Swedbank AB (publ)

Good morning and welcome to Swedbank's 2022 full year and fourth quarter results presentation. My name is Annie Ho from Investor Relations and also on the line is our CEO, CFO and CRO Jens Henriksson, Anders Karlsson and Rolf Marquardt. As this is also the full year report, we will have a slightly longer presentation than usual before we open up for questions. But with that, let me hand over to Jens straight away. Please, go ahead.

Thank you, Annie, and a warm welcome, everybody, to this presentation of Swedbank's result for 2022. It's a year marked by the pandemic, war and inflation. And in these turbulent times, we are a reliable and stable partner. We listen and use our expertise to support and help our customers with advice and financing and contribute to financial stability for society at large. The fourth quarter was characterized by a weaker macroeconomic outlook. Increased prices and higher rates reduce demand as our home markets enters into recession. Inflation rates are forecasted to subdue and policy rates will peak during the first half of 2023. Swedbank is a low-risk bank and our four home markets, Sweden, Estonia, Latvia and Lithuania, are characterized by strong public finances, well-managed firms and resilient households. And in this situation with high energy prices, increased cost of living and a continued global uncertainty, there is a need for stable, sustainable and thus profitable banks. And in these turbulent times, I am proud to present a strong result for the full year of 2022. We have for a long time positioned the bank to benefit from a normalised rate environment. As a result, net interest income was up 6 billion kroner. During the year, margins on mortgages are down while they're up on deposits. The turbulence in the markets and falling asset prices affected net commission income that was down 4%. Other income was up 6%, mainly from insurance-related income. And we control our costs. More than two years ago, in a low inflation environment, we announced a nominal cost cap. And apart from the costs related to the closing of the Danish branch and the winter allowance to employees in the Baltics, we delivered spot on target. Weaker macroeconomic outlook drives impairments, and they were up 1.3 billion compared to 2021, all according to IFRS 9. For individual assessments, recoveries were larger than the provisions. During 2022, we made other impairments for IT systems and goodwill of around 1 billion, and the bank tax landed at the same size, 1 billion. And if the tax were to be removed, this would fully benefit our customers. In total, net profit was up 5% compared to 2021. Our cost-to-income ratio was down to 0.40, return on equity was 13.3%, and earnings per share is 19 Swedish crowns and 43 öre. A sustainable bank is a profitable bank. The returns we generate to benefit our owners, our customers, our employees and society at large. During the quarter, we have delivered in accordance with the plan we presented at our investor day, with improved availability and based on our proven business model and pricing strategy, and we report a profit of 6.8 billion kronor in the last quarter of 2022. Return on equity was 15.8%. Our cost-to-income ratio was 0.36%. And as you see, net interest income developed well. Deposits margins were up, while the mortgage margins continued to be under pressure, down a couple of basis points. Net commission and other income were down compared to the previous quarter, and cost increased in accordance with our plan. We have a strong and stable position. Our credit quality is good, and our proven business model with a thorough and conservative credit origination process delivers. During the quarter, we had credit impairments of 680 million kronor connected to the weaker macroeconomic outlook. Provisions on individual engagements were only 30 million Swedish kronor. Since the beginning of the pandemic, we have held an expert portfolio adjustment above what the model shows. It increased somewhat during the quarter and is now 1.7 billion kroner. Our exposure to everything property related is in line with the bank's strategy and risk appetite. In line with what we communicated at our investor day, we have proactively added on to our risk exposure amount while waiting for the dialogue with the Swedish financial supervisory authority to be finalized. This is prudent and this is transparent. Our liquidity and capital position is strong, and we now have a buffer of 3.4 percentage points relative to the capital requirement. Geopolitical tensions are high, and the debate on threats and cyber attacks continue, and we continue to invest in security. We are stable and well prepared. Our dividend policy is to distribute half of the profit. That is a dividend that contributes to society through savings banks, pension funds, insurance companies, retail and other investors, and foundations, which in turn donate to local sports and cultural activities to help their communities grow. The Board of Directors proposes a dividend of 9 kroner and 75 euro per share. the remainder of the profit is used to grow our business in line with the strategy. In Swedbank, we have, for the last three years, focused on our fundamentals, and this has produced results. I am proud of the plan we presented at the end of last year, Swedbank 1525, where we will grow business and reach a sustainable return on equity of 15% by 2025. We set out four business priorities in Sweden, Estonia, Latvia and Lithuania in line with our core business. First, we are leveraging our proven business model and pricing strategy. Secondly, we are growing our share of wallet for existing customers. Thirdly, we are growing the business in prioritized segments. And fourth, we're improving our availability and operational excellence. And these are priorities that will grow our income three percentage points more than costs on average. And we will not hold more capital than necessary and maintain our focus on credit quality. And that is how we reach our goal of 1525. The Swedish housing market has stalled. Falling home prices and lower turnover increase competition. And we maintain our long-term pricing strategy. We are not the most expensive nor the cheapest, but we have the best full service offering. In Estonia, Latvia and Lithuania, there is a structural underlying demand for mortgage loans from younger generations looking to buy their first home, and this is driving volume. Swedbank has the best full service offering and our many savings options give customers an opportunity to choose what suits them best. We have raised interest rates on our savings account in both kronor and euro as we empower our customers to save for a better future with a good return. In Sweden, savings in fixed income funds increased while it decreased for equity funds during the quarter. At the same time, we see steady interest and growth in fund savings in Estonia, Latvia and Lithuania. In Sweden, corporate lending decreased slightly compared to previous quarter. Activity in the capital market rose, and Swedbank assisted customers to raise capital in the bond markets. A continued focus on our four-home market is an important part of the Swedbank 1525 plan, and we have thus decided to close our branch office in Denmark. Corporate customers will be served going forward through a strategic partnership with Danish Sydbank, and it's a similar solution to the one we had with SR Bank in Norway. And as we pointed out on our investor day, we want to grow among mid-sized corporates. In January, I recruited Bo Bengtsson to be the new head of LC&I. And he has a long experience working with these types of customers, and he will deliver on our corporate strategy and grow our market share in the segment. Swedbank stands in the middle of the digital transformation in society. And for us, it is always our customers that take priority as we develop the bank. And increased availability is also a key part of the Swedbank 1525. In Latvia, as a first step, we have rolled out the cloud-based omni-channel communication platform that makes the next generation of customer meetings possible. New technology now integrates services via branches, telephone, the internet bank and the app. The platform will be gradually launched in our other home market. We have a 200-year history of innovation, and during the quarter we made it possible for customers to use facial recognition or biometrics for identification by mobile phone when customers order their bank ID. And we've also been awarded with two European prizes that recognize this customer value delivered through our virtual assistant. Swedbank has for several years focused on reducing our own carbon footprint through less travel, less postal mail, and more energy-efficient offices. In the quarter, we took a new and important step as we adopted science-based targets for our credit portfolio. And the targets cover five sectors, mortgages, commercial real estate, power generation, oil and gas, and steel. To contribute to a climate-neutral world, our finance carbon emissions will be reduced, as you see on the slide, by between 29% and 59% by 2030. These sectors have been chosen based on their impact on the climate, the bank's portfolio exposure, and available data. Now, Anders, I will turn over the microphone to you. You will do a deep dive into the results.

What an introduction. Thank you, Jens. I'm pleased to dive into the financials in more detail. As I go through the results, I will mention a couple of one-offs. But overall, it has been a really good quarter and full year. Let's start with lending and deposits. The total loan portfolio was stable. Swedish mortgage lending volumes were broadly unchanged. The trends in the housing market, which we saw already last quarter, continued. Both house prices and the number of transactions decreased, while extra amortizations increased as a reaction to the economic outlook. Corporate lending decreased by 4 billion, excluding FX of 2 billion. Lending in LC&I decreased by 2 billion despite a good amount of activity. During the start of the quarter, we increased lending by 10 billion through higher RCF utilization and lending to the manufacturing sector. This was offset by repayments to both RCFs and term loans across several sectors in December. Baltic banking increased lending by 2 billion each in both private and corporate segments. Customer deposits increased by 14 billion, excluding a positive FX impact of 7 billion. deposit volumes were lower in Swedish banking, driven by a decrease of 6 billion in private transaction deposits. We also saw a movement of around 15 billion from on-demand savings accounts to term savings account. Baltic banking contributed with an increase of 25 billion, excluding FX, mostly in on-demand deposits, and mainly due to seasonality of salary bonus payments and distribution of government funds. Elsie and I had stable volumes. Now looking at the revenue lines, starting off with net interest income, which increased by 31% quarter on quarter, The strong development was driven by an expansion of net interest margin, particularly in Baltic banking and Swedish banking. In addition, there was a positive adjustment of the Swedish deposit guarantee fee that decreased by 130 million. In terms of outlook, The view of our macro research team is that during the first half of 2023, both the Riksbank and ECB will raise rates further. But let me reiterate. our belief that the higher policy rates go, the narrower the expected positive differential in pass-through on lending and deposits will become. These market dynamics were already apparent during the latter part of Q4. We will continue our pricing strategy. and aim to strike an optimal balance between volumes and margins, subject to changes in risk, market rates, market growth and competition. Over to net commission income. Where card commissions were seasonally lower, there was also a negative effect of 80 million from adjustments relating to MasterCard. Asset management was broadly stable. We saw a shift from equity to fixed income funds, which negatively impacted income. In terms of Swedish mutual fund flows, we saw net inflows totaling 28 billion, mainly institutional, while retail flows were stable. Corporate finance and securities increased by 20 million thanks to the annual market maker fees. Turning to net gains and losses, which was once again strong, client trading performed well, especially in FX within LC&I. The result in Treasury was positively impacted by FX swaps and covered bond buybacks, which more than offset negative effects in hedge accounting and derivatives valuation. and valuations in the liquidity portfolio improved due to narrowing credit spreads. Other income decreased by 90 million due to lower profit in net insurance and Intercard, while the savings banks continue to perform well. Regarding expenses, we exercised strict cost discipline throughout 2022. Full year underlying expenses were in line with the cost cap of 20.5 billion set two years ago. Total underlying expenses ended at 20.65 billion, a deviation of 0.7%. The deviation can be explained by the 60 million of winter allowance to colleagues in the Baltic countries and the one-off of 80 million relating to the closure of our Danish branch in Q4. For the full year, AML investigation costs total 443 million and the FX effect was 320 million reminding you that the FX effect is positive for net profit. As part of our investor day in December, we stated that we would use a cost-income ratio of 0.4 to support our ambition to reach a sustainable 15% return on equity in 2025. This is therefore a long-term supporting KPI that looks through the annual cycle. Going forward, we will continue to exercise strict cost discipline. Moving to other impairments. As part of the annual impairment test, we have recognized impairments of 681 million relating to Payex regarding goodwill, internally developed software and brand. As we mentioned at our investor day, the card acquiring business in the Nordics has been facing challenges to reach profitability in a market with increased competition and rapid technological development. While it continues to add value from a total customer offering point of view, we intend to implement measures to improve profitability going forward. The Baltic part of the business is, in contrast, profitable, operating within a market where cash-to-card conversion is still occurring. In addition, the Baltic merchant payment operations is an integrated part of overall business banking, and so we will continue to develop the Baltic merchant payment business. Now over to you, Rolf, to talk about asset quality and credit impairments. Thank you, Anders.