Swedbank AB (publ)

Hello and welcome to the Swedbank Third Quarter Report for 2020. Throughout the call, all participants will be in listen-only mode, and afterwards there will be a question and answer session. Today, I'm pleased to present Annie Ho, Head of Investor Relations. Please go ahead with your meeting.

Thank you, Keith. And good morning, everybody, and welcome to the presentation of Swedbank's Third Quarter 2020 results. With me in the room today is our CEO, Jens Henriksson, our CFO, Anders Karlsson, and our CRO, Rolf Markvart. The format of the call will, as per usual, begin with our opening comments, followed by Q&A. So without further ado, I'll hand over to Jens.

Thank you, Annie. Good morning, everyone, and welcome to the call. I am very proud today to present another strong quarter for Swedbank in uncertain times. Now, for the last past 20 years, I've almost every year attended the IMF's annual meeting in Washington. And this year, it was a bit different because it was digitally. And the picture that emerged was very clear. It was all about COVID, COVID, and Trump. And sometimes I heard somebody mention Brexit. I have said that in this kind of crisis, the economy goes through three phases. Mitigation, restart, and then budget consolidation following the crisis. But it doesn't mean you will automatically go from phase one to phase two to phase three. Sometimes you take a step backwards, going back to phase one, and then you walk up the ladder again. This quarter, we've seen signs of recovery. But after a calmer phase in the pandemic during the summer, cases of COVID seems to be increasing again. Now, the IMF also sees signs of recovery in its latest forecast. But the IMF still forecast a drop in the global economy by 4%, 4.4% this year. The crisis is deep. So far, governments and central banks have met it well, but it's important to maintain this and continue to support the economy. The recovery will take time and it will be difficult. And the effects of the COVID-19 crisis will linger for a long time. Now, the economic crisis is created both by lockdowns and the effects of voluntary social distancing. Therefore, the economic risks will remain as long as the health risks are still there. Next year, IMF expects global growth, but again sees risk of setbacks due to new outbreaks. In Sweden, we see recovery. but it would take time before the economy is back at the level before the crisis. This year, GDP is expected to decline by 5% and in 2021 to grow by 3%. And there is still a great uncertainty surrounding the spread of the virus and the economic development. We follow the developments closely and are prepared in case the number of COVID-19 cases rises rises and it becomes more volatile again. Now, for the bank's customers, the situation began to stabilize in the quarter. We see in our card transaction data that consumption has climbed to level just below last year's. And we continue to be there to support our customers if needed. And we have a close dialogue with our customers in the most affected sectors. A strong trend during this quarter was that savings increased significantly. Deposit flows continues to be strong. And we have approved amortization exemptions for over 70,000 customers. Among the bank's private customers, we saw higher activity in the housing market, while companies held back and borrowed less from the bank. Now is what you're looking for, and now let's get to the result. It's another strong quarter in uncertain times. Total income was 11.6 billion kroner during the quarter. Net interest income was stable, even though it was somewhat lower than in the second quarter. But it's the second best in at least the last five years if you compare on net interest income. Commission income rose, and this was due to rising activity from consumer spending and rising equity markets. Net gains and losses on financial items stabilized after a volatile first half of the year. Other income improved because of higher income from our insurance business, Intercard, and our saving banks' holdings. The underlying costs are developing according to plan, but the costs connected to the investigations have been lower than expected this year. On the other hand, we increased the number of staff, and the lion's share of the new hires this quarter have been recruited to work on preventing suspected money loaning. During the third quarter, we make further credit impairment provisions of 425 million The economic development is better, but we do not take this into account due to the continued significant uncertainty. Our return on equity during the quarter is 14.3%. This is below our target of 15%, but it's a strong result in uncertain times, and costs as a share of income are quite stable at 0.41%. and we have a robust margin of 380 basis points to the Swedish Financial Supervisory Authority's minimum common equity Tier 1 capital ratio requirement. Now, the Board of Directors is still considering the issue of a dividend for 2019. We want to pay a dividend, but we follow the development and take regulatory authorities' assessment into account and pay attention to how the pandemic develops. Swedbank continues to report strong earnings and stable capital and liquidity buffers, and we stand ready to support our customers in these uncertain situations. I must take the opportunity also to say a few words about our work to prevent money laundering. We continue to work very hard to remedy the shortcomings that the authorities and our own investigation have pointed out. Carrying out our AML action plan is a big task. And during the quarter, 28 points were carried out, And in the end of September, 99 points of the 244 remained. And here we can see the progress that's been made in the AML action plan. Of the 244 points in the action plan, 145 are completed and 19 remain to be started. And according to plan, 63 points will be carried out during 2020. and we will continue to work with 36 points during the coming years. And I'm sorry to disappoint you, but this is the last time I will give an account of our program externally. During the fourth quarter, we will deliver on the Swedish and Estonian FSA's requirement, and then what remains to be done in the 244-point program will become a part of our regular work. This doesn't mean that our work against money only ends. Quite the opposite. And we have very high ambitions when it comes to preventing it. I have said that we are at the beginning of the end when it comes to our historical shortcomings. And we've gone through a tough period with investigation. And we're working hard with the action plan, compliance, and governance of the company. And we've also paid our fine to the Swedish FSA. But at the same time, we know there will be more work to be done when it comes to past events. In September, we received a notification from the Swedish FSA about an investigation into the events from the time when the issue of money laundering surfaced in media reports, and our work with U.S. support is continuous. And I don't have any estimate today of how long the investigation may take. We want to be there for our customers. And during the quarter, we continue to make life easier for them with digital services that meet their everyday needs. Just four examples. We've launched a new youth app in Sweden, which has become very popular. It focuses on the demand among young people for a simple way to monitor their expenses and account balances. We've listened to what our customers want to do digitally and launch new services, for example, chat and automate Q&A on the website and more digital customer meetings. And our customers, they want simple and secure services, and therefore, we have launched a simplified login to mobile bank ID with a QR code. In these COVID-19 times, many customers express a need to keep track of their spending. and we've launched a tool that calculates and helps the customers with their everyday expenses. Now, this autumn, it feels even more exciting than usual to be the CEO of Swedbank. We have roots that stretch back to the 19th century, and this year we celebrate 200 years. Now, the first savings banks in Sweden opened on the 28th of October in Gothenburg in 1820. Since then, we have always been on the customer side as Sweden has gone from being a poor farming society to one of the most modern countries in the world. One thing I brought with me from the IMF meetings was how much focus there was on climate change. And the IMF proposes large investment initiative as a part of the build-up cases. Now, Swedbank is already in tune with this. The long-term sustainable is the long-term profitable. And the corona crisis has shown us how true that is. And our tradition to give customers advice on how they can save to build a stronger economy, generation after generation, starts with the young. And that I hand over to the young Mr. Karlsson who will now dig deeper into the numbers.