Svenska Handelsbanken AB (publ)

Good morning, everyone, and welcome to this presentation of Handelsbanken's result for the fourth quarter and full year of 2025. The bank reported a solid fourth quarter with net profits from continuing operations up slightly compared to Q3 and the return on equity of 13%. The savings business continued to perform well with strong inflows in customer savings. Asset under management reached an all-time high in our home markets. Household lending has started to grow again in most of our home markets. And in the UK and the Netherlands, we now have also seen several quarters with steadily growth also in corporate lending. All in all, the income increase in the quarter by the normal seasonal pickup in expenses was fairly modest. Asset quality remained very strong, and we added yet another quarter with net credit loss reversals, bringing the consecutive count to eight quarters in a row with net reversals. Given the solid asset quality and strong financial position of the bank, the board proposes a dividend of 17 kronor and 50 öre per share to the AGM, of which an ordinary dividend of 1,8 kronor per share and an extra dividend of 9 kronor and 50 öre per share. The CET1 ratio of 17.6 was 2.85% above the regulatory requirement. In other words, the bank is now back again in the long-term range of 100 to 300 basis points above the regulatory requirement. Now, if we look closer at the financials of the fourth quarter compared to our previous quarter, our RE amounted to 13% and the cost-income ratio was 41%. Operating profits were down marginally, but net profits from continuing operations increased slightly. Adjusted for currency effects, the NII declined by 3%. The drop was explained by negative margin effects due to lower short-term market rates and by a year-end calibration of the deposit guarantee fee for 2025. Fee and commissions increased by 5% and were driven primarily by continued strong net inflows into assets under management and positive stock market develops boosting the savings business. The NFT increased somewhat and other income was supported by VAT reassessment in Sweden and Denmark of around $200 million. So all in all, the income grew by 1%. Expenses usually increase some in Q4 as the activity level is always higher after the preceding summer quarter. The increase of 2% was however relatively low compared to in previous Q4s, which reflects the increased cost focus in the bank. Net credit losses amounted to 5 million. If we switch over and look at the full year of 2025 compared to 2024, ROE amounted to 13% for the year and the cost-income ratio to 41.5. And adjusted for currency effects, the NRI declined by 7%, again mainly as a result of the material cuts in central bank policy rates during this year affecting the margins. Net fee and commission income, on the other hand, remained resilient and increased by 2%, adjusted for FX effects. The key contributor was again the savings business. The NFT was down due to temporary negative effects in the second quarter in 2025. All in all, total income dropped by 9%. Expenses at the same time dropped by 7%. And when adjusting for the FX restructuring expenses and octogonen, the underlying decline was 3%. The reduction of the running cost base of the bank came as a result of the initiatives carried out over the last year and a half. This enabled the bank to counter general inflation and annual salary increases by a wide margin. Net credit losses reversals amounted to 313 million compared to the 601 million a year ago. All in all, the underlying operating profit was down by 12%. Now, if you take a closer look on the NII development compared to the previous quarter. As said, the NII dropped by 4%. Over a number of quarters, we have seen positive signs of recovering growth, in particular in the UK and the Netherlands, but also in the mortgage lending market in Sweden. Overall, however, volume development only contributed with 14 million to the NII in the quarter. The main effect in the NII rather related to effects from policy rate cuts with lower short-term rates, which impacted the net interest margins. In Q4, we received the final bill for the deposit guarantee fee in 2025 from the Swedish National Debt Office. It was a touch higher than expected and resulted in a top-up in Q4, burdening the NII with around 50 million. Currency effects were negative due to the strengthening of the Swedish krona. Net fee and commission income increased by 5% in the quarter. The bulk of fees and commission relates to the savings business, especially in the mutual funds offering. That's an area where the bank has seen the bulk of the increase in fees and commissions due to both positive market development as well as continued strong net inflows into our funds under management. In both Sweden and Norway, the bank's market share of inflows into mutual funds exceeded the market share by the outstanding volumes by more than two times in 2025. This has consistently been the case for over a decade in Sweden. In Norway, it has been the case since the bank refocused two years ago to a more balanced growth between lending and savings. Other fees have grown a bit more moderately. Now over to the expenses. As shown in the slide, the trend of increased cost has broken in 2024, and the expenses have since then trended down, despite annual salary revisions and general cost inflation. Central and business support functions have been streamlined and the use of external consultants materially reduced. The positive trend has continued also in Q4 in 2025, and we can note that the underlying staff costs are down by 5% compared to the same quarter last year. Looking at the other expenses, they were down 4%, were 4% lower compared to the same quarter in 2024. And the bank is now in a very good position in regards to cost efficiency. But that does not stop us from continuing to strive every day to increase our productivity. And as part of that daily endeavor, we always explore and embrace new opportunities arising from technological advancements. One obvious field today is the AI, where we spend a lot of time and resources in examining the potential for improved operational excellence and productivity, as well as for further improvements of the customers' experience and the bank's value proposal. Now over to asset quality and the credit loss reversals. When summing up the last five years, meaning since before the pandemic, the bank has in total booked net reversals and has said now the eight quarters in a row with reversals. The absence of credit losses is an evidence of the prudency in the bank when it comes to managing credit risk. It reflects the bank's underwriting procedures and policies, the risk appetite and the customer selection, as well as the press preference for collateralized lending. But also not least in the ability to detect early signs of credit risk deterioration and the ability to quick make this necessary actions and decisions. In this context, the local presence through our branches and the close relationships with our customers is essential, but cannot be emphasized enough. Now turning to slide nine, a few words about our respective home markets. To start with our largest home market, Sweden, which accounts for 71% of group earnings. The market position for the bank is strong, with the bank being the largest combined lender in private and corporate lending. Mortgage volumes are now growing again and have been since the last spring, although with a bit moderate pace. The market share of the net new mortgages was 6% in the first half of 2025, but doubled to 12% in the second half. Corporate lending volumes remains a bit on a standstill, but expectations for recovery along with general economic growth in Sweden going forward. The saving business, as I've touched upon earlier, continued to develop well. The cost-income ratio was 33% in Q4 and the profitability around 15%. The UK accounts for 14% of the group earnings. Household lending volumes has consistently grown since early 2025 and were up another percent in Q4. Corporate lending has grown consistently since the summer of 2024. In Q4, the volumes were up by 2%. We also see deposit volumes increasing steadily on both the household and the corporate side. In the recent quarters, the efficiency has gradually improved and we are now starting to see initiatives filtering through in the cost space that offset margin pressure on the NII relating to lower short-term rates. The cost-income ratio improved in the quarter to 57.5 from 59 in Q3. The operating profit increased by 3% in local currency and the profitability was 13%. Norway accounts for around 9% of the group earnings. After a refocused period that started during the spring in 2024, the business is now gradually becoming more balanced between lending, deposits and savings. While the competition in especially the mortgage market is fierce, the bank continues to focus on deepening our customer relationships and also in the fields of deposit and savings. As mentioned, the savings business is progressing very well in Norway. In 2025, the bank attracted 6% of the net inflows into mutual funds in Norway compared to the market share of just about 2% on the outstanding volumes. For the full year, the cost-income ratio improved to 43 from 46 in 2024, and the profitability improved to 11 from 10%. And finally, the Netherlands account for 2% of the group earnings. And just like in the UK, the trend shifted one, one and a half years ago on the household and corporate lending side. We have now seen a steadily growth month by month. The positive volume development was however offset by the margins due to lower short term Euro rates. The ROE fell slightly in the quarter. The bank is in a very solid financial position. Credit risks, funding risks, liquidity risks and market related risks are prudently managed and the capital position is strong. After the proposed dividend of 17.5 krona per share, the CET ratio stood at 17.6% or 285 basis points above the regulatory requirement and therefore now within the long-term range of 100 to 300 basis points. The dividend proposal corresponds to 146% of the earnings generated during the year. The bank should always be considered as one of the most trustworthy and stable counterparts in the industry. This is also the view in the lending rating agencies who rates the bank the highest among comparable banks globally. And finally, to wrap up, we see now positive household lending growth in most of our home markets and within corporate lending growth also in the UK now again and in the Netherlands. The commission business is growing and we see momentum continuing to build in the savings business with strong inflows of assets under management into the bank. Income was up in Q4 and the cost discipline is maintained. Asset quality is robust and the financial position is very strong. The customer satisfaction levels during the year follow the long trend of being higher than average of our peers in all of our home markets and on both the household and on the corporate side. And we will continue our endless efforts of making sure that our advisors in our branches are close and easily available to our customers, simply providing an offering the customer asks for and appreciates. Local and personal as well as through our digital offer and by our 24-7 service over the phone. And finally, I'm also pleased to note that the total shareholder return created during 2025, meaning the share price performance plus paid out dividends, exceeded 30% in 2025. And with those final remarks, we now take a short break before moving into the Q&A session. Thank you.

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

Thank you. As a reminder, to ask a question, please press star 1-1. The first question is cast from the line of Andreas Haakonsson from SEB. Please go ahead.