Svenska Handelsbanken AB (publ)

Good morning and welcome to this presentation of Handelsbanken's results for the first quarter of 2026. We can conclude that the bank reported yet another solid quarter. Operating profit increased by 9% compared to Q4, and the ROE amounted to 14%. The main income lines, NII, and fee and commissions were stable. While the lending growth in Sweden was held back a bit by a general slow Swedish economic growth, it was again very encouraging to see that the lending growth trend in the UK and the Netherlands continued both on the household and on the corporate side. This has now been a consistent trend for more than a year. The savings business continued to perform well with market shares of net inflows into mutual funds far exceeding the market share in our books. in both Sweden and in Norway. Cost efficiency is always a top priority in the bank, and again, we saw expenses declining. The net asset quality remained very strong with more or less insignificant credit losses once again. The capital remains robust. The anticipated dividends for the quarter earnings were increased a bit in order to calibrate the CET1 ratio to 17.2% or 250 basis points above the regulatory requirement compared to the 285 basis points in the previous quarter. The anticipated dividends amounted to 2.93 krona per share. or 91% of the earnings generated in the quarter. When we look at the longer-term value creation for our shareholders, this solid Q1 report fits well into the picture of the bank's resilient business model. As illustrated in this graph, the growth in equity per share plus dividends has not only been consistently stable over the past decade, but also growing with an average of 14% per year. And if zooming in on the past five years, the average growth rate has been even higher at 15%. And not to forget, this has been achieved in a decade, which includes everything from negative interest rates, Brexit, a pandemic, warning in the Ukraine, inflation and interest rate spikes, stresses in the real estate sectors, etc., etc. This is what we strive at always generating for our shareholders and also what the shareholders should expect from a bank like us. This stability is, of course, not achieved by coincidence and not just of our way of working. It's a result of the chosen markets and geographies. Our four home markets share the following common traits. They are all stable democracies with large economies, rule of law applies, and the political and regulatory landscape are stable. It also helps if there are cultural similarities and shares of values. Not only the assets, but also the cash flow from our customers are stemming from stable Western European economies. In such markets, the Handelsbanken model has a chance to stand out with a unique offering and a higher customer satisfaction than our peers. It is, of course, also essential that there are large bases of potential customers with the right risk profile and that we have a demand for our offering. Hence, offering material scope for long-term profitable growth at a suitable risk level in stable markets. And just to add a small remark, given the recent themes into the financial markets, we have no exposures to private credit. Before going into the financials for the first quarter, just some comments on the recent business development in these four home markets. Starting with Sweden, which accounts for 76% of the profits in our home markets. Handelsbanken is the largest lender in Sweden when summing up household and corporate lending. It's therefore fairly natural that the soft general economic growth in Sweden translates into fairly flat lending volumes in the past quarters. Deposits are growing somewhat, but the key growth is clearly seen in the savings business, where we consistently for the one and a half decade have seen market share of net inflows into our mutual funds far exceeding the market share of our outstanding volume by more than two times. In the UK, we had a long period after Brexit with declining lending volumes, mainly due to customer amortizations exceeding new lending. since more than a year the trend has clearly shifted to a consistent lending growth quarter by quarter on both the household and the corporate side also deposits have increased over the past years as well as the savings business the uk is a market where the customer satisfaction really stands out the most when comparing with our peers in the market In Norway, we stated two years ago that we needed to see a better balance between lending, deposits, and savings, and the situation has improved since. While lending volume have dropped over the past year, mainly due to intense competition, growth has been seen in deposits, and in particular in the savings business. Over the past two years, the market share of the net flows into mutual funds in Norway has been more than two times the market share of the outstanding volumes. This means that we are deepening the relationships with existing customers and adding new customers, which for improved profitability over time. And finally, the Netherlands. Just like in the UK, the distance to peers in terms of customer satisfaction is particularly large. Lending growth has been very strong, as you can see, and despite the drop in deposit last year, the longer trend has also been positive. And what is even more positive is that we now see also, we now also register a sound growth in the savings business with steady growing asset under management. Now, if we look closer at the financials of the fourth quarter compared to the previous quarter, the first quarter, sorry, already amounted to 14%, and the cost-income ratio was 39.5%. In Q1, VAT refund of 1.1 billion was booked, and an adjusted basis, the RE was 11.7, and the cost income ratio 42.8. Operating profit increased by 9%, but declined on underlying basis by 3%. NII and fee and commission were marginally down. Headwinds mainly related to day count effects and FX. Income increased by 3%, but declining by 3% on an underlying basis. Credit losses amounted to 35 million or one basis point. Regular fees decreased as the previous quarter included a booking of a charge for the interest-free deposits at the central bank. Now if we switch over and look at the quarter compared to Q1 last year. NII declined by 13% and 10% adjusted for currency effects. The decline is related to lower margins in the wake of lower short-term market rates. Net fee and commission income, on the other hand, increased by 7% adjusted for FX effect. The key driver was again the savings business and strong inflows and positive market developments. All in all, total income dropped by 6% on an underlying basis. Underlying expenses dropped by 1% despite the annual salary revision that comes into force on January 1st each year, and also the general cost inflation. Last year, we had a net credit loss reverses, and the regulatory fees were flat year on year. All in all, the underlying operating profit was down by 12%. Now, if we take a closer look at the NII development compared to the previous quarter, we see that NII dropped by 1%. Volume growth contributed with 20 million in the quarter. Due to lagging effects on interest margins from lower short-term market rates in the previous quarter, the net of margins and funding contributed negatively by 67 million. Deposit guarantee fees were lower this quarter. The decline being explained by fees being elevated last quarter as the final bill for that year was received and paid. The day count effect due to two less days in the quarter and the currency effects due to a stronger krona on average is creating some headwind as you can see. Net fee and commission income dropped slightly in the quarter, the bulk of fee and commissions related to the savings business, especially in the mutual funds business. The positive effect on fees from the strong net fee inflows were, however, offset in Q1 by a negative day count effect as well as negative mixed effects with an increased share of the AAUM asset management in lower fee funds. Other fees were seasonally down. The high market share of net inflows into mutual funds have added significant customer asset management to the bank over time. As illustrated in this slide, the bank has now accumulated net inflows into Swedish mutual funds at almost two times the runner-up over the past decade. This success comes not only from appreciated offering and strong performance in the funds over the years, but also the bank's distribution capacity where advisors are close to and have deep relationship with our customers parallel to an appreciated offering and distribution in our digital channels. Now over to the expenses. That trend of increased costs was broken in 2024, and since then the expenses have trended down, despite annual salary revisions and general cost inflation. The bank is now in a good position in regards to cost efficiency. As illustrated in Q1, when costs continued down on both quarter on quarter, and year on year. It's deeply rooted in our culture and among our employees to always look at new ways of becoming even more efficient. Next slide show our asset quality and credit losses. Over the past decades, credit losses have been very low, which they should be in the bank with our risk appetite. Since the outbreak of the pandemic in 2020, the sum of all credit losses has been 50 million krona or on an average 2 million krona per quarter. And that includes the period from the pandemic, sharp swings in policy rates and inflation, the disruption of supply chains following the war in the Ukraine and Middle East, et cetera, et cetera. Still more or less no credit losses. If we compare the credit losses to our closest peers, the bank also stands out over the decade. In particular, in volatile times, difference in underlying asset quality has shown. In Q1, the credit loss ratio was one basis point. Perhaps needless to say, asset quality remains very strong. 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. The anticipated dividend in the quarter of 2.93 per share equals to 91% of the earnings in Q1, and is yet another step to gradually adjust the capital position in the bank. The CET one ratio now stands at 250 basis points above the regulatory minimum compared to the 285 basis points in the previous quarter. The bank should, however, always be considered one of the most trustworthy and stable counterparts in the industry. This is also the view by the lending rating agencies who rate the bank the highest among comparable rates globally. And this view was again confirmed and further enforced last evening by Moody's, who upgraded the bank's baseline credit assessment rating to A1 from A2. This put the bank in a very exclusive group of only a handful of privately owned banks globally with the highest BCA rating by Moody's. Finally, to wrap up, Q1 was a solid quarter with increased operating profit and ROE, although including a positive contribution from a one-off VAT refund. Q1 NII and fee and commissions were stable and cost declined. We see lending now growing consistently in the UK and the Netherlands and also in the savings business broadly over the markets. Our way of doing bank is appreciated by customers where they experience close relationship with us, and it's also seen in the external surveys in all of our well-chosen stable home markets. Asset quality remains just as strong as it should for a bank with our risk appetite, and the capital position is very strong, and we took another step down in the target range by anticipating dividend equaling to 91% of the earnings in the quarter. Finally, I'm also happy for our shareholders that have seen share price reach an all-time high during the quarter. And with those final remarks, we now take a short break before moving into the Q&A session. Thank you. Thank you. Thank you. you Thank you. Thank you. Thank you. Thank you. Thank you.

Hello, everyone, and welcome back. This is Peter Grabe, Head of Investor Relations, speaking. And with me, I have Michael Green, CEO, and Morten Bjurman, CFO. As always, we would like to emphasize that we appreciate that if you ask one question at a time in order to make sure that everyone gets a chance to ask their questions. With those words operated, could we have the first question, please?

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We will now take the first question, and your first question today comes from the line of Magnus Andersen from ABG Sundar Kulja. Please go ahead.

Yes, thank you, and good morning. I was just wondering regarding the in total 6 billion in 81 capitals issued late in Q126, whether the main reason was to be able to go down for the new management buffer, or if you expect a higher volume growth going forward or a combination of both. And related to that, also, if you could confirm that the coupon will be taken directly in other comprehensive income rather than in NII. Thanks.

Hi, Magnus. This is Morten speaking. Good morning. Yeah, I had a little bit of difficulty hearing your first part of your question, Magnus, but I assume that you talked about the 81 that was issued late in the quarter and booked in Q2. And it's fair what you say, it's correct what you say, that this is an equity instrument. It will be booked in the equity and the interest rate, if I may call it that, the coupon, that will be booked also in the equity. Yes.

Okay, and also the recent work, as you have your next call, in March 2027 of 500 million U.S. dollars. What was the main reason for doing this now? Was it to be able to go down in management after volume growth or what?

Well, there are various components into that equation, Magnus. But obviously, we didn't have a full box of the 81, if I may call it that. This provides flexibility to the bank. And as you know, the two outstanding 81s, they are in U.S. dollar. This one is in Swedish krona. So, yes, and then we take it from there. We'll see. But the main reason is that it provides flexibility for the future.

Okay. Thank you. Thank you.

Thank you. Your next question today comes from the line of Marcus Sangren from Kepler. Please go ahead.

Good morning, guys. I was thinking about you, Mikael. You mentioned that you're going down gradually in terms of capital buffers. Can you give some guidance on, I know that the board is deciding what you will pay out, but since you have gradually reduced this buffer in your accrual of dividends, where are we heading within the range, please?

Yeah, good morning. This is Michael speaking. Yeah, I don't think you should read that much into the adjustment this quarter, but the bank is in a position where we are running the bank very operationally strong, and we have the cost in place and all that, so we have gradually come down in our target range. And when we look at the world outside and we compare what's going on there with how our customers behave in terms of risk, we don't see anything that really sticks out. So our customers, they're in very good shape. And the risk we allocate for is taking care of our internal risk models. So I don't see the need for having 285 now. So we just take it down to 250. And then, as you just said, we decide where to go when we come into the, what we anticipate now for the year, and then we take the decision in the board for how we recommend the for the shareholders on the dividend side when we come into the Q4 report.

Yes, so I understand, but what do you mean by that? You shouldn't read too much into that. You change it because you do change it because you think it looks good. Yeah. So there must be some message in that.

Because it looks good.

So, but let me underline a little bit also. Again, I think bear in mind where we're coming from. We have a, you know, we're coming from a plus 5 or 6 percent, and then we take it, took it gradually down, as you know, and we felt the need to guide a little bit to say that, reinforce that, the message that, yes, we have this interval. It is set, and we are slowly moving into that. Now, as we are within the interval, we don't feel the need to guide that much further on a quarterly basis, so you shouldn't expect us to draw the line anywhere within the range. Now we are in the range, it feels great. Okay, thank you. Thanks.

Thank you. Your next question today comes from the line of Gulnara Sekalova from Morgan Stanley. Please go ahead.

Hi, good morning, and thank you for taking my question. On your cost outlook, please, could you walk us through the key moving parts in your cost base for the next three quarters that we should be aware of? Specifically, where do you think we should work in for further cost reductions versus what could be the areas of additional cost pressure? You previously mentioned that you have completed the centralized cost-cutting program, but do you expect more efficiencies to come through from elsewhere, for example, from the local branches? And if you look at your headcount, it's down 1% quarter on quarter. Do you expect any further reductions in the number of employees to come through? And how should we think about your octagonal contributions going forward?

Okay. Well, maybe my answer will be a little bit disappointing to you because we will not guide on the costs going forward. But it's very true what you say. We have that initiative behind us now. We have no plans of, you know, broadcasting yet another of those initiatives. But rather we are staying very true to our culture, our model, where every employee within the bank is extremely cost dependent. cautious and very sensitive to increases in cost. And this quarter was extremely successful when it comes to cost as well. It was even to me a little bit surprising actually. But again, I think that you shouldn't expect it to go further down. We are at the level now where we are extremely confident that we can run the bank the way we want. We have resources to spend and invest where we want to spend and invest. But this model is extremely decentralized. we will not interfere with our whole markets we will not interfere with our branch office managers so so ultimately they decide so therefore we cannot guide any further and what about the headcount Head-to-head number is basically the same. Maybe a little bit boring answer, but still, if a home country wants to expand in terms of number of employees, they are free to do so if they have good reasons to do it. So I don't foresee any, you know, big shifts either upwards or downwards in terms of full-time employees.

Thank you. And just to add on, when Morten says we, the decision-making for resources both in headcounts and other cost initiatives that could happen throughout branch networks and in-product or whatever. It's not that we don't guide and we don't steer, but we follow them closely. So it's a very sharp following up in terms of cost efficiency and the returns on the investment we do. So it's not do as you like. It's do what you think is necessary, and we will keep very close track on what's going on.

Thank you. Thank you. Your next question today comes from the line of Andreas Haakenson from SVD. Please go ahead.

Thank you, and good morning, everyone. So a little bit of a follow-up here on costs. I mean, you've been reducing costs continuously now for it feels like eight quarters roughly, and I mean, When we speak to quite a few banks, they see that there's a lot of IT investments relating to AI and whatnot. And when we speak locally and we hear people gossiping or talking, it doesn't sound like you are clearly ahead of the pack in terms of those investments. So is it a risk that you have underinvested now over the last years? Because a lot of the savings have come from IT, if nothing else.

The short answer is no, I don't think so. I think it's more of a matter of how you're running your development within the IT space. We were heavily dependent on the consultants for a very long time. We are now at another place in terms of that mix between employees and consultants. So that's one thing. But the other thing is that we are running our IT development in another way now. We have much more control. Generally speaking. In terms of AI, are we lagging behind? Are we the first mover? I don't think it's in our nature to be, you know, the first mover in terms of trying out different AI solutions. That being said, though, I'm extremely confident that we have navigated through these challenges and opportunities the right way so far. So it's a broad area. It opens up a lot of opportunities, not only for the bank, but also for our customers. We're following closely. We have quite a number of initiatives that are all the way from ideas to fully implemented in up and running successfully. So it's a broad range of initiatives. So I'm not worried for that matter.

So as a CFO, it's not that you want more resources, but Michael thinks you need to slow it down still, or what's the balance between you?

No, no, we don't. The balance is very good between my CFO and myself, but just for the record, I totally embrace the technology and the development of that, and that's a very wide area, and we invest largely in things that we need, that we see could fit well into our customers and also for ourselves in terms of efficiency reporting, whatever. So I'm very interested in that, and we have a quite good pace, actually. I don't really have the feeling that you described in your first question that we lag. I don't think we lag. I think we do it in a very balanced way in the way we see it from our perspective. Okay. Thank you.

Thank you. Your next question comes from the line of Shrey Srivastava from Citi. Please go ahead.

Hi, and thank you for taking my questions. My first is, actually on the positive side, you've got the second consecutive strong course of the loan volumes in the UK. What is the profile of the new customers you're attracting versus the UK incumbent? Has this materially changed versus your existing customer profile? Thanks.

uh thank you no no it hasn't changed it's basically the same uh it's it's uh the uh corporate lending growth that you see in uk is is very pleasing facing and the trend is is continuing uh so very pleased with that generally speaking uh in terms of our customers It's no new mix of customers. We are very true to our model in terms of providing financing to businesses that we understand that have strong cash flows, a strong repayment capacity, and all that. So no, short answer is no. We don't have any new features into our model in providing financing to our customers.

Right. Thank you. And my second one is, can you explain this 50 basis points and negative impacts on the CT1 ratio from other factors, including claims on investment banking settlements and rounding off? I don't believe it's ever been called out before explicitly. So I'm wondering why it was so large this quarter. Thanks.

Well, it is large this quarter due to natural reasons, because I think that that business where this derives from is typically slowing down in Q4. So when you compare the two quarters, this looks quite hefty. But it's not. I think if you... take this level, it could be a natural level for the coming quarters. And I think it touched upon it in your question where it comes from. This is coming from the market making in the capital market side of the bank. So this is really short-term claims. These are coming from market making and deals that are between settlement date and trade date, basically. So very short-term claims on our customers. majority in the fixed income space.

Okay, so this was a bit larger than you'd expect, given the seasonality, if you look back at the past few years.

No, I mean, this portion that I just explained is maybe one-third. The other two-thirds are, you know, so many items in so many parts, so it must be considered a regular quarterly volatility, many, many smaller items in that. So I'm not surprised where we are, but again, you have to compare with, you know, a regular quarter, and in this case, Q4 might not be that one. Understood. Thank you very much. Thank you.

Thank you. Your next question comes from the line of Namita Sampani from Barkies. Please go ahead.

Morning, and thank you for taking my question. I just wondered, it's just another quarter where Nordea is growing its Swedish corporate lending by 4% quarter-on-quarter, and Hamels Bank and Volumes are flattish. So I just wondered why you're allowing another bank to take market share from you so much so that you're not even growing the Swedish spending book in the quarter. And just to follow up to that, I just also wondered why there's appetite to grow in commercial real estate in the UK and Norway, but not in Sweden, just based on how you grew this quarter. Are the contested dynamics different in Sweden versus Norway and the UK? Thank you.

Yeah, so first of all, we... We don't allow competitors to take business from us. We compete every day, and you win and you lose some. From my perspective, the volumes that we've seen leaving the bank has mainly been the vast majority goes to the capital market side. So it's not that any other bank is competing with us and we do not have the capacity to compete with that. So that's how it is. And I'm not going to comment on Nordea's growth. I don't know what they do there. But I think growing the lending book, when you have market shares like we do in Sweden, you tend to grow, as we said before, in line with the real economy growth in this country. If you want to grow more over time, you need to be very aware of pricing and risk. And we are conservative in that sense. So we follow our customers. If they invest, we will grow with them. And we will gladly compete and take business from our competitors. But in general, we grow in Sweden with our very, very strong corporates and private individuals there. And if you look at the market right now when it comes to corporates, what we see from our perspective when we talk to our customers is that they are a bit reluctant now to invest, both when it comes to investing in factories and production, but also invest in in real estate right now. So it's a bit on a standstill due to the uncertainty in the surroundings. And when it comes to the private individuals in Sweden, we see a small pickup when it comes to, you know, buying new houses. And we have quite a strong inflow when it comes to that market, when it comes to the transition market when they buy houses. So we don't see a problem with this. In Sweden, we follow our customers when they grow and when they're not growing. When it comes to the, as you probably noticed in the UK and the Netherlands, we have the opposite. We have a quite strong growth there because the market shares we have is quite low, and that's what you should expect, and that's what I'm expecting with high ambition in these countries.

Sorry, could you just comment a bit on the differences in the commercial real estate UK and Norway versus Sweden? Is it more contested in Sweden?

No, I think there's competition everywhere we are because we're a very strong and transparent country with strong competitors. So I don't think there is any difference there.

Thank you very much.

Thank you. Your next question today comes from the line of Sophie Peterson from Goldman Sachs. Please go ahead.

Yeah, hi. Here is Sophie from Goldman Sachs. Thanks a lot for taking my question. I was just wondering how we should think about the net interest income in the other division, given that it was up 41%, I think, quarter and quarter. Could you just comment on kind of what's the normalized run rate? Are there any headwinds or tailwinds we should kind of be mindful of? And also, I know you're doing a guide on rate sensitivity, but if you could just help us kind of think about how we should model potentially higher rates in Sweden and also elsewhere in Europe, what the kind of moving parts are. Thank you.

Yeah, a number of questions there. And the sensitivity to policy rates, yes. Obviously, when we have, as we had in this quarter, policy rates turned down late in the previous quarter, we will have an effect. And generally speaking, as you know, we benefit from higher rates rather than lower. But in the meantime, we have lag effects that you know of when these rates are cut. It varies a little bit between countries, but yeah, generally speaking, we should expect now that, okay, policy rates were expected to go down further in UK and in Norway. Now we're not so sure anymore. Some say flat. Some say even a little bit of a pickup. Obviously, we will have an impact of that. it will take a little bit of time to bleed through that effect through the books, as with all banks, I guess. So that's where we are, and we don't guide any further than that.

But in terms of the other divisions, do you have any guidance on how we should think about the contribution from there? Because it's very difficult to do more on a quarterly basis, plus 40%. So is there any way we could kind of think about how to think about the kind of volatility in this division going forward?

Yeah, this is Peter speaking. You can say that there are mainly two reasons. One is within the treasure department, where actually both of these two items are within the treasure department. And it goes up and down in between quarters, and it's connected to what's allocated out to the different segments. On a group basis, everything of course nets out, but occasionally you allocate out more for central treasury and sometimes you allocate out slightly less. And then furthermore, it's also a result of what you generate in our liquidity portfolio, i.e., the returns on the assets we have in the liquidity portfolio, which means that it can go up and down somewhat in between quarters. But I think overall, you should see this more of relating to components that generally are sort of intertwined with the allocations out to the respective segments.

Okay. Okay. Thank you.

Thank you. Your next question comes from the line of Ricardo Rivera from Mediobanker. Please go ahead.

Thanks. Thank you. Good morning, everybody. Thanks for taking my question. Steven, last time cut price in September, so say around six months ago, would you say that now the balance sheet on the asset and the liability side has absorbed the last cut made by the risk bank six months ago, or should we expect a little bit more tail in the coming months? Thank you.

Yeah, yeah, generally speaking, yes. I think we have seen most of the effect, not all, but most of the effect for sure, so that's the short answer.

Thanks. And let's assume for a second that short and right, I mean, where they are, I mean, time or years are a little bit that I just suppose nothing of that is eventually visible in these second numbers. I don't say so. Am I right in saying so?

I'm very sorry. I didn't catch your question fully. Would you be able to?

Yeah, sure. The time of three months was a little bit higher, especially in the month of March. Let's assume for a second that that remains. I think it was 9 or 10 basis points higher in the month of March. Let's assume that that stays for a while. It is fair to assume that in these sets of numbers, we have not seen anything from this 9 or 10 basis points higher level on Cyborg three months.

I think it's what we usually say. I mean, the reason for us being silent here is that it's difficult to give you a straight answer to that question. I mean, obviously, as we always say, that there are tons of factors that play in when we talk about the development of net interest of funding and margins. The STIBOR is, of course, one component. But how a particular stable movement in between months or quarters directly will affect the NII is very difficult to guide on. And as you know, we prefer to stay away from guidance. I'm sorry, Morten, please carry on.

No worries, carry on. Thank you.

Okay. Thank you. Your next question today comes from the line of Emerald Princelle from Nordea. Please go ahead.

Hi, thank you for taking my question. I know we touched upon this, but just to double check here, what do you need to see for Swedish lending growth to meaningfully pick up in the next few quarters? I mean, we're expecting Swedish GDP to grow maybe 2.5%. Should we therefore see a reading to you that you ought to grow 2.5% in Sweden, or what's a reasonable way of looking at this going forward?

Thank you. Yeah, great question. Yes, I would love to grow 2.5%. That would be perfect for us. And as Michael alluded to earlier, we have seen one or two tickets leaving the book in this quarter, not to other banks, but to the bond market. That happens. It can happen. And what will it take for us to really set off the corporate lending? Well, I think – and we've been talking about this quite a bit also during previous quarters – Generally speaking, we will need the economy to pick up speed in terms of the recovery phase that we are in. And everything that is disturbing that picture is obviously not good for business. So if we have globally, even if it's not evident in our books, but the appetite or the demand for credits... needs to pick up speed. That's where we are. We are not growing on our own. We are growing with our customers. So if they have a need, then we support them. Obviously, it's not more fancy than that.

Thank you.

Thank you. Your next question today comes from the line of Johan Ekblom from UBS, please go ahead.

Thank you very much. I just wanted to pick up on some of the earlier comments you made around cost and AI, right? So I think in response to one question you said that the staffing decisions are made at a branch level and at the same time you feel like you're doing kind of enough in terms of technology and AI, but When we think about that, I mean, surely technology and AI are investment decisions that had to be made at a central level, and the benefits of AI are expected to largely come through in the form of lower staff needs. So does that create a tension in your decentralized model? Do you think you are as well equipped to reach the benefits of AI Maybe some of your peers that run more centralized business models.

so you want uh thank you for the question i i appreciate that because this is actually a very good point when it comes to decentralized decentralized way of working and resource resources that refers mostly to the to the to the branch business and when it comes to the decision making in terms of infrastructure program ai investments which is obviously a larger ticket That's been taken care of within the management of the different areas, but also, of course, with the head of IT. And we discussed that, both me and Morten, when it comes to these large investment programs that we run to make sure that we don't have any problem with holding back on time when it comes to develop new facilities, new prospects for doing business online. or creating efficiencies. So this is not a decentralized way of working. What we should do comes from business and from IT. And then Morten and I and Anton Keller, head of IT, makes decision when it comes to the more heavy investments in this. So it's not a decentralized way of doing what you like when it comes to IT investments.

But do you not need... full buy-in from the organization on adoption to make the investments work.

Yes, but that's not a problem because if the reason is correct and right and logic and good for the bank, everybody will buy in. That's up to us to really make sure that the people understand why we do this. And I don't have any, not once have I felt or heard that there is going to be difficulties in explaining the rationale when it comes to IT investment in Spain, because that puts the bank in a strong competition position, which will be necessary all the time for a company to grow. So I don't think there is any problem with that, actually.

Thank you very much.

Thank you. Your next question today comes from the line of Max Jakob Kruse from Bernstein. Please go ahead.

Hi. Thank you. Just one question then. So this quarter, you hiked your mortgage rates very late in the quarter and stag was moved earlier. Could you just talk a bit about what you saw in the quarter in terms of timing effects and maybe if you could touch on as well any kind balance sheet hedge offset to have there.

Thank you. We saw none of those effects is the short answer. So, yeah, that's it. I'm sorry. How is that?

I thought your list price would be determining the kind of role of the negotiated rates or the rates on mortgages. and obviously your STIB or any kind of slots in the STIB would have moved. So why would you not see any impact?

We reset the interest rate for mortgages the first of April to start with. So it's first every month is the cycle, if you will, where we reset these interest rates.

I'll just add the price we get from the business when we do business with our private customers when it comes to mortgages is not – the discussion stems from the list price, but it's not where we do business. So the cost for our branches, when it comes to, the funding cost for our branches, it's volatile. It comes from where the market rates are. And they will then push and they do business where they find there is a profitability. So the list price is just the way we start with the list price. We never do business on list price. So the volatility in short rating short interest rates are taken care of in the day-to-day business on the branches.

So just to clarify that, so the stable moves are, the stable moves in the quarter, you say your pricing on the list price changed on the 1st of April because I guess your list price changed at the end of March. But I understand that your front book is a negotiated rate. But surely, as people roll towards, if I have a, if I have negotiated the rate, that will move with the list price. That is, it will not move, that plus the discount will be the roll. So, I don't quite understand how you can have Stibor moving up and list price is staying stable without having any impact.

So when you roll your three months interest rate period, we have another discussion with the customers, and then we set the new price for the next coming three months. So I don't really understand your concern there.

Maybe I'll . Yeah, thank you.

Thank you. We will now take our final question for today. And the final question comes from the line of Andreas Harkinson from SEB. Please go ahead.

Yeah, thanks. And sorry, some follow-up since we can only ask one question. So a follow-up and a real question, and it's back to, I think it was Namita, about the commercial real estate exposure. I mean, you're one of the most commercial real estate heavy banks around. And if we look in this quarter, the only growth, It's coming from commercial real estate, I think, in all markets, while other corporate banking is declining. Is that a strategy that you're happy with, given that, I mean, the profitability of a CRE loan is normally lower than other types of corporate banking, given what you can do around it and so on? So are you steering the bank in this way, or is it just happening to work out like this?

we so unless you know we don't steer the bank in which customer to pick and choose that's for the branches to do if they find it suitable or they find the risk the risk suits as well we have product that that that could solve problems for for a corporate warrior or real estate company We do that. So it's not a steering from my side. This is the way the bank is run. We make sure that our branches are in a position to compete, and then they choose which counterpart they want to do business with. And this is how the balance sheet ends up in that case. So it's not a choice from my perspective on where to do business. We try to compete on all segments. We compete on... on industrials or we compete on commercial real estate business. It's up to the custom, to the branches to do that, to choose.

Yeah, that's fine, but the branches is quite significantly steered by a cost income ratio and want to keep costs low as you discussed earlier. But if they would then go after some other types of corporates where the margin could potentially be thinner and the cost income ratio would be higher and then the benefits of doing some, Other types of business could be taken in the markets division in Stockholm. So is the branch really the one that would drive a higher profitability type of lending since they are driven by costs?

Yes, I say they are because what we do when we do business on the ancillary business, for example, within FX or other parts of the investment bank, that's been taken care of by uh refund if you put that way to the branches so everything it comes down to the branches pnl anyway so that's just good so eventually sorry but you took it eventually but you may might have to live two years with a low margin until you do that business because you have to be committed to the company and so No, no, that's not how it works. So you get instantly repaid from the investment bank when they do their trades or their interest rates, derivatives or whatever. That comes the month after. So that's not the way it works when you stay at the bank.

Okay. Then finally, on your lowest deposit ratio in Norway at around 300%, if rates now start to go up in Norway, which seems to be expected, is that a positive or negative for you guys?

It will eventually be a positive thing, Andreas, but it will take a little bit of time to adjust, obviously. So, yes, but it's positive long-term, yes.

And we will immediately benefit from the deposit side, of course. That will give a boost. But then it's all about adjusting the lending book as well to the new market rate.

Yeah, we're thinking that some of the very deposit-rich banks could afford to compete on the margin on the lending side given that they make so much more on the deposit side. Would you guys have flipped either way around?

Yeah, but that's the way it has been for many decades now when it comes to the business and how we compete in always, so that's nothing new.

Yeah. Okay. Thank you.

Thank you. That was our final question for today. I will now hand the call back for closing remarks.

All right. Thank you, everyone, for all the questions and for those of you who listened in. And as always, you know, you can always reach out to the Investor Relations Department for any further questions and follow-ups. With those words, we wish you all a very good day. Thank you very much.