Good morning, everyone, and welcome to Aktia's Q3 results briefing. My name is Oscar Taimitarha. I am the head of Aktia's investor relations, and I will be the moderator for this event. Earlier this morning, we published our Q3 report. Aktia CEO Anssi Huhta and CFO Sakari Järvelä will soon walk us through the results. As always, after the presentations, we are happy to answer your questions. This time, we have also set up a conference call line for those who wish to ask questions. I hope you will make use of it, and I ask you to bear with me if I get a bit confused with the technical side of things. It is, of course, also possible to write your questions in the comments field. Let us get started. The stage is yours, Anssi.
Thank you, Oscar, and warm welcome from me as well. There are several things in this quarter that I am particularly pleased with. Assets under management reached another record, and Private Banking delivered an excellent quarter in net sales. The quarterly results also reflects the rapid movement in interest rates, particularly in life insurance. We will explain that clearly today. But looking at how our customer business is developing, I feel confident about the direction we are taking. Together with Sakari, I will walk you through the quarter. Let me start with the customer business, because that is where Aktia builds the future earnings. Assets under management reached record EUR 18.2 billion, with EUR 124 million in net sales during the quarter. Private Banking was a particular highlight. We also received excellent customer feedback in the independent EPSI Rating survey.
Aktia ranked first in customer satisfaction among corporate customers. Among private customers, satisfaction improved to very satisfied category. Our comparable operating profit was EUR 22.5 million. Life insurance income was affected by rapid raise in market rates. Higher rates are positive for Aktia overall over time. The timing matters, however. Valuation effects can appear quickly, while the benefit to net interest income comes through more gradually. Commission income remained at last year level, and credit losses were extremely low at EUR 1.5 million. Our CET1 capital ratio also strengthened to 12.6%. That brings our capital buffer back to close to upper end of our target range. Taking a slightly longer view, comparable operating profit for the first nine months was EUR 84.8 million, up 3% from last year. We have seen substantial movements between the quarters, particularly in life insurance. Alongside these movements, the customer business has continued to progress.
Net commission income is up 4% year-to-date, and the customers have entrusted us with more assets. That gives us a good basis to build on. Our job is to turn that growing customer business into sustainable earnings. This is development I am very pleased with. Assets under management reached EUR 18.2 billion, around 12% higher than a year ago. The net sales was EUR 124 million in the quarter and EUR 757 million for the first nine months. Private Banking delivered EUR 85 million in quarterly net sales. That is an excellent result, and I want to recognize the work our colleagues are doing with the customers. A significant share of those investments also goes to insurance wrappers.
We can see the value of bringing wealth management and life insurance together around the customer. Internationally, our emerging market debt funds continue to grow, supported by positive net sales and good investment performance.
We have strengthened our sales presence in DACH region, and customer activity has already doubled. There is also a planned change with these AUM figures that I want to explain. As we stated in the beginning of the year, the legacy Taaleri closed-end funds account for approximately EUR 1.2 billion. These funds are in runoff, and we expect around EUR 300 million to be returned to investor over the next 12 months as funds mature. That will affect the AUM and commission income. The timing will be uneven, and our task is to stay close to customers and offer suitable investment solutions as capital is returned. At the same time, we continue to build the growth through our international fixed income business and comprehensive wealth management offering, especially in private and premium banking. Let's turn to our strategy and what it looks like in practice.
We are concentrating our efforts to areas where Aktia has strong expertise and clear opportunity to grow. During the quarter, this trend was particularly evident across private banking, our international asset management business, and our rapidly expanding insurance portfolio. We manage Aktia through two complementary businesses, life and wealth, and banking. Life and wealth gives us attractive opportunities for capital light growth. We have strong expertise in fixed income, particularly in emerging markets, as well as in manager selection and asset allocation. Our life insurance company is important part of our customer offering, providing investment solutions and risk protection. Banking provides a stable foundation and opportunities to grow in selected customer segments. It also brings our wealth management expertise to much wider customer base. These businesses work best when the customer experiences Aktia as a one team, and that depends on our people.
We want the colleagues to have the support and confidence to do their best work, and customers to feel that we understand their whole situation. The customer feedback we received this quarter is very encouraging sign of progress. This is one of the slides I'm most pleased to present today. It reflects the work our teams do with the customer every day. In the independent EPSI survey, Aktia ranks number one among corporate customers in satisfaction, loyalty, and service quality. Among private customers, satisfaction improved significantly. That was the largest increase in the comparison. Our own customer survey supports this picture. Our customer survey points to clear growth potential in private banking. One in four respondents plan to increase their investments with Aktia over the next 12 months. That's the highest share in the five-year comparison.
At the same time, the share of planning reduced investments has fallen from 21%- 12%. This is an encouraging sign of customer confidence. Our focus is to turn that potential into net inflows and profitable growth through good advice and strong customer relationships. For me, this shows the value of knowing your customer, giving a good advice, and building lasting relationships. I'm proud of our teams and grateful for the trust our customers place in us. These results give a strong foundation to build on. Across the businesses, we are seeing concrete progress. In life and wealth, asset management reached another record. Risk insurance and unit-linked insurance product developed well, in line with our strategic priorities. Private banking had a particularly strong quarter. The combination of personal advice, investment expertise, and insurance solutions is clearly relevant to our customers. Internationally, we have strengthened our sales resources into DACH region.
Investor engagement has increased, and our focus is now turning that engagement to lasting customer relationships and new business. In banking, leasing and hire purchase finance continue to grow. Demand for cash management and working capital solutions remain strong. Premium customers also continue to invest, generating extremely positive AUM net sales that shows that contribution banking makes to wider life and wealth business. Credit quality remains solid with low losses. Taken together, this development gives us confidence in our direction. There is good work happening across Aktia, and I want to thank our colleagues for keeping the customer at the center of it. Sakari, over to you for the financial result.
Good morning, everyone, and welcome also from me. My name is Sakari Järvelä, and I am happy to present the financial result for the third quarter and the first nine months of 2026. I am very happy to start by noting that after three quarters, we are heading towards a strong result for 2026. In the third quarter, we reported comparable operating profit of EUR 22.5 million. For the first nine months, comparable operating profit amounted to EUR 84.8 million, 3% higher than last year. While the result in the quarter looks slightly on the weaker side, this is mainly due to fair value changes and timing effects, while the underlying performance has remained strong. Starting with net interest income, we reported EUR 31.9 million in the quarter. As I have said in previous quarters, we believe that NII bottomed in the first quarter, and that view has not changed.
The Q3 number looks somewhat weaker compared to Q2 than the underlying development actually was due to timing of certain one-off effects between the quarters. Net commission income was EUR 31.1 million, approximately at the same level as last year. Also here, there are certain elements that make the headline number not fully reflect the underlying strength. I will come back to these when we look at the net interest income and net commission income in more detail. Income from life insurance was EUR 5.7 million compared with EUR 8.2 million last year. Risk insurance and unit-linked insurance continued to develop well, but the run-off portfolio of with-profit contracts was negatively affected by the rapid upward movement in short-term interest rate in a similar fashion as in Q1 this year.
While such rate moves have led to fair value losses affecting our P&L immediately, it is very important to remember that the impact from higher interest rates over the medium term are unquestionably a positive one. We are also very pleased with the development of our capital position. Our CET1 ratio increased from 12%- 12.6% during the quarter, bringing us once again close to the upper end of our target range. We are also reporting relatively high cost in items affecting comparability. These relate primarily to strategic projects completed in the quarter and partly to costs related to a previously exited business in our life insurance unit. As said, net income from the life insurance amounted to EUR 5.7 million in the third quarter. The two strategically important businesses within Aktia Life, unit-linked investment contracts and risk insurance contracts, continued a solid performance.
The result from risk insurance was EUR 3.5 million, supported by a good claims ratio, and the result from investment contracts was EUR 2.6 million. The unit-linked insurance portfolio continued to grow to another record level, supported by good new sales. As we have explained in detail in the first quarter, the run-off insurance portfolio and the attached investment portfolio can fluctuate between quarters in periods of larger interest rate moves. During 2026, we have now witnessed two large and abrupt periods of volatility when short-term interest rates have rapidly moved up and the interest rate curve has inverted, first time in March and now again in September. What comes to these fair value moves, I will repeat what I also said in Q1.
These effects materialize due to the hedging and investment strategy we have chosen, and once the interest rate curve normalizes, we will also see the opposite positive effect on our P&L. Despite the headline volatility, I would again draw your attention to the solid contribution from the strategic core businesses and the positive development there. Net commission income, as said, amounted to EUR 31.1 million, approximately at the same level as last year. The strongest development was once again in income from mutual funds. Fund-related commission income increased by 7% to EUR 18.5 million, supported by the strong growth in assets under management. As I've said before, this is the core strategic item we follow, and we are very pleased with the development. In this quarter, there were two items weighing on the commission income.
First, income from cards and payment services was lower than last year and also dipped quarter-on-quarter. As per previous communication, the ongoing migration from Mastercard to Visa is having a temporary negative effect on card-related commission income during the year, and this effect was now very visible in Q3. Second, the income from asset management and securities brokerage amounted to EUR 2.2 million compared to EUR 2.8 million last year. The decline mainly reflects timing differences, as the comparison period included higher income from a structured products campaign, which was absent in the third quarter of this year, but will now be timed in Q4. Turning to net interest income, as I mentioned already, we continue to stand by our earlier statement that the core NII bottomed out in the first quarter, even though we reported EUR 31.9 million in the third quarter.
Looking at the components, interest income from lending starts to show the positive development from higher interest rates, increasing both from the previous quarter and compared to last year. At the same time, there were some technical timing effects in the hedging side that made the Q3 number look somewhat weaker and Q2 look stronger than the underlying development actually was. I would not read too much into the sequential decline from Q2- Q3. The underlying development remains broadly consistent with what we have communicated earlier. Going forward towards Q4, and especially looking into next year, we expect net interest income to be increasingly supported by the higher interest environment. To reiterate, our overall view on the NII trajectory has not changed. The first quarter level represented the bottom, and we expect the benefit from higher rates to become increasingly visible going forward.
Looking at costs for the first nine months, comparable operating expenses increased by 6% to EUR 136 million. Personnel costs increased by 4%, and this was in the quarter due to contractual salary increases. Also, we increased variable compensation accruals for 2026, which show in this third quarter. Overall, the cost development is in line with our plan and our expectations, as we continue to invest very selectively in the capabilities required to support growth, AI and digital capabilities, and strengthen our operational resilience and regulatory compliance. Nothing has changed also with our message on costs, as we continue to balance disciplined cost management with measured investments needed to deliver our strategy. Moving on to asset quality. Credit losses for the third quarter amounted to EUR 1.5 million, 59% lower than last year. Both individual impairments and model-based expected credit losses remained at low levels.
For the first nine months, impairments had a positive impact of EUR 3.5 million on earnings, including the EUR 8.1 million transitional effect from the implementation of the new ECL model in the second quarter. Also, excluding the transitional effect, the underlying credit loss development has been favorable compared to last year. Our annualized net credit losses were seven basis points, remaining at a very low level. Overall, we are very pleased with the quality and the strength of our loan portfolio. Moving on to capitalization, our CET1 ratio increased from 12%- 12.6% during the third quarter, which we are very, very pleased with. The buffer above the regulatory requirement was 3.9 percentage points, bringing us back to the upper end of our target range of two to four percentage points above the minimum required.
The relatively large increase in CET1 in the quarter was driven by lower risk-weighted assets, which to a large part was due to FIN-FSA's updated guidance on certain housing association loans, which positively affected the risk weights of the so-called acquisition, development, and construction, or ADC exposures. Overall, our capital position is strong and back at the level where we want it to be, which together with the solid loan book quality puts us in a great position to continue supporting our clients with capital. Our liquidity position remained strong throughout the quarter. The liquidity coverage ratio was 223% at the end of September, at a very strong level. No new long-term funding transactions were executed during the third quarter. We continue to monitor the senior preferred private placement market in preparation for upcoming refinancing needs.
Aktia Life Insurance has also received the required approval from the FIN-FSA to call its inaugural tier two instrument issued in November 2021. As planned, the instrument will be refinanced and replaced during Q4. Earlier this week, S&P Global Ratings revised the outlook on Aktia from negative to stable and affirmed our long-term and short-term issuer credit ratings at A- and A-2. According to S&P, the revision reflects Aktia's resilient strategic execution, ability to generate returns, strong capitalization, and the successful stabilization of leadership. We are naturally very pleased with the decision. It provides external confirmation of the progress we have made and recognizes the resilience of our business model and our capital position and our ability to execute our strategy. Maintaining strong ratings is important for Aktia because it supports access to funding markets and contributes to competitive funding costs.
We continue to maintain our commitment to keeping our current strong credit ratings also going forward. Then to guidance. We again keep our full-year guidance unchanged. Aktia's comparable operating profit for 2026 is expected to be approximately at the same level as or slightly higher than the comparable operating profit for 2025. That is EUR 106 million. Recognizing that there is only one quarter left of the year, we would perhaps place a bit more emphasis on the wording slightly higher, but given the type of volatility we have seen in the markets already during the year, we believe it is appropriate to show some caution with forward-looking statements. Hence, we retain the guidance unchanged. This completes our review of the third quarter results. Thank you for listening, and we are now happy to answer your questions. The Q&A session will be moderated by Oscar. Thank you.
Thank you, Anssi and Sakari, and welcome back on stage. Before we go to the question, one small correction. Concerning the outlook, our profit last year was not EUR 206 million, it was EUR 106 million, unfortunately.
Unfortunately. Apologies for that.
As I said in the beginning, we have a conference call line for you following us online, and you should be able to see the link to the conference call at the bottom of the page. We are happy to answer your questions, and I think we will start here on site. I can see that Jacob Hesslevik from SEB, you have the microphone, so please go ahead.
Yes. Thank you very much, and good morning, everyone. Maybe we can dive into the NII a little bit more for this quarter. If we look at lending book to start off with, the loan book was down 2% this year. Mortgages is - 3%, but corporates are doing very well, up 6%. When does the loan book start to grow again, and how do you see the household side of the business?
You want to start?
We are highly dependent on the household market here in Finland, so that's obvious thing what's happening. The Finnish household market, it's rather slow at the moment, but we are concentrating now to corporate side, as you have noticed. We're putting a lot of effort to corporate banking, especially in the high-return products such as leasing, factoring and hire purchase. It's rather difficult to say when the Finnish mortgage market is going to change, but let's hope for the best. Otherwise, we are putting effort to corporate banking and these highly profitable products. We are able to grow there, and we are investing more to those product types, so to speak.
Thank you. That's very clear. If we also look at the deposits, it fell group-wide in this quarter. Are you losing out on price, or is it just competitive dynamics playing out here?
[inaudible]
Concerning the deposits, Aktia is a wealth manager bank. Typically, we had an internal meeting just before this, and we had a discussion around that topic also. But we are putting a lot of effort to our wealth management, asset management sales. Typically, our clients would like to invest, and we are doing a lot of work to transfer those deposits to funds. In a short term, that is a negative impact, but we strongly believe that is beneficial to our clients, and it gives a long-term customer relationship with our clients. That is one of the things what we are actively doing. And you can clearly see that we are all fund sales, for example, in private banking.
Maybe just to add, I mean, to your question, we do not see ourselves particularly losing to competition, I would say. I think we run a relatively successful campaign on certain types of deposits in the quarter. But it is also going a little bit hand-in-hand with the lending book, you know, honestly.
Thank you for that color. Then it is my trying here to understand your hedge, which we do not know that much about. But when I look in your financials and your liquidity, covered bond interest cost rose 38% year-over-year, despite mortgages not really growing. So, this is a reason why you have these hedge timing effects that you mentioned in the quarter, that is swapped bonds reprice with Euribor ahead of the mortgage book? Is that the reason, or when do you expect lending repricing to catch up?
I think it is part of the reason. All right. Our loan book is primarily in 12-month Euribor, and we are, from the funding side, on the covered bonds and senior bonds are mainly floating. That is part of the timing effect. Between Q2 and Q3, there was also something a little bit more technical relating to old hedges from, I think, made originally from 2022, protecting some bond portfolio in our liquidity portfolio, where the timing of the exit of the swap and when the bonds will actually be maturing, it became apparent now. Hence, Q2 looked a little bit better for that reason than Q3. But the underlying dynamic, I would say, is that, like I said, the interest rate, they will support the NII going forward.
Okay. Thank you for that. Just a final question from my side is on capital. Your CET1 is now 390 basis points above the requirement. S&P announced earlier this week that they moved you to stable outlook. How large buffer do you want to hold, and is there a potential for extra dividend here?
I think, like we said, on a typical year, we expect it to be roughly where we are right now. Our dividend policy, our capital policy, it gives us an opportunity to start returning capital to shareholders if we are clearly above our target range. I would not say that we are in that territory yet. I would say, and I do not want to I think, Anssi, you can correct me if I am wrong, but I think our primary wish would be that we could deploy the capital to supporting our clients— going forward. But that requires also the demand side to function, so—
Yeah
I think that is how we look at the future and the capital right now.
Thank you. Very clear.
Thank you, Jacob. Kasper Mellas from Inderes, please go ahead.
Thank you. First question, how do you see current loan demand in your corporate customers since Q3 was a bit soft in this front?
The demand is high, and it depends on the customer group. Obviously, there is a fluctuation between the small and large corporates, and that has an impact. But the demand in the target group, and the target group, as you know, is SMEs and certain products. There is still demand, and we are able to grow there, and we want to grow there. As Sakari just shared, we have also capital to do that. So, we are putting a lot of effort to that direction. But there are certain larger tickets in our scale which has had an impact to us. But in the targeted customers, we are able to grow, and we are willing to grow, and we are growing.
All right.
If I just add, I think you have to remember that what we've also said publicly, we have a relatively large book of housing associations, and we haven't really been active in that segment. So, we don't particularly try to hold onto those loans. That book also reduced a little bit. That's something we need to look going forward, what we're going to do there. But that has been part of the reason for the corporate loan book.
All right. Then about NII. Could you paint us a picture how the higher interest rates will affect your NII development in the upcoming quarters? Should we expect any meaningful improvement in Q4 already? Looking at the next year, do you expect the growth to be somewhat linear when looking at the NII margin?
I think, yes, we expect the Q4 to be better than Q3, for sure. Going to next year, we would rather not give too much guidance right now. I think the sort of time for the guidance for next year is later. But if you take together what we have said, that we typically hedge roughly 12 months of NII, and if you look at the interest rate move that has happened during this year, starting from March all the way now to this September, then obviously our view on next year in NII is quite positive.
Yeah. I guess most of the headwind from the hedges have already taken place.
That is correct.
Yeah. Then could you elaborate a bit more what were the negative changes in your card business, and how are these only a short-term headwind?
There is a one-time cost. We transferred our card scheme from Mastercard to Visa, and obviously there are project costs which has a clear impact to our card income and also the cost side. That is a one-time negative impact for the what changed.
All right. This was a project.
Yeah. It is a project and a still ongoing project, but it will end.
All right. Then I noticed that there were quite significant rise in your other costs. Where did this come from, and how much of this should we treat as continues?
There is several elements. It is partly related to elements in the card transition that is also coming through from the other operating expenses. There is also a couple of other project-related things. I would say there is non-permanent increases. But again, we guide more to next year later, but you shouldn't perhaps model it at this level going forward.
All right.
It is a little bit elevated now.
All right. That is clear. What did the one-time cost of EUR 4.4 million include during this quarter?
Like I said, there were some strategic projects that we completed in the quarter. There were some external costs related to those. There is a cost reservation for a business line that we ended already in 2023, I believe, in our life insurance, and there are some sort of back payment type of things coming from there.
All right. My last question. Do you expect any further internal credit risk model reviews or any other one-time changes in your risk-weighted assets?
We do not have a clear view that we have We do not know that we are having that kind of effects in the future. Obviously, we are constantly going through our models, how we operate. As we all know, the environment where we are operating currently is changing constantly, but we do not have a clear view that we have that kind of impact in the near future.
All right. That is clear.
I think it is fair to say that the regulation and the capital regulation and the things about models and risk weights, they have been driving quite a bit of volatility in our risk-weighted assets and capital over the last two years. We hope it is not something we particularly want, but we cannot exclude something happening in the future. But right now, obviously, there is nothing we know that would be meaningful.
All right. That was it for me. Thank you very much.
Thank you very much. We will move on to questions online or questions from the telephone lines. So, please.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Antti Saari from OP Markets. Please go ahead.
Hello. Regarding your structured products business, I understood that last year you had campaign in Q3, and this year you have it Q3. At the same time, it is a tailwind for Q3, it is going to be headwind for Q4 compared to last year. Is this correct?
To some extent, yes. The campaign that was timed last year in Q3 is now timed in Q4. It is also a little bit of a question of the sizes of these campaigns. I believe we had something also in Q4 last year.
This year, we are expecting a good result for the campaign we are running now
Okay. Regarding these card commission expenses that you mentioned regarding this project, it is still ongoing, so we should expect it to affect Q4 figures as well, but is the impact as big as in Q3? Can you give us some flavor?
Yes, it will affect, to some extent, Q4. I would rather not guide the size, but maybe it is not too bad of an assumption that it would be similar to Q3.
Okay. I would come back to your capitalization. If I understood correctly, you said that if your capitalization is clearly above your target, you would consider some actions. Still, you paid already last year clearly higher payout ratio than your policy of 60%. How should we read this? Should we expect you to pay out 60% in the future or something more like last year?
If I start-
I think for us to go with our dividend policy of 60%, that is a good assumption. Let us start from there. If we are then clearly over-capitalized and we do not see demand for our capital from our customers, then obviously the board has, according to our policy, an opportunity to consider additional distributions. As said, it is not something our policy demands or requires. It is, of course, something we will consider if we are clearly over-capitalized.
Yeah. There is an option that we can, or the board can use. We targeted to 60%.
This means that now when you are still inside your range, it means that we shouldn't expect much more than 60%.
As I said, the 60% is a good assumption, but obviously it is for the board to decide and review when the time comes at the end of the year.
Yeah. Okay, thanks. This was all from me.
Thank you so much, Antti. I suppose that was the only questions that we had online. Do we have any further questions here on site?
Yeah. Maybe you could
Well, please
talk a little bit more about your investments in the DACH region. It weighed a little bit on the cost line in this quarter, but I am completely fine as that is an investment for future revenue. When do you expect to see the revenue to take off from the DACH region? Is it already next year, or is it a longer project?
Obviously, it is institutional sales. It is a long project, as we all know. As I mentioned a while ago, our customer meetings, number of customer meetings has doubled compared to last year. I am expecting results already during this year, hopefully. Let us see. Obviously, it is a long project. It has a cost, but we are seeing really promising signs in Central Europe. Let us hope for the best, but promising signs.
Are investments going to continue to accelerate, or have we hit like a ceiling now, and that is a new steady state?
We are not going to see significant raise of the costs. There has been, as Sakari said, the one-time effects also in the cost line. Our personnel costs are in that level that they should be. We are not going to see significant rise in those regarding this project or task.
Very clear. Thank you.
Thank you very much, Jacob Hesslevik. I think that was the last question for today. Many thanks to all of you, both those on site and those who have followed us online. Thank you, Anssi. Thank you, Sakari. I wish you all a great rest of the autumn and a lovely run-up to Christmas. Thank you. Goodbye. See you again.