Hi, everyone. Thank you for joining us on Jyske Bank's conference call for the financial results for the third quarter of 2026. I am Simon Hagbart from Investor Relations. 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 will open up for questions. I will now hand over to Lars.
Thank you, Simon. I will start with some highlights and then Birger will take you through some of the details. First of all, our earnings per share, which is important for Jyske Bank, is up 14% year-on-year, exclusive value adjustments. This is supported by both internal and external factors, most notably, a good business momentum and higher interest rates. Earlier, we have said that we expected to be able to close the deal with Formuepleje by November 2, and I am happy to say that this is still our plan. Thirdly, we have seen a good and strong acceleration in mortgage loan during the last year. And during the last quarter, we are up 0.9%, compared to the third quarter last year. Also internally, we have seen again, and we will get back to this, a further improvement of the customer satisfaction across segments in Jyske Bank.
Thank you, Lars. Looking at the performance in Q3, at the left-hand side, you can see a decent return, EPS return of DKK 21 in Q3, slightly below Q3 last year, which had a very high trading income in that quarter. In the middle section, you can see at the bottom that we are on target towards our 2028 goals with a return on tangible equity of 11.1% and a cost income ratio of 49%. Looking at the top end of the section, net interest income was up 4%. Higher volumes and higher margins, especially on deposits, were the drivers behind the 4% growth. Net fee and commission income is up 11% over the quarter. Higher AUM, higher activity, larger number of transactions, and also especially refinancing of mortgage was high here in the third quarter. Core expenses up 1% over the quarter.
Still focus point for us to keep strong momentum on cost management. On the right-hand side, you can see that the AUM grew 12% year-over-year and 2% on the quarter. Continued growth due to financial markets, which were positive and a net inflow of new customers. On the mortgage side, in the third quarter, 2% up QoQ, primarily driven by private mortgages. And on the lending side, for bank lending, it was up 1%, leasing up 1% as well. And if we exclude the transfer of mortgages to the balance sheet of Jyske Realkredit, we see an uplift of bank lending of 3% in the quarter. Deposits were flat after several quarters of a very strong growth.
Going into the end of 2026, we have upgraded our guidance here on the 12th of October, and now we guide for DKK 78 to DKK 87, comparably, DKK 4.7 billion to DKK 5.2 billion net profit.
Thanks a lot, Birger. As I said before, we still expect to close the deal by the 2nd of November. The acquisition is in line with our focus on private wealth management and our aim to grow AUM. This is one of the largest independent wealth managers in Denmark. It is a capital-light business model, and it further strengthens our development in Aarhus and Copenhagen, which are the two largest cities in Denmark. We already have growth in those areas and within this segment, but it will further strengthen our position. We also see a potential to deepen banking relationships with the investors of Formuepleje today. We will keep you updated on the strategy on Formuepleje going forward. As we have already said, we expect this to be EPS positive from 2028. In due course, we will inform you more about the strategy here.
Looking at the forward rates, as you can see during the course of Q3 this year, forward rates have increased by 0.8 percentage points after the two rate hikes in June and September. The market also expects a possible hike here in December and possibly also further hikes during the course of 2027. Looking at our customers so far, they have fully risk-wise managed the higher funding cost, which is certainly very positive. The pass-through rate looking at the deposit margin has been relatively limited here after the June and September rate hikes, i.e., we see higher margins on deposits as you can see on the graph.
Going forward, it of course very much depends on market conditions, but we expect higher pass-through rates in accordance with what we saw back in 2023, where at the start was very high market discipline, but later on, of course, there was no as expected challenge as rates went higher.
The sensitivity is more or less unchanged, DKK 700 million year one with a 100 basis point shift, and DKK 900 million from year two onwards, due to the delayed higher return on our liquidity portfolio. Looking at the top line, our net interest income, we saw an uplift of 4% QoQ. We started out in Q1 with the lowest level as expected, and since then we've grown steadily in Q2 and now even more in Q3. Of course, it's a combination of the full effect of the June hike and higher volumes, as I referred to earlier on. The September hikes and potential further hikes will add, of course, to NII in Q4 and going into 2027, and it also is dependent naturally upon the volume development in the group.
When we look at the fee and commission income line, we've actually grown 12% year-over-year in Q3. If we take the longer horizon and look at it from 2020 onwards, we've seen an annual growth of 8%, and that also applies after the inclusion of Handelsbanken back in 2022. The specifics for Q3 relates to AUM and custody fees up 21% due to higher AUM, as I said before, positive financial margins and net inflow of new customers, but also a much higher mortgage refinancing in Q3, a slight shift in the seasonality between Q3 and Q4. Finally, we've seen fee expenses going up 9% year-over-year, partly due to issuance of bonds, but also, positively speaking, due to higher business volumes and business activity in the quarter.
Thanks a lot, Birger. Looking at customer satisfaction, which is one of our areas that we focus on in our strategy, we've seen a positive development since we announced the strategy, and we continue to see a positive development here. Looking at the net promoter score, we see the positive development across personal banking, private banking, and business and corporate banking. This is part of the reason why we have turned a negative customer development into a very strong and net positive customer development on personal clients. It's also part of the reason why customers want to do more business with Jyske Bank. Turning to more business and personal mortgage loans, we've seen over the quarters a turnaround here from being in negative territory to being in very positive territory, and with even stronger growth rates here again in Q3.
We are now up 9% year-on-year, Q3 to Q3 last year.
Yes. And then finally, looking at the capital position of the group, CET1 is 15.7% in Q3, stable from Q2. And if we look at the buildup of CET1 in Q3, it relates to percentage points due to retained earnings, of which the 84% are reserved for dividends and buybacks. Then looking at the upcoming regulation, and especially the output floor when we talk about Basel IV fully phased in, you can see that at the outset now we have DKK 27 billion in a buffer from a REA perspective, reflecting relatively conservative IRB risk weights here in Q3. And we can further improve our risk weights before output floor will be a binding constraint when it's fully implemented.
When it comes to model implementation, we implemented a new corporate IRB model back in Q4 of last year, and we of course have an ongoing constructive and very positive dialogue with the FSA regarding the last models that needs to be updated.
Yeah. Thank you, Birger. Thank you, Lars. We'll now open up for questions. If you would like to ask a question, please raise your hand or unmute your device. And the first question in line comes from Martin Birk from SEB. Please go ahead.
Thank you so much. A couple of questions on NII from my side. Well, I guess the sunshine story has been deposit pricing. What kind of beta are you currently seeing on deposits, and what should we expect for the coming 50 basis points in terms of deposit pricing? That'll be my first question. Then second question, could you please also help us with the NII walk into Q4? I suspect there is going to be some seasonality in that number. And also on NII going out a little bit longer. You still have a consensus NII that is implying a DKK 500 million-DKK 600 million pickup between now and 2028. What do you think about that consensus number? Thanks.
Yeah. Firstly, on deposit betas, they are clearly below what we normally assume in our interest rate sensitivity as of yet. However, at some point I assume that we will see changes to some of the deposit products that haven't repriced yet.
I would still assume that we, in the coming quarters overall, should see something close to our overall interest rate sensitivity over the coming quarters and years. Secondly, on Q4 versus Q3, we saw quite a healthy development here in Q3 QoQ with 4% growth on NII. I wouldn't expect that to repeat fully in Q4, given that we only see or we have a large portion of bonds with semi-annual interest rate resetting. I would expect a slightly lower growth or somewhat lower growth in Q4 and then continued growth in Q1. But of course, this depends on the rate development. If short-term interest rates start flattening out, that will also have an impact on the growth rate. Lastly, of course, volumes will also have an impact on the trajectory.
On 2028 versus 2026, if you do the math according to our interest rate sensitivity based on forward rates, of course, we would be significantly higher. Also, we are in a good development in terms of volumes, which also should help. Yeah, I agree that hopefully we will be able to show a positive NII development in 2027 especially, but also in 2028. Overall, we should see significant NII growth from 2026 to 2028.
All right. Thanks. Very clear. Then maybe just a final question, I guess this is for you, Lars, and this is in order to keep a tradition at bay here. You reverse DKK 50 million. You still book roughly DKK 120 million in your post-model adjustments. You're now at 4x normalized cost of risk. Your Stage 3 loans are at record lows. Could you please explain me why?
Yeah. Thanks a lot, Martin. We are in general happy about the book and where we are. Basically nothing has changed on that. There are specifics every quarter that we need to take into account. You will see that line go up and down and hopefully most down during quarters in the future. Basically, as I have said before, we are around 1.9, which we have been for quite some time. It is not given by nature that that cannot move from here. As of now, as you allude to, and I agree to, we are in a very solid position here, and obviously at the current moment is solid and does not need to go higher.
Lars, what does it take for you to tell Birger to reverse DKK 250 million or DKK 500 million of that buffer and then tell Simon to write that profit upgrade?
This number comes not from Birger, but it comes from the organization, which has a rigorous process of going through potential risks to the credit book. There are several iterations on a process like this. There are some of the risks here that we could hope improves, and then we will obviously take the number down here. For instance, agriculture could, when we get more information, could move in the right direction, and then we will obviously revert some of the money.
All right. Appreciate it. I am sure we will continue our discussions on that. Thanks.
Thank you, Martin. The next questions in line come from Alexander Vilstrup-Jørgensen from DNB Carnegie. Please go ahead.
Yes. Thank you. Maybe on your IRB models. Given the recent announcements from some other Nordic banks, do you expect any similar issues with your own IRB models?
As I said at the outset, we are actually relatively conservative when it comes to the risk weights compared to peers in the Nordics. As I also alluded to, we have actually a positive REA buffer of DKK 27 billion that we can take advantage from going forward if we are able to manage the modeling properly in the next one or two or three years. We are very certain and see a very constructive dialogue with the FSA. As I said, the latest model was implemented in Q4 of last year, and I think we can stay on that track going forward.
Okay. Thank you. Maybe on competition in the sector. How do you see the competition in the sector overall, both on the retail and corporate side? Should we expect any pressure on lending margins from here, or would you see pricing discipline improving?
Yeah, it is a very good question. As it leads into the future, it is difficult to be 100% certain what will happen. What I can say is that we have said earlier that we felt four or five quarters back in time, the competition to be much harder on both price and on credit standards, most probably within commercial property. I think what we have seen recently is a more normalized pattern. I am actually a little bit positive towards the development here. I think what we are seeing is things that, from our perspective, to a large extent, make sense, both from a profitability perspective and a credit risk perspective. So cautiously optimistic as to this is getting into a situation where it is just, so to say, normal hard-fought competition that seems rational.
Okay. Thank you. Maybe on bank lending, I can see that it grew some 1.2% in the quarter. Would you be comfortable seeing bank lending grow at around the same level in the coming quarters, or should it be maybe even higher?
I think when you look at bank lending in Jyske Bank, you always need to take into account that we see a movement towards mortgage loans, which will, for a start, basically take the number or the development into negative territory. What we are seeing is a better and better pipeline on business and corporate clients. I am actually also cautiously optimistic here of a fairly good development during the next quarters.
Okay. Thank you. Maybe just one last question, on your 2028 targets. They are based on a steady state policy rate of what? 1.75%. Now we are at a high level, and we are looking into further rate hikes. Shouldn't this speak for revised targets?
You are correct that we, in the autumn of 2024, when we launched the strategy, expected the rates to be different from the level you see at present. The uptick in rates were not predicted from our side two years ago. I think we also have alluded to this before, in the dialogue with you in the market that, in due course, of course, we will reconsider the financial targets and also the strategy in general.
Okay, great. Thank you. That was all for me.
Thank you, Alexander. Next question in line comes from Feyi Awofala from PGIM. Please go ahead.
Hi. Yeah, thank you for your time. My first question has been answered already on IRB, so thanks for clarifying that. Just next question, in terms of how you see fee income evolving over the next coming quarters, especially with rate hikes, maybe driving a bit of remortgage activity. That obviously feeds into the fee income line. How can we expect that to evolve, and what kind of assumptions do you have at higher rates for that activity? Thanks.
For now, we haven't assumed that this will spark a remortgaging wave or anything like that, similar to what we've seen in 2022 to a minor extent, and especially 2019. Currently, we are still within what we have seen in terms of rate levels, what we have seen in recent years. We are not seeing signs of a pickup in remortgaging activity. Overall, we see activity levels at somewhat normal. Currently, we are not seeing high activity levels, but we are not seeing low activity levels as we did in 2024. I would assume 2026 could be a good baseline looking into 2027. Of course, adding the fact that we have seen a positive volume development, especially on the AUM side, which will, of course, have a positive spillover effect on next year.
Just quite an interesting What makes you so confident that this volume baseline will continue? I kind of understand that you're saying it's going to continue, but why? Surely that kind of demand pulls in at higher rates.
Well, that's a very good question. I think what we've seen in the former quarters is that we've been able to attract new customers that add to the fee line and transaction in general. Secondly, also, that we've seen in the Danish market a relatively decent price performance for property, both private individual properties as well as corporate property. So in general, if prices are steady or slightly upward ticking, that implies a decent turnover and return on that line for us. That's what we've been seeing for several years now. I think overall, we are relatively optimistic when it comes to the general sentiment in the Danish market, activity in the Danish market. If you look at the macro picture, I think also it's fair to say that the outlook and the latest development has shown a decent growth.
Overall, we are still rather positive when it comes to the economy in Denmark.
Yeah, then lastly, maybe we should mention, but I am sure you are aware of this, but Formuepleje will hopefully close soon. Then, of course, that will have a significant positive impact on our fee income development.
That is super helpful. Thank you very much.
Thank you. Next question in line comes from Anders Svendbak from Danske Bank. Please go ahead.
Thank you.
Two questions from my side, please. I understand that mortgage lending on nominal annual growth, if we take into account the increased interest rates, that is growing in line with the market. But it seems like on bank lending, you lost market share and your very popular flexible mortgage product. Could you perhaps elaborate a little bit about what have changed, what have improved your competitive position versus in the past year? The second question goes on the IRB framework. When can we expect you to fully live up to EBA guidelines in having the models cleared? Thank you.
Yeah. Anders, thanks a lot. Good questions. I think it's basically two different stories here. The one on the mortgages, where our view is that when it comes to personal clients are winning market share here, and we are net winning customers in personal banking. If we look across the lending that we do out of personal banking, it's certainly also turned around from a couple of years ago where we were losing clients and volume. So here we are growing now, and I think with a strong momentum. What has been, and I've seen you've also alluded to that recently, where we have not been winning market share is when it comes to the larger SME clients, where basically we've kept our customers and is in good shape here and losing no good clients, winning some.
But we've not been as hard in the competition on new commercial property, for instance, as some of our competitors. That is basically what moves volume in this segment short term. We were taken a little bit by surprise by how hard that was fought in terms of prices and to some extent also credit willingness. As I said in one of the previous answers here, we think that is being somewhat normalized at the moment, and we think we will fare better also in that segment going forward. Then I think underlying, you should see that we have a different movement from the other banks, where some of the other banks have a movement from mortgage product to bank loans. We have the other movement here. So generally, I would look at lending combined when it comes to us and comparing to the market.
So basically combining the mortgage or realkredit in Danish and the bank loans and compare to market development from here.
When it comes to the second question regarding the IRB models and the dialogue with the FSA and EBA guidelines, you're quite right that we are not fully compliant with the EBA guidelines today. We also have a risk density that's relatively high compared to peers. We have presented, well, naturally a model project for the FSA, and we are fully transparent with them. We have an ongoing dialogue, and we apply and implement models on a sequential basis, and we've been doing that, as I said, latest we implemented last year, a new corporate model. We will finalize within the next very few years, the full project of being EBA compliant.
Do you see any risk that there could be last-minute cancellation of approval, or are we talking about smaller adjustments?
Well, of course, a new model is a cumbersome task that every bank knows that. So of course, there are risk related to an application with the FSA and a dialogue with them, but I think we are on a good footing and in a constructive dialogue as far as we can see.
Very good. Thank you.
Thank you, Anders. Feyi, it seems as if your hand is raised. Do you have another question?
Yeah, just one more question. Being slightly less active in new CRE development and lending towards that, is that intentional, or is that something that has just naturally happened and maybe you are just not being as competitive in other areas? Is this a conscious pullback?
It has been a conscious decision from our side. We had in our strategy that we basically had the composition of the mortgage book that we would like to see, and we would like not to see a larger share that is commercial real estate related. This means that what we have been taking care of as first priority is to make sure that we are keeping good clients, and we are focusing on the long-term relationships in that area. This has also meant that for new clients, we have not been fighting as hard as some of our competitors in that segment. Our view has been, and we might be wrong, that some of the pricing and some of the credit standards have been outside normal competition or normal standards, and some of them is not sustainable.
We have not had the same hunger after new CRE lending, standalone lending. We also wanted to make sure that we are also giving the good price and credit standards to the current clients here. We thought it would not make sense, and it would be ROE wise, negative for us to fight harder for new volumes in that space.
Great. That is super clear. Thank you.
Thank you, Feyi. It seems as if there are no further questions in line. Thank you for participating in-