good morning. Thank you. Yeah, so that's right. What we opened the conversation at this point last year was to look into the possibility of semi-annual dividends. And the market participants, of course, it's a lot to do with listening to our shareholders and having discussions around the process within which this could be done. And one option is, of course, to have a dividend approved at the AGM and then distributed in two installments. But the feedback from our shareholders was that this is effectively just waiting a little bit longer for the dividend to be handed out. So the feedback on that model would also deviate a little bit from what we see in the rest of Europe, where distributions are made from current year's rolling earnings. This, however, in our jurisdiction requires an extra general meeting of shareholders. So it immediately creates a slightly bigger process and a procedure around this in order to get this into place in a shareholder-friendly way, which would then be to do the forward-leaning semi-annual dividends. And this, of course, has been a conversation with primarily investors, and I think the model that we would then have to introduce in Sweden would be less appreciated. Now, we're not entirely ruling this out to, you know, if there is a way that we could put this in place in a friendly way, then, you know, something we could revisit. But for now, the proposal is that we continue with one annual distribution.

Okay, thank you. And then for my second question, just quickly taking a step back and focusing on your return on equity, which was 12.9% in the quarter, i.e. well below a 15% long-term target and below some of your Swedish peers as well. So, I mean, we talked a bit about the costs on this call, right? But recognizing that a lot of the macro factors impacting your revenues are outside of your control. What do you think would need to happen in Sweden macroeconomically for you to close that gap to target 15% and to peers? And when do you see the timing of this? Are you kind of a wish list macroeconomically from you guys?

I can elaborate a bit on that. Thank you. First, let's establish the baseline. So first, we have a significant surplus in our pension fund historically we haven't really been been talking about it because it has not been meaningful but right now it's actually very significant so if you say that the 24 billion of surplus would which is not available to do business but it's included in the return on equity calculation we don't adjust for it it equates to 110 basis points picked up On top of that, it is, of course, the capital that we have on capital add-ons that we have, which is also outside the normal course of business as we are approving the IRB models over time. And that's another almost 200 basis point equivalent or so of a drag. So that's the baseline. So the thing that is comparable with others are, of course, without these two, which is not a comparable thing. number when you want to see what's the underlying profitability. So that equates to quite a lot in totality. Now, what is required for top-line, because you're so right, you don't dictate income. I would love to, but we dictate cost, and there we have a more modest trajectory going forward, as you can see from today's announcement, and we started already last year. And of course, we also now have a little bit of pause on increasing the number of FTs in order to address efficiency and make sure shaking the tree that we maximum optimal capital allocation also in the operational side of things that we have the right cost base. But what we do need in my book is consumption. So the old things look pretty promising. But it's on leading indicators. It's not really happening to the full extent. And if I look at the relative weakness for investments to really come along, for that to be debt financed or equity financed, which is, of course, where we come into the picture, it is for both households and corporates to take that last step. And for me, it is consumption. And consumption is weak. I just consumed our own macroeconomics Nordic outlook the other day. And it's a pretty constructive view, and I don't think they are far off consensus. There is a strong group of consensus around the 3% growth of GDP in Sweden next year, which would have been a fairly significant acceleration. If it happens or not, we will know next year. But it's definitely the one that I'm on the watch out for, for income. to come up, both for transactional banking, payments banking, and balance sheet banking. All three areas will benefit from that.

Okay, great answer. Thank you.

Thank you. We will now take the next question. From the line of Marcus Sandgren from Caprichevrel, please go ahead.

Good morning. So I just had two questions coming back to what some others have asked about. But if we're starting with the buybacks, so last year you did 10 billion for the next year and now you're doing 125 and then you can annualize that of course, I guess. But nevertheless, it seems like you really want to defend the 300 bps. So your target to be within 100 to 300, is that kind of obsolete. It's more like 300 plus minus something. Is that what we should expect going forward? So that's the first one.

Yeah, I think at this point in time, considering the broader geopolitical uncertainty, you know, the outlook that we have are, to Johan's previous answer, hoping, of course, that balance sheet growth should come back again. We've had tremendous tailwinds from the FX. And of course that could go the other way. So I think at this point in time we feel it's appropriate to be at the upper end. Just to mention also, we are on a pro forma basis taking into account the remaining facing of the IRB effect in the Baltics down to 250. So to some extent you could argue that that's moving and dipping into the buffer. But all things taken into account, I think it's a And as you know, we are a cautious and a conservative bank to operate at the upper end of the range.

Okay, thanks. And then coming back to cost, Namita was alluding to what AI can do and so forth. But I mean, you were saying that you expect cost to taper off after 26. So, I mean, in terms of numbers, one of your competitors has said they expect cost to grow by 2% annually until 2030. Is there something similar you're expecting or what should we read into this tapering of?

Yeah. So, as you know, we provide annual cost service and not the longer term cost guidance. But what we're trying to elaborate a little bit around in the slide there is to show what that underlying cost growth is at the moment. And also to highlight that some of the incremental investments we're undertaking in 2026 should a peak in 2026 and then fade thereafter. And I think that when it comes to the productivity gains and the efficiency gains that we're starting to see, if you look at our underlying cost growth adjusting for the consolidation of R-plus and the implementation charges, you'll see that it's gradually come down during the course of the year and underlying in the fourth quarter, it is actually in that range or even a little bit below. So, of course, to the extent that we can continue to enhance productivity going forward, working with the churn and the efficiency gains that we have lined up, there is, of course, the possibility to continuously improve on that cost growth. But the main message with the tapering is really to say that the current growth trajectory that we're on should taper from here going forward.

Okay, very good. Thanks. Thank you.

Thank you. We will now take the next question from the line of Ricardo Rovere from Mediabanca. Please go ahead.

Thanks for taking my questions. A couple if I may. The first one is on, sorry to get back to loan growth, but accounting rules are the same for everyone and the loan book, corporate and retail, so forget governments uh repos collateral margin all that stuff the book is flat quarter or quarter and it's flat kind of flat year on year uh so the nii considering you give the margins in your fact book and the margins are stable quarter on quarter and actually up versus p2 it looks to be more a problem of absence of growth in general terms also retail while the rest of the rest of scandinavia is somehow responsive to the easing in monetary policy so i was wondering why you don't seem to be responsive to that and what you're planning if you are planning anything to start assuming growth in in 2026 this is the first question the second question i had is If there is any room, maybe on SRTs or something like that, to keep RWA under control, you know, and eventually to keep the capital return as it is. And on this topic, you know, 10 billion buyback on 986 billion risk-weighted assets would throw 100 basis point a capital into the fireplace to cancel a 203 euro, sorry, tech per share to cancel less than 2.5% of your share count. So reducing the buyback to me is the most sensible thing you could have done. So that's to be clear because the share price can move by 2.5% any minute of an hour. So canceling, I would have canceled it personally, but reducing it and giving cash to shareholders is the best thing you can do, in my view. But again, on risk-weighted assets, is there anything you can do to keep it under control, under LSRTs and stuff like that?

Okay. Here, Ricardo, you're on here. I can start with growth. One is a constant disappointment on growth, as you're pointing out correctly in your question, that the transmission mechanism, rates are going down from the central bank, banks are lowering rates, and you see economic activity go up, has been very disappointing. There are some signs in the retail market that things are picking up, but it's been remarkably slow to act. This is actually quite normal and very frustrating, as you probably have four to five year cycles when you look at global. You can just take a graph on FCB's corporate lending exposure and you see that it moves slowly and it has not picked up. My potential explanation, because I don't know why, is the capacity utilization in the industrial side, on the corporate side, has been fairly low. And therefore, any demand that they have met in this slightly more stabilized environment, they've been able to cover with cash at hand or existing loans, and therefore not used more capital to increase capacity. That's back to my original point on consumption. So we are looking at that, and it's one potential explanation, and it looks promising if things pan out, as economists say, that there will be a catch-up effect for that going forward. I also say that the leading indicators which is typically having a 12-month lag to actual lending, is the industrial sentiment indices, and they all point more than modestly. They are upwards, but not particularly impressive yet. On the retail side, there is signs of things waking up. There's clearly a weedy one, which is the house price expectations, which is a leading indicator, and that is clearly recovered. However, then you have the specifics for SEBs. to our earlier question around market share. So we do see that we are not performing to the best of our ability in the mortgage market, which is also partly explaining where we have some work to do there in the coming year or two.

On your question, Ricardo, about the SRTs, I mean, as you know, we have not been active in that space historically, but it is a space that we are looking into. it is as you also know something that is top of the regulatory agenda in Europe and there seems to be a lot of initiatives providing more favorable conditions for such transactions to take place so it is something that we are looking into also the pricing environment has changed there so from a attractiveness financially speaking it has also become increasingly attractive so it is something that we are evaluating and And then just on your final comment, thank you for the comment on the dividend. We'll pass that also to the board.

Christopher, if I may follow up very, very briefly. Have you identified in SEC billions the maximum amount of portfolio that eventually could be part of SRT's program? Because that instrument, I mean, there are banks that are very active on that and they are, you know, keeping risk-weighted assets kind of flattish or eventually down. So I was wondering, what is the theoretical maximum capacity that you could have there?

It's too early to share any numbers on sizes of portfolios, but one thing that we need to take into account is is the regulatory environment in Sweden, which has some impact on the amount of capital release that could be achieved from an SRT. So that is one aspect into this, which then, of course, will dictate the attractiveness of the type of transaction and volume, et cetera. But no volumes to share at this point, Ricardo.

Thank you very much. Thank you, Ricardo. We have a hard deadline, so we'll try to be a little bit quick, so please go ahead.

Thank you. We will now take the last question from the line of Shrey Srivastava from Citi. Please go ahead.

Hi, Anne. Thank you for taking my questions. My first one centers around the 500 million uplift from sort of AI regulatory and resilience. If you were to break this down between regulatory and resilience and actual sort of AI initiatives, or put another way, investments and revenue synergies versus cost synergies. Where would you land on this, if we could just have some more color? Thanks.

Thank you. We don't break that down any further, but given that we're mentioning these three, they all three have a meaningful contribution to the total number, but we don't provide an additional breakdown to that number.

Thank you. And just a second brief one. If I was to look at your comment on the sort of uptick in investment banking activity, could we just have a little bit of color on that, specifically around if you're seeing an increase in demand from corporates operating in broader Europe around any Riyama initiatives, for example?

Yeah, I can take that. So generally speaking, it's a quite unusual world where the financial markets depending business lines are doing very well. It's really to say that share prices are good, rates are low. It's been quite a lot of activity, very resilient financial market, given the risks that we see. However, the real economy has not really performed, which is more linked to the actual funding, actual loans, house buying, factory openings. So it's a quite divided world. This seems to be continuing. I have no reason to believe that this recent more uptick in investment banking, in capital markets supported by resilient financial markets, will continue until we have another, you know, call it a situation in the markets. And now we're hoping that the other part of the real economy, where you actually need new funds, will come and help us. On Europe, I would say no. This is again the position where leading indicators are pointing to a better future. But I couldn't say that we have really seen it materialize yet. Excuse me. To the point where you see, because half of the book, of course, corporate lending is outside Sweden. Sorry. And it's quite muted still.

Understood. Thank you very much.

Thank you. I would now like to turn the conference back to Johan Torgevi for closing remarks.

Yeah, thank you. Usually we ask you to close early. Thank you for helping us with that because I know there's a lot of other calls we have today from your side. Thank you for participating. I wish you a good day.