Swedbank AB (publ)

Good morning, everybody, and thank you for dialing in to Swedbank's second quarter 2023 results presentation. My name is Annie Ho, Head of Investor Relations, and in the room with me today is Jens Henriksson, our CEO, Anders Felsen, our CFO, and Rolf Marquardt, our CRO. Let's start with our usual presentation at the beginning and then follow up with questions. With that, Jens, I hand over to you.

Thank you, Annie. And a warm welcome to everybody this summer day to the presentation of Swedbank's results for the second quarter of 2023. Swedbank stands strong. We have strong liquidity, strong capitalization and high profitability. And our proven business model delivers. A sustainable bank is a profitable bank that makes it possible for the many people and businesses to create a better future. And we are here for both people and businesses in tough economic times. Inflation has continued to trend lower in our home markets, but it remains at high levels. Although central banks are tightening, the global economy remains resilient. The International Monetary Fund stresses that it is vital to stay the course on monetary policy until inflation is durably brought down to the targets. And that means that fiscal policy must play its part by being restrictive, which implies that interest rates are expected to remain high for longer. Swedbank's profit for the quarter was up to 9.1 billion kronor, mainly driven by NII that increased by 7%. Lending margins on mortgages continue to decrease in this quarter by six basis points, but deposit margins continue to increase, although at a slower pace. Total cost was down compared to last quarter, since costs related to investigations by authorities decreased. The underlying expense increased according to plan due to mainly higher IT costs and marketing. Our cost-to-income ratio was down to 0.31. All in all, our return on equity during the quarter was 20.4%. Our credit quality is solid, and we have confidence in our thorough and conservative origination standards. Total credit impairments decreased and amounted to 188 million. The impairments are mainly model-driven, and if one looks at the provision for individual exposures, they amounted to around 30 million. Our expert adjustments beyond what the model shows is now 1.7 billion kronor. Our liquidity and capital position is strong. And the increased counter-cyclical requirements in Sweden reduced our capital buffers by 70 basis points. But this was partly balanced by our profit net of expected dividends. Our capital buffer is thus 3.5% above the requirement from the Swedish FSA. Our exposure to everything property related is in line with the bank's strategy and risk appetite. And we see that our customers have and continue to adapt to the economic conditions. Corporate business is the cornerstone of our operations because we are the bank for the many corporates in all our home markets. In Sweden, the new organization for corporate institutions, CNI, has begun to have an impact with a clear focus on profitability. Corporate lending was stable while deposit decreased. In Estonia, Latvia and Lithuania, investor sentiment was positive with a strong demand in the energy sectors. Private customers use Swedbank for their savings, and their deposits increased in all markets. In June, we decided to increase rates for all our private customers with deposits in Swedish krona. By that, we give interest on all private accounts for the full amount. Mortgage rates were raised on par. Altogether, Swedbank has a competitive full service offering. In Sweden, the mortgage market was cautious, though housing prices rose slightly. The trend among our private customers holds, and that is they continue to save by amortizing on a broad basis. And we have also sharpened our focus on customer contacts and saw increased volumes at the end of the quarter. In Baltic banking, our green mortgages grew by a little over 40%. And mortgage is a highly competitive business in all our home markets. And we maintain our leading positions. We want to make our customers' financial life easier. And we do that by meeting them where they want. Investments in availability and efficiency is ongoing and great results. For example, the rollout of the cloud-based communication platform in all home market. It is now in place in Latvia, Estonia and Lithuania and in Sweden work is underway. We also see that the digital availability was very good in the quarter. At the same time, we focus to improve availability in the Swedish customer center. And one action is that we have a new customer center site in Umeå. Swedbank's climate position is aligned with the Paris Agreement's 1.5 degree goal. As a bank, we have responsibility and good opportunities to contribute to the climate transition. And we focus on advice and financing to our customers in all our home markets. On the corporate side, demand is growing for loans for sustainable investments, and especially in the Baltic markets. And the financing to build three new large solar energy parks in Estonia is a good example of climate work. In line with our savings bank tradition, we now level up our engagement to contribute to financially sound and sustainable society by supporting local decisions of establishing foundations in Estonia and Latvia. We invest 10 million euro in each country so that the foundations can raise awareness on financial literacy and contribute to financial health. And this is a part of our solid 200-year-old tradition and our heritage from the savings banks. And it is still modern. Modern, that means it's your turn, Anders.

Thank you, Jens. We are pleased to report another quarter of strong profitability with the return on equity of 20% and earnings per share growth of around 8% adjusted for the 890 million in one-offs in Q1. Let me start with a side note. On 1st of May, we restated our 2022 and 2023 numbers to reflect organizational changes that have recently been implemented in line with our corporate strategy presented at the Investor Day. They primarily relate to the transfer of advanced corporate customers from Swedish Banking to CNI, as well as staff transfers between these two business areas and group functions. In addition to the restatements, there were further transfers of loans and deposits during the quarter between Swedish Banking and CNI. There were no effects on group level overall. Now let's go through the financials in more detail, beginning with lending and deposits. The total loan portfolio was stable, excluding a positive FX impact of 15 billion. Total private lending in Sweden had a small decrease of 2 billion, The overall market trends remain the same, with very limited new mortgage market volumes and elevated levels of extra amortizations. Total corporate lending in Sweden decreased by 4 billion, excluding a positive FX effect of 8 billion. In Baltic banking, private lending increased by 3 billion, and corporate lending was flat, excluding FX. Customer deposits decreased by 24 billion, excluding a positive FX impact of 19 billion. Although, private deposits increased in both Swedish banking and Baltic banking, with 5 and 2 billion respectively excluding FX. Corporate deposits in Sweden decreased by 25 billion, primarily due to CNI with a normal seasonal pattern of temporary deposit inflows in Q1, which are withdrawn in Q2. And corporate deposits in Baltic banking decreased by 7 billion, excluding FX. Turning to the revenue lines, beginning with net interest income, which increased by 832 million quarter on quarter, mainly driven by a continued expansion of net interest margin in Baltic banking. Overall, lending margins were lower for private and largely flat for corporates. reminding you that rate changes have an immediate effect on the deposit side, while the impact gradually comes into effect on the lending side. With limited new lending volumes, increasing market rates and our pass-through abilities continue to be the main factors impacting NII. And in terms of outlook, Our macro research team forecast a couple of more rate hikes from the ECB and the Riksbank before stabilizing towards the end of the year, i.e. high for longer. Let me reiterate that the NIM expansion is expected to narrow the higher the policy rates go. In this context, we have a good track record. We will continue with our proven pricing strategy and strive to strike an optimal balance between volumes and margins subject to origination standards, market rates, market growth and competition. Over to net commission income, which increased by 151 million. Card commissions were seasonally higher, Asset management performed well on the back of higher average stock market levels. And in Sweden, Svedbank Robor had net inflows of 7 billion, driven by private inflows, which mostly went into equity and mixed funds. Securities and corporate finance decreased due to lower DCM activity. Turning to net gains and losses. which returned to more normal levels after a very strong Q1. Fixed income and FX sales and trading performed well on the back of good client activity, and in Treasury we saw a reversal of the positive revaluation effects of funding-related swaps from last quarter. Other income increased by 194 million. primarily driven by a stronger performance in the insurance business, Intercard and the savings banks. Total expenses ended at 5.7 billion. Quarter on quarter costs increased in line with the normal seasonal trend. The underlying cost development is as expected. and the cost-income ratio went from 0.37 to 0.31. Regarding costs going forward, the annual headwind from inflation is expected to be slightly higher than assumed in our 1525 plan. On the other hand, the inflation also implies that that interest rates have moved higher and will stay higher for longer than previously assumed. The Lithuanian temporary bank fee was implemented as of 16th of May, adding $325 million quarter over quarter. For the full year 2023, we expect the Q2 monthly run rate to be a fairly good assumption, subject to changes in foreign exchange rates. The fee applies until the end of 2024 and is tax deductible. Now over to you, Rolf, to talk about asset quality and credit impairments.