Morning, and welcome to this presentation of the 3rd quarter results for Nordea. We will also present the new financial targets for Nordea, which we will go through in detail at the Capital Markets Day in London tomorrow. My name is Rod Nardi, and I'm heading at the Investor Relations at Nordea. So today, we will start with a presentation by the President and Group CEO, Mr. Frank van Janssen.
That will then be followed by 2 high level questions that you can ask to him. Then that would be a Q and A session together with me and the Group CFO, Mr. Christopher Rees. So with that, Frank, please.
Thank you, Rodney, and good morning. Today, we have published our Q3 results. We have also decided on our strategic priorities, updated business plans and new financial targets. These decisions have clearly impacted the result. This is a day when Nordea starts a new phase, which will go which we will go through in our Capital Markets Day tomorrow in London.
Before getting into the details of the new financial targets, I would like to start by addressing our quarterly results. In the Q3, both net interest income and net commission income increased from higher business volumes. We have encouraging signs of improving business momentum. Net fair value decreased following significant interest rate movements during the summer. Total revenue are down 2% in local currencies.
Underlying, we have delivered on our cost targets. Our underlying costs were down by 1% in local currencies. This quarter is special as we have had several one offs. In total, these amount to €1,300,000,000 whereby an impairment of charge of €735,000,000 related to the new business plan and expense of €75,000,000 related to the divestment of shares in Luminor. And it also leads to a restructuring provision of €204,000,000 in relation to our new business plan.
The credit quality remains solid. However, after dialogues with ECB, we have decided to increase provisions by a total of €229,000,000 In addition, we have reviewed our collective provisioning models, resulting in an increase of €53,000,000 in collective provisions. Underlying, we reported a cost to income ratio of 58% and a return of equity of 8.4% in Q3. For a while now, our financial performance has not been where
it should
be. We have therefore done a strategic review, and we have developed a new business plan to ensure stronger results meeting new targets. The new plan will significantly improve our operating performance. We will optimize operational efficiency with strong cost discipline. We'll find the right balance between costs and income.
We will concentrate on driving growth initiatives and creating great customer experiences. We have the readiness and we will invest in our core business. Our new phase is about execution and to retake lost ground in the markets. So our new financial targets are a return on equity above 10% in 2022, a cost to income ratio of 50% in 'twenty two. With regards to expectations for next year, we expect our cost base to be below €4,700,000,000 in 2020.
We plan continued net cost reductions beyond that. The new capital policy from 'twenty is to have a management buffer of 150 to 200 basis points above the regulatory CET1 requirement and a dividend payout ratio of 60% to 70%. This new dividend policy, in a good way, should balance the risk to reset the dividend to market expectations, including those from the regulators. The target with payout ratio is to create flexibility to capture both organic growth opportunities as well as potential bolt on acquisitions, like we did last summer before with Jensidige Bank in Norway. If we have excess capital, we intend to distribute to the shareholders with share buybacks as a tool for this.
In 'nineteen, we target a dividend of $0.40 per share. And let me now spend time or more time focusing on the 3rd quarter results. In the quarter, we have seen improved signs of business momentum in most business areas. However, the income growth is reduced by the weak result on the net fair value, which has impacted the interest rate impacted by the interest rate drop during the summer. This has resulted in 2% lower income in the quarter compared to Q2.
Cost is 1% lower and operating profit 2% lower than in the second quarter when excluding these one offs. When it comes to net interest income, the higher activity level We are improving our mortgage business. We experienced to some extent margin pressure in Sweden, but overall, margins has been largely stable in the quarter. Higher volumes give a solid contribution. In total, volumes and margins are 12,000,000 add 12,000,000 to the NII in the quarter.
All in all, we have 2% higher net interest income compared to the Q2. Let me highlight the development in the mortgage market. We are now growing in all markets. The Danish market has seen very high activity in mortgage refinancing in the Q3, and we have been capturing a larger part of that new volume. In Finland, the market has been challenging for some time, but we have now had 2 quarters in a row with volume growth.
We have had good volume growth in Norway. I'm also satisfied with the development in Sweden, where we have strong volume recovery. So all, mortgage lending volumes are picking up, and we are also improving our market share of new mortgages in all countries. Fee and commission income was 2% stronger compared to the 2nd quarter. Fees in Asset Management, the biggest contributor in NCI, had a solid development in the quarter.
The higher net inflow have had a limited impact on fee income in the quarter. In brokerage and corporate finance, the 3rd quarter is seasonally low, but it was still higher than the 3rd quarter last year. The main driver in this quarter was a strong mortgage refinancing activities in Denmark. Overall, we see the result of the increased activity level reflecting our efforts. The second highlight of this quarter is our strong development in assets under management.
Net inflow in the Q3 amounted to €3,700,000,000 which corresponds to 5% annualized growth. This means that we are back on our growth track and in line with our long term targets. In particular, I'm particularly happy to see inflows in all of our segments and challenge. Assets under management is now €314,000,000,000 which underlying is all time high. Investment performance continues to be strong and year to date 88% of our funds are outperforming the benchmarks.
On net fair value, market conditions were challenging in July August, followed by a recovery in September. The result in treasury is lower compared to the strong second quarter, which was unusually high. Despite this, the net fair value was higher than in Q3 last year. Underlying customer activity is normally a bit lower in the 3rd quarter, and it is in line with last year's Q3 results. So let's go to the business areas as usual.
In Personal Banking, we reported the highest quarterly profit since the Q3 of 2018. The strong trend in customer driven activity continued in the Q3. I don't want to repeat myself too much, but now the promising signs of mortgage sales are starting to realize step by step in all countries. Lending volumes grew slightly compared to the previous quarter and is up 4% compared to last year. In local currencies, it is up by 6%.
Customer satisfaction is key for us. And while we can see positive signs, we are moving in the right direction here. We still have to do a lot more. I cannot stress enough that growth initiatives and better customer experiences are the top of our agenda. And the key driver to create business momentum is being available for our customers.
If we move on to Commercial and Business Banking, the underlying positive income trend was maintained in the 3rd quarter and operating profit was up 7% compared to same quarter last year. Norway and Sweden are still our main growth areas. In wholesale banking, the challenging trading environment continued in the 3rd quarter. This has been a challenging quarter for all markets operations with significant interest rate drops in July August, where interest rates fell even more into negative territory, impacting fair value in our markets business. We had a good recovery in September, meaning that the quarter results is actually a bit better than Q3 last year.
On the positive side, we have a better momentum in both equity and debt capital markets. The wholesale banking result was negatively impacted by the additional loan loss provision of $207,000,000 following the dialogue with the ECB. Assets and Wealth Management continues to experience strong momentum. As I mentioned, we had net inflow of €3,700,000,000 in the quarter. This is the 3rd quarter in a row with positive flows.
We have a leading position in asset and wealth management with asset under management now at 314,000,000 Investment performance has been exceptionally strong during 'nineteen. Year to date, 88% of our funds are outperforming the benchmark, demonstrating the strength of our active asset management strategy. Let me come back to the group results. I'd like to start by costs where we are underlying deliver on our targets. Underlying costs continued downwards compared to the previous quarter.
As mentioned, there were several one offs in the quarter on the cost side. This amounts to around €1,000,000,000 Our underlying cost to income ratio in the 3rd quarter was 58%. For 2020, we expect to reach a cost base of below €4,700,000,000 with planned continued net cost reductions beyond that. Our solid credit quality gave us a strong foundation to build our future business. In the Q3, underlying net loan losses amounted to €49,000,000 so track record of loan losses of low loan losses continued.
Following the ECB dialogues, we have decided to increase provisions by a total of €229,000,000 Additionally, we have reviewed the collective provisioning models and this model update generates a €53,000,000 increase in collective provisions in the 3rd quarter. Our expectations for the coming quarters is that net loan losses will be low and around the average level of 'eighteen. However, this comes with a somewhat more uncertain macroeconomic outlook. Common Equity Tier 1 in the Q3 saw positive development and increased from 14.8% to 15.4%. The increase is partly driven by the decreased ownership in Luminor.
CET1 capital was also increased by the lower accrued dividend for 2019. The capital requirement, which JSB is setting for us, will not be valued until 1st January 2020. So in this quarter, we are still following the requirements set by the Swedish FSA. And for the Q3, our capital requirement is 14.3%. A CET ratio of 15.4% gives us a management buffer of 110 basis points above requirement.
We have received our future capital requirements from the ECB and our new capital policy is to have a management buffer of 150 to 200 basis points above this requirement. The dividend payout ratio will be 60% to 70%. And for 2019, we target a dividend of 40% per share. The dividend policy has been to set to reflect or has been set to reflect the current environment. Our target is clear, stable and competitive dividend to our shareholders in the future, but also creating flexibility to grow our business.
So, Nordea's new financial targets for 2022 are a return on equity above 10%, a cost to income target of 50%. Our full focus is now on execution and delivering on these targets. Once that has been achieved, we decide what the next steps will be. Our capital and dividend policy is as follows starting in 2020. Management buffer of 150 to 200 basis points above the regulatory CET1 requirement, a 60% to 70% payout of profits to shareholder, Excess capital is intended to be distributed to shareholders through buybacks.
And as I mentioned, this also leaves room to drive growth initiatives organically and readiness for taxably bolt on acquisitions. With these targets, we will bring the cost efficiency and the profitability to healthy levels. Luttea is entering a new phase. It's about execution and to retake lost ground. It is our way of working and how we will run the bag today and tomorrow.
In the new phase, we have clear target, clear priorities. The 3 key priorities are: 1, optimize operational efficiency 2, drive income growth initiatives and 3, create great customer experiences. We will relentlessly focus on execution, follow-up and make sure that the necessary actions are taken. Thank you and see you tomorrow at our Capital Markets Day.
Frank, thank you very much for this. So we will now open up for a few high level strategic questions. Please remember that the financial targets we will elaborate upon tomorrow. So please focus on the Q3 end strategic questions. And the first question comes from Mr.
Peter Kessiakoff from SEB. Please.
Thank you very much. Thank you for that and congratulations to the job, Frank. First of all, I would like to ask you on the dividend, the way you mentioned that you potentially could do bolt on acquisitions similar to that of Gjensidige Bank. Is it possible to elaborate a bit on what you would potentially be looking for? Any criteria and how you view would view that versus buybacks when for instance your share price is trading 1 times below book?
That's my first out of 2 questions.
Yes. Thank you. Good question. Our point is that now we have dividend policy that will make us able to create a stable return for our shareholders. We will primarily focus, of course, on organic growth.
We see do we do see good opportunities. We will invest and make sure that we can invest in our core segments. And it's the priority is the way we choose where to invest is in the BAs and the business areas, in the segments that lead to an improved return of what we are doing. When we then or if we then see bolon acquisition possibilities within these segments And also, of course, being sure that they will add value to the bank and our shareholders, we, of course, are positive of looking into these and following these possibilities.
But we're talking acquisitions in the Nordics as the main focus?
Yes. That's a good point. We are a Nordic focused bank. We have 4 business areas, 4 countries, and that is what we are dreaming about every single day.
Okay. Then my second question, just on the IT write downs. Could you perhaps elaborate on what that actually relates to? And how is the IT modernization program progressing? And should we read anything to the write down today on how it progresses?
No, I don't think so. When we this morning decided on our new business plan, our financial plan and our financial targets, it is and has led to a review of our intangibles. The new business plan, the new financial targets lead to an acceleration to move to common platforms. And when we then do that test looking into the, you can say, the lifetime or the duration of the lifetime on the legacy systems, among other things, it leads to an impairment. And that is what we showed today.
Okay. So it's solely related to the old systems?
It's for a very, very, very, very last part related to the old systems, yes.
Okay. Thank you for that. See you tomorrow.
Yes. Thank you. So we
have room for one more question. So if you have that, please dial 1 on your telephone. So operator, do we have one more question? Okay. So that seems to be the case.
Sorry, Rodney.
Yes, Andreas, please.
Yes. Sorry, I didn't hear if it was my turn. But I have two quick questions then. First one was that you talk about the new capital buffer that was higher than previously. But could you tell us what is the requirement that we should measure that against?
Sorry, I didn't get the question. I couldn't actually hear it.
Yes. Sorry. So you're talking about your new management buffer on the capital side. But could you tell us what's the capital requirement we should measure that buffer against?
Yes. As we said then, the new buffer is for the time being, it's a 13.4% requirement. And at the time being, we are under Swedish, you can say, regulations. We have had the you can say the feedback from ECB and we haven't publicized that yet. But what we have decided here is a buffer going forward.
And we will, of course, come back when we have new information to inform about.
Okay. And the second question, could you ask us when you take the restructuring charge, how many FTEs are you planning to reduce on the back of that? Thanks.
Yes. We have not set the final figure yet. That is up to us now to decide and discuss together with the unions, and we will then move forward in a good collaborative way as we always do in AdeA together with our unions and our people.
Okay. Thanks. I guess we can chat about that tomorrow as well. Thank you.
Thank you, Andreas, and thank you, Frank, for this. We will now close down this webcast, and then we will open up an audio conference for all the number crunchers together with me and our CFO, Christopher Rees. Thank you, Frank, and
thank
you, everyone, for calling in. Okay. So let's continue now with the questions. It's me and Christopher Rees here. So please dial 1 and ask your questions.
So operator, do we have any questions?
Our first question is from Espen Espenas, EV. Please go ahead.
All right. First question again. Lucky me. Well, so just on the trading side, I mean, with trading now being kind of below the guided normalized level for a while. Is there anything new to say on the normalized guidance that you've given of €275,000,000 to €325,000,000 €1,000,000 per quarter?
That's my first question.
Hi, Peter, and good morning. As we go forward, this is the only line that we have guided for. And now we are tomorrow going to talk about the future and that we will, in that respect, cease to guide as we have before. What I can do is talk about the trends. And as we go forward here in the next quarter, given where rates are and where volatility is, I would expect the trend to what we've seen in the last few quarters to continue.
So as we go looking into the future, it will be clearly lower than what we have guided for, but we will talk a bit more about that tomorrow. But as we see the trends right now, they are similar to what they have been in the last few quarters looking ahead.
Okay. And then on the margin side, when I look at your NII bridge, yet again, the margins on the lending side continue down. And it's almost as large as the volume growth that you're seeing in the quarter. Is and this trend has been continuing for roughly 2 years when we, for instance, strip out Gjensidige Bank and acquisition. What's kind of your view there going forward in terms of how much of the volume growth that you're actually seeing will be removed by margin drifts?
Yes. So I think we said in Q2, Peter, that the margins will still outweigh the volumes. But in this quarter, we've seen volumes offset that lending margin pressure, which is, I guess, a first positive sign of that. We feel that the margins overall have been more stable this quarter. However, the outlook is still challenging.
For example, in Sweden, we saw more stable margins, but of course, there's fierce competition still out there that are making price moves. So we feel this quarter has seen a sign that volumes are now starting to outpace margin, but we still have a cautious outlook on that.
But when I look at the absolute number in terms of margin headwind that you're seeing in this quarter, do you think that, that reflects what you would expect for, say, the coming 4 quarters or the coming year?
I think for the next few quarters, that is probably a fair assessment, Peter.
I mean, if you split up you have 3 components of margins. Lending margins reduces NII by €9,000,000 And I think that's a pretty fair assumption that, that will continue at that pace. Then deposit margin improved NII by €3,000,000 and that is then a lot subject to interest rate movements.
And then we had a very good trend on cost of funds that improved NII by €9,000,000 in this quarter and
that is not realistic to
But it is worth noting that the margins have been more stable than Q2. And the impact of the lending margin is lower in Q2 than or Q3 than it was in Q2.
Okay. And then just last question and the personal nitty gritty. But of the write downs of the IT intangibles, as Frank mentioned, the vast majority relates to legacy systems. But is it possible to strip out how much relates to new systems?
It is a very, very small part, and that is mainly because we are putting some components into use earlier than expected. This is more about the fact that we are making some strategic changes to some of the businesses. It is to what Frank said, we're accelerating moving to some of the global platforms because now actually some of them are available. For example, some of the local Internet sites will are now being replaced with the global, and that is the main reasons for this. And we are also changing some of the governance in terms of the speed of amortization and the tenure of the amortization periods given the development of IT in the world.
Next question is Andrea. Please go ahead.
Hi. I'm not sure this time either if it was my turn. Roden, can you hear me?
We hear you loud and clear, Andreas. Please.
Yes, thanks. So I'm coming back to the same questions before actually, because when I read in the report, you talk about the ECB SREP draft of 13%. Do we need to make further adjustment to that? Is it PQG or something? Or what should we really be expecting from DCP later on?
Thanks, Andreas. I think I mean, if you look at the Q3, first of all, we're still under the transition period. However, the legal requirement is now greater than the capital commitment. So our overall requirement this quarter is 14.3%. As we go forward, we have a draft SREP, so we have an expectation of the P2R around 1.75%.
And if you do the math then, we would in Q1 be around 13.1% in CET1 requirement, and that would effectively be our MBA level. Then as we look forward into 2020, you will see that there are some further increases of local countercyclical buffers that will, of course, have an impact on our CET1 requirement throughout 2020 in all of it.
But that means that already today, if I take the 13.1% with today's core Tier one ratio, you have a 230 bps management buffer. And then you have a slight increase in the caliper cyclical buffers next year, but you're also building capital. So you're very early on going to be above the management targets you're giving. Of course, you can do acquisitions early, but would that mean that on top of the 60% to 70% payout, you could actually start to do buyback already next year? Is that how we should actually see that?
We used to be we saw banks talking about a management buffer of, let's say, EUR 100,000,000 to EUR 200,000,000. But even if there were EUR 300,000,000 above, they said it too much and we're still not going to do anything. But is this management buffer you're talking about a real buffer? So everything above, it will actually be distributed.
So the management buffer is very similar to how other SSM banks have their buffers, I. E, we also have a P2G from the SSM that is part of this buffer, of course. And we will enter the SSM. The SREP will effectively come into force when we announce the final one end of this year and will come into force in the beginning of January. And then we will make sure that we continue to have a healthy buffer and the flexibility to drive our business.
And we will continuously assess the possibilities for shareholder return through the buybacks. And of course, that is will be subject to the regulatory approval. But so that is the intended plan.
Okay. I'll think I'll come back to that tomorrow as well actually, but thanks for now.
I think
so. We hope so, yes.
Our next question is from Manif, ABG. Please go ahead.
Yes. Good morning. Just on capital, the way forward. Now you got the requirement in place. Is it still the case that we should expect the result of model approvals coming in, in late 2020?
And can you give us any feeling what that might result in?
Thank you. First of all, it is the final airstrip is not in place. Just to be clear on that, this is we are guiding for where we expect it to land. And then, yes, we are still working on a model development program, and we will submit models in 2020. Then of course the ECB will evaluate that and revert back to us in due course.
I can't specify the timing of when they will do so, but we will give the models to them next year, the impact of which is very hard to say at this point. So we can't comment on that. Okay.
But it could also be in 20 21 then we get the
So the result, it could be in 'twenty one, absolutely. We need to deliver them in 'twenty. And then, of course, ECB needs to revert back to us following their processes and that could very well be in 2021.
Okay. Good. And then secondly, this one off loan losses you took now related to what you say is a dialogue with ECB, is that a yearly dialogue that can result in both positives and negatives? Or how will this work going forward?
Yes. This particular point is effectively one off as part of the comprehensive assessment. And all banks who enter into the banking union go through a comprehensive assessment. So this is, for us, the first time that we will do that. And as part of the comprehensive assessment, you do the so called AQR.
And that and we did it with their new manual as incorporating the new IFRS and their interpretation of it. And that has led us to review some specific sectors where their outlook is a little bit worse, take realigning our aligning that outlook according to the AQR Prudential methodology. So this is a one off. We think that the credit quality that we have and the actual risk that we have on the is solid as we go forward in the other
areas. So what is this related to? Is it possible to say anything about that? Any areas or any
what or is it just
I can guide that the majority of it was related to the offshore portfolios, where some of the collateral values were reevaluate to align with the outlook that we have. And we're taking on board the ECB AQR methodology to align to that. And hence, we are making these taking these decisions to make these additional provisions with respect to that.
Yes. Okay. Thank you very much.
Next question is Robin.
Yes. Robin from Kepler Cheuvreux here. A follow-up on the Magnus question. So the increase in the collective provision, is that also something that is to be considered as a one off? Or is that a review that's ongoing?
For example, now we had worsening macro outlook during the quarter. Could that also have an impact in next quarter?
The collective provision was actually an update of some of the key parameters also taken into account some feedback from the SSM in our collective provisioning models. It is an item affecting comparability as we go forward. And of course so it's a model update effectively.
Okay. Thank you very much. And then on the capital, how much do you generate about per capital now with the new dividend accrual in CET1 capital?
Robin, please repeat that question.
Sorry, how much TD1 capital do you generate per quarter with a new dividend accrual?
I mean, for this year, we have so far accrued €30 after 3 quarters, I. E. 75% of the €0.40 percent Then next year, I actually have to come back on that. It's a very good question. So I need to look how we will accrue that.
But I mean, we will pay out 60% to 70% of the profit. So I assume that we every quarter will accrue 70% of that's the rules from ECB that we need to accrue the higher part. So but I will double check, but that's my initial finding.
It is such that 30% therefore of our distributable earnings will be retained and accrue into the CET1 ratio.
All right. And how much during this year per quarter, how much in CET1 capital or in terms of basis points have you generated per quarter?
Well, we have accrued €30 so far after 3 quarters. And bear with me a second. I don't think the profit is much more than that. We have so far generated €0.19 in profit. But then also you need to remember that this IT the write down, the impairment charge we take of 7.35 percent.
Then you have a tax shield of 24%. So that gives you some €170,000,000 in extra capital. And then we also have given the AQR, we no longer need to have a shortfall deduction of €90,000,000 So you should add some €260,000,000 due to those two actions. But we have accrued €30,000,000 and we have earned €19,000,000 year to date.
Okay. Thank you very much. And then lastly, on negative deposit rates in for countries with negative interest rates in general and Denmark in particular, what have you what's your thinking about introducing negative deposit rates for households?
Good question. Obviously, all the countries, I mean, Norway's got positive, but the other three countries got negative. We are reviewing the dynamics in the countries are different. And in certain other countries, we are watching the situation very, very carefully and analyzing it. At the moment, as of today, we're not charging customers for the negative rates.
We are analyzing the situation and following it very carefully.
Okay. Excellent. Thank you very much.
Next question is Sophie from JPMorgan.
Yes. Hi. Here is Sophie from JPMorgan. In terms of the capital impact, do you expect any impact from TRIM?
I'm sorry. Would you mind repeat the question for me, please?
So ECB has a targeted review of internal models, which is called TRIM, which a number of European banks have seen quite big capital hits. And when you speak to European banks, they, in general, still expect more to come on these ongoing TRIM reviews. So the question is, should we expect any impact on core Equity Tier 1 on Nordea from the ongoing TRIM reviews?
Yes. Thank you. I mean, you could say that our transition into the banking union last year, when we did that, we effectively did a mini trim when they reviewed our internal models, and we got this temporary acceptance of our internal models. As part of that, we are therefore reviewing and redoing some of our models to adjust to the SSMs requirement or from the Swedish regulatory requirements. And those models we are working on and we'll be delivering next year to the ECB.
So effectively, this whole process is, you could say, our TRIM, I. E, the original review of our models, then we need to adjust them to the SSM requirements and we are delivering them next year. So that is a part of, could say, the TRIM exercise, but it's a specific situation given we have moved to the banking union recently. Okay.
That's very clear. But is it fair to assume that we're not going to have a similar negative surprise on core Equity Tier 1 next year to the AQR hit that you took this quarter?
I think in terms of models, as I mentioned earlier, we when we moved into the SSM, our risk weight assets went up, mainly because they are a pillar 1 regime and we came from a pillar 2 regime. Our models that we deliver will then set the new risk weights. And I can't comment whether they are going to be positive or negative. Rates, we hope to at least improve as we go forward.
Yes. That's very clear. And in terms of the IT amortization and depreciation line, with the Q3 numbers, you guided that the IT amortization will peak in 2020. But given the one off ID costs that you took this quarter, is it fair to assume that this doesn't hold anymore? Or how should we think about the ID amortization going forward?
Sorry, the question was on 2020, did you say?
Yes. With the 2nd quarter numbers, you guided that IT amortization will be in 2020. So I was just wondering how we should think about IT amortization going forward. I guess given that you already do very high IT amortization costs or one off costs this quarter, is it fair to assume that this guidance doesn't hold anymore? Or how should we think about the kind of amortization and depreciation line that you have?
Going forward, we're going to give and you will hear it tomorrow in the Capital Markets Day, full guidance for the full costs, total costs, actually including the regulatory fees as well. In terms of the amortizations, over time, of course, we are we have had a huge IT programs and over time they will start coming down. This impairment that we're making is, of course, helpful with respect to that, but we are also shortening and changing some of the governance with respect to our capitalizations. We expect the capitalizations to go down and some of these increasing depreciation offset this impairment as we go forward. So you can't assume that it's a one for one relationship here on this one.
Okay. And one final question. In terms of the loan losses that you saw this quarter, was there anything related to Thomas Cook?
We cannot comment on individual provisions. But as you see, if you take out these AQR related one off provisions, the loan losses were very low.
I got it. So you didn't have any large single name exposures this
quarter? No,
exactly, exactly.
Okay. Okay, perfect. Thank you.
Remember also that we are a Nordic bank, except for oil and offshore. So we are a Nordic focused bank.
Yeah.
And the name you refer to, to my knowledge is not Nordic.
Yes. But they had quite big operations in Scandinavia.
Who is not in bankruptcy?
Yes.
The next question is Jacob from Autonomous.
Jacob, are you on line?
Yes, sorry. Hi. I just had two questions, I guess. Firstly, I know you can't say very much about the risk weighted asset model approvals, but do you think you will be able to provide more granular data about how your current risk weights look and how the parameters look on a more granular basis, so for the commercial real estate books or things like that, so we can do our own estimates of how it might look? And I guess my second question was just following up on this amortization discussion.
Do you when you say you want to accelerate the amortization program, could you talk about at all what kind of moving from what to what or is that something that we will get to tomorrow? Thank you.
So just coming to your last question first. We that has not been fully gone through the relevant processes in terms of where we exactly will land, given that we have just gone through the Q3 in terms of the actual systems and impairments. So we will revert back to that and unlikely we will do that by tomorrow either. With respect to the first point, you will see in some of our previous reporting that we have shown the risk weights in certain classes. When we have further clarity, we can have those conversations.
But you refer to corporate real estate, for example, in some aspects given the transition, they've actually been at 100%. And that is the discussion that we have as we go forward with the SSM with respect to the model.
I guess my question will be, so you say it's 100%. Would you be able to provide, for example, the risk classes of that book and the PD and LGD parameters so that we could see what the theoretical IRB risk weight would be?
We will report the relevant numbers in the Pillar 3 report that we come out with every year. So I would refer to that one as we go forward.
Next question is from Johan, UBS.
Thank you. Just two questions, please. In the Q2 report, you stated that following the AQR, you were comfortable with the ECB. Does this have anything to do with calendar provisioning? Or is that a potential future headwind in terms of building additional buffers?
And the second question is just whether you've had any concrete discussions with the ECB about buybacks. I mean, I think there is few examples and no large cap banks that have really done any material buybacks under SSM supervision.
Yes. And with respect to the AQR, I think we say also in the Q2 that we have an ongoing credit outlook. Frank said the macroeconomic is a bit more credit outlook. Frank said the macroeconomic is a bit more uncertain as we go forward, and we expect credit provisioning to be, as I said, average to 2018 as we go forward. But following the discussions with the SSM and slight challenge subdued market outlook in certain sectors, as I mentioned earlier on the call, we are reevaluating some of our the way they look at the collateral values in line with the AQR Prudential methodology.
And hence, we make the decision to take these provisions. But in terms of credit outlook for the rest of the book and for the overall loan loss provisions based on accounting principles, we are indeed comfortable looking going forward, subject to the overall macroeconomic environment being a bit more uncertain. That was question 1. Then you had a second question, which I'm now forgotten.
The buybacks. Just whether you've had a concrete discussion around buybacks, right? It's not a tool that has been used by the larger banks in Europe under SSM supervision in the past?
Yes. We have had discussions about the possibility of buybacks under the SSM. But of course, any buyback would be subject to their approval going forward.
But they haven't come out and said this is not a tool we like?
No.
Thank you.
It needs to fulfill their requirement in terms of the overall capital position that they feel comfortable, but they have not said anything with respect to the tool itself.
Thank you.
Okay. So it doesn't seem to be any further questions on the call. Thank you very much for calling in and for all the questions. We would very much like to see you in London tomorrow at the Capital Markets Day. We start at 9 a.
M. And ends with a management buffet, not management buffer, but a management buffet of at 12:30. So we very much like and of course, please feel free to call me or Axel at any time. We will fly to London, but otherwise we are all open. Thank you very much.