Svenska Handelsbanken AB (publ)

Good morning, everyone, and welcome to this presentation of Handelsbanken's result for the first quarter of 2025. The first quarter showed an operating profit of 8.1 billion, which was very stable compared to last quarter last year. The return on equity was 13%. Compared to the same quarter last year, the NII showed resilience. And fee and commissions grew on the back of positive development, again in the savings business. The costs have come down significantly over the year, down 7%. This led to the cost-income ratio improving year-on-year to 40.7 in the quarter. Net credit losses again for the fifth consecutive quarter amounted to net credit loss recoveries. In times of volatile markets and uncertainties about the macro outlook, it's always important to remind about the low funding and liquidity risks in the bank. These are continuously handled in a prudent manner in order to safeguard the bank from potential unknown factors such as market disruptions or a rapid change in the macro environment. And on top of the low credit, funding and liquidity risks, the capital situation is robust, with the CET ratio still above the long-term target range. This, all in all, puts the bank in a solid financial position. On the back of prevailing uncertainties regarding the geopolitical landscape and the macro outlook, the anticipated dividend is calibrated to a level resulting in a CET1 ratio of 18.4%. which means 50 basis points above the long-term target range of 100 to 300 basis points above the regulatory requirement. The anticipated dividend for the first quarter of the year hence amounts to 5 kronor per share, or 157% of the earnings generated in the quarter. Now, if we look closer at the financial summary of the first quarter compared to the previous quarter, ROE amounted, as said, to around 13%. NII dropped 2% when adjusting for negative currency effects relating to the strengthening of the SEC. The fee and commission income was seasonally lower and dropped 5%. The NFT was unusually strong in Q4 and dropped back to a more normal level for the bank. In total, income dropped by 8%. Total expenses dropped by 5% and 2% adjusted for restructuring expenses, allocation to the octagon and FX. This despite the annual salary increase that always comes in play in Q1 for the bank. The cost to income ratio was consequently kept around 40% despite the headwinds in income. The net credit losses amounted to net recoveries of 54 million, or one basis point. The underlying operating profit was down 12%. If we instead compared to the same quarter last year, NII showed resilience and only declined by 2% despite the material cuts in policy rates in our home markets. Net fee and commission, on the other hand, increased by 5% with the key contributor again being the savings and mutual funds business. On the expense side, we saw an underlying reduction by 5%. The decline comes as an effect of the cost initiatives carried out over the last year. Net accrued loss recoveries were a touch lower than last year. So all in all, the operating profit was down by 2% and on an underlying basis by 4%. Now we zoom in to the NII development compared to the previous quarter. So the NII dropped by 3%, of which 1 percentage point related to currency effects from the strongest Swedish krona. The remaining decline of 2 percentage point was explained by negative margin effects due to mainly policy rate cuts. The remaining effects from volume development, day count and other effects were minor and more or less offset each other. Net fee and commission income increased by 5% compared to last year, with a key contributor again relating to the savings-related commissions, which increased by 7% compared to last year. We continue to see that the bank gains market share in the savings business, which has been the trend for many years now. The decline in saving relating commissions versus Q4 was mainly related to a negative day count effect and performance fee booked in the previous quarter. Payment fees increased by 2% year-on-year. The quarter-on-quarter development was related to seasonality with especially a slower customer activity on the card side. Other fees were up 2% year-on-year and fairly stable versus Q4. Now over to the expenses. 2024 was a year with intense internal work in order to first identify and then address efficiency-enhancing measures. Central and business support functions were trimmed and the use of external consultants reduced. The total staffing, meaning employees and external resources, was down by 7% compared to Q1 last year, and the total underlying cost dropped by 5%. The efforts carried out over the past 12 months have not only reduced the running cost base, but also strengthened the cost culture throughout the bank, which is essential for sustainable long-term efficiency, competitiveness and profitability of the bank. At the same time, we increased our efforts and resources in the areas where we meet the customers and are now in Sweden physically presented in more locations than a year ago. As a result of the elevated pace of IT development spend in the past recent number of years, numerous rollouts of both efficiency enhancing and business facilitating tools have been made available for our employees. In fact, the stream of new tools in recent years has never been higher. This on top of continuous upgrades in the customer interfaces in the app and in our internet bank. Of course, new digital tools are not increasing efficiency or generating business volumes simply by itself. The value creation rather arises from efficient and optimal utilization of these. Currently, the organization is in full speed in adapting to working on realizing the full benefits of the new tools. For example, in the fields of CRM, FCP, internal workflows, customer interaction in areas of signing and documentation, Microsoft 365, cloud solutions, et cetera. Naturally, this should lead to increased efficiency and improved offering and advice to our customers in the future. From a cost perspective, this also means that the running IT development spend can be kept somewhat lower as of now compared to the recent years. Now over to asset quality and credit losses, or rather the net credit recoveries. Over the past five years, which have included both a pandemic as well as stress situations for some corporate sectors during this period of sharp rate hikes, the bank has on aggregated reported total net credit loss recoveries over more than 220 million. This underscores the strength of the asset quality and the prudent approach to risk in the bank. The reason for this relates to the bank's limited risk appetite, 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-ons were trimmed down a bit, this time by 28 million to a remaining 121 million. Excluding the add-ons, the net credit loss recovers amounted to 26 million. The general view in the bank is that we simply do not like risk relating to external factors that we cannot control, such market disruptions or rapid change in the macro environment. Our business model is rather built around relationships long-term with customers, having strong cash flow profiles and managing of prudent credit risk over time. Therefore, we always strive at limiting funding, liquidity and market related risk as much as possible in order to safeguard the bank against whatever unknown external events that might occur. Over the past five years, few years, sorry, we've increased the already ample liquidity buffer to add even further protection to the bank And currently, the liquidity reserve amounts to around 950 billion kronor, representing more than a quarter of the balance sheet. And on top of that, there are unencumbered assets, which in practice mean an additional liquidity buffer in the form of unused room for covered bond issuance. Hence, the bank is in a strong position to swiftly adjust to market disruptions should such occur. And on top of low credit funding and liquidity risks, the capital situation is robust, with a CET 1 ratio 50 basis points above the bank's long-term target range, which is 100 to 300 basis points above the regulatory requirement. The solid financials put the bank in a position of strength, being one of the most trustworthy and stable counterparts in the industry. And the view is shared by the leading rating agencies who rate the bank the highest among comparable banks globally. Now a few words about the respective home markets. In our largest home market, Sweden, the development is stable. The cost-income ratio is around 30 and the return on allocated capital almost 15%. The bank has a strong market position in Sweden as the largest combined lender in private and corporate lending. And as we've seen in the statistics over the past decade, the biggest player in regards to net inflows into mutual funds. In Norway, we've seen significant improvements over the course of the year. The cost-income ratio has improved from 52 in Q1 last year down to 44 in this quarter. After a refocus period that was starting during the spring last year, the business growth is now more balanced between lending, deposits and savings. And cost initiatives are also starting to show in the numbers. In the UK, we have the most satisfied customers in the market. Volume growth, however, remains subdued with continued high amortization, but we see small signs of increased customer activity. The focus in the recent quarters have been on improving the efficiency, and we are gradually starting to see initiatives filtering through in the cost space in the UK. And finally, the Netherlands, which is our smallest home market of the group. Also in Q1, we saw business volume growth, especially in asset management and deposits. So to sum up, Q1 operating profit held up well compared to last year with NII resilience and lower costs. The cost-income ratio improved. Asset quality remains as robust as it should be for a bank with hundreds bankers' risk appetite and risk profile. The funding and liquidity risks are low and the capital position very strong. And finally, and not least, we continue to focus on making sure that our advisors in our branches are close to and easily available for our customers. This is something our customers really appreciate, especially in more uncertain times. So with those final remarks, we now take a short break before moving into the Q&A session. Thank you.

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Hello, everyone, and welcome back to the Q&A session. This is Peter Grabe, Head of Investor Relations, speaking. And in the studio, we have Michael Green, CEO, and Carl Sederskjöld, CFO. As always, we would like to remind you that we appreciate if you ask one question at a time in order for everyone to get a chance to ask your question. Follow-up questions are, of course, welcome when it's your turn again. And with those words, operator, please, could we have the first question?