Swedbank AB (publ)

Good morning, and thank you for joining our presentation of Swedbank's first quarter 2023 results. My name is Annie Ho, Head of Investor Relations, and in the room with me today is our CEO, Jens Henriksson, our CFO, Anders Karlsson, and our CRO, Rolf Markvart. Let's begin, as usual, with our presentation, and then follow up with a Q&A session. And with that, I hand over straight to Jens.

Thank you, Annie. And a warm welcome to this presentation of Swedbank's result for the first quarter of 2023. And it's a very strong result in uncertain times. The quarter was defined by the war in Ukraine, slower economic development, rising interest rates, and turbulence in parts of the banking sector. In this, Swedbank stands strong. Our liquidity is strong. Our capital situation is strong, our credit quality is good, and our proven business model delivers. Swedbank is a sustainable bank, and a sustainable bank is a profitable bank. A few weeks ago, the world's central bank governors and finance ministers met at the annual spring meetings in Washington, D.C. And the IMF is forecasting global growth below 3 percent this year. But the uncertainty is unusually high. The rapid transition from a long period of low rates to high interest rates is creating problems and vulnerabilities. The growth in Estonia, Latvia, Lithuania is fluctuating around zero. And in Sweden, our economies expect a drop in GDP of 1%. Inflation has begun to fall in all our home markets, but from very high levels. As a result, real wage growth was sharply negative in 2022 and will continue to fall in Sweden 2023. In Sweden, employers and industrial unions nevertheless reached a two-year collective bargaining agreement with annual wage increases of 3.7%. And this is a major success for the Swedish wage formation. And with very strong public finances and competitive industry, Sweden will be in a strong position when the economy turns around next year. And in these uncertain times, Swedbank delivers a strong quarterly profit of 7.6 billion kronor and a return of equity of 17% with a cost-income ratio of 0.37%. Compared with last quarter, net interest income increased by 9%. The margin on deposits continued to rise, but at a significantly slower pace. The margin on mortgages in Sweden continues to fall during the quarter by 14 basis points. Net commission income increased by just over 200 million. Net gains and losses was again strong, and other income was up. Expenses decreased by 80 million due to continued cost control. On the other hand, we reported an administrative fine from the Swedish financial supervisory authorities of 850 million kronor in the quarter due to a mistake during an IT change in one system a year ago. In addition, we have reserved 40 million as we now can assess the financial consequences of our discussions with the U.S. Office of Foreign Assets Control, which have been ongoing since 2019. Swedbank's capital position is strong, and we have a buffer of 390 basis points relative to the capital requirement. During the quarter, the annual general meeting decided upon a dividend of 9 kroner and 75 euro to our owners, savings banks, insurance companies, mutual funds, other investors, individual savers and foundations that in turn distribute funds to projects that makes our societies stronger. Half of our return is reserved for our owners and the other half is used to develop our business. Our credit quality remains good due to our thorough and conservative origination standards. And the provisions for individual exposures amounted to 10 million kronor in the quarter. But due to the worsening macroeconomic outlook, we have credit impairments of around 800 million in the quarter. And beyond what the model tells us, our export adjustment has been raised by 200 million. As a result, this extra reserve now totals close to 2 billion kroner. And our exposure to anything property-related is in line with the bank's strategy and risk appetite. Our customers have taken, and continue to take, measures to handle a worsening of the economic conditions. Cyber threats continue to be an important issue in society, and we are well prepared. Investments and hard work with our IT systems have produced results. The bank's digital availability is above target. Digital fraud is a societal problem that hit many customers. And that is the reason we, together with other Swedish banks, have launched the campaign Svårlurad, or Hard to be Scammed. The work to reach a sustainable return on equity of 15% by 2025 is underway. One way will be through helping our small and mid-sized corporate customers to grow sustainable. And to better meet their needs, we have reorganized the bank's corporate services. Consequently, large corporate and institutions, LC&I, is now changing name to Corporates and Institutions C&I. During the quarter, corporate activity varied by country and sector. In Sweden, corporate lending increased slightly while it decreased in Norway due to a drop in utilization of revolving credit facilities and our Norwegian oil portfolio. Also, we had a client transfer to our strategic partner, SR Bank. And this is in line with what we communicated in our 1525 plan. In the Baltics, the demand for business loans is stable. We are focusing on existing customers and are there for them while maintaining a thorough and conservative lending origination standard. Corporate deposits increased slightly on a seasonal basis, while deposits from private customers decreased. Savings accounts with interest rates are attractive for our customers. In Sweden, on-demand savings accounts pay 1.1%, while you, for instance, can get an 18-month fixed-term deposit that pays more than 3.5%. That's a strong offer in tough competition. And we are keeping pace with the market and, as always, are committed to having the best full service offering. We are proud of our extensive savings options and have been given renewed vote of confidence by the ITP Occupational Collective Pension Plan. And there we can now provide new customers with advice on a broad range of topics. The mortgage market in Sweden is essentially at standstill, while mortgage volumes are still growing slightly in Estonia, Latvia and Lithuania. The competition is tough in all our four home markets, but we are maintaining our leading positions and pricing strategy. And in a shrinking mortgage market, we focus on our existing customers. During the quarter, we have seen an increase of amortizations, extra amortizations. And as a bank firmly rooted in the Swedish savings banks movement, we embrace this. And we are certain that it will benefit us in the long term. Our customer promise is to always provide customer guidance on their terms. As you know, sustainable personal finances are always based on knowledge. At the same time, our financial health index shows that many people are feeling financially constrained or vulnerable. And we would like to see more people becoming financially stronger by balancing their expenses, building a savings buffer, adding insurance protection, and saving for retirement. We have therefore set as a target that we at Swedbank by 2030 want to enable one million people in Estonia, Latvia, Lithuania and Sweden to strengthen their financial health. And we will reach that target by meeting more customers face to face and greatly increasing the number of digital advisory sessions with practical advice. That work is already underway, according to 1525, and we are providing easier access to more advice and digital channels on savings, pensions and insurance. And our investment in a new cloud-based communication platform now delivers results, with shorter telephone queues and stability in Latvia. And that platform will now be rolled out in all our home markets during the year. Swedbank's climate position is clear and fully aligned with the Paris Agreement's 1.5 degree goal. And as a financial player, we have a responsibility and also great opportunities to contribute to climate transition. We have studied the potential to improve energy efficiency of properties in our home markets. And this would contribute both to European energy security and reaching the EU's climate targets. In February, I had the privilege, together with the Executive Director of IEA, to inspire and discuss with all the EU's energy ministers at their informal meeting in Stockholm. I pointed out that with investments it will be possible to forcefully reduce energy consumption for buildings in our four home markets. And here, we at Swedbank can make a difference. In Estonia, we are working with the university to offer our corporate customers the opportunity to train sustainability specialists. In Latvia, we have the business council focused on sustainability. In Lithuania, the focus on sustainable innovation in a program we launched together with Rocket. And in Sweden, we have established a collaboration with HEMA to enable more households to buy solar panels or a sustainable heat pump. During the quarter, we have also facilitated the payments of the government's electricity support to nearly 4.3 million households in Sweden. And our award-winning virtual assistant has handled half a million customer queries relating to the payments of the government's electricity support, resulting in quick responses and efficient processes for both customers and the bank. Swedbank fulfilled the assignment quickly. securely and according to plan, and we are now preparing for the next payment. Of this I am very proud, as I am of the quarterly result, and that means that it is time to give the floor to our CFO. Anders Karlsson, the floor is yours.

Thank you Jens. And this has indeed been another good quarter This has indeed been another good quarter, with a return on equity of 17%, or 19% if we exclude the fine, and earnings per share growth of 11%. So let's go into the financials in more detail, starting with deposits and lending. Customer deposits were stable and there was a positive FX impact of 6 billion. Volumes in private savings accounts were stable in Swedish banking, while transaction accounts decreased by 7 billion. This was driven by increased cost of living and extra amortizations compared to last quarter, as well as net inflows into equities and funds on the back of a positive stock market development. We continue to see migration from on-demand savings accounts to term savings, and in this quarter it amounted to 11 billion. Deposits in Baltic banking decreased by 6 billion, excluding FX, due to seasonality. In Q4... We saw large increase from salary bonus payments and distribution of government funds. In the corporate segment, deposits were up with an increase in short-term deposits of 23 billion in large corporate and institutions and a decrease of 10 billion in Swedish banking due to higher OPEX and financing costs. The total loan portfolio decreased by 10 billion, excluding a positive FX impact of 3 billion. In Swedish banking, 4 out of the 7 billion decrease was from private mortgage lending. The trends from last quarter continue, where new mortgage market volumes are very limited, and extra amortizations by our customers have been on a higher level than usual. In Baltic banking, mortgage lending increased by 1 billion, excluding FX, while corporate lending was stable. In large corporate and institution, the decrease of 4 billion, excluding FX, is driven by Norway, with repayments of RCFs in the property management sector, client transfers to SR Bank, and a small reduction of the oil portfolio. In Sweden, corporate lending in LC&I increased slightly. Now looking at the revenue lines, which were all higher quarter on quarter. Net interest income increased by one billion quarter on quarter. driven by a continued expansion of net interest margin as a result of higher deposit margins in Swedish and Baltic banking. Overall, lending margins were lower for private and slightly higher for corporates. The factors impacting NII are similar to those seen over the last couple of quarters, increasing market rates and the level of pass-through we can maintain on our lending and deposits. In terms of outlook, our macro research team forecasts further rate hikes in the first half of the year from the ECB and the Riksbank, even after the one we saw yesterday. Let me reiterate our belief that the NIM expansion is expected to narrow the higher the policy rates go. In this context, we will continue with our pricing strategy and strive 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 all key commission lines were higher. Card commissions were higher thanks to MasterCard discount of 100 million during the quarter. Asset management performed well on the back of higher average stock market levels. In Sweden, Swedbank Rober saw inflows of 5 billion, which mostly went into equity funds. And over the quarter, Rober increased its total asset under management market share from 21 to 21.5%. Securities and corporate finance improved due to higher ECM and DCM activity. Turning to net gains and losses, which was strong? Fixed income and FX sales and trading performed well on the back of high client activity, and within Treasury the key positive component came from revaluation effects of funding-related swaps. Other income increased by 32 million, primarily driven by a revaluation effect resulting in a higher net insurance in Baltic banking. Total expenses ended at 6.4 billion, excluding the fines that Jens mentioned. Expenses were 5.5 billion, which is 80 million lower quarter on quarter. Our underlying cost development is as expected. We have strict cost discipline. We have an investment plan. And inflation has been the key headwind. You can see, if you compare this quarter with the first quarter 2022, an increase of cost of 12%. But stripping out a couple of items affecting that comparability, such as the Baltic winter allowance, which was 90 million, ending in March, FX, which amounted to around 110 million, and restructuring costs related to paychecks around 60%. The reasons for the increase were higher salaries, IT maintenance and IT depreciation. This is in accordance with what we communicated previously. The cost-income ratio went from 0.35 to 0.37 or 0.32 if you exclude the fines quarter over quarter. Now over to you, Rolf, to talk about asset quality and credit impairments.