Svenska Handelsbanken AB (publ)

Good morning everyone and welcome to this presentation of Handelsbanken's results for the full year and fourth quarter of 2024. Before the presentation, let me just start by saying it's a very sad day in Sweden today, following yesterday's tragic events in Örebro. Our thoughts go to the victims and their relatives. The fourth quarter showed an operating profit of 9.2 billion, the highest Q4 results so far in our 153-year history. The ROE amounted to a touch above 14%. Despite a year with sharp rate cuts by central banks, the income generation has remained resilient. The cost initiatives we launched during the spring have been to the most part been executed and it's now bearing fruit and showing in the numbers. Cost income ratio remain below 40. And also in this quarter we have net credit loss reversals. The board proposes a total dividend of 15 krona per share with an ordinary dividend of 7 krona and 50 öre and a special dividend of 7 krona and 50 öre per share. The financial position remains solid, and after the deduction of the proposed dividend, the CET1 ratio was 18.8%, which is almost 400 basis points above the regulatory requirement. Now, if we look closer at the fourth quarter, we can see, as previously mentioned, that the cost-income ratio was 39.7, and the RE amounted to 14.2%. Net interest income remained resilient and was more or less flat compared to Q3, while down marginally when adjusting for currency effects. The fee and commission income continued to grow and was up 3% compared to Q3. Total income increased by 3%. Total expenses increased by 7%. But adjusted for an octagonal provision of 68 million and restructuring expenses of 146 million, the expenses increased by 4%. The net credit loss for various covers amounted to 232 million or three basis points. All in all, operating profit grew by 3%, adjusted for items affecting comparability. If we move over to the full year results on slide four, we see that ROE amounted to 15%, the cost-income ratio to 40%, and the net credit losses recoveries of two basis points. Net NII was down 2%, mainly as a consequence of lower net effects of margins and funding costs. Net fee and commission up 5%, with the key contributor again being the savings and mutual funds business. Expenses increased by 9% and 7% if we adjust for items affecting comparability. The increase was attributable to annual salary inflation, increased pension and staff costs. The average number of employees increased by 5%, of which increased four percentage points were attributable to additional employees working in the branch operations and one percent point to the bank's IT development, primarily through the replacement of consultants with employees. However, the staff, total staff, i.e. employees, as well as external consultants, were 5% lower at year end and compared to year end of 2023. This as a result of the efficiency work carried out in the bank since Q1. So all in all, the operating profit declined by 2%, adjusting for items affecting comparability. Now, if we zoom into the NII development compared to the previous quarter, the NII remained resilient as previously mentioned. For the first time in four and a half years, we saw an increase in lending and deposit volumes in all of our home markets. While the growth was still minor, it contributed with 105 million to the NII. As interest rates drops, it's fairly natural to gradually see credit appetite among our customers recovering again. Like we've seen now for a few quarters, the net of margins and funding costs were negatively affected by the further rate cuts by the central banks. All in all, the effect from the net of margins and funding was minus 208 million. This was, however, partly offset by positive FX effect of 70 million due to the weakening of the Swedish krona. Net fee and commission income grew continually, continued to grow also in the fourth quarter, up 3% compared to the Q3 and up 10% compared to the Q4 last year. Almost 70% comes from the savings-related commissions. And it also there, that's where we saw the main pickup in the quarter and during the year. Payment fees also rose in line with normal seasonality. Now let's take a closer look at the savings business in Sweden, which is the main contributor to savings and related fees and the mutual fund market. So in Handelsbanken, 2024, we were the largest player when it comes to the net inflows into mutual funds in Sweden, with a market share of 18%. Since 2011, Handelsbanken has attracted almost one quarter of 24% of the total net new savings into the Swedish mutual funds market. The market share of the outstanding volumes is still only 12%. suggesting potential to continue to grow well ahead of the back book market share also ahead. Now, over to the expenses. 2024 was a year with intense internal work in order to first identify and then address efficiency enhancing measures. By year end, most of the work was finalized. We have trimmed especially central and business support functions and have come a bit on the journey of working even more efficient. At the same time, as we have reduced central and business support functions, we have increased our efforts and resources in the areas where we meet customers. In Sweden, we now meet our customers at more than 20 new physical locations as a complement to our existing branches. At these locations, the customers can get service and advice every now and then. Some of these locations are open daily, others only a few days a week. The opening hours are trimmed in line with the customer's demands. But on a net basis, as you can see on the right-hand graph, the reduction of total staffing, meaning FTEs and external consultants, resources have been material since the launch of the initiatives in Q1. Since Q1, the staffing is down by 778 people, or 6%. The dotted line shows the average number that naturally lags and suggests some tailwind to the average number moving into next year. The efficiency measures are now also starting to show in the cost base, as you can see to the right. Cost increased in Q4 in line with normal seasonality, but the graph clearly shows a break in the negative cost trend we've had since running up to Q1. During the course of 2024, we also had a reported cost base that was elevated due to a restructuring expense related to the cost initiative programs. As mentioned before, we do not expect these to repeat in the next year. The efficiency programs have not only reduced our running cost base, they've also enhanced and strengthened the cost culture through the bank, which is essential for the long-term improvement of the profitability of the bank. Now over to asset quality and credit losses, or rather the net credit recoveries that we've seen now for four consecutive quarters. For a long time, credit losses have been more or less zero, and asset quality remains strong, just as expected. The reason for this relates to the bank's limited risk appetite and the consistency in the underwriting, the preference for collateralized lending, and not least the local presence and connections through our branches. Also in this quarter, the management add-on was trimmed down a bit, this time by 229 millions. Excluding the add-ons, there were a few millions of further net loss recoveries. The add-ons is always reassessed each quarter and stood at 149 million at the end of the year. The strong financial position of the bank enables the board to propose an extra and increased ordinary dividend compared to last year, while remaining almost 100 basis points CET buffer above the long-term CET1 ratio target range. The board proposes a total dividend of 15 krona per share, of which 7.50 was an ordinary and 7.50 was as a special dividend. After the deduction on the proposed dividend, the CET1 ratio stood at 18.8, which is, as said, is almost 400 basis points above the SREP. The extra capital buffer that the bank retains for now should not be seen as a buffer for risk that the bank sees in its own operation. It should be seen as a general precautionary measure given the current general geopolitical unrest and as well as stated that the bank should always be considered the most stable and trustworthy counterpart in the market. This is the view that the leading rating agencies already have on the bank, as no other privately owned bank in the world has a higher combined credit rating by them. Assessment of the additional capital buffer of 100 basis points above the long-term target range will be reviewed continuously going forward. Now a few words about respective home markets. In our largest market, Sweden, the development is stable. The cost-income ratio is around 30%, and the return on allocated capital almost 17%. The bank has a strong market position in Sweden as the largest combined lender in private and corporate lending. And as mentioned earlier, the largest player in the mutual funds market in terms of net inflows of new savings. In Norway, we've seen significant improvements over the course of the year. The cost-income ratio has improved from 52% in Q1 down to 41% in Q4. After the refocus period during the spring, the growth is now more balanced between lending, deposits and savings. And we are very pleased to see that our footprint in the Norwegian savings market has improved significantly during this year. In Q2 and Q3, our market share of the net inflows into mutual funds in Norway was more than twice as high as our market share of the outstanding mutual funds volumes. And in Q4, it was more than 6.5 times as high, as the bank attracted more than 15% of the net inflows in Norway in the fund market, compared to the market share just above 2% of the total outstanding volumes. Just like in Sweden, the trend suggests good potential to grow these capital light and already enhancing income streams also going forward. And cost initiatives are also starting to show in the numbers. As a result, the profitability has improved with the return on allocated capital now over 13%. In the UK, we saw business volume growth in both lending and deposits for the first time in four and a half years. And asset under management also grew healthy. The return of 16.4 was almost as high as the bank's Swedish operations. And finally, the Netherlands, which is the smallest market, smallest home market of the group. Also here, we saw business volume growth, especially in asset management and deposits. ROE increased slightly compared to the previous quarter and it was up to 14%. So to sum up, Despite NII headwind from lower central bank's policy rates, the income generation has been stable. In the beginning of the year, we saw what we needed to do. We reorganized the bank in 4th of April and started to execute on our plans. And in the second half of the year, we saw the effects that we've anticipated. Asset quality remains as robust as it should be for a bank with hundreds bankers risk appetite and risk profile. And the capital position continues to be very solid even after an increase of the proposed dividend. And finally, and not least, on the back of increased customer activity and the customer's demand for meeting the bank physically for advice and support, we adhere as always and have expanded our local presence accordingly. So with those final remarks, we now take a short break before moving into the Q&A session.

Thank you for now. Thank you. . . We'll be right back. Thank you. Thank you. Thank you. Thank you. Thank you.

Hello everyone and welcome to the Q&A session. This is Peter Grabe, Head of Investor Relations speaking. As always, we would like to remind you all that we prefer that you ask one question at a time and then follow-up questions can be asked when it's your turn again. And with those words, could we please have the first question, please?