Swedbank AB (publ)

I am Maria Kahneman, Head of Investor Relations here at Swedbank. Welcome to our third quarter results presentation. With me today is our CEO, Jens Henriksson, and our CFO, Jon Lidefelt. Jens and Jon will start with the presentation, and then there will be an opportunity to ask questions. Jens, I hand over to you.

Thank you, Maria. Swedbank has once again delivered a strong result in uncertain times. The geopolitical situation, continued uncertainty about tariffs and trade, and the increasing concerns about weak public finances across the world are slowing down global growth. Twice a year, the world's economic policy decision makers meet at the IMF, The sorting point for their discussions is the World Economic Outlook, which was published a week ago with the headline, and I quote, global economy influx, prospects remain dim, end of quote. With that said, our four home markets have healthy fundamentals. strong public finances, low government debt, innovative companies, profitable banks and low interest rates. In Sweden, we see signs of improvement. Our economists forecast growth of 2% next year, while the Swedish government is more optimistic and projects 3%. In Estonia, economic development is still subdued and we are seeing some recovery in Latvia and the development in Lithuania continues to be strong. In these uncertain times, Swedbank stands strong and is well positioned for sustainable growth and profitability. We can today report a return on equity of 16% and earnings per share of 7,53 kronor for the third quarter. During the quarter, income increased while cost decreased. Our cost-to-income ratio was 0.35. Strict cost control is producing results. We had the conservative and 4-0 lending process, and during the quarter we saw credit impairment reversals. We had the robust ability to generate capital, and we had the very strong capital and liquidity position. During the quarter, Standard & Poor's upgraded Swedbank's credit rating. In their decision, they highlight the bank's improved governance, regulatory compliance and risk management. Furthermore, during the quarter, the U.S. Authority SEC ended its investigation into the bank's historical shortcomings without enforcement. We are delivering according to our plan Swedbank 1527. And as you know, it focuses on three areas. Strengthen customer interactions, grow volumes and increase efficiency. Our customer focus is producing results. We have further improved our availability during the quarter and now 70% of incoming calls in Sweden are answered within three minutes. And we are thereby getting closer to our target of at least 80%. We consistently work to improve our digital offerings and we see that more and more customers do their everyday banking through our app or the internet bank. We have also increased our efficiency. Our employees can spend more time meeting customers and less time on administration using new AI tools. And the number of advisory sessions per employee has increased. During the quarter, we lowered mortgage rates due to lower policy and market rates. Mortgage loans increased by 5.2 billion kronor and mortgages in Sweden distributed through our own channels accounted for 4.2 billion kronor. Deposits from private customers are stable and we continue to be close to our customers and give them advice. Strengthening their financial health is an important task for the bank. Savings and pensions continued to develop positively. Swedbank Robo saw a net inflow of 9 billion kronor in our four-home market. As announced in August, we want to acquire the remaining part of Entercard. Thereby, Swedbank will have the largest card business in the Nordic Baltic region. This will develop our business and strengthen our customer offering. In Lithuania, the business climate remains strong. In Sweden, Estonia and Latvia, economic activity is improving, but from low levels. During the quarter, corporate lending increased by 7 billion kronor. Our customers are showing a high demand for sustainable investments. 36% of the bonds arranged by Swedbank during the quarter were classified as sustainable, and our sustainable asset register has now surpassed 150 billion kronor. We now own 20% of the investment bank SP1 markets. And during the quarter they started up in Sweden. It's an important step in further developing our offering to corporate customers. In addition, our customers will get access to an expanded range of equity research. In the Baltic market, we launched the card payment feature Click2Pay, a secure and convenient service that simplifies payments. Jun, it's your turn now to deep dive into the financials.

Thank you, Jens. We delivered a strong result in the third quarter, with volume growth across markets and increasing income. We have continued our work with focus on long-term shareholder value through business growth and cost efficiency. Cost to income ratio was 35% and return on equity 16%. Lending volumes grew in the quarter and the increase came mainly from Baltic banking, where we continue to see solid growth on both the private and corporate side. Mortgage volumes in Sweden sold through our own channels increased by 4.2 billion, while the savings banks reduced their mortgage volumes on our balance sheet by 1.6 billion. We see continued results of our increased efforts on customer interactions and availability, as we are capturing a larger share of the market. In August, our front book market share through owned channels was 16.4%, still below the back book market share of 17.8%, but the development continued in the right direction. Also for the corporate business in Sweden, the positive development continued with increasing volumes. though somewhat offset by repayments related to a couple of larger exposures. Customer deposit volumes were stable in the quarter. In Sweden, private deposits decreased somewhat from a high level as the second quarter was impacted by seasonal inflow of tax returns. In Baltic banking, deposit volumes were overall stable. Net interest income decreased by 0.9% compared to the previous quarter, driven mainly by lower mortgage rates. Lower deposit rates impacted NII in Q3 with a full quarter effect. while lower rates on the lending side were gradually rolled in during the quarter. Higher business volumes had a positive impact of 94 million in the quarter. Wholesale funding costs continued to decrease in the quarter. Liquidity was, however, reallocated from the market's business, increasing liability volumes, but also positively impacted central bank placements, and hence had an overall neutral NII effect. Day count and FX effects impacted NII positively in the quarter. The Swedish central bank cut policy rates effective as of the 1st of October, and ECB cut rates effectively as of the 11th of June. Hence, there are further repricing dynamics in play. Reminding you that the positive effect on the funding side materialize ahead of the negative effect on the asset side. Furthermore, that it takes approximately three months in Sweden for a rate cut to roll in and six months in the Baltics. We will continue with our pricing strategy on both sides of the balance sheet and maintain focus on the balance between volumes and long-term profitability. Net commission income increased in the quarter, driven mainly by strong asset management commissions. Mutual funds had a net inflow of $9 billion, and combined with a positive stock market performance, increased asset under management to $2,471 billion. Card commissions were seasonally higher in the quarter following higher spending abroad during the summer months, while brokerage and corporate finance commissions were seasonally lower. In addition, we saw positive development in commissions from insurance products. Net gains and losses remained at a high level in the quarter and amounted to 847 million. Income was strong, driven by high business activity, mainly within fixed income. Positive revaluations supported the Treasury result. Other income increased by 2.7%. Net insurance decreased driven by both normalized levels of claims compared to the low levels we saw in the second quarter and the effects from revaluations of future cash flows. One-off transfer in connection with the establishment of SB1 markets on the 1st of September also contributed. The results from partly owned companies supported as well as increased income from services to the savings banks. As a reminder, our collaboration with the savings banks include cost sharing for IT development and administrative services. The savings bank's share of the cost is included in Swedbank's total cost, and you can see the corresponding income as services to the savings banks here under other income. Total expenses were 1.4% lower. Fewer employees, together with seasonally lower staff costs, IT maintenance and consultancy costs contributed. As announced in conjunction to the Q2 presentation, a VAT recovery of 197 million related to the year 2016 was received in the beginning of the third quarter. In line with previous patents, costs will be seasonally higher towards the end of the year. Costs for the full year 2025 is expected to be around 25.3 billion at current exchange rates. This includes the already received VAT recoveries related to the year 2016, 2017 and 2018 amounting to 576 million. It also includes 200 million lower temporary investments this year and an estimated 300 million lower costs due to FX. Asset quality is solid. During the quarter, there were reversals of credit impairments amounting to 398 million, which corresponds to an impairment ratio of minus 8 basis points. The reversals are mainly driven by improved macro scenarios, and we have continued to reduce the post-model adjustment, which now stand at 364 million. Individual assessments resulted in a 568 million increase, driven by a few larger corporate exposures. At the same time, repayments and reversals of previously written-off exposures resulted in a release of 451 million. I feel comfortable with our strict origination standards and the solid collaterals that secure our lending. Our CET1 capital ratio was stable at 19.7%. In the 2025 SREP, our Pillar 2 requirement was lowered by 40 basis points, and our CET1 capital requirement now stands at 14.8%, meaning we have a buffer of around 480 basis points above the requirement. The reduction by the Swedish FSA stems from two parts. Firstly, 20 basis points are related to the new CRR3 risk weights for standardized credit risks. This has an impact on the Pillar 2 add-on that we shall hold until the new Swedish IRB models are approved. Thereby, approximately 20 basis points of the expected capital relief of at least 50 basis points from the new IRB models has now materialized. We continue to expect most of the remaining impact from the IRB model updates to materialize during next year. The Swedish FSA also approved parts of our non-maturing deposit model resulting in 20 basis points lower capital requirement for interest rate risk in the banking book. To conclude, we continue to focus on growth and efficiency. We deliver strong profitability while maintaining prudent underwriting standards, strong liquidity and capital positions. Back to you, Jens.

So let me now sum up the quarter. Swedbank once again delivered a strong result in uncertain times. Income increased, cost decreased, and we saw credit impairment reversals. Return on equity for the third quarter amounts to 16%, cost to income to 0.35%. Our credit quality is solid, and our capital buffer is very strong at 4.8%. Swedbank is well positioned for continued sustainable growth and profitability and we continue to deliver according to our plan Swedbank 1527. We will focus on strengthening customer interactions. growing volumes and increasing efficiency. We create value for our customers and our shareholders, and our customers' future is our focus. With that said, back to you, Maria.

Thank you both very much. We will now begin the Q&A session. A kind reminder to please limit yourself to two questions per turn. Operator, please go ahead.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. We have the first question from Martin Ekstad, Handelsbanken. Please go ahead.

Thank you. Can you hear me?

Yes, we can.

Excellent. So could you just give us a bit more on the SB1 markets initiative? You mentioned it launched in Sweden every quarter. Is it now fully staffed up on the Swedish side, or are all the business lines up and running? Thanks. That's the first one.

To be honest, I don't know if it's really fully staffed up. A lot of persons have gone over and I think they're doing some great jobs. I think they're fully running. And the key point is that this is a partnership that offer our corporate customers a strengthened offer. through access to a larger set of investment banking services and sector expertise. And both corporate and private customers can also benefit from access to a broader range of equity research. So this is great.

Okay. Okay. And then a second question, if I may, then. I'm looking at your NII sensitivity on page 20 of the presentation deck. So in the past, the MII elasticity, so to speak, of a rate shift have been balanced around the plus-minus side. But your calculation example is now tilted towards seeing a larger impact if rates come down than if they go up. And I just wanted to confirm, this is due to some deposit rates now having reached zero and therefore not able, at least commercially able, to go any lower, right? i.e. it's the floor of the zero percent rates that you mentioned on the page coming into effect. Is that correct?

You're perfectly correct, Martin. That is the reason.

Understood. Thank you. Those were my two questions.

The next question from Magnus Anderson, ABG. Please go ahead.

Yes, good morning. My first question is how you view the prospects Potentially being able to increase the thin household mortgage margins in Sweden now that short-term rates are no longer expected to fall. And related to that, what market growth rate do you think is necessary for this household mortgage margin pressure to ease? And secondly, just how you have lending growth now 4% quarter-on-quarter in the Baltics. FX adjusted how you view the sustainability of lending growth in the Baltics now that the leveraging that's been going on for nearly 20 years finally seems to be over. And related to that, how you tame the inflationary tendencies, the impact on the cost-based taxes.

Thank you for that. Two good questions. The first one is, let me say a few words of the overall situation in the mortgage market and reminding you that we are the market leader in all four home markets. And first, just me repeat that in the Baltics, we see continued strong growth in mortgage volumes. In Sweden we've seen that the housing market remains muted, although we see some gradually increasing mortgage market growth during 2025, and you see that we're now picking up some momentum. And the reason for that is that we are more active, we have shorter waiting times and quicker to resolve questions. There is a strong competition out there and we want to grow. And when that competition abates, we do not know. I don't think the competition will go down. I think it will be continued competition there. Then when you move over to the Baltics, we have seen quite a large volume growth in that. reminding you that these are steady and stable economies, and we now expect Estonia and Latvia to pick off as well, while Lithuania has been doing very good.

Okay, so are you saying that you think the household mortgage margins we have in Sweden currently are here to stay? My question was whether you think there will be a potential to increase them going forward and what the trigger would be, how you would be able to achieve that, because I think it's a concern to all of us.

Well, I won't do any forecast on that. There is tough competition, but I think when you see higher volumes, I think that we can grow in that environment.

Okay. And the inflationary impact on costs in the Baltics?

Yeah, Magnus, I think as we've talked about before, I mean, in the Baltic banking, we have lived with higher inflation for many, many years, even before the inflationary shock. So that is something that we are constantly working with to make sure that we can increase our efficiency to mitigate that. If you look at the societies as a whole, I mean, our concern is As we have been talking about, generally it's very stable and healthy. But, of course, if the salary inflation continues, then that will eventually lead to a problem since it's going to be hard to pick up on the productivity in line with the current salary levels, increased levels.

Okay. Thank you so much.

The next question from Andreas Hakinson, SEB. Please go ahead.

Thank you, and good morning, everyone. So first question on costs. You mentioned the three VAT refunds you had during this year. Could you tell us how many years have we got outstanding? And just to confirm that you don't assume one of those reversals to appear in the fourth quarter.

You're correct. We have assumed no VAT recovery in the 25.3 guidance that I gave you. If that will come, it will come as one of extraordinary thing that we will not take into account when we run our ordinary business. So no further VAT in the 25.3. We have, as I think I mentioned in the previous quarterly presentation, requested VAT recovery for year 2019 up until 2023. It's in the hands of the tax authorities and I have no visibility in the numbers and will not speculate if and when we would get anything more back there.

Are the cases similar or, I mean, it seems like you want three cases, so are the other cases different or wouldn't the outcome be likely to be the same?

Sorry, I said 19 to 23. I should have said 19 to 24. But it depends a lot on the interest rate level since this is sort of depending on the on the turnover that we have in the parts of our business that is non-VAT related and the one that there is VAT, i.e. mainly the leasing business. So it depends a lot on the interest rate levels for the years, and that's why I don't want to speculate in any numbers or if we would get it back before we have the answer from the tax authorities.

That's fine. Then on the Baltic NII, I mean, you talk about the six-month time lag, but could you confirm that when you talk about that the NII should drop six months after the last rate cut, that's with a static balance sheet? And we saw already that NII grew Q3 to Q2 on the back of very strong volumes. So volumes continue at the current pace, and if anything, it seems to be picking up. Is there any reason why then I shouldn't continue to grow even though you have that underlying pressure driven by interest rates?

First of all, yes, you're correct. When I talk about the three and six months, then I mean the same margins, the same volumes, and then you'll have to make your own assumptions on that as well as on further central bank rate cuts. When it comes to the NII development in the Baltics, it's impacted by FX in this quarter. So underlying the NII in the Baltics is stable quarter over quarter.

With 3% volume growth, right? So those are the two components, the margin pressure and the volume growth. That's up to zero in this quarter. Yes. Yeah. That's all from me. Thank you.

The next question from . Please go ahead. Hi. Good morning. Thank you for taking my questions. So on capital, given your solid capital buffer, could you remind us of your latest thinking on how to deploy the excess capital between ordinary dividends, special dividends, buybacks, or potential M&A? And how should we think about your approach to excess capital in a theoretical scenario? where the AML resolution is still delayed by several years. Would you still aim to be around the midpoint of your targeted management buffer range, or would you adopt a more cautious stance in that case? And if you were to pursue M&A opportunities, which areas or markets would be of the greatest strategic interest for you for potential acquisitions? Thank you.

Well, thank you for that question. Let me be very short here. And that is that we have a capital buffer range between 100 and 300 basis points. In our 1527 plan, we target the middle of it, i.e. 200 basis points. We now have a buffer of 480 basis points with a dividend policy of 60 to 70%. And the timing of further capital release continues to be a judgment call depending on the many uncertainties where the long-running U.S. investigations is the largest one. And we have no intention to hold more capital than necessary. When you look into M&A activity, reminding you that we've had seen quite a lot of M&A activity during the last quarter. We want to acquire Stabelo. We want to acquire the remaining part of Entercod, and both those two are still subject to approvals. And then we've gone into the SP1 market, which was the first question. As the CEO, I always need to look out for new opportunities.

Thank you. The next question is from . Please go ahead.

Good morning, guys. I was just going to follow up on the last question when it comes to . Can you just give some more flavor of your thinking about the acquisition and what do you think or what's your planning in terms of asset quality for that company?

Well, straightforward. We've had a business cooperation with Barclays and we own roughly 50-50 each. And they wanted to sell it and we wanted to acquire it. It's that simple. And the reason we want to do that is that we want to become the largest card business in the Nordic Baltic region. with scale benefits and of course benefits also from increased efficiency and I think Jon will get back later when we have more information when that's fulfilled and tell you the effects on the bank at large. What we will do is we'll do a strategic overview and when we look on Entercard we've seen that we think that the risk level is a bit too high and we wanted to reduce it a bit more to a more appropriate level for Swedbank.

And what does that reduction mean? Is it getting rid of loans or how do you plan to do it?

Let us get back to that when hopefully this goes through all the sort of processes.

Okay. Thank you.

The next question from Shrey Slivastava, CT. Please go ahead.

Hi, and thank you very much for taking the question. It's actually on the 20 basis points benefit to use of capital requirements that you got from being able to model the contractual maturity of non-contractors. My question is twofold. The first is, is this all we can expect to see in terms of benefits? And secondly, does this open up the possibility of you sort of investing these non-maturing deposits and potentially sort of higher yield and long-dated assets going forward?

Thank you. Thank you, Shrey. First of all, we've gotten a partial approval for modeling of non-maturing deposits. So all things equal, if we would get the full approval, there would be a little bit more to come. When it comes to our NMD hedging, I have said in previous quarters on questions from you and your colleagues that we have had some hedges. It's been an important tool for us to have in the toolbox and we wanted to test it and try it out. But it has been immaterial from an NII perspective so that you can discard the impact of the hedges that we have in place when you forecast our NII. The approval that we have gotten, it still means, to make it simple, that our liability side is still shorter than our asset side. So if we would add further hedges to prolong our asset side, which is what we... want to do in order to smoothen out NII when the timing is right, it would still mean that our capital for IRRBB, our pillar two charge, will go up even with this approval. It might go up a bit smaller than before, but there still will be an increase. We will come back. Should we do more or should our hedges be material to make sure that we are transparent? Should that be in the future?

Thank you very much. And a very brief follow-up. You said you received partial approval. Should you receive full approval, what sort of tax or benefit can we expect there?

Unfortunately, as long as the Swedish FSA do not change their view on this, even a full approval will lead to the same thing, that if we prolong our asset side, our capital charge will still go up. there is a difference between the Swedish FSA's view and the view that banks under ECB supervision have. They can do this hedging much more efficiently than we can do.

Thank you very much. And a final one for me. Have you noticed a sort of softening of the Swedish FSA's view? Because it seems sort of that way looking at the partial approval you've received. Or is that inaccurate?

No, I am not.

Thank you very much.

The next question from Namita Santani, Barclays. Please go ahead.

Good morning, and thanks for taking my questions. My first one, I just wondered what measures you're taking in the Baltics to bulletproof your ROE of above 20%. I saw an announcement that Revolut's now offering mortgage loans or something similar to that in Lithuania. And in time, that will probably become a full offering. And clearly, the deposit rates they offer are better than banks. So what initiatives is FedBank taking to protect itself from competitive threats? And then secondly, appreciate the 2025 updated guidelines. Thank you.

Well, the key thing about Estonia, Latvia, Lithuania, these are growing economies, and compared to Sweden, they will grow with, let's say, one, one and a half percent more. So it's a very attractive market, and it's also a market that doesn't have the same financial inclusion as there is in Sweden. So that means that we see many possibilities. And I think we went through very much this when we had Swedbank 1527. In the end, it's about being close to our customers. We are the most loved brand in the Baltic region for the seventh year in a row. We want to grow volumes, continue to grow with the countries, we want to increase financial inclusion, we want to have more customer interactions, and we want to make sure that we keep costs contained and work in an efficient way. So in that sense, it's not different from the other markets. Is the competition tough? Yes, it is tough. Will it be tougher? Yes, but that's life. Keep on and be close to your customers. Do you want to say a few things about that?

I think your question was about 2026 costs, and we will come back in conjunction to the Q4 presentation on that. But principally, we tried to explain how we work with cost efficiency, with the headwind and with investment and so forth when we had the 1525 presentation. But more details I'll come back with when we present the Q4 results.

Thanks very much.

The next question is from Tariq El-Masad, Bank of America. Please go ahead.

Hi, good morning. Just a quick two questions, please. First, on costs, I mean, you had quite impressive good cost control here with cost income really at very low levels. I just was questioning the strategy of sustained hiring freeze, which how long that you can be sustained, especially in the context of potentially recovery of growth. But also, we just had a call with one of your competitors, and the approach is this hiring freeze or control could be sustained as long as we invest in AI and technology and be able to question each time, can we replace or hire or invest in some technology that would be more cost-efficient? Where are you in this thinking and in this investment in AI and technology? And the second question is on the... U.S. or money laundering litigation. I mean, I've been following those with the German, French banks and so on in the past with the OFAC. How the conclusions from the ACC, you think, are correlated to what would come for the OJ, or is it because usually it's bundled within one decision? How do you read that? Are you more optimistic about the outcome? Thank you.

Well, thank you. Two important questions. The first one when it comes to the personnel, we steered the bank on costs, not on FTEs. But what happened a year ago was that we saw that FTEs increased too much due to change of churn. And what we did then was that we implemented an external hiring freeze, but a possibility for people to make exceptions. I gave quite a few exceptions, but it worked. And then last quarter we decided to take that away. And we now have a process where Jon will take those kind of decisions together with the head of HR. So we do not have a hiring freeze anymore. That's the first thing to say. The other thing is to say that we see quite a lot of use of AI. We work it both on an individual level and on a structural level. We worked with AI for a very long time. And what we want to do is we want to decrease administration so that we can see more time with our customers. So to give you an example is that right now we're seeing that the waiting lines are sort of the time waiting. If you call into a Swedish customer center, it's much shorter than before. So we've reached 70% of the call signs within three minutes. Why? New technology. And then we can use call summary. So that means you can have more time to meet the customers rather than do the administration. things like that. When it comes to the US investigation, first thing to say is that when it came to OFAC, that was closed quite a while ago, and as I said in my introduction, during the quarter, SEC decided to close their investigation without any further actions. That said, we still have two other investigations by US authorities, and now I need to sort of repeat myself and But I've told you many times when I was new as CEO, I met and called around and talked with colleagues that have been in similar circumstances. They told me that the process like this usually takes three to five years. Now, more than six years have passed, but the timeline is fully owned by the U.S. authorities. I can just repeat what I say, and that is I still do not know whether we will get any fines, and if we do get fines, I cannot estimate the size of those. And we've been as transparent as possible during this long-running process, and when something material happens, we'll continue to adhere to that principle. Thank you. Thank you.

The next question from Nicholas McBeath, DNB Carnegie. Please go ahead.

Hi. I had a question on the deposit volumes. So after the most recent rate cut in Sweden, your deposit rates on some of your most popular savings account, like e-savings, have been cut to zero. So I was wondering, how are deposit volumes behaving on these accounts? Have you seen any increased tendency of withdrawals since these error rates were introduced, either to your own Spark Hunter Plus or migrations to competitors' deposits with above zero rate? That's my first question.

Well, thank you, Niklas. The volume or the mix has been stable in that sense, so we have not seen any mix shift. And over time, the deposit beta has been around one on accounts with interest rate, where the sort of distance to zero has been enough to reduce it. So then, as we've talked about before, sometimes we have, for business reasons, taken a little bit of time lag between doing different rate changes. But over time, it has been one, and we have not seen mixed shifts lately.

All right. And then I have a question on levies for next year. What's your expectation there? I mean, can you confirm whether the cost for interest-free deposits at the Riksbank, will those be taken on the levies line or reduced ?

Well, let me start with saying that if you see, overall loan demand in Sweden from both corporate and private customers is subdued. In the Baltic, demand is stronger. And just to be blunt here, but we have an appetite for healthy loan growth while sticking to our conservative lending standards and focusing on profitability. You want to follow up, Johan?

On your question on the Swedish Riksbank, we will have to deposit 6 billion, for which we will not get an interest rate for now for nine months, I think it is. I think the jury is still somewhat out on exactly how to account for that. But my assumption or belief is that, yes, it will be under the bank tax row. And then the discussion is, will it be a one-off now in Q4 or will it be spread out for the period? But most likely under the bank tax rule. Yes, I think that was the answer, right?

Yeah, and then just also if you could comment what your expectations for bank taxes are for 2026.

Bank taxes don't get me sorted, but let me say a few words. And then, as always, I want to remind you that banks are an important part of our societies. What we do is we channel our customers' hard-earned deposits to lending, thus empowering people and businesses to create a sustainable future. And to do that, we need to be profitable. And a sustainable bank is a profitable bank. And we are proud taxpayers that contribute to the financing of welfare and security in our home markets. What we do not like is our sector-specific taxes, retroactive measures, and an unpredictable regulatory environment. What we do like is equal treatment, a rule-based system, and an investment climate that fosters growth, financial stability, and sustainable transformation. With that said, I need to say that. Then let me do a quick tour across our four home markets. First, Estonia, general corporate taxes are increasing, as we see, but there is a political debate on that. In Lithuania, corporate taxes are also up. And then remind you that on top of this, since 2020, there is a 5% extra tax on banks. And the extra investor tax on NII further on top will be phased out during the year. In Latvia, we will have three years with a similar investor tax. There are some discussions on excluding new lending from the tax. If that would materialize, it would be positive for the Latvian economy. In Sweden, the government has proposed a base deduction to the bank tax while delivering the same tax revenues. And the tax rate is therefore proposed to be raised from six to seven basis points in 2026. And now there is a government inquiry of some kind that will look into the specifics. And then, as Ewan talked about, let's call it what is, it's another tax on the banking system, is that the Riksbank has decided that credit institutions from the end of October this year we need to place an interest free deposit with them and as you said it amounts to around six billion kroner that will earn zero interest okay thank you the next question from Sophie Petersen Goldman Sachs please go ahead yeah thanks a lot here is the fee from Goldman Sachs

So my first question would be on net interest income. When do you expect net interest income to drop? One of your competitors this morning said that it will be three to six months after the last rate cut. Do you think that's fair, or do you have a different view to this? And then my second question would be on the VAT refunds. that you continue to get. It was $197 billion now in the third quarter and $174 million in the previous quarter. When should we expect these VAT refunds to come to an end, or should we expect still some VAT recoveries in 2026? Thank you.

Thank you, Sophie. If I start with the NII, then if we assume no further rate cuts, to make it a bit simple, then ECB did their last one. It was effective on the 11th of June, and the Swedish Riksbank was effective as of 1st of October. And then if you take three months roughly in Sweden and six months roughly in the Baltics, that means that your round year ends. these rate cuts will be priced in. And the first quarter next year then will be the first quarter where you have a full quarter effect. Then, as I've said before, you'll have to add your own assumptions on potential further rate cuts from the central banks, volume growth and margin development. When it comes to the VAT, then... I don't know. There is the discussion from the Swedish government to change the VAT legislation. Everything around the VAT recovery is due to that there's been a clash between the Swedish VAT law and the European regulation around that. So I would expect in a couple of years that there will be a new Swedish law in place. I don't know how fast or when it will come or what it will mean. So we don't know. We'll have to see what happens. But we have so far then asked back for 19 to 23. Now it's clear 23. I've been a bit back and forth on it. But 19 to 23 we have asked recoveries for. And then let's see for the years after how things play out.

Thank you.

As a reminder for questions, please press star and one on your telephone. The next question from Ricardo Rovere, Mediobanca. Please go ahead.

Thanks for taking my question. Just a quick follow-up again. Do you think that the pickup in lending volumes in general, so deposits, could somehow upset the last leg of the repricing that you've just mentioned, the three months and seven, six months in the mortgage that should be with the bond? by the end of the year. They think Boston is going to accept that.

We lost you. But thank you, Ricardo.

Okay, sorry. Can you hear me now?

Yeah, we're here.

I think I lost you. Okay, please repeat. Okay, okay, fine. Okay, okay.

I think I got the question. No, just wondering whether the volume growth deposits and loans could somehow offset the last leg of the requires that you just mentioned, three months in Sweden, six months in the Baltics. It's absurd to say that the last cuts that are done should be usable by the end of the year, because that is the margin

part of the equation and i always wonder whether the volume side of the equation can somehow upset it thank you ricardo yes i mean you're you're perfectly right but i i do not sort of forecast the nai so i leave that to you to to do your own assumptions on volume growth margin development and so forth but but of course there is an offsetting effect on on this I said that in this quarter, higher volumes had a positive impact on 94 million on the NII. So, of course, growth do offset. But I leave it to you to do your own assumptions on how that will develop going forward further.

Fair enough.

Fair enough. Thank you.

This was the last question. I would like to turn the conference back over to Maria Kahneman for any closing remarks. Thank you.

Well, I'll take that, Maria. It's okay with you. So thank you for calling in, and thank you for always asking tough and knowledgeable questions. I now look forward to meeting you and many of your colleagues in our dialogue on Swedbank. Thank you for calling in. Bye.