Svenska Handelsbanken AB (publ)

Good morning everyone and welcome to this presentation of Handelsbanken's result for the second quarter and the first half of 2026. The second quarter was yet another solid quarter for the bank. Operating profit was 6.7 billion and the ROE almost 13%. We saw business growth with lending, deposits, and asset under management growing in the quarter. Both NII and expenses were stable, and fee and commission grew to close to all-time high, mainly thanks to continued strong progress in our savings business. Income reached 13.5 billion, and with expenses of 6 billion, the cost-income ratio was 44%. Asset quality remained solid and the credit loss ratio was zero. And as always, the financial position of the bank was robust. After deduction of anticipated dividends for the first half year of 4.77 krona per share, equivalent to 82% of the profits for the period, the CET1 ratio was 250 basis points above the regulatory minimum. In other words, within the target range of 100 to 300 basis points above the regulatory minimum. We see over and over again in customer satisfaction surveys that customers attribute a great value to our way of supporting them. As long as there is a clear customer demand for our relationship-driven model, we will continue to strive at further strengthening our capacities in the branches even more. Just like we always have done over our 155-year-old year history. Handelsbanken operates with a business model that some might consider quite unique today. We believe in being close to customers and in long-term relationships with strong credit worthy customers. But Handelsbanken's model is not only customer relationship oriented, it's also run with a prudent risk appetite and always with a long-term focus. This model has generated very stable shareholder value over time regardless of external factors such as financial crisis or different types of macro or geopolitical disruptions. The shareholders' equity per share plus dividends has over time grown by on average 14-15% per year. And the stability in this growth is equally as important as the growth itself. Thank you very much. countries which also have trails of cultural similarities and shared values. These are also countries where we have recognized a very large scope of potential customers for a bank with our model and where we can stand out in our offering and services. And importantly, the cash flow from our customers are also stemming from stable Western European economies. Simply put, markets where the bank can grow profitability with stability over time. Now, if we'll take a closer look at the recent business development in our four home markets. All the home markets recorded improved numbers and overall business growth. Starting with Sweden, accounting for 75% of the operating profits in the home markets. In Sweden, we are the biggest lender combined in the market. Loan volumes have been relatively flat over the past year. Household mortgage lending has grown, but the corporate lending volumes have been slightly down. When we look at the corporate business in Sweden, we would have been more happy if we had seen a pickup on the lending side. But at the same time, there are a few reasons why we remain optimistic about the corporate business going forward. First, as part of the bank's everyday managing of risk and housekeeping of the loan portfolios, some corporate customers are not on our books anymore. This means that the influx of new corporate customers were not visible in the aggregate volume development. Secondly, the interaction and dialogue with corporate customers have picked up materially over the spring. Increased customer activity has many times been a leading indicator of forthcoming customer demands for loans and other services from the bank. Thirdly, other business volumes with corporates, namely deposits and asset under management, have shown a positive development. Deposits overall are up in Sweden, but the key outlier when it comes to growth is seen in the savings business, which I'll come back to more on that shortly. Operating profits in Sweden grew by 4% in the quarter, the cost-income ratio improved to 34% and the profitability increased to 16.3%. Now in the UK, which accounts for 13% of the profits of our home markets, we have for the past year and a half seen a consistent growth in both our household and corporate lending. Deposits have been fairly stable while the asset under management are increasing, as you can see in the slide. UK is the market where we stand out the most in customer satisfaction, which forms a solid base to build profitable growth from over time. Operating profit grew by 11% in the quarter. The cost-to-income ratio improved to 61% and the profitability increased to 12%. In Norway, which accounts for 9% of the profits in our home market, we stated two years ago that we needed to see a better balance between deposits, savings and lending. Over the past year, the lending volumes have dropped, mainly due to increased low margin competition, while deposits have increased. But the key improvement in Norway is seen in the savings business. Over the past two years, the market share of the net inflows into mutual funds in Norway has been materially above the market share of the outstanding volumes. The operating profit increased in the quarter by 18%, the cost-to-income ratio dropped to 45%, and the profitability improved to 11%. And finally, the Netherlands, which accounts for 3% of the profits in the home markets. And just like in the UK, the distance to peers in terms of customer satisfaction is particularly large. Lending growth has been very strong, up 10% compared to last year. Deposit volumes are slightly up. And also here we have a trend now for numerous quarters with strong growth in asset under management. Operating profit increased by 13% in the quarter. The cost to income ratio dropped to 54 and the profitability increased to 11%. I'm having a bit of a trouble with the slides here. So now if we look at the group financials of Q2 compared to Q1, the RE amounted to 13% and the cost income ratio was 44. NII was largely unchanged and down 1% adjusted for the currency effects. Fee and commission grew by 2%, mainly driven by increased asset under management. The customer-driven NFT continued to be stable, amounting to around 500 million in the quarter. But in the NFT, occasionally, there can be some swings relating to market valuation effects on instruments used to hedge risk in the funding and liquidity management. However, the market values of these derivative contracts pull to par over time, meaning that the NFT swings are temporary. In this quarter, we saw such negative valuation effects, leading to NFT dropping to 160 million in the quarter. Other income dropped, but that was entirely explained by the one-off VAT regain of 1.1 billion in the previous quarter. Adjusted for the currency effects and the VAT regain, total income dropped by 2%. Expenses were unchanged, adjusted for octagonal and currency effects. Credit losses amounted to 30 million, which was equal to a credit loss ratio of 0%. Regulatory fees increased by 11% due to a booking in Q2 for mandatory interest-free deposits at the central bank, covering the next 12 months. All in all, the underlying operating profits decreased by 6%, primarily due to the NFT line. Adjusted for the temporary drop in NFT, the underlying operating profit was actually up a touch. Now, if we switch over and look at the first half of the year to the same period last year. ROE again amounted to 13%, and the cost-income ratio was 42%. NII declined by 10%, and 9% adjusted for currency effects. The decline was related to lower margins in the wake of lower short-term market rates. Net fee and commission income, on the other hand, increased by 8%, adjusted for FX effects. The key driver was again the savings business and the strong influence and positive market developments. And all in all, total income dropped by 4% on an underlying basis. The expenses dropped by 1% despite the annual salary revision that comes into force on January 1st each year, general cost inflation and increased spend in IT development. The credit loss ratio was one basis point compared to net credit loss reversals last year. And the regulatory fees were up this year due to the aforementioned mandatory interest-free deposit at the central bank. So underlying operating profit was down 10%, explained by the drop in NII. All the other income lines and expenses were developed very positively. Now, if we move over to and take a closer look at the NII development for this quarter compared to the previous quarter. As I mentioned earlier, the NII was flat over the quarter. It's a positive note that volume growth is now again starting to filter through into the sequential NII development. Increased lending and deposit volume contributed with 90 million or 1% to the NII in this quarter. The net of margin and funding, however, affected negatively by 249 million. And the main reasons for the decline is divided into three parts. In Norway, there is a mandatory notice period of eight weeks before customer rates can be raised. This lag effect affected NII by around 40 million to NII in the quarter. This effect reverses when there is a quarter with flat rates. The remainder of the decline around 200 million can roughly be explained by two relatively equal parts. First, market rates increased and resulted in funding costs increasing more than interest rates on certain assets, such as central bank deposits. There was also an element of lag effect in the sense that repricing of some customer rates come later than the increase of the funding cost for the bank. Secondly, the bank paid out a record high dividend to shareholders of 35 billion at the end of the previous quarter. This means less interest rate generating liquid assets for the second quarter for the bank. Moving on, the day count effect due to one more day in the quarter and the currency effects due to a weaker krona on average contributed together with 156 million. Other effects were minor. Now, the next slide shows the net fee and commission income, how it reached the second quarter with the highest level so far in the quarter and was up 9% compared to last year. The bulk of fee and commission relates to the savings business, especially in the mutual funds business. The positive effects from the strong net inflows into AUM as well as positive market developments increased the savings-related fees by 14% compared to last year. Other fees were stable. Again, we would like to highlight the consistency in the organic growth of the savings business in this bank. The bank's market share of outstanding mutual funds volumes in Sweden is 12%. But over the past decade, the bank has attracted 27% of all net inflows into the market. And for the first six months of 2026, 46% of the net inflows into the Swedish mutual funds markets went into Handelsbanken's funds. Over time, these strong net inflows have added a significant number of customers to AUM. Over the past decade, the bank has seen accumulated net inflows of almost 320 billion, significantly outpacing peers. The success comes not only from an 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 a deep relationship with the customers, parallel to an appreciated offering and distribution in our digital channels. Now, over to the expenses. As mentioned previously, costs are down compared to last year. While staff costs are down marginally and other expenses are down more despite the pickup in the IT development spend. As new technology emerge, such as in the field of AI, it's essential for the bank to embrace the opportunities as we do. The bank invests roughly 3 to 3.5 billion per year in IT development. In Q2, the IT development spend was 6% higher compared to the same quarter last year. As we continuously invest in new IT development, we also continuously roll out new tools in the bank, supporting our advisors in creating business opportunities, enhancing customer experience, and to be able to work more efficiently. Within the very broad space of AI, there is no doubt that there is an abundance of opportunities arising. Today, the bank has several AI initiatives in play, spanning from facilitating simpler tasks relating to administration to more advanced fields such as AML and transaction monitoring, and of course, code assistance. At current, the investments in AI tech fits within the current run rate of our IT spending. Next slide shows our asset quality and credit losses. And over the past decades, credit losses have been very low, which they should be in a bank with Handelsbanken's risk appetite. And the difference compared to peers really shows in the volatile times when there is an economic downturn. The average quarterly credit losses since 2019 has been 3 million SEK per year, equal to 0%. And that includes not only the outbreak of the pandemic, but also sharp swings in policy rates and inflation, the disruptions of the supply chain following geopolitical uncertainties. with the wars in Ukraine and the Middle East, etc., etc. Still, more or less no credit losses underlying the strength of the bank's asset quality. 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 very strong. After an anticipated dividend for the first six months of the year of 9.4 billion, corresponding to 4.77 kronor per share and the 82% of the earnings generated, the CET1 ratio was 250 basis points above the regulatory requirement. The bank is thereby within the target range of 100 to 300 basis points above the regulatory requirement. The strong financial position creates trust and confidence, as well as a prerequisite for continued stable and profitable growth. The bank's exceptional position as one of the world's most stable banks was again confirmed by the leading rating agencies during the first half of this year. In Q2, Moody's also raised their baseline credit assessment rating of the bank to the highest level, A1. This is a level shared with only a handful of banks globally. No other privately owned bank in the world has a higher combined corporate rating by Fitch, Moody's and Standard & Poor's. This is achieved by our long-term, connected, long-term and customer-oriented business model, combined with the low risk tolerance and a very strong financial position. Finally, to wrap up, Q2 was yet another solid quarter for the bank with the ROE of 13%. Business volumes are growing overall, NII was stable, and fee and commission grew, driven by continued strong development in the savings business. The costs are under control and asset quality remains very strong. The capital position is solid, enabling the bank to anticipate healthy dividends equaling 82% of the earnings in the first half of this year. We have satisfied customers in the bank. This quality confirmed by our first position on the savings side in the Kantar Prospera annual survey among institutional asset managers. With those final remarks, we now take a short break before moving into the Q&A session. Thank you so much.

Hello everyone and welcome back. This is Peter Grabe, Head of Investor Relations speaking and with me for this Q&A session, Michael Green, CEO and Morten Bjurman, CFO. As always, we would appreciate if you would ask one question at a time in order to make sure that everyone has a chance to ask their questions. Follow-up questions are of course warmly welcomed afterwards. With that said, operator, 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 go to the first question. One moment, please. And your first question comes from the line of Gulnara Sekalova from Morgan Stanley. Please go ahead.