Svenska Handelsbanken AB (publ)

Good morning, everyone, and welcome to this presentation of Handelsbanken's results for the first nine months and the third quarter of 2024. The third quarter showed an increase in ROE to 15.6% from 15.2% in the previous quarter. Operating profits grew by 6% to 9.1 billion Swedish kronor. As income grew, expenses declined and again we saw net credit loss reversals. The cost-income ratio improved to 38.3% from 41.5% in Q2 this year. So in terms of the sequential P&L, we saw positive development in more or less all the key lines. The financial position remains very healthy. The CET1 ratio of 18.8 was 400 basis points above the regulatory requirement. And the anticipated dividend in Q3 of SEC 3.95 was equal to 109% of the earnings in the quarter. In the first nine months, the anticipated dividend amount to CEC 9.20 per share or 88% of the earnings. So both a steady generation of distributable funds as well as the capitalization level. When the banking package will be introduced in January 1st, the bank's assessment of the day one effect is a neutral or in fact a slight reduction of the risk exposure amount. Annual external surveys are usually published in Q3 each year, and the long trend continued with evidence also this year of Handelsbanken customers being more satisfied than those in our peers. And the highest scores show among both private and corporate customers, and in all of our four home markets. The bank also again received the reward as the Business Bank of the Year in Sweden and for the 13th consecutive year, Sweden's SME Bank. The external recognitions align with our view that our locally connected and long-term relationship-oriented business model really stands out in the market and is highly valued and appreciated by both our private as well as our corporate customers. Now, if we look closer at the third quarter, we can see again that our ROE increased to 15.6 from 15.2 in Q2. The cost income ratio dropped to 38% from 42 in the Q2, and credit losses again amounted to net reversals of two basis points. NII was up marginally, and the fee and commission income grew by 1% to the second highest level seen so far. Total expenses dropped by 7%. Adjusted for the one-off costs relating to staff layoff agreements, Octogonen and FX, the expenses dropped by 5%. Credit losses consisted of net recoveries of 141 million. And that gives us all in all an operating profit growing by 6% or 4% adjusted for the items affecting comparability. If we move over to the accumulated numbers for the first nine months compared to the same period last year, ROE amounted to 15%, the cost-income ratio to 41%, and the net credit loss recoveries to two basis points. NII was down marginally and fee and commission grew by 4%. Expenses increased by 10%. The increase was attributable to annual salary inflation, increased pension and staff costs. The average number of employees increased by 6%, of which 4 percentage points were attributable to additional employees working in the branches due to a larger customer activity and 1 percentage point within the bank's IT development. All in all, the operating profit declined by 4% on an underlying basis. Now, if we zoom in to the NII development compared to the previous quarter, interest margins were negatively affected by lower central bank rates, and the net effect of margins and funding cost was 109 million, negatively. This was, however, offset by a positive day count effect of 97 million. Apart from that, there were only minor effects from other NII components. Net fee and commission income continued to grow also in the third quarter. Almost 70% of the fee and commission's income comes from the savings-related commissions, of which the asset management business is the largest contributor. The positive development in the quarter was both driven by the stock market development, but also by higher net inflows. The other fee and commission lines were fairly flat in the quarter. Asset under management reached a new all-time high this quarter. For a very long time, we have seen the market share on net inflows into the mutual fund savings in Sweden so far, exceeding the bank's market share and outstanding volumes. The bank has continuously, over the past 15 years or so, attracted around 20-25% of the net inflows into the Swedish mutual funds. But the market share of the outstanding funds volume has only gone from around 89% to around 12%. This suggests the potential for the bank to continue to grow well in this field also going forward. The success over the years is the result of a combination of a very strong performance, early focus on mutual funds with ESG profile, strong customer relationship, and not least, a strong distribution capacity. And since the spring, we've also noticed strong development in Norway, where we in the past two quarters have seen the market share of net inflows into Handelsbanken's funds exceeding the market share by outstanding volume by more than two times. The growth in business volumes is naturally also connected to the customer activity. And during this year, we've seen a good pickup in the number of advisory meetings in our branches, especially in Sweden and Norway. In the past few years, we've strengthened our branches with more capacity and underwriting mandates. And in addition to what we believe also increased the availability for our customers to meet our specialists such as private banking and occupational pension advisors locally where the customer is situated. The number of private banking advisory meetings is up by around 40% in the first nine months of this year compared to two years ago. And the number of occupational pension advisory meetings is up by more than 90%. And quite naturally, we see that the asset under management is growing as a result. Increasing assets under management builds structural earnings growth over time and also an ROE-enhancing growth for the bank. Now over to the expenses. We started this year by reviewing the efficiency in the bank. We have since then reshaped the organization and addressed efficiency measures initially, primarily within business support and group functions. In Q3, we've started to see underlying effects in the cost base and underlying expenses dropped by 5%. The total number of staff, meaning employees and external resources, has now declined by 3% or around 440 people since the spring. And it's clear a negative trend in staffing has changed since the beginning of the year. Further initiatives are recognized and will be addressed continuously, just like we've done and showed now for the two consecutive quarters. The efficiency work is important in order to ensure the long-term competitiveness of the bank and the long-term shareholder value creation. Now briefly on assets quality and credit losses, or rather the net credit recoveries for the third consecutive quarter. In fact, the bank has in total not burdened the shareholders with any credit losses since Q2 2020, over more than four years. Credit losses have been more or less zero for a long time, where we see no signs of deteriorating asset quality. This is a result of the bank's limited risk appetite, the consistency in the underwriting and the preference for collateralized lending. And importantly, the local presence and connections via our branches, which enable the banks to be very quick in detecting signs of stress for customers and also handling such situations. Also in this quarter, the management add-on was trimmed down a bit, this time by 76 million. The add-ons is reassessed each quarter and stood at 378 million at the end of the quarter. A stable financial position forms the foundation for long-term customer relationships and long-term business growth. The bank's strong view is that it should always be able to support customers with financing, regardless of external factors, and without any aid from governments, central banks or shareholders in rough times. In Q3, the CE1 ratio was 18.8, which was 400 basis points above the regulatory requirement, just in line with the previous guidance. In order to calibrate the CE1 ratio to 400 basis points above the regulatory requirement, the anticipated dividend in the quarter amounted to around 4 SEK per share, or 109% of the earnings in the quarter. For the first nine months, the anticipated dividend amounted to 9.2 SEK per share or 88% of earnings. As always, the board will make a holistic assessment of capital situation in the Q4 report in February and decide on a dividend proposal for 2024 to the AGM. January 1st next year, the banking package will be introduced, meaning that the implementation of the last parts of the Basel III agreement in the EU. The bank's assessment is that the day one effect will be a marginal reduction of the risk exposure amount. The banking package is hence not expected to affect the capital planning of the bank. A few words about the respective home markets, which also improved cost-income ratios in the quarter. In Sweden, the volume growth remained muted on both the lending and deposit side, but recovered on the savings side. The cost-income ratio dropped to 28, which is the second lowest level historically, and the ROE stood at a healthy 18%, the highest among the home markets. In Norway, the cost-to-income ratio dropped to 44 and the ROE remained around 11%. After the refocusing period during the spring, we are now seeing a more balanced growth between lending, deposits and saving, which bodes well for future investment improvement of the profitability in Norway. In the UK, the cost-to-income ratio improved slightly and the ROE was 17%. Deposits continued to grow, as did the savings volume in the quarter. Finally, the Netherlands, their earnings grew by 10% in the quarter and the cost-income ratio improved to 51 from 55 in the Q2. The ROE increased to 14%. So, to sum up the first nine months for the year and the Q3 in particular, Q3 was a quarter which saw increased income, lower costs and net credit loss reversals. The cost-income ratio and the ROE improved. Customers showed their appreciation of the bank's locally connected and decentralized model in its annual external surveys. And the bank is in a very solid financial position. So thank you very much for listening in, and we will now take a short break before commencing the Q&A session. Thank you so much.

Thank you. Thank you. you . . . . . Thank you. you

Hello, everyone, and welcome back to the Q&A session. This is Peter Grabe, Head of Investor Relations, speaking. And in this Q&A session, we will have Michael Green, CEO, and Carl Cedarskjöld, CFO. And as always, we would welcome you to ask one question at a time, please, in order to make sure that everyone gets a chance to ask their question. And with those words, operator, please, could we have the first question?