Hi everyone, thank you for joining us on Jyske Bank's conference call for the financial results for the third quarter of 2025. This is Simon Hagbart from Investor Relations speaking. With me I have Jyske Bank's CEO, Lars Mørch, and CFO, Birger Nielsen. Lars and Birger will walk you through our prepared remarks. Afterwards, we'll open up for questions. I will now hand over to Lars.
Thank you, Simon. I would also like to welcome you to our conference call for Q3 2025. I know that our figures have been awaited with somewhat less anticipation than normally, and in that light, I'm extra pleased that you've decided to spend time with us here. We've had a strong 2025 so far, reaching our highest earnings per share for the first three quarters of a year. This builds on the positive momentum from recent quarters, with earnings per share growing 7% year- on- year in Q3, despite the backdrop of significantly lower short-term interest rates. Based on this positive development, we've upgraded our earnings outlook for 2025, now targeting a net profit of between DKK 4.9 billion and DKK 5.3 billion. We're also making progress on key initiatives with focused cost management while improving both personal business and corporate customer satisfaction significantly.
Higher customer satisfaction affects customer flows, and the number of personal private banking and business clients have improved during the last year. The outlook is for a balanced development for the Danish economy and a stabilization of short-term interest rates. Additionally, credit quality remains very solid, with a continued low level of loan losses and significant post-model adjustments in place in order to mitigate potential repercussions of the elevated geopolitical uncertainty. Overall, our results put us in a healthy position as we look to further strengthen our momentum. With that, let me hand over to you, Birger, for a walkthrough of our financial results.
Thank you, Lars. And as you can see, the strongest quarter we've delivered in the last seven quarters was here in Q3 with an earnings per share of DKK 23, and simultaneously with lower short-term interest rates, as already mentioned. If I look at Jyske Bank at a glance here, return on tangible equity 12%, well above the 10% mark in the long term, cost-to-income ratio well below 50%, and cost of risk just around zero basis points actually for several quarters now in a row, and the C ET 1 ratio at 16.2%, a small dip from Q2 due to higher market risk, operational risk, and credit risk, the latter due to higher mortgage lending and property lending. And so, inclusive of a reservation for capital distribution of 71%, we end up at 16.2% this quarter, still well above our long-term targets.
If you look at the bottom in the middle, you can see that the P&L statement demonstrates that the NII line is now only dropping 1% from Q2 to Q3, so actually a bit more stable now than we have seen in the former quarters. The fee and commission income continuously grow and remain strong, both over the quarter and over the year. We still see strong value adjustments, cost is under control, and we deliver, as we say, as we mentioned, DKK 1.455 billion net profit in the quarter. At the right-hand side, you can see that business volumes is somewhat different, well, it differs a bit because the AUM is on the rise, steadily going quarter by quarter, whereas property lending is also rising steadily on a quarterly basis around 1%, and bank lending is a bit more subdued with a drop of 1% here in the quarter.
Deposits stable, going from Q2 to Q3. Looking at the expectations, we lifted our expectations on the 9th of October, and 2025 actually could end up being the second strongest year in history, and we now expect DKK 77-DKK 84 per share, and we also adjust our expectations for core expenses, where we now state that they will be approximately stable in 2024 versus 2025 due to slightly lower cost here after Q3 relative to last year. Moving on to the AUM development, as I said, steady going. We have seen net inflow of customers and positive financial markets again this quarter, leading to a 2% lift quarter- over- quarter, 7% over the year, and that is inclusive of the market setback we saw back in Q1 of this year.
Looking at the underlying deposits base, we have been able over the last year also to grow the stable part of deposits with now 5% higher level here in Q3 versus last year, which is more in line with our market share. And now more than 90% of our deposit base is what is characterized as stable deposits. If we take a glance at the Danish economy, we are operating in a Danish economy that is very resilient, strong labor market, historically high employment, stable inflation, and actually we have since 2019 outpaced the EU growth. And if you take the layoffs in Novo as an example, it is less than 0.2% of Danish employment. So we are in a very steady environment and also despite the geopolitical uncertainty that we still see around us.
Moving on to short-term interest rates, we now expect no further rate cuts from the ECB, and our net interest income expects to bottom out within the next couple of quarters. And the reason for that is primarily due to some bond issuances, both liquidity and capital issuances here also in Q3. And of course, if we look into and when we look into 2026, much depends upon the volume development in that year. When we see on the next slide the development in value adjustments, you can see that over several years we have been able to actually lift the level of value adjustments in average to a level around DKK 900 million per annum. And that actually includes the sharpest interest rate increase in decades in 2022, 2023, but also the sharpest, a very sharp rebound in 2024, 2025.
And if we look at the composition of the value adjustments, approximately 80% is customer-driven, and the rest is placing of excess liquidity and our sector shares that are needed to support our business. Moving on to costs, as you can see since the acquisition of Handelsbanken Denmark and PFA Bank, we have had very steady costs. The costs are actually down 2% year- over- year in the last four quarters, but the underlying, we see an increase of below 1% adjusted for one-offs. We still, of course, see inflation present in all areas of the group. Wage agreements are up 2.5%. And please bear in mind that Q3 was a slim quarter when we look at costs, and we expect slightly higher Q4 numbers. And therefore, we state now that 2025 is expected to be approximately at the same level as 2024.
Then moving to the last slide I will comment upon now is our credit quality. And actually, the story is very much the same as we have seen in former quarters, a very stable portfolio. Stage 3 exposures are up from, or sorry, are down from 1.2%-1.0% over the year. Stage 1 exposures, the very strong part of the portfolio has grown from 95%-95.8% over the year. And management estimates or post-model adjustments are at DKK 1.9 billion unchanged from Q2. And still, we see a very low level of write-offs. So all in all, a very strong portfolio, low impairments, and very low write-offs in the book. And I think that concludes our initial remarks.
Yeah, and we will now open up for questions. The first one in line comes from the line of Mathias Nielsen from Nordea. Please go ahead.
Thank you very much, and thank you for taking my question as well. So on the first one, I know we can't comment much on the, or probably won't comment much on the AL Sydbank merger. However, I find it quite interesting that if memory serves me right, you actually had an acquisition of Handelsbanken, which was on the BEC platform versus you being on the Bankdata platform. So I guess you have some run rate cost comparison. How does that look like when you acquired Handelsbanken, the BEC run rate cost? How does that look compared to the Bankdata run rate cost when you take it from a high-level perspective?
Yeah, hi, Mathias, Lars here. And thanks a lot for your question. As you rightly say, there are things that I can comment on and things that would not be appropriate for me to comment on. The situation with Handelsbanken was a situation where we got quite a bit of synergies of moving it to Bankdata. And in our view, Bankdata is a very strong, suitable platform for the business model that we have with quite a bit of business and SME clients and the markets operation. So we actually had quite a bit of synergies moving in that direction.
Okay, that was my first question, and then the second question on the capital distribution side, like you seem to be a bit overcapitalized, some would argue probably, especially among the equity investors, so when thinking about capital distribution for this year, is there anything holding you back from 100% payout rate? Is there anything on timing of buyback applications, something like that, that could hold you below 100%, let's say 90 or something like that? Is there anything we should, any details that we need to keep in mind when we're looking at such things?
Yeah, that's a very good question, a very appropriate question to ask. I'm happy that our capital build-up is strong at the moment. We stick to our plan of 30% cash payout and the rest within our possibilities and still keeping a strong capital position. We will have share buybacks. The share buybacks will normally be done based on an application to the FSA quite a bit earlier than the yearly result. And for that reason, it's not possible for us to apply based on the full year result. So that could hold us back.
Okay, so in terms of Q3, is that included, or now it's almost getting too detailed, but given the strong result on trading income, I think it's probably relevant to ask if we should assume the Q3 results to be reflected in the application or we should assume that will be not reflected in the application that you may have said or may not have said?
It's difficult for us to get into a lot more details on this one here, Mathias, because we are doing our application according to the rules here, and that's quite a bit earlier than the yearly result.
Okay, thank you. And then the last question that I have on cost, you also highlight that Q3 was a slim quarter on cost and now maybe a bit less on the year-to-year improvement versus last year in Q4. What should we think about 2026? Is it fair to assume that you can keep this stable cost trend into 2026? Or is there anything that we should be particularly aware of? I guess you had some one-off related to the new premises that we can easily take out of next year. So how should we think about it?
Yeah, thank you very much, Mathias. The cost base in 2025 will approximately be the same level as 2024, all inclusive that, i.e., one-off items as well, and you're quite right that there were some one-off items both in 2022, 2023, 2024, and also this year that will run off and not be part of the equation in 2026. We have said that we will try to the extent possible to keep cost as flattish as possible given the market conditions according to our strategy, and that still applies, but also please be aware that we have inflation pressure present, as I said before, in all areas of the group. That still applies, and we expect that also to be the case in 2026.
Okay, thank you. That was my question for now.
Thank you, Mathias. Next question in line comes from the line of Martin Birk from SEB. Please go ahead.
Thank you so much. Lars, you also happen to sit at the board in Bankdata, and if Sydbank manages to bring AL Bank and Vestjysk Bank to Bankdata, would revenues in Bankdata still need to be DKK 2 billion?
I think if we get more or if we get benefit of more volume at Bankdata, we would be able to run that more efficiently. There's not a lot of extra cost adding an extra bank to Bankdata.
Okay. And revenues will also need to be DKK 2 billion if we assume that or if we play with the scenario that Sydbank is going to be easy?
I think the cost of running a bank is divided on an IT platform into development and running the bank basically. The development will not change a lot. A lot of the run the bank will be on JN Data.
Okay.
For the individual bank.
Okay, okay, very clear. All right, thanks. Yeah, I guess that's it for me for now.
Thank you, Martin. Next question comes from the line of Namita Samtani from Barclays. Please go ahead.
Good afternoon, and thanks for taking my questions. My first one, the Commercial Real Estate systemic risk buffer, like the decrease in the proposal, how much of an impact would that be for you?
Yeah, we see you're quite right. There is a relief in the CRE buffer. They have lifted the LTV band that is excluded from the extra fee and payment. It is a small relief relative to the full exposure or for the full payment that we have today and the buffer we have to reserve today. So expect a small relief in Q4. And then also be aware that we also in the slide deck mentioned that we could see a slight inflation in the REA numbers in Q4 because when we implement new models, there is an initial conservative attitude from us and the FSA because when we implement a new model, there are still some reservations that will gradually be taken off, but only gradually due to dialogues with the FSA on formal validations.
So there could be a slight inflation in the REA numbers despite the relief from the CRE buffer in Q4.
Okay, thank you. And then my second question, you said net interest income will trough in the next couple of quarters, and that's because there's some bond issuances. But what are these exactly, and what's the quantum of the headwind, and why is it that volume growth cannot offset these?
Yeah, so we did some issuances in Q4, sorry, in Q3, which we'll see the full quarter effect from in Q4. It's not going to be a material headwind, but I can't remember the exact figure. We did a T2 issuance of EUR 500 million, and on top of that, we also recently did a non-preferred senior issuance for EUR 100 million. I can come back to you with the specific figures if you would like that, Namita.
That's helpful. And my final question, the AL Sydbank merger, I just wondered what your thoughts were on how this impacts the wider Danish banking market. Do you have any initial thoughts? Like, is this positive? Is this negative? And particularly on corporate, because when I read the press release, they were very specific on being competitive in the corporate space.
Yeah, thanks a lot for that question. I think it's fairly neutral from a Jyske Bank perspective in the sense that it is a personal customer bank going together with an SME bank and a smaller local bank, three banks going together. It doesn't really change a lot from our perspective in the market space because basically in cities today, we are up against three banks that would be one bank going forward. They are each of them good and strong in their own areas, but we don't see a lot of new things being added in terms of capabilities or volume when it comes to the business and corporate side here. So I think it's fairly neutral from our perspective looking at the market space.
We are standing with a very strong value proposition, and we will by far still be altogether a bigger bank lending-wise in the corporate and business space.
Thanks. Sorry, just one small question. Given that these three banks will be quite busy merging together, if there's any attrition, are you ready to take on any clients from that space?
Yeah, we are running a relationship bank that we want to see solid also going forward. If there are possibilities in the market and it's on our acquisition list, the business clients who would like to talk to us, we will talk to them, obviously, no matter if they come from one or the other bank. So we are open for business, obviously, with strong and good clients.
Thank you.
Thank you, Namita. Next question comes from AsBirger Mørk from Danske Bank. Please go ahead.
Thank you and good afternoon. A little bit on the same topic of the last question. If I look at your strategy from last year, basically a year or so ago, you basically emphasized midsized businesses and selective large corporate institutional clients as a main focus area in the new strategy period, and I guess that made a lot of sense when you were sort of the only real alternative to the two largest banks in the Danish market. I guess the market has changed quite a lot. I do appreciate your comment, Lars, on AL being more retail, but one of the things that at least Sydbank is saying is that they will double their balance sheet. They will be able to underwrite full lines. I have the same arguments for Nykredit after they acquired Spar Nord.
So at least there's something from the competitor point of view that seems to indicate that the three bank market has become a five bank market. So I was just wondering if you see any changed behavior from Spar Nord, sorry, from Nykredit at this stage, and if you have seen or if you anticipate sort of a changed behavior from Sydbank on the back of this.
I think they're all strong competitors today. And I think from the Nykredit perspective, we don't see a change here. So far, it's also early days. But I think Nykredit has had a big and strong balance sheet also prior to this acquisition. And I don't think it changes a lot from their perspective. They were able to underwrite big credits before and normally. And I don't know the internal policies within Nykredit, obviously, but I think they were able to underwrite credits of a size where you normally have a single name concentration cap in most banks. That's at least what we see across banks when we do underwrite credits for larger companies, that there's a limit to how big you want a single name credit no matter how big your balance sheet is. And then in terms of Sydbank, it would be early days.
They would have a little bit bigger balance sheet. They don't have mortgage products in-house now, which is basically where the other banks have been growing in volumes. That is when they're able to do a combined advisory, combined bank products and mortgage products. That's a feature in the Danish market, and even the very large companies, they prefer to have a balance here with both products in.
All right, thanks. Then if I look at these sector statistics, it seems like there's still quite good credit demand in the corporate space. I do acknowledge that Q- over- Q bank lending on the corporate space is down slightly, and I guess your numbers reflect some of the same. But if you could just touch a little bit upon or shed some light on where the corporate demand is derived from. Is it within the larger corporates? Is it within SMEs? Are you beginning to see changed demand across or any sort of impact from the German package, etc.? Anything that starts to move?
We've seen a remarkably stable business and corporate segment within our bank during the last year. If we look at the market, we would see quite a bit of the growth in terms of numbers comes from major mergers and acquisitions among the very largest businesses and some bridge financing and so on, which is normally not the territory of our bank. When it comes to the SMEs, fairly stable development here and not a lot of extra credit volume this year. We are in a very stable situation. We just calculated recently that with the churn rate that we've seen lately, it means that our customers on average, the SME customers on average will stay with us 45 years.
Obviously, we don't know that for sure, but if you look at the raw figures now and you do the math, then that would imply that the customers will stay with us.
Did you, if I may follow up, you said that the demand is from the largest corporates? Isn't that the area that you wanted to tap into a year ago, or is it a little bit of a more of a niche market?
It's a little bit more of a niche market. So what we do is some different products and financing for some of the very largest companies, including the very largest in the country here also. But if you have the biggest cross-border companies and they do bridge financing on major acquisitions, we are part of that to a limited extent and predominantly where we have a relationship with the customer.
Okay, thank you.
Thank you, AsBirger. Next question comes from Martin Birk from SEB. Please go ahead.
Thank you so much. Maybe I'll just follow up on my Bankdata questions before. Lars, can you please help me unpack the toolbox? So what kind of levers can you pull in order to make the Bankdata offering attractive for the part of AL Sydbank that is not already on Bankdata today, beyond, of course, having the best product in the market?
Yeah, I can, to some extent, but I also think that you would appreciate that this is coming down to a negotiation and I think if we play out all our cards here, that would be wrong, so allow me to comment on this a little bit, but not in great detail, so there's a pure quality that they would obviously consider of the IT solutions and basically, I don't think there are weak data platforms out there, so it's strong platforms that they are considering. From our perspective, we think that the one that we are on is in particular strong when it comes to business and corporate clients and we think the setup is strong when it comes to supporting the markets business, which is part of our business and some other banks' business also.
We think we are in a very good development within Bankdata, and that has accelerated within the last year or two, and that the cooperation on a daily basis is strong. And then I think what we can do is obviously we can discuss the future plans of the platform here to make sure that what we come with is the most compelling offer. There's also something that is related to speed. So when can we do the migration? I think that would be of great importance to AL Sydbank. And there's a number of quality things that we can do.
Okay. In your position as a CEO of Jyske Bank and also sitting at the board and Bankdata, would you like to see that Bankdata and BEC merged?
I think what we've discussed across the industry many times is what is the right number of data platforms. On the one hand, you would probably want more than one. Do you want two or three? That's up for debate. What we will do is what makes sense, both short and longer term. And we would not be the last one who would wish to do mergers of platforms. But I don't envisage any of that within the next year or two. But there's a number of things that need to be right before that is potentially done. We've been one of the banks who are not against that in the past, and that will also be the future. For now, we are very pleased with the platform that we're on. We believe that that's the strongest platform for us.
I'm confident that we'll be in a good position also a year and two down the road.
Okay. So if we go back to my first questions about the DKK 2 billion in revenues, then we assume that and sort of try to play on your stance of being a pro-merger. Do you think that if you move all the banks to Bankdata and you completely write off the BEC system just as a theoretical thing, do you think that you could still run Bankdata around DKK 2.5 billion in revenues once everything is migrated and done and dusted? Is that a fair way of seeing it?
So basically.
Your IT cost to Bankdata would be half?
Yeah, I don't want to comment on it if it would be half or if it would be 60%, but it would be quite a bit lower. I think the thing that has been holding back banks from doing this in the past is the transition and the cost of the transition. There's no doubt that there will be major synergies for all banks if that was done on the little bit longer term. What has also made us hesitate is that there's quite a bit of pressure on bringing new things to the market, and not the least also working on the stability and the resilience of the IT platforms. So you have a number of tasks that each of the platforms are doing at the moment that you need to do in order to be confident that you have a resilient and strong platform.
And you cannot postpone that for four or five years while you do a merger of these platforms. And that is what, to a large extent, is complicating this.
Okay. Thanks, Lars.
Thank you, Martin. Next question comes from AsBirger Mørk from Danske Bank. Please go ahead.
Yes, thank you. It was actually a little bit on the same topic as Martin, but let me ask you a little bit differently then. So Lars, if you look at the complexity of merging Bankdata and BEC, just trying to grasp a bit here how complex that task would be, what kind of cost it would involve. Because I guess now Sydbank, it seems, wants to play out Bankdata and BEC and see who will offer the best terms. And I guess losing this bank is going to be devastating for whatever IT platform that will lose. But I guess there's also a winner's curse here in terms of offering too attractive terms.
So do you think that the exit cost that Sydbank or AL would have to pay, would that cover the sort of extra cost if you were to do a full integration of the two IT systems? Do you have any sort of view on that?
I think the cost would probably be bigger for a full integration, but the benefit will come later.
How much bigger, you think?
It depends on the model. It's a philosophical question because those negotiations aren't ongoing. But it's a philosophical question, and it's also based on the decision that will be made. There's no doubt that the cheapest way of doing it would be to decide on one of the IT platforms and migrate the banks on the other platform onto that platform. Many times, I think when you have negotiations like that, every platform would like to come with 50% or their share of subsystems. And that would be extremely expensive, and that would be complicated. So it also depends on model.
But if you were to, let's say, migrate BEC into Bankdata, just migrate the banks onto that, would that be covered by that cost, you think?
I think I should respond differently. I think any cost that the banks would have doing this upfront, there would be savings coming in the fairly near future that would pay this off fairly soon, so that would not be a 10-year thing.
And considering the scalability that you just answered on one of the previous questions, I guess at the end of the day, for Bankdata to lose, Sydbank would be an unacceptable outcome?
That's certainly not the outcome that we would anticipate. But there will be a number of different possibilities should that occur. And please remember, no matter if some of the banks are leaving BEC or Bankdata here, there will be a payment at least two and a half years and probably longer into the future. And some of the payment will be even larger than running as the systems do today. So there will be quite a payment, and there will be quite some time to consider your options and make a deal. I find quite a bit of comfort in the fact that I think our platform is very strong also compared to the alternatives out there. So I'm fairly certain that Bankdata, the one way or the other, would be part of the future setup here.
All right. And then final question from my side. If I sort of look at the two major deals we've seen in the market the last year, I guess if you're a smaller bank in Denmark, you will all, as well, feel a little bit less sure about your mortgage provider. And I guess this deal also, the deal on Monday, I guess, shows that there are still uncertainties relating to IT that's basically out of your control. Do you see any sort of changed behavior from the smaller banks in terms of sort of being a bit more unsure about the future and wanting to sort of secure their own destiny, so to speak?
Yeah, I think quite a number of them, if not all, are considering to have a plan B. And I think most of them are discussing that heavily. And probably we'll see some moves also in the next couple of years here.
That also goes for a mortgage provider?
It could. It could.
Okay. Interesting. All right. Thanks a lot.
Thank you, AsBirger. And next question comes from Martin Birk from SEB. Please go ahead.
Yeah, thanks. And sorry for my curiosity, Lars. Now that we have you here, I might as well just give you a couple of more questions. Do you think that coming back to the Bankdata questions, do you think that once this AL Sydbank deal is done and dusted, you will for the first time have a defined big brother and a defined little brother in the Danish banking IT space? Do you think that increases the probabilities of the two going together?
Of the two platforms?
Yeah. Hasn't that been, I mean, hasn't that always been the problem that BEC and Bankdata have simply in the past been too equal in terms of size? And all of a sudden, you do have a defined little brother now, and you will in the future also have a defined sort of big brother?
Yeah. I think there are three platforms out there. And I think if you look at the past, there have been. You're normally a fairly direct person, Martin. You would say there's been a number of excuses for not merging the platforms. We would say that there's been a number of different reasons that that has not been done. There are also reasons for not doing it now, not the least because from a regulatory compliance and resilience perspective, there's a big number of investments in all of the platforms now to make sure to live up to future requirements. And you don't want to jeopardize that you're able to live up to that. So I think that's the biggest hurdle here if discussions were to occur.
Okay. All right. I guess we will continue our talks on these data platforms for the foreseeable future. But that's it for me for now. Thanks.
Yeah, maybe there's a solution one day.
Let's hope.
Thank you, Martin. It seems as if there are no further questions in line. We would like to thank you for participating in today's conference call. A recording of the call will be made available on our IR website in the coming days. Please do not hesitate to contact us if you have any further questions. We appreciate your interest in Jyske Bank and wish you a nice day.