Swedbank AB (publ)

Hello and welcome to the call. My name is Annie Ho, Head of Investor Relations here at Swedbank. And in the room with me today is our CEO, Jens Henriksson, our CFO, Anders Karsson, and our CRO, Rolf Marquardt. As per usual, we will start with the presentation. And for the Q&A section, if I may ask callers to pose a maximum of two questions each in order to facilitate the call to end at 9.30pm. And with that, I'll hand over to Jens to begin the presentation. Please.

Thank you, Annie. And a warm welcome, everybody, to the presentation of Swedbank's result for the first quarter of 2022. We have a devastating aggressive war in Ukraine and Europe. It has an impact on our customers and it has an impact on us. In these turbulent times, Swedbank stands strong. We are there for our customers and we do business. In our daily work, we contribute to free, open and democratic societies. And we continue to focus on the long term and to be sustainable to provide stability and growth in our four home markets, Estonia, Latvia, Lithuania and Sweden. Four major topics affect us all. Geopolitics, climate change, the pandemic and inflation. And they are all interconnected. During the weekend, IMF said that global economic prospects have worsened significantly since January. But despite the pandemic and the war, growth is still positive in our home markets. The transformation of the energy market due to both geopolitics and climate change brings both threats and opportunity. The pandemic is still there, but focus has changed since February 24th, and inflation is rising in the shadow of the war. Several central banks have responded by raising rates, and that will be positive for the bank since we currently are subject to negative central bank rates for excess liquidity. At the same time, businesses and households will have to live with higher financing costs and lower purchasing power. Thanks to high household savings, there is large buffers. The result in the quarter was 4.6 billion, in line with the fourth quarter excluding the bank tax. That means a profit of 4 kronor and 10 öre per share. NII was up a tad, mainly due to higher volumes. Mortgages increased by 10 million, and corporate lending grew by a strong 32 billion, where of the large bulk came in towards the end of the quarter. Net provisions decreased due to seasonally lower card commissions, less activity in the capital markets and lower equity prices. Net gains and losses declined due to the turbulence in the financial markets and other income increased due to the result in the insurance company and enter card. Costs was seasonally lower and came in according to plan. The cost cap for 2022 remains at 20.5 billion, excluding the cost related to U.S. investigations. Return on equity was, as usually in the first quarter, way down by the capital held for upcoming dividends and was 11.4%. Our target of a 15% return on equity remains unchanged, and before the end of the year, we will present our plan on how we can reach the target. Swedbank is a profitable bank with a strong capacity to generate capital. It gives us the strength to support our customers in turbulent times, just as we did during the pandemic. Swedbank's capital and liquidity position is strong. We have a buffer relative to the Swedish FSA's capital requirement of 4.6%. Credit quality remains good, and for the quarter, provisions amounted to 158 million. Model effects due to weaker macroeconomic development explains it. And we have still a buffer of 1.7 billion to handle indirect effect of both the geopolitical situation and the pandemic. As you all know, dividend to shareholders is important to us in Swedbank. During the quarter, a dividend of 11 kronor and 25 öre was decided and later paid out. We are proud of that. Swedbank stands strong. We have control of our risks. We are managing sanctions, cyber risks and AML with high attention. Our focus and my focus in recent years on governance and control has strengthened our capacity to handle the challenges of today. Four US authorities and one Estonian authority are still investigating us and we have no information on when they could be finished or the size of any possible fines. Our diligent work with a stable and resilient IT system is paying off, and availability increased during the quarter. For quite some time, the Baltic markets have reoriented their economies away from Russia and towards the European Union. The invasion of Crimea accelerated this. Their export of goods of national origin to Russia accounts for 3-4% of their export. Lithuania imports its natural gas through an LNG terminal. In Estonia and Latvia, the transformation away from Russian gas is ongoing, and we participate with financing. Inflation is high in all countries, but there are strong indications that it will slow down next year, both due to base effects and reduced demand. The business in Estonia, Latvia and Lithuania is resilient and important to us in Swedbank. It stands for 20% of our income. And we remain the market leader in all three countries. We are the biggest in mortgages. We're number one for corporates in Estonia. And we are competing for the same position in Latvia and Lithuania. Swedbank does not have any operations in Russia, Belarus or Ukraine. Our direct exposure to Russia is now below 10 million kronor. And we've practically stopped doing transactions with Russia. As war and sanctions redraw the map of oil and gas markets, the argument to quickly reduce our dependencies on fossil fuels are only getting stronger. And to us, this means growing business opportunities. Sustainability is the strategy of the bank, not because we are environmentalists, but because it has proved to be profitable for 200 years. In the annual report, we have provided an initial calculation of Swedbank's finance emissions. Well, that is the climate impact from our customers with the focus on the real estate sector. a sector where we have a strong position and participate in financing the transformation. We see that our diligent origination standards contribute to a strong credit quality. Our real estate clients have low loan-to-value ratios, healthy cash flows, and a focus to improve their energy efficiency. The mortgage market in Sweden continues to grow. We are the market leader with a back book market share of 23% and in the top in new lending. And during recent months, our front book market share has been around 17%. We continue to work hard and provide our customers fast service and feedback as well as competitive pricing. Customers that digitally apply for an increase of the mortgage can now track their loan applications and receive updates digitally. And we remain proactive with customers and we have the market's best overall offer. We are a bank that focuses on advice for financial health. We can be reached through the app whenever and wherever our customers want. We have launched new tools so that our advisors can work more efficiently with savings and pensions. The number of digital advisory sessions is going up. App visits to our digital guidance for better financial health increased in the quarter by 20%. And when a personal meeting is part of that advice, we see customer satisfaction and sales volumes rise. During the quarter, a new concept was launched at our branches to guide customers to the right channels for day-to-day banking. This frees up time for personal advice. So when inflation rises and interest rates follow suit, Swedbank is there for our customers and help them to plan financially in uncertain times. The demand from our corporate customers has been high and we are providing advice on their financing mix. And we are in close dialogue with our agricultural customers. We have developed solutions for those struggling with liquidity. During a dark quarter, Swedbank has been there and supported our customers. In Estonia, Latvia, and Lithuania, Swedbank is the most loved brand. In Sweden, we are not that strong, but we are the quickest climber, and we're named by YouGov Sweden as a star brand. And we are closing in on our customer satisfaction targets. That is positive, but challenges remain. Customer satisfaction in Sweden is below our target, and work is being done. We are improving response time in the customer center. We're supporting customers who use the app so they can bank simply and conveniently. We're listening to our customers to deliver on our own customer promise and to provide ultimate value to our shareholders. And who better to give us the number to show us just that? Our CFO, Anders Karlsson. The floor is yours, Anders.

Thank you, Jens. Now let's go into the details of the quarterly results, beginning with lending and deposits. The total loan portfolio increased by 42 billion this quarter, excluding a positive FX impact of 4 billion. Corporate lending performed well, having contributed 32 billion to this increase. LC&I originated 30 billion of this, mainly in the end of the quarter. Half of the increase was traditional bank financing, and half were event-driven transactions and short-term lending, which are expected to be repaid over the course of this year. Swedish mortgages grew by 8 billion, and we continue to capture market-leading front-book market shares. Baltic banking lending volumes grew by 2 billion, supported by continuously robust new lending in private mortgages. Year over year, corporate lending increased by 8% and private lending by 6%. Customer deposit inflows continued this quarter, increasing by 18 billion, excluding a positive FX effect of 5 billion. This was mainly driven by a 25 billion increase in deposits in large corporate and institutions, of which 10 billion is of a temporary nature. Deposits in Baltic banking decreased by 12 billion, corresponding to seasonal patterns. Year over year, private deposits, which tend to be more sticky, increased by 10%. And overall, lending outpaced deposits this quarter. Now looking at the revenue lines, starting off with net interest income. which increased slightly. The underlying NII increased by 30 million as higher average lending volumes offset slightly lower lending margins. NII from private mortgages and Swedish banking was flat as higher average volumes mitigated decreased margins. Deposit margins were neutral on a group level. An FX benefit of 52 million partially offset a negative day count effect of 70 million. Regarding the ECB liquidity facility, we booked the third part of the income this quarter, while the first two parts were booked last quarter. The fourth and final installment will be booked in Q2. Reminding you that the fourth quarter also included a negative one-off effect in the leasing business. For a number of quarters, we have had a muted development in our NII despite strong lending growth. One key driver is that the large inflow of deposits has outpaced lending growth. In a negative rate environment and over the last two years, deposits have grown by 271 billion, while lending has grown by 93 billion. In addition, we have seen pressure on mortgage margins in Sweden from high competition and mixed shifts in an environment with a negatively sloping list price curve during most of last year. However, this composition of our balance sheet in terms of lending and deposits puts us in a beneficial position in an environment with increasing rates. When it comes to NII sensitivity to interest rate movements, we will benefit from higher rates over time. The magnitude of the positive NII impact is highly dependent on the pass-through to administratively priced lending and deposits, where deposits in general are less rate sensitive. Let me illustrate potential outcomes by giving you two examples of what could happen if we had a parallel shift of 50 basis points along the term structures in all our four home markets. The first example gives plus half a billion on an annual basis and assumes that we have zero pass-through to administratively priced lending and deposits. Thus, the effect comes from the fact that we have more IBOR-priced assets than liabilities, and that the residual is financed with equity. The second example gives approximately plus 3 billion. In this case, we assume full pass-through to administratively-priced lending and deposits, except for transaction accounts. Before I move on to NCI, just a quick word about the new line in the P&L, which we present after credit impairments. We have moved the resolution fund fee from NII to this line, where the new bank tax will also be reported. Consequently, we have restated historical NII in our disclosure. Over to net commission income, which has indeed been impacted by global events this quarter. Card commissions were seasonally lower. Income from asset management decreased by 176 million from a high level last quarter due to market development. Day count effects of minus 40 million and performance fees of 34 million from last quarter. Corporate advisory fees declined compared to a very strong last quarter as deals were postponed on the back of new political uncertainties. NCI year over year has developed well. having increased by 7%, while assets under management increased by 6% on the back of an overall improvement in consumption levels and market conditions compared to a time when we were in the midst of the pandemic. Turning to net gains and losses, fixed income trading improved compared to last quarter, even though market conditions have been difficult, as customer activity in general was good. The result from Group Treasury was lower. Derivative valuations related to the bank's funding activities were impacted negatively by significantly increasing market rates in the quarter. The liquidity portfolio in Group Treasury and the bond inventory in LC&I were impacted negatively by widening credit spreads. Other income increased by 80 million from a combination of higher income in net insurance and anti-card, as well as a provision release in net insurance. A few words on expenses before I hand over to Rolf. Expenses were lower quarter on quarter and according to plan, due mainly to seasonality of staff, IT and marketing costs. AML investigation costs for the quarter was 55 million. While the FX development has been positive for EPS, benefiting our income lines and overall profit, it has impacted expenses negatively by 60 million this quarter. Nevertheless, our 20.5 billion cost cap An estimate of half a billion for AML investigation costs for 2022 still stand. Any excess FX volatility over the year would not cause us to deviate from our business and investment strategy. I will now hand over to Rolf to talk about asset quality and credit impairments.