Swedbank AB (publ)

Good morning, everybody. Thank you for dialing in to Swedbank's third quarter 2022 results presentation. My name is Annie Ho from Investor Relations, and with me in the room today is Jens Henriksson, our CEO, Anders Karlsson, our CFO, and Rolf Marquardt, our CRO. We'll have the usual format today. We'll start with our presentations and then have Q&A. So please, Jens, go ahead.

Thank you, Annie, and good morning to everyone, and a warm welcome to the presentation of Swedbank's result for the third quarter 2022. We live in truly turbulent times with an ongoing war, pandemic and climate change. And a few days ago, finance ministers and central bank governors from all over the world met at the IMF's annual meetings in Washington. And the tone of the meeting was dire. The global economy is now experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades. Or, to quote the IMF, and I quote, the cost of living crisis, tightening financial conditions, Russia's invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook. The IMF forecast a slowdown of global growth this year to 3.2% and 2.7% next year. And two days ago, our macroeconomists presented their latest outlook. For Sweden, the forecast is an economic contraction of 1.1% next year, while Estonia, Latvia and Lithuania will have zero growth. And growth returns in 2024 in all our home markets. We are facing a situation with great challenges for both companies and individuals, despite resilient home markets with strong public finances, well-managed firms and high household savings. In these turbulent times, Swedbank stands strong. We are helping companies and individuals with advice and liquidity. A sustainable bank is a profitable bank. By being profitable, we contribute to a financially sound and sustainable society. By being profitable, we can support our customers, distribute dividends and continue to develop the bank and contribute to financial stability for our customers and society at large. I am proud to present a strong result in the third quarter with a profit of 5.7 billion kroner. The return on equity in the quarter amounted to 13.9%, with a cost-to-income ratio of 0.38. The bank's positioning and business model gives a strong development in net interest income. Mortgage margins have declined, while deposit margins are up. And at the same time, we are proud to give our customers interest on their savings accounts from the very first krona and euro. We have a long-term perspective on our financing. The ratio between lending and deposit has shrunk from 170% three years ago to 140% today. And this is beneficial for us now that we are on a more normalized interest rate level. Net commission income increased due to higher income from cards and our stable and well-run asset management in Roeburg. Expenses were somewhat up due to a weak krona and high inflation, and especially in the Baltics. And we expect slightly higher expenses for the full year compared to the cost cap of 20.5 billion kronor that we set almost two years ago in a low inflation environment. Credit quality is strong, and it's now that a thorough and conservative credit process is tested for real. And we have not yet seen any material changes. During the quarter, we even made individual recoveries. The impairments of 600 million kroners are macro and model driven. Our management overlay of 1.7 billion kronor, beyond what the model gives, remains in these turbulent times. And our exposure towards everything that is property-related is in line with the bank's strategy and risk appetite. Our liquidity and capital position is strong, and we have a buffer of around 420 basis points relative to the Swedish FSA's capital requirements. The geopolitical tension has grown during the quarter. The public discussion about threat scenarios and cyber attacks is intense, and Swedbank continues to invest in security. We are stable and well prepared. The mortgage business is resilient, despite that activity in prices in Sweden declined in the quarter. In Estonia, Latvia and Lithuania, prices have been stable thanks to growing standards of living and demand for modern housing. And Swedbank is the mortgage leader in all our four home markets, and new lending in Sweden during August was even above our back book. It is worth remembering that the mortgage business has been stable throughout business cycles. Since 1982, 40 years ago, accumulated credit losses have amounted to 1.7 billion kroner. The corporate business has developed positively. Our ability to provide credit and connect customers with the right investor in the capital market has proved beneficial. It is now easier for corporate customers to digitally order account statements, handle card-related issues and access rights. And that gives our advisors more time to spend on qualified advice. Monthly savings are stable and we're working actively with our broad savings offering. This fall, many customers have wanted to talk to us in depth about their financial situation. We are redistributing and adding staff to support them. App visits are steadily rising, so far this year by nearly 30%. Customers like using the mobile bank, and availability in our digital channels remains high. We are a digital bank with physical meeting points. And during the year, we've onboarded more than 50,000 customers digitally, and out of which 12,000 youngsters were added in the quarter alone. Our asset management company, Ruber, continues to gain attention for its sustainability work and is ranked number one in Sweden and the Nordics in Morningstar's sustainability rating. And as the first Nordic bank, we've expanded our framework for sustainable fundings with social assets. We want to help our customers invest in social projects that contribute to society. Fraud continues to be a societal problem that puts customers at risk. And the collaboration and information exchange between us and the police and other government authorities has deepened. And so has the collaboration against money loaning. The economies in Estonia, Latvia and Lithuania remain resilient, despite energy prices pushing inflation higher. Activity dropped slightly in the quarter, but the labour market remained strong. Baltic state-owned energy companies need short-term liquidity to bridge higher costs. For the agricultural and transportation sector, the need for liquidity has also grown. At the same time, we are advising firms that see opportunities to develop services as renewable energy, for example, grows in importance. In spite of volatile markets, we've seen savings through the mutual funds introduced in the Baltics in 2021 continue to rise. And this will in time increase the financial health in all three countries. Our purpose is to empower the many people and businesses to create a better future. And in our Baltic home markets, we now helped over 36,000 Ukrainian refugees to ease their way into society by becoming Swedbank customers. Trust in the bank is strong in Estonia, Latvia, Lithuania, and Swedbank was once again named the most loved brand in the Baltics. In Sweden, customer satisfaction has increased, but we still have room for improvement before we catch up with the rest of the industry. And with that, I hand over to our CFO, Anders Karlsson, to give us more details. 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 28 billion this quarter, excluding a positive FX impact of 5 billion. Corporate lending increased by 19 billion, where LC&I grew by 10 and Baltic Banking by 7. Lending in large corporate and institution was related to utilities, manufacturing and property management. It was a mix of increased revolving credit facility utilizations and traditional bank lending. Baltic banking increased by 7 billion and it was mostly driven by short-term lending to the utility sector. For example, to state-owned companies purchasing natural gas. Private lending increased by 9 billion, predominantly from mortgage lending in Swedish and Baltic banking. Regarding the Swedish housing market, house prices and number of transactions have been decreasing as a natural reaction to the economic outlook. Customers are also being more prudent through increased extra amortizations. We continue to be market leader and this quarter, Swedish mortgage lending volumes increased by 6 billion. Regarding customer deposits, private deposits increased by 2 billion and corporate deposits decreased by 16 billion. So overall, a decrease of 14 billion in the quarter, excluding a positive FX effect of 6 billion. Now looking at the revenue lines, starting off with net interest income, which increased by 18% quarter on quarter. The strong development was driven by higher volumes and an expansion of net interest margin. As I said last quarter, the magnitude of the NII impact from increasing rates depends on how we are executing on our pricing strategy. In doing so, we are balancing between business opportunities given the economic outlook and the overall impact on profitability given our balance sheet composition. We strive to have competitive prices while increasing the net interest margin. And this quarter, we have been able to achieve that. Let me give you some details of the key components for NII development in a more normalized rate environment. Baltic banking is fully funded through deposits. The loan to deposit ratio in the quarter was 66%. The deposit base amounts to around 340 billion, which are administratively priced, while 230 billion of lending is six-month Euribor linked and consequently reprices automatically at rollover dates. Excess liquidity can currently be placed at 75 basis points with ECB. In Sweden, we have around 1,000 billion of administratively priced lending and around 650 billion of administratively priced deposits. And there is a 40-60 split between transaction and savings accounts. Over to net commission income. Card commissions were seasonally higher due to summer spending and travel. This quarter, the economic outlook impacted sentiment in the capital markets. Subdued activity in brokerage and corporate finance reflected this. However, asset management proved resilient and ended the quarter with a stable result. Turning to net gains and losses, which recovered significantly compared to last quarter, This was driven by a reversal of valuation effects from previous quarters in Treasury's hedging operations as well as FX sales and client trading in LC&I. Treasury's liquidity portfolio continues to be negatively affected by widening credit spreads, although to a lesser extent than last quarter. Other income increased by 191 million, net insurance, enter card and the savings banks all performed well this quarter. Regarding expenses, which were slightly higher in the third quarter, in previous quarter we spoke about the FX effect on the full year expenses and how it is positive for net profit. We are also starting to see some impact from inflation on the cost side, especially in terms of increased energy expenses. Amidst this backdrop, we remain committed to transforming and investing in our bank. We have continued to invest in IT resilience and cybersecurity. And this quarter, we also started the implementation of a new cloud-based omni-channel communication platform to improve availability. Excluding FX effects, we now expect the full year costs to be around 1% above the 20.5 billion cost cap that was set two years ago. AML investigation costs, which are excluded from the cost cap and estimated to be 500 million for the full year, were 152 million for the quarter and approximately at the same level year over year. In the quarter, we also had impairments of intangible assets. 263 million relates to an impairment of an internally developed software and 181 million was an impairment of goodwill as a consequence of the revised business model in Norway. Now over to you, Rolf, to talk about asset quality and credit impairments.