Swedbank AB (publ)

Good morning, everybody. It's a bright and sunny morning here in Stockholm, so I wish everybody a very warm welcome to Swedbank's second quarter 2022 results presentation. I'm Annie Ho, Investor Relations, and in the room with me today is Jens Henriksson, our CEO, Anders Karlsson, our CFO, and Rolf Marquardt, our CRO. As per usual, we'll start with a presentation and then have Q&A. So without further ado, Jens, please.

Thank you, Annie. And let me also wish everybody a warm welcome to this presentation of our results for the second quarter 2022. A quarter where we once again deliver a strong result in turbulent times. You all know that there are four major events that are shaping our time. The war, the pandemic, inflation and climate change. And they are all interconnected. The quarter was dominated by high and rising inflation, turbulence on the financial markets with increasing rates and falling stock markets and a weaker economic development. Estonia, Latvia, Lithuania and Sweden, all our home markets are affected by the situation with lower growth and rising inflation. But low public debts, public finances in world class, high household savings and profitable companies creates a strong resilience. Looking forward, we see continued rate hikes by Federal Reserve and the Riksbank. The European Central Bank is expected to follow suit later this month. And this sends a clear signal to households and corporates that the central banks will act forcefully to bring back inflation to sustainable levels. Economic growth is expected to slow down during the fall and then stabilize on lower levels coming years. The rate-raising cycle is expected to be aggressive but not long-lasting. The Riksbank forecast their own policy rate to peak at around 2%. In this situation, we are supporting our customers and contributing to the transition as they adapt their business models, energy sourcing and household budgets. In this time, I feel confidence from the fact that we for a long time have had conservative credit origination standards and prepared our customers for higher rates. The new rate environment affects the bank's business and is positive for net interest income. for quite some time with lost money on the large inflow of deposits. Now it turned into earnings. A part of this is shared with our customers as we have reinstated interest in all savings accounts in Sweden. We see a good and stable growth in lending in the segments where we are strong and where we want to grow. And that goes for both corporates and mortgages. Swedbank's profit increased during the quarter to 4.7 billion kronor. Net interest income was 7.1 billion kroner, which is the second highest in the history of the bank. Commission income remains stable and declining income from asset management fees is being offset by higher card income. Net gains and losses are down due to a one-off sale of Danish mortgages. But the underlying level is on par with last quarter's low level due to the continued turbulence in the debt markets. Expenses were according to plan, and the cost cap for the current year of 20.5 billion kroner and 500 million for the U.S. investigations remain unchanged. Credit quality is strong, which is reflected in low credit impairments, slightly lower than the previous quarter. And our exposure to Swedish property management companies is in line with our strategy and risk appetite. The equity market's valuation of these companies have dropped as interest rates have risen. But we are confident in our conservative credit origination standards that during a long time has focused on our customers' cash flow, debt service tolerance, business models, and good collateral. Our liquidity position is strong and we have a significant buffer of 4.6 percentage points relative to the Swedish Financial Supervisory Authority's capital requirement. Return on equity increased in the quarter to 12%. And, as I have announced previously, I will before the year end host an investor day to present our plan on how we can reach 15% return on equity. The focus on internal controls and governance during the last three years is continuously producing results. Fitch upgraded our rating to AA-, noting that we have addressed our historical shortcomings and implemented broad-based changes in our corporate culture, compliance, organization, and risk control. and we continued to invest in infrastructure and availability for our customers was good in the second quarter. Nevertheless, we did have a serious IT incident in Sweden that affected our customers. To make sure this does not happen again, we are improving our IT change management. The geopolitical situation has raised the cyber threat level in all our four home markets. We are cooperating with relevant authorities and are allocating extensive resources to keep our systems resilient and resistant. We shall be there for our customers 24 hours a day, seven days a week. The mortgage business remained strong, and we are the market leader in all our four home markets. We had the conservative and thorough credit process, and the group grew by 11.9 billion kroner in the quarter. But with higher interest rates and increased uncertainty in the housing market, it takes longer for buyers and sellers to agree on a market price. House prices in the Swedish market have dropped during the quarter from high levels with around 2% between March and May. And we expect a continued slowdown during the year. In the Baltic, house prices have continued to rise. As a leading digital bank with physical presence, we continue step by step to adopt secure and established cloud solutions, where we are building flexible services that makes our customers' financial life easier. This quarter, the first functionalities in our new savings platform are being run as a pilot with a group of customers in Sweden. And we continue to develop a comprehensive offering. In Sweden, expense control has been launched for young customers. In the Baltics, children can now be onboarded digitally. And so far this year, we have onboarded more than 30,000 customers digitally. And more than 70% of digital bank visits are now made through the app. And customers rating in the app store kept us on top. the National Debt Office in Sweden has once again entrusted Swedbank to manage a large share of the Swedish state's payment through an effective and proven solution. Our green asset portfolio grew by 14% during the quarter and now holds 53 billion kronor, including new and existing loans that have been reclassified. And ahead of the new sustainability regulation that takes effect in August, we have trained 3,900 advisors to help our customers to understand how their personal choice of investments impacts and contributes to sustainable society. And our focus on sustainability is noted by both our customers and stakeholders at large. Fair Finance Guide's policy report ranked Swedbank as number one among the large banks in Sweden. And Swedbank has reached the highest level diamond in the National Sustainability Index of Latvia. Standard and Poor raised our sustainability rating based on an updated evaluation of the anti-money laundering governance in Swedbank. In Estonia, Latvia and Lithuania, both inflation and activity remained high in the quarter. A transition is underway to adapt to high energy prices, commodity shortages and broken supply chains. And we are supporting this transition by financing the liquefied gas to replace deliveries from Russia. At the same time, we're seeing individuals invest in renovations and solar panels to a growing extent. In the Baltic countries, lending for solar panels was three times higher in May than the same month in 2021. And also, we see that demand for insurance and fund savings is going up. We are proud to be the leading bank in all our four home markets, Estonia, Latvia, Lithuania, and Sweden. And we are focusing. During the quarter, we have entered into a strategic partnership in Norway with the largest savings banks, SR Bank. And with this change, we can give a sharper imprint at a lower cost and a stronger comprehensive offering to our corporate customers. Our focus is our home markets. And with that, I give the floor to our CFO, Anders. The floor is yours.

Thank you, Jens. And now let's go into the details of the quarterly result, beginning with lending and deposits. The total loan portfolio increased by 33 billion this quarter, excluding a positive FX impact of 10 billion. Corporate lending performed well, having contributed with 19 billion to this increase. This was mainly driven by higher volumes in the property management and food retail sectors. Five billion of this were revolving credit facility drawdowns, and the rest were in the form of traditional lending. Swedish mortgages grew by 11 billion, where we continue to be the market leader. Baltic banking lending volumes grew by 3.5 billion, supported by robust new business in private mortgages. Customer deposits were stable overall, having decreased this quarter by 6 billion, excluding a positive FX effect of 14 billion. Private deposits increased by 9 billion, while corporate deposits decreased by 15 billion. Now looking at the revenue lines, starting off with net interest income, which increased substantially and was the second highest quarterly NII ever. The increase was driven by higher volumes and higher deposit margins. which more than mitigated the impact from decreased lending margins and higher funding costs. As I mentioned last quarter, when it comes to NII's sensitivity to interest rate movements, we benefit from higher rates over time. The magnitude of the positive NII impact is dependent on the level of pass-through to administratively priced lending and deposits. And here, we will strive to achieve the right balance between business opportunities, given the economic outlook, and the overall impact on profitability, given our balance sheet composition. When it comes to business dynamics, we have seen a slight decrease in the Swedish housing prices and in the number of transactions. We remain confident that there will be continued growth in Swedish mortgage volumes, but most likely at a lower pace, as there are elements of the underlying housing market dynamics that are still supportive. over to net commission income, which was stable. Card commissions were higher from a COVID restriction free quarter, along with an increase in travel expenditure and higher volume per transactions due to inflation. This, along with increases in corporate finance and securities business, helped to offset the negative impact in asset management from continued adverse market conditions. Turning to net gains and losses, which had another challenging quarter. Sales and trading in both fixed income and FX contributed positively, as did Group Treasury's covered bond buyback activity. However, market rates increased and we saw continued widening of credit spreads negatively impacting the bond inventory in large corporate and institutions and Treasury's liquidity portfolio, reminding you that Treasury's liquidity portfolio will pull to par. and there was a one-off of 54 million from the sale of the Danish mortgage portfolio during the quarter. Other income decreased by 100 million, but please note that Q1 included a provision release of 115 million in the insurance business. A few words on expenses before I hand over to Rolf. Expenses were higher quarter on quarter due to seasonality, higher number of FTEs and the impact of the annual salary review in the Baltics. AML investigation costs for the quarter was 92 million. Our 20.5 billion cost cap and an estimate of 0.5 billion AML investigation costs for 2022 still stands. Any excess FX volatility over the year would not cause us to deviate from our business and investment strategy, as a weakening Swedish krona is positive for our net profit bottom line. I will now hand over to Rolf to talk about asset quality and credit impairments. Thank you, Anders.