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.

Thank you Anders. I would like to start and go back to where Jens started regarding the macro development. We find ourselves in uncertain times. Economic prospects have deteriorated since the second quarter and downside risks have increased. We expect that this may impact us to a certain extent, which is reflected in our updated macro scenarios and provisions. But we can also conclude that we start from a strong position. Our customers, both on the corporate and the private side, generally have good margins to cope with the headwinds in the form of increasing interest rates, inflation, energy prices and related effects. An important foundation is our origination standards, which focus on strong cash flows and on collateral, particularly in property management and mortgage lending. Against this background, we assess that our credit quality remains strong. The provisions for the third quarter ended at 602 million. This exceeds what we have seen in previous quarters, but is explained by the updated macro forecasts and technical adjustments due to the implementation of the new definition of default, which was approved by supervisors during the third quarter. The macro impact was 333 million. This is due to the updated macro scenarios, which were downward adjusted for all home markets. The implementation of the new definition of default added 207 million. This is part of our introduction of the RB overhaul, and it increases the number of customers in default, causing credit migrations, although the underlying credit quality is unchanged. A large part of this is of one-off character. Rating and stage migrations of 171 million were mainly stage 2 migrations. A part of these migrations were connected to the changed macro scenarios. Regarding individually assessed credit losses in stage 3, we released 20 million. The release of 87 million in other is mainly amortizations by customers with elevated risk. Expert portfolio adjustments were unchanged, but reassessments have been made of specific sectors, reducing the reserves for oil and offshore and increasing reserves for property management, manufacturing and retail. When looking at the development for the first nine months of 2022, we can conclude that we year to date have added 835 million in reserves, reflecting revisions of macro scenarios. We have kept the expert portfolio adjustment of 1.7 billion, and we have made net releases on individually assessed exposures of 97 million. Now on to property management lending. Business conditions in this sector was largely unchanged in the third quarter. We take note of the fact that many of these companies have shored up liquidity during the quarter to manage maturities in the coming 12 to 18 months. As mentioned earlier, a key foundation here is our ordination standards and lending strategy, focusing on strong cash flows and collateral. As we specified last quarter, our ordination criteria includes that net operating income should at least be sufficient to cover interest rates and amortizations of six to eight percent. The average debt service tolerance ratio for our 20 largest property management customers exceed 7%, and the average interest coverage ratio is 4.7. On top of that, we have low LTV levels. The average LTV for commercial real estate is 52%, and 55% for residential real estate. This provides headroom in a situation where valuations start to come down. Against this background, the bank is well positioned also under stressed conditions. So with that, back to you, Anders.

Thank you, Rolf. Turning to capital. Our capital position continues to be strong, with a CT1 capital ratio of 18.5%. Our capital requirement rose by around 60 basis points in the quarter, mainly from two effects. The implementation of the 1% increase in the counter-cyclical buffer in Sweden, which resulted in a 75 basis points increase on group level. And we received a new SREP. from the Swedish FSA where the net change to the Pillar 2 requirement and Pillar 2 guidance was 18 basis points lower than previously. Consequently, the buffer stands at around 420 basis points above the minimum regulatory requirements. The capital target range of 100 to 300 basis points remains. And regarding expected future capital requirements in the near term, the counter-cyclical buffer will be raised by another 1% in the second quarter of 2023, as previously communicated. And we are still awaiting approvals for our updated IRB models from our regulators. With that, I hand over to you, Jens, to conclude.

Let me briefly summarize the quarter. We live in turbulent times and we expect a cold and harsh winter. Swedbank stands strong in this situation. We report a profit of 5.7 billion kronor, a 13.9% return on equity with a cost-to-income ratio of 0.38. Our business model for the many customers with savings and financing is now showing its strength. Next time we meet is on December 6th when I will host an Investor Day where we will present our plan to reach 15% return on equity. I can't enough emphasize the importance of the sustainable bank being profitable. It is good for our customers, our employees, our shareholders and society at large. And our societal engagement is substantial. Therefore, I'm very excited that the weekly allowance day is now established in the Swedish calendar. From now on, on October 28th, we celebrate veckopengasdag. And with that, I give the word back to you, Annie.

Thank you very much. Let's open the lines. Operator, would you mind? And before we do that, actually, if I could remind everybody to stick to two questions per turn, that would be great. Great.

We now begin the question and answer session. Anyone who has a question may press star or one at this time. The first question from Komat Lijedal from SEB. Please go ahead.

Yes, good morning and thank you. Two questions then. If we allude one to net interest income and sensitivity and thanks for the split on deposits. Would you say that the NII sensitivity stands for the next coming 25 basis points if we have a parallel shift or has that changed over the quarter? That's the first question. And then I have a question on this new default definition. And you said that this was a one-off character. But should we expect now under going forward that we will have a more volatile development in terms of... classifying default ratios, etc., or how should I read this going forward? Thank you.

Thank you. To start with your first question, you have been provided with the sensitivity to 50 basis points in the Factbook, and you have also been provided with the assumptions underlying that. What you need to play around with yourself is the pass through on the asset side and the pass through on the liability side. What I can say, though, is that it will most likely be more and more difficult to differentiate between lending and deposits as central bank rates are increasing. But again, it's up to you to play around with the sensitivities and to be clear on that, our ambition and we strive for a further expansion of net interest margin. And then over to you, Rolf.

Hi Mats. So a few words on the new definition of default and some background here. So this is part of the implementation of IRB overhaul. What this means and what is the difference with the new definition is that it does contain more automatic triggers when it comes to, for instance, when we have granted amortization holidays and so on. And that would automatically pass some customers into stage three when they become non-performing for born. And what is also important to keep in mind here is that this is part of the implementation and it's actually the first step. that we take when it comes to the implementation of IRB overhaul. What will then happen is that we will gradually start to implement PD and LGD models and so on. And normally what you would have done is to adjust LGDs as a consequence of this. But that is something, there is a timing issue here because that will happen later. And that would partly have mitigated this. When it comes to the future volatility, that's a bit hard to assess, but I wouldn't say that it should increase that very much.

Okay, thank you. Very clear.

The next question is from Magnus Andersson from AVG. Please go ahead.

Yes, good morning. Two questions then. First of all, on volumes, we can see that your appetite for property management loans in Sweden has increased quite significantly since year 21, and you're now at the 15% annual growth rate. So I was just a bit curious how you see the risk-reward situation there, if anything is happening to lending margins yet. And secondly, if you are taking on any new clients gaining market share deliberately or if it's primarily lending to existing names so that's the first one and secondly just to follow up on the sensitivity analysis Anders you used to give us a split between Sweden and the Baltics for the first 50 and the additional 50 basis points. I note that the sensitivity has increased somewhat compared to the situation in Q2.

Thank you, Magnus. It's Jens here. We have a property management exposure in the lending book of 233 billion kronor in Sweden. That exposure is in line with our strategy and risk appetite. And we are confident in that we for a long time have had good credit origination standards and a focus on our customers' debt service tolerance and cash flow. As Rolf said in his introduction, the average debt service tolerance ratio for our 15 largest property management customers is above 7%. And on top of this, we have collateral with an average LTV of 53%. Looking forward, we are ready to support our core customers further if it's in line with our strategy, risk appetite, and leads to well-balanced growth. Anders?

Thank you. Yes, Magnus. Hello. There are a couple of things to keep in mind when you play around with the numbers. But roughly speaking, Baltic banking stands for 1.6 billion of that sensitivity. And what you need to keep in mind are a couple of things. One is that the asset side is six months Euribor, so it's gradually repricing if rates are moving up or Euribor are moving up. And secondly, we have left most, I would say, the lion part of flooring effects behind us. Thirdly, we are actually receiving interest on the excess liquidity. And fourthly, when you play around with the Baltic Banking balance sheet, you need to keep in mind that they typically only have one account in the Baltic Banking. The customers have one account. They do not have us in Sweden, a couple of different accounts. But 1.6 with the assumptions in the sensitivity.

So 1.6 out of?

3.5.

The 3.5 of 3.6. Yeah. Okay. Good. And just sorry to follow up on the commercial real estate there. Is anything happening on lending margins? The new business you're writing now, I guess that there is an uptick from what you have previously in the book.

I think there is prospects for that, but it's gradually coming in. It's not something that you should write home about currently.

Okay. Thank you very much.

The next question comes from Namita Samtani from Berkeley. Please go ahead.

Hi, and thanks. I've got two questions, please. Firstly, Andy, you gave a deposit beta of 7% last quarter. Can you tell us what it is now? And secondly, could you disclose how much of the lending margin headwinds you expect to see in Sweden on mortgages, given mortgage repricing has not really been able to keep up with the rate rises? Thanks.

Sorry, I think I got your question. And when it comes to the lending margins for mortgages, it's down 11 basis points.

And then I think you said something about the deposit beta. I will not guide you on any specific deposit beta. What we are aiming at and our ambition is to pass on more of rate increases on our lending side than on our liability side, i.e. NIM expansion. That is our ambition and that is what you should focus on.

Thank you very much.

The next question is from Maria Semikatova from Citibank. Please go ahead.

Yes, thank you. Two questions from my side. First, on margins, on the slide where you show the impact of margins, is it possible to break it into deposits and loan margins? see what was the magnitude of the negative impact on the lending side. And the second on commercial real estate portfolio, thank you for your comments on the largest borrowers. Just wanted to get a sense of how concentrated your portfolio, maybe you could share. what percentage of the book is to these largest companies in Sweden, and if it's possible to provide how much of post-model overlay is currently for property management companies.

Thank you. I think that breaking down the margins into lending and deposits is a function of where you put the ruler, i.e. internal FTP. My experience with FTPs in a very quickly, rapidly changing interest rate environment is that you get a lot of difficulties with it and lag effects. That's why I'm focusing on the net interest margin rather than talking about fund transfer pricing. So that is my first answer. So when you look at the NII split, you see the margins primarily, if you would like so, with the ruler coming from deposit margins. But the combination of treasury and the margin development is what you should look for. So that's my answer to this question.

And then on to your question regarding the concentration of the CRE portfolio. So I don't have the exact number, but I would say in the range of 35 to 40% of the portfolio is covered by these 20 companies.

And then on the post-model overlay for property management, how much is out of 1.7 billion is for this sector?

So I will soon come back on that one.

Okay, thank you. And just maybe to clarify, I understand your point on internal funds transfer. But when you said that Swedish mortgages margins were down 11 basis points, what funding assumptions do you have on this?

I don't have that on the top of my head. We said that it's down 11 basis points. What I said is, and I think that is important to have in the back of your head, that as rates are moving up, we foresee that We will not be able to differentiate as much as we have been doing during the year so far, but our ambition is to expand net interest margin, i.e. to pass more on to lending than on to the liability side.

And now back on the question, sorry, on the expert portfolio adjustment, 250 million out of the 1.7 billion is related to property management.

Thank you.

The next question is from Andreas Hackensen from Danske Bank. Please go ahead.

Hi and good morning, everyone. Two questions, a bit of follow-up on both, actually. But just having come back to the mortgage margins, and yes, I see that your cover bonds is now 38% of your outstanding mortgages. So it's a significant increase in deposit funding. You're probably the least wholesale funding dependent bank in Sweden now when it comes to mortgage lending. Do you feel you have an advantage when it comes to the pricing side and would you be tempted using that advantage to price more aggressively or you're rather going to see your margins expanding? First question.

thank you andreas you're perfectly correct that we are to a much larger extent than other players funded by deposits so and i think that is beneficial in in on the current conditions we do not have any ambition to change our pricing strategy on mortgages to gain more market share in this environment okay that's clear and then just detail i see that

Stage 2 in CRE has moved up quite a bit, but you haven't seen an increase in stage 2 provisions for CRE. Should that tell us that it's basically just macro assumptions that's driving the change rather than any potential changes in LGD or anything else?

Yes, that's correct.

Okay, that's all. Thank you.

The next question is from Jan Ekblom from UBS. Please go ahead.

Thank you. I can just briefly come back to the net interest income. Just kind of one clarification and one brief question. The sensitivity that you provide, given that the assumptions are static, is the increase quarter on quarter just the reflection of balance sheet growth or is there anything else going on there? And then if we get something from the ECB on changes to to tearing or reserve remuneration is the 100 110 billion excess that you spoke about the baltic the the right number we should think about as uh as being impacted and then the second question is just on the cost i mean we're clearly seeing some headwinds this year. But as we look into next year, what's your thinking around inflationary pressures, etc.? I'm guessing we'll get maybe more at the capital markets day on plans for investments and savings. But if we just focus in on kind of the current cost base and what pressures you see there, that'd be helpful. Thank you.

Well, I can start saying a few words on cost guidance. When we get back and present our plan to reach the 50%, well, you will hear more then, and I'm really looking forward to answer questions then. And on cost guidance for next year, we'll do that either in conjunction with the investor day or Q4. We haven't yet decided.

Thank you. On your first question, I'm not entirely sure I understood it correctly, but if you're talking about the TLRO, it's a very small portion. We have 2.5 billion euros outstanding that we are... We have met the conditions and we are now looking into whether that should be prolonged or not, depending on the terms and conditions. The 110 billion that I talked about is pure excess liquidity that could be placed with ECB.

Thank you. And on the sensitivity, the increased quarter-on-quarter, is that just balance sheet growth?

Yes. Yes.

Thank you.

The next question is from Ricard Strand from Nordea. Please go ahead.

Hi and good morning. Starting off with a question on asset quality. In the Baltics, given the very high inflation environment we have there, could you share your view on the risk you see there to rising loan losses in this environment? Are you more worried about households or corporates and what the key parameters that you focus on, if that's how long the inflation is extended or something else or unemployment or something else? Start there.

Hi, Rickard. Okay, so the development in the Baltic countries with a very high inflation, of course, do put pressure on households and companies to a certain degree. When it comes to private individuals, we have also seen very large salary increases that to a certain extent offset this. So that's the headwind, and that's very obvious, and energy prices are driving here, obviously. When it comes to the lending we have to these customers, the ones that are more sensitive are those that have come late into the cycle, so late cycle lending to a certain degree. But having said that, I think that what we have seen now so far in the figures is actually nothing in terms of of deteriorating payment behavior. It's looking good and stable. And generally speaking, we do not have any worries about that. So margins are good within that sector. And the same goes for corporates. We have seen no signs so far of deterioration. And they have good margins. But having said that, of course, times might get tough.

Thank you. And then second question on corporate margins. I had some of your peers have talked about the potential of repricing their lending book at higher margins ahead, given that the price of money has gone up in the bond market, etc. How do you see that for your corporate loan book? And also, if you could talk about the potential from that perspective, both on the large corporates versus the SME lending you have?

Thank you. I think there are numerous answers to your question. Obviously when markets are now finally, I would say, pricing credit risk at least more correct than they did before, there is obviously a potential for repricing at some point. But if you look at the corporate book, it has a fairly long duration I think the SME book is having a duration of around two and a half years, so that will gradually come into the books if there are possibilities there. On the large corporate side, I think that there are two elements to it. One is new lending, where I definitely see that there is a potential for repricing. The other one is old repricing. revolving credit facilities that were written before this happening where where there will be opportunities when they are up for for renegotiations but there is a mix of these which means that what i essentially say is yes i agree with the prospects but it will take time thank you

The next question is from Markin Leitgeb from Goldman Sachs. Please go ahead.

Yes, good morning. Thank you for taking my questions. Just two on the back of earlier comments on the expectations for further NIM expansion. Just firstly on mortgages, I was just wondering if you could Help me understand how big an impact churn of mortgages is, so essentially mortgages rolling onto a new pricing. How quickly does your mortgage book churn and what is the difference between new business rates and back book rates? And secondly, I was just wondering if you can comment on how corporate deposits are currently priced in Sweden and have you seen any attrition? from on-demand accounts into savings. Thank you.

Okay, thank you. There was a lot of questions in two, so if I forget one, you have to repeat it. But if I start with repricing of mortgages, we have a book which consists in Sweden to 40% of mortgages three months and 60% of fixed. The three months are essentially repricing on a monthly basis throughout the quarter. The fixed one is sort of gradually coming in. So that's sort of a difference. When it comes to your question on competition or churn, If we come back to what Jens said, people are very interested in discussing their financial situation under these uncertainties. People tend to stick with strong banks. We do not see any increase in churn. What we do see is that the market is slowing down. We see that it takes longer time for sellers and buyers to meet. We see prices coming down and we see some extra amortizations. So I would say that the competitive landscape and no campaigning. So at this point, the competitive landscape is not in any way disturbing. On your third question, I think it is difficult to compare list prices with average prices in a fast moving interest environment. But what you can do is you can look, we have increased our list prices on three months, 195 basis points during the year. And then you can compare that to what you see on average prices where you can find that information. And last but maybe not least, we changed our pricing on administratively set lending and deposits at 23rd of September. So that is gradually rolling in during this quarter and had nearly no impact on Q3 results. And then you might have had a fourth question, but I don't remember that one. So that you need to repeat in case I forgot something.

Yeah, I could actually just come back to the earlier point on mortgages. I was just curious. One of your peers made a comment with regards to potential headwinds. in terms of NRI progression arising from mortgage pricing. And I was just wondering if you look at it on a mortgage pricing, less funding cost perspective with mortgages churn, is this a similar headwind for you or due to the lower quantum of covered bond funding, is this less of a concern for you?

I can't comment on what SEB said. The only thing is he defined his ruler. I think that the ruler, i.e. the FTP, is of less interest. I'm looking at an expansion of net interest margin. So I'm coming back to my earlier comments. We will continue to strive to expand net interest margin further, but as rates are coming up, the differential between assets and liabilities in terms of pass-through will be less and less. It will become more difficult in an environment where rates are continuously coming up. That is what I said. But the ambition is quite clear.

Thank you very much.

The next question is from Riccardo Rovere from Mediobanca. Please go ahead.

Good morning, everybody. Thanks for taking my question. I was just wondering, I was looking at the fast book where you provide the funding structure, and I know that deposits are kind of sluggish over the past six months, 1.3 trillion or so, while debt securities and sub-debt is up fairly substantially. So I was wondering if there is any, if there has been any pre-funding on the debt security side, given tight financial conditions, and if eventually sluggish deposits could be linked to, customers starting to erode the deposit base to cope with higher inflation costs and so on, higher spending, or am I reading too much into that? Thank you.

Hey Ricardo, sorry, we're having a little bit of difficulty hearing you, but if your first question was about funding and debt securities increasing, we did do a couple of benchmark transactions in the third quarter. We did a tier two, tenon core five, euro 750 million, and also a senior non-preferred five-year one billion dollars. I hope that answers your first question, but if you could repeat your second part, that would be helpful.

Yeah, this Yeah, the second part was on the deposits that are flat. I was wondering whether you see signs that people, your customers, are starting to erode the deposit base to cope with higher spending costs. Or am I reading too much into that?

Okay, thank you. Then I understand, Ricardo. In the quarter, private deposits in Swedish banking were stable, and private deposits in Baltic banking were increasing. What you saw was corporate deposits going down. So we haven't seen much of what you're looking for, so I think you read too much into it yet.

Yeah, that's very clear. Thank you.

The next question is from Jacob Cruz from Autonomous. Please go ahead.

Hi, thank you. Just first to get back on the mortgage and margin question, could you say something about where the current margins on your the business you're writing, how they compare to the average back book margin that you have. And then my other question was on commercial real estate. It looks like your LTVs that you disclose are quite a bit higher than those disclosed by the other Swedish banks so far. Do you think that these signals that you've written a bit more aggressively or Is this a mixed change, or how do you view that difference? Thank you.

Hi, Jakob. So on the LTV side, so the LTV we have on the 20 largest companies is 46%. So that is in line with what our peers have been communicating the last days here. But then the 52, that covers the complete portfolio. So in my mind, we have not been more aggressive than our peers in this area.

And on your first question, I think we're coming back to this philosophical question about FTP. But my point still is that we have repriced our mortgages consequently, not as much as market rates have increased, but to a fairly large extent. What I'm focusing on is ensuring that the pass-through on the lending side exceeds the pass-through on the combined liability side.

Yeah, but when you talk about the ruler, I guess your back book and your front book would have the same philosophical ruler without having to compare to how other banks may think about it. And could also just check when you talk about these top 15 clients or top 20 in the CRE book, what proportion of the volumes roughly are we talking about here?

So the 15 largest, that is approximately 35% of the total book, and the 20 is a bit further, and I don't have the exact figure.

And on your second question, I don't have that information to you. Okay, thank you.

That was the last question. Then I just want to say that, summarize, Swedbank stands strong. 13.9% return on equity with a cost-income ratio of 0.38. And our business model for the many customers with savings and financing is now showing strength. Looking forward to see you all December 6th. Until then, take care.