Good morning, everyone, welcome to the Nordea fourth quarter 2018 web conference, where we will present the results. My name is Rodney Alfvén. I am heading up the investor relations. With us today, we also have Casper von Koskull, the President and Group CEO, and Christopher Rees, the Group CFO. We will start with a presentation by Casper, then we will open up with a Q&A with Casper and Christopher. Casper, please go ahead.
Thank you. Good morning to everybody. Let me start with an overview. When I look at 2018, I can say that it has been characterized by really key deliveries in our transformation. We are today a more focused, a simpler, and more resilient bank. We do now operate in the Banking Union, of course, as of 1st of October of last year. We have a much-improved risk and compliance platform following considerable investments in 2018, but also the previous two years. Our digital capabilities are further developed and now enable enhanced customer experience and increased efficiency. A much stronger platform going forward. However, revenues have been challenged. The underlying results are not where we want them to be. Let me make that very clear. However, on cost and cash spending, they are reduced according to plan, which I am very pleased, and we will continue on deliver on that.
We have strong credit quality, and we have a solid Common Equity Tier 1 ratio of 15.5% in line with the expectations and, of course, the new way of calculating, so not comparable to the past. With that, Nordea Bank board is going to propose a dividend increase of EUR 0.01 to EUR 0.69, and that proposal will be made later, and it will then, of course, be taken to the AGM. Let me give a few highlights from the fourth quarter. Looking at total revenues, they are 3% up quarter-on-quarter. N et interest income is up 5% from the previous quarter. However, now on revenue side, the net fair value line is actually down 11%. This is driven by the very tough trading environment we had, particularly towards the end of the fourth quarter.
When we look at loan loss levels, they continue to come down, and we now expect that also going forward, the loan losses will actually stay around the average level we had in 2018, really showing that we have very solid credit quality in our book. On an annual level, when I look at 2018, it is clear that it featured challenges in all of our revenue lines, and overall operating income came down 5%. I will come back to a little bit more detail on the revenue challenges. We did reach our cost target of 2018, so we are below 4.8% when we exclude the goodwill write-down related to Russia, which was EUR 141 million. We also reached our target of higher net profit in 2018 than 2017, and this actually includes the goodwill write-down of Russia.
Without Russia, our net profit would have actually been 6% higher than last year, which was actually our target. Let me look at the revenue. I already mentioned we are not happy with the results, particularly driven by the revenue challenge that we have. We have seen new regulation coming into force. We also have had a much tougher operating environment, particularly the trading environment, the market environment. I do have to recognize that we have also had a focus that has been too much inwardly focused. We have done a lot of things to strengthen the bank, putting it in a better position, but that has also meant that we have been inwardly focused. Year-on-year revenues are down 6% when I look at the continued operations in local currencies. Revenues are also down because of structural deals and particularly pressure in three specific areas.
On the structural deals, they are mainly related to de-risking and related to our focus on the Nordic area and Nordic market. There have been very clear strategy to de-risk and focus on the Nordic. The three areas where we see particular pressure, number one is really savings and investments, where there has been outflow, especially in the high margin areas. Here, new regulation has impacted negatively, and no doubt, particularly the fourth quarter turmoil we saw had an impact on asset under management. Market making activity, our trading or trading environment has been extremely difficult, particularly in the fourth quarter. The third quarter wasn't easy either, I would actually say this has been challenging throughout 2018. Then in the more traditional business, we have lower household lending margins in all four countries.
Looking at net interest income, we've seen actually lending volume growth in both household and corporate, but the margins have, of course, been impacted by rate movements. Deposit margins are improving, which is positive, but lending margins, as I said already, particularly in the household side, continue to come down. The good news here is that the pressure in the fourth quarter, particularly towards the end of the fourth quarter, was less than we had seen throughout 2018. Definitely an improvement towards the end of the year. We had lower resolution and deposit guarantee fees in the fourth quarter as we had expected. Net interest income is actually up 1% if we look at the underlying business that we have. You see actually a picture, I think, which illustrates quite well the margin pressure on the household lending side.
Margins are down anywhere from 3%-26% in the four different regions that we have. You see particular pressure in Sweden and Norway. Norway lending margins are down, but there, of course, we also see an offset with higher deposit margins. In Finland and Denmark, the margins are less under pressure. We do expect that this continued pressure on margins will continue, although not as fierce as we saw it, particularly towards in the beginning of 2018. On net fee and commissions, overall fee and commission is up 2% from the previous quarter. Corporate advisory fees picked up from a very low level in Q3. Asset management fees were up mainly due to higher volumes in the beginning of the quarter. Towards the end, of course, we had a lot of turmoil.
Here is to note that when we look at net fee commission income, we did divest our international private banking activity in Luxembourg. We also had lower than expected performance fees, again, given the turmoil towards the end of the quarter. In assets and asset under management has been impacted, one, by the divestment of Nordea Life and Pension in Denmark, and also by, as I already mentioned, the sale of Private Banking International in Luxembourg, which actually structurally takes down our asset under management. Also, in the fourth quarter, the challenging market condition reduced asset under management. I think particularly towards the end of the quarter, we saw this happening. When I exclude the structural deals that I just mentioned and the turmoil in the fourth quarter, asset under management is down roughly EUR 5 billion.
In this picture, you also see really a rebasing of our asset management business. Now with the structural deals out of the numbers, it is really from this level that we will have several initiatives to grow the business going forward, and we feel very confident about that. Net fair value, I have already said, was particularly challenged throughout 2018. I think what pleases me specifically is that we have very strong customer business, and particularly in the fourth quarter, it actually shows the value of our strong customer franchise. The fourth quarter was actually, from a customer business perspective, the strongest quarter in 2018. No doubt, the worsening market conditions, they pressured market making activity, i.e. the trading activity, particularly in the fourth quarter. I think we saw specifically very widening spreads in the fourth quarter.
Actually, when you look at asset performance overall, fourth quarter was the worst since 2008. That led, of course, to weakness, especially in the credit trading book and mortgages and covered bonds. Nordea, being the dominant risk taker in the Nordic bond market, both corporate and covered bond, clearly we experienced a challenge in the fourth quarter in trading, given our position in this business. The cost to me are very positive. We do continue to take down cost, and they are down according to plan. Cost, excluding goodwill write-downs and excluding the Russia goodwill write-down, is roughly now at EUR 4.7 billion, in line with what we had planned and in line with what we had also communicated. We have a number of staff down by 5%. Here you also have to remember that we have depreciation and amortization is actually going up according to plan again.
The overall cash cost actually is coming down more. We expect to take down cost to 2021 by 3% compared to last year. Also when I look at 2019, we will be lower despite the fact that we have bought DNB. We also expect cash costs to be up to 10% down to 2021 compared to last year. Of course, cash costs will also be lower this year compared to last year. Very pleased in the development there. Cash cost, I've already mentioned, is very important. When we look at just from 2018, we were down actually 12% since the year before. This is really a broad-based reduction in cash spending, which of course impacts particularly our dividend payment capability. What's actually happening in our cost base is that you see really a workforce shift taking place.
One, because of the regulatory landscape, and one, of course, the way we serve customers. We have meaningfully reduced our number of staff in our personal banking side. Of course, due to the fact that we are digitalizing the business and increasing efficiency. Where we see two areas where the workforce increase is actually coming in is one on risk and compliance, driven by financial crime prevention. I have already mentioned I am very happy that we have fundamentally strengthened this platform over the last three years. Of course, we see an increase in technology and data management driven by the digital drive that we have. The number of employees in Poland has more than doubled from 1,200 to over 3,000 over the last three years. Particularly in IT, we are increasing our activity in Poland, and this trend in increasing staffing in Poland will also continue.
A shift in the whole workforce, and also in the way our cost base actually is being structured. On lending and asset quality, asset quality remains strong, and the positive trend here on lower loan losses continued also in the fourth quarter. We had reversals mainly in shipping and offshore and also in Russia, and loan loss levels actually ended at five basis points for the quarter. Gross impairment rate also down by six basis points from the previous quarter, and now it's at 182 basis points. We do, and I mentioned this already earlier, we expect that the loan losses will actually remain low, and they will remain at the 2018 average level also now, at least the foreseeable, as we can see going forward. Common Equity Tier 1 ratio is in line with our expectations at 15.5%.
Again, I emphasize here it's a new way of calculating now when we have moved into SSM. Our CET1 ratio requirement is at 13.9%, and our management buffer, which stays unchanged at EUR 2.5 billion. I think it is also worth highlighting that our risk exposure amount, our risk-weighted assets, have gone up by EUR 35 billion and is now standing at EUR 156 billion, one driven by that the Swedish mortgage risk weights floors are now put into Pillar 1, and the European Central Bank transitional measures of EUR 25 billion that we have certainly in the transition period now when we have moved into the Banking Union. As a result of all this, Nordea Bank board is going to propose a dividend per share of EUR 0.69, which corresponds to a payout ratio of 91%.
Maybe taking again a step back, when I look at the past three years, and particularly 2018, we are delivering on our transformation. We are now a more focused, a more simple, and more resilient bank. We are operating within the Banking Union, also following our branchification. I think we have made a major shift in our structure. We are operating in an environment now where we have predictability, stability, and we believe that we should also have a level playing field. We have fundamentally changed our technological and digital capabilities so we can leverage our scale and increase our efficiency going forward. I think very importantly in the environment where we operate, we have a satisfactory platform for risk and compliance operations. More work needs to be done, but we are fundamentally a different bank today than we were three years ago.
We are delivering our cost efficiency plan. Credit quality remains strong, and our balance sheet is robust. All in all, I think we are well prepared to manage the bank successfully throughout the cycle, well-positioned to continue the transformation that we're on. Today, where we are is, one, we have strong cost control, where the trend is down year-over-year, also in the years to come. We also believe that we can continue to take down cost after 2021. Of course, we review the cost all the time, but we also need to calibrate cost and cost reductions based on revenue so that we strike the right balance to ensure lower structural cost at the same time when we can increase the revenue and revenue momentum. The strong risk management and attractive risk profile is in place. We have very robust capital and funding position.
As I've said, we have an unsatisfactory revenue development. We know that. We're not happy with that, and we will address and tackle that. That's also going forward, the main focus, increasing business momentum. Let me say a few words on really digital and digital transformation. To us, the whole transformation is really based on a set capabilities. It's not one thing. It's a set of capabilities, and those sets of capabilities are now starting to fall in place given the heavy focus on investments that we've done, particularly over the last three years. The way we look at it, our vision for a mature digital capability, what really needs to be delivered to have it is, of course, a digital front-end relationship bank. That's the front end where we can be anytime, anywhere, and easy to deal with. That is actually starting to fall in place.
We need a digital backbone operating on one platform, fully automated end to end. This is where we actually reduce complexity. This is also where our core bank system investments come into place. Then we need an agile, lean way of driving the business. All three elements, all three layers need to be in place, and we are now starting to see all the pieces falling in place that you can see on the picture here. When I look at the past six months, we have actually completed several key deliveries. I'll mention just a few of them. One is the new mobile front end launch in Sweden, which we already have in Finland, and we will also launch in this year into Denmark and Norway. Customers can now access savings and investment products on their mobiles.
Our Nova chatbot reached instant resolution for over 25% of inquiries or requests in Finland. We have now rolled out a group-wide advanced analytics platform, and we have continued to develop Nora, our robo-advisor, and its functionalities. Last year, we had 115,000 advisory meetings on Nora, and now only in January, we are already at 30,000. We can see how the whole digital and going through digital is giving results. Realizing this vision, the foundation of digital capabilities will drive structural costs down, but it will also increase business momentum where we can have better customer experience, better retention, and growth in the customer side. It is both business momentum and cost. Of course, it's also improved resilience in our systems that is important. The foundations are now in place, and now it's all about driving the adaption and continue the rollout.
I think the pieces are falling well in place. I've talked a lot about structural cost efficiency, and just to be clear what we mean by that. One is that we are increasing the use of AI and robotics, clearly a way of driving down structural cost. We have a big workforce shift with ramp-up in Poland and Estonia. We are simplifying our product and service offerings. We are not doing that many products, which means also that both maintenance, new launch, et cetera, will be cheaper. We are now starting to leverage our scale and gain efficiency where we consolidate common units. This is IT, this is in operations, and this is also in business risk management. Lastly, what we are doing is we are really partnering on infrastructure, and we also outsourcing some of our infrastructure.
All these efforts will structurally lower our cost base. When we look at income, which I think is a key driver of further and future returns, I'm convinced that we have the expertise, we have the products, and we have the services and the platforms today to really increase the business momentum. Our position in the marketplace is such. We also have the organization in place. No doubt, I've said it earlier, we have been too inwardly focused. Given what we have done over the last three years, we can shift that, and the number one priority is actually get the business momentum back because we have the pieces in place. We are investing to increase our presence, particularly in Norway and Sweden in Private Banking, where we have a very strong position and strong offering. Same thing in Life and Pension.
We have, as you know, bought and acquired the Gjensidige Bank , which we expect to close that transaction still during the first quarter of this year. We have new distribution channels within both asset management and wholesale banking with the aim to increase top line and business momentum. Also on the mortgages, I think we have regained momentum, particularly towards the end of the year. We have adjusted our price. We are competitive. We have increased our accessibility to our clients, and we see a significant improvement here in Sweden, where we were particularly maybe challenged, particularly in 2017 and into 2018. This takes time, but I think we're very much on the right path. To conclude, what is 2019 all about? It is about creating shareholder value by increasing business momentum and continue to drive down structural cost and structural cost efficiency.
We can use our scale, One Nordea, to do it. We can use the technological capabilities and platforms that we have now put in place. To be very clear, this is all about execution. The pieces are there, and it is about executing on increased momentum and structural cost. Of course, culture is key here. I'm a big believer that culture eats strategy for breakfast, so it's all about execution, and I think we're well-positioned to do this. Thank you all. I think I give back to Rodney, and we will have some Q&A now.
Thank you, Casper. Yes, you are now able to press the phone or to start asking question. It's going to be both Casper and Christopher Rees, the Group CFO, who will answer questions. We'll start with Matti Ahokas, please.
First question is from Matti Ahokas from Danske Bank. Please go ahead, your line is open.
Yes, good morning. Two questions, please. Casper, you identified the revenue pressure in three areas. How do you see these developing going forward now in 2019? Doesn't seem that, at least in market making activities and the lending margins, we would see an improvement altogether. The other question is regarding net interest income. Now with the lower regulatory costs on NII, is this the kind of normal run rate we should be expecting in 2019? Thanks.
I'll maybe take the first part of your question. When I look at particularly the market making or let's say trading, of course, the environment is challenged. When I look at the result that we did, particularly in the fourth quarter on the customer side, it actually shows the strength of our platform. It is very clear that when you had the big dislocation, which actually I said an asset performance in fourth quarter was actually worse than we'd seen in 2008. When you see a dominant risk-taker, that we are one of the dominant risk-takers in particularly the bond market, it's not surprising that fourth quarter was challenging. I actually see that we are very well-positioned to actually improve and compete well in this area. If anything, the customer flow actually shows it.
On asset management in general, I think you can see the structural. Actually, the development there has been relatively positive. If I take out the structural deals, which are basically life and pension, I take out the Luxembourg sale, and then I actually take only one, the Stable Return Fund that has been our star product has had some difficulty. We actually have inflow in asset management. When you actually look at just these three elements, two structural, one maybe I think a little bit of a one-off, we actually have inflows. I think we're well positioned, and particularly we looked at now both new product and new distribution in asset management. We are well-positioned. We will then have that new baseline and actually take it from there. Those two make a force.
That means that we need to work hard, but I'm pretty confident that that's the right way to go.
Your question on NII. Good morning, everyone. It's Christopher Rees here. Yes, this has to do with the treatment of deposit guarantee fees and resolution fees in terms of the transition to the Banking Union and the split year treatment there. This is more of a one-time effect. I would like to note that for Q1, as we are now in the Banking Union under IFRS, the majority of resolution fees will be booked in Q1. In Q1, we will book therefore a resolution fee north of EUR 150 million next year rather than on a running basis, so you should be aware of that. To answer your question, therefore, the resolution fees in totality for next year will be very similar to what they were in 2018.
Booked in Q1, you mentioned?
The resolution fee will be booked in Q1, the majority of it, the deposit guarantees fees will be booked per quarter. The deposit guarantee fees are roughly EUR 15 million per quarter.
Great. Thanks.
The next question goes to Petar Kazakov, please.
Yes. Petar Kazakov from UBS, please go ahead. Your line is open.
Yes. Thank you. Good morning. First of all, just on the trading income side, which has been subdued for or the income development has been subdued for two quarters now at least. We're at least a month into 2019. Have you seen any change in the underlying performance, or should we expect similar level going into Q1, and what do you expect for 2019?
Yes, you're right. The trading environment has been challenging. As you are aware, we had also some significant valuation adjustments because of the market movement in Q4 last year. As Casper mentioned, it's the greatest asset price movement since basically 2008. Of course, that has been a challenge. The customer business, as mentioned, has actually did improve particularly in Q4. We hope that we bring some of that with us. In terms of our outlook, given the market environment and given the uncertainty regarding the outlook, it is phenomenally difficult to estimate the direction. I would say that we continue to drive the franchise. We want to continue the client business, and I think the guidance that we have given for net fair value in the long term remains.
However, for the next few quarters, it's very difficult to give an outlook, and I would suspect that we would be challenged to meet the lower end of the guidance that we have given. January has started more positive than December.
Okay. On more kind of nitty-gritty, you mentioned that cash cost is improving on the cost side. I think a year ago, you mentioned that you expect other intangibles to peak at EUR 2.5 billion by 2020. Is that still the expectation?
In terms of peak on the intangibles, that is indeed the expectations. As you know, we are shifting the composition of our cost base because depreciations are going up over the next few years as well. The cost guidance for 2021 is actually net cost, also including the absorption of the Gjensidige Bank. As part of that, we expect cash costs to, what Casper said before, to be down up to 10% in 2021.
Okay. EUR 2.5 billion still remains in place.
Yes.
Yeah. Okay. Just a last question. Could you elaborate a bit on NII sensitivity for the Swedish rate hike, what you expect there?
Yes. 25 basis points rate hike in Sweden alone, we expect approximately EUR 50 million positive effect annualized. Full year 2019 effect is approximately EUR 50 million, and that is almost exclusively coming from deposits.
I think going back maybe a few months, I think you talked about two rate hikes in Sweden impacting EUR 160 million, which would imply that 25 basis points would be EUR 80 million. Has something changed the last few months, or was it just that it wasn't even split in the 50 basis points and how it's implemented?
The EUR 160 million, I think I don't really recognize. We have said more than EUR 100 million, and that is still valid for 50 basis points. Of course, if you look for the group, 50 basis points is close to EUR 400 million.
Okay. I'm happy there. Thank you.
It might also be worth pointing out that, of course, this is assuming a straight pass-through into lending. Of course, we have indeed raised some of our mortgage rates in Sweden, but not by the full amount of what the Riksbank did. On top of that, we've also not raised it in linearly across the curve, we've actually reduced some of our rates. This will not be a straight pass-through, and therefore the effect might be slightly lower.
Okay.
The next question goes to Magnus Andersson, ABG Sundal Collier, please.
Yes, please go ahead, Magnus. Your line is open.
Thank you. Good morning. If I start with a broader question. On your business areas, when I look at the profitability in your various business areas, you're at 9, 10% in personal banking, weighed primarily by Finland, 8%-10% commercial and business banking, 5% now down from 8% in the last, I don't know if it's four or five quarters in wholesale banking, while asset and wealth are at around 30. Could you say anything about what you deem as reasonable, sustainable profitability levels in respective business areas? Obviously you repeatedly have stated throughout the call that you are unhappy with 2018 and primarily the income development. When you are happy, so to speak, where will profitability be in these business areas?
Happy, it's only pigs who are happy. The thing is that we are not satisfied with the profitability, so the only way is up. That goes basically for all business areas. We have not expressed an explicit return on equity target, but as you know, our target is to have a relative ROE that's better than peers, and that's not where we are right now. We will work hard to improve the ROE in all business areas.
Okay. The 12% target for wholesale stands, I guess.
Yes. That's not ROE, it's return on capital at risk, but that still stands.
ROCAR, yeah. I am talking about ROCAR.
Yes. That's correct.
Okay. No answer then. Secondly, on dividend, is there anything restraining you from paying out more than 100% of EPS if you would like to do that?
Technically, no, I think, of course, this is a discussion always with where we are and where the environment is and the regulators. Technically, there's nothing that I know about.
Okay. On transformation costs, which came in much lower, I think there seem to be some restatements, but around EUR 70 million-EUR 80 million for the year. Previously, you talked about, I think, EUR 500 million-EUR 600 million throughout this transformation period. Originally EUR 150 million for 2018, down to EUR 120 million, and now it's EUR 70 million-EUR 80 million. Why is the transformation so much cheaper than you originally expected?
Yes, it has come down lower than we expected. Part of it is because the cost of the transformation in terms of packages and so forth is actually lower than estimated. Of course, as we go forward, we will have transformation costs every year, and we will have it to 2021, and we will have it beyond. It's a normal course of our business. Really what we look at is the total cost of the business. Please also note that we're coming in at EUR 4,738 million, excluding Russia goodwill in 2018. That is sub EUR 30 million or so lower than we expected. Of course, we bring that back into the flight path into 2019.
Magnus, if you may remember, when we started to discuss the transformation cost in 2017, we said that we want to have them as running costs, not a restructuring charge [crosstalk] because we felt that that was a good way to put pressure on the BAs to do this transformation as cheap as possible. What you now see is actually that they are delivering the transformation cheaper than possible. The EUR 500 million-EUR 600 million will be lower. We don't guide an exact number, but we are already in 2018 some EUR 75 million lower than expected. That means that it's at least EUR 75 million cheaper than we initially expected.
Yeah, you spent half of what you expected, that's perhaps reasonable going forward as well.
Correct.
Okay, good. Finally, just on the sensitivity, I think there were two answers there. Rodney, you said EUR 50 million annualized on the rate impact, it looks like that was the number you talked about earlier. Of course, you haven't repriced everything during Q1, I guess if it's EUR 50 annualized, it should be EUR 37.5 or so in 2019, since you don't get full impact in Q1. Is that correct?
Yeah, you're right that you will not see a lot in the Q1. It's basically from Q2. You will see some. You will see roughly half of the impact in Q1, call it closer to EUR 40, EUR 45.
Yeah, okay. Good. Thank you.
Before we go to the next participant, just as a reminder, if you do wish to ask a question, please press zero one on your telephone keypad now. The next question is from Jan Wolter from Credit Suisse. Please go ahead. Your line is open.
Hi, Jan Wolter , Credit Suisse. If I could just return to the trading business and the net fair value there, guidance or indication of EUR 275 million-EUR 325 million per quarter. Could you just confirm if you said or think that it will be difficult to meet the lower end, excuse me, of that guidance now in the coming quarters? Secondly, it looks like wholesale banking other is where the issue is. You highlighted that you have had good client revenues throughout the year. Could you just give some color what wholesale banking other, or the issue is there? I suspect it has to do with the risk management, but still give some color what the real issue is, which you do not expect to be solved in the next few quarters.
Secondly, I think you said something about resolution fund regulatory fees being booked in the first quarter. How much will be booked in the first quarter? Will that be the total resolution fund and regulatory fees for 2019? My final question is, I think that Casper commented on margin on the outlook that still see margins being under pressure. In what region in the Nordics do you see that going forward? What would be the area where you see the most margin pressure? Then the pecking order there, where you see the least, especially on the retail side. Thank you.
Okay, thank you. I think that was three good questions there. The outlook, yes, I think that's the long-term outlook that we retain. The trading environment remains challenging, and the outlook is very uncertain, and I think you see the economic indicators in Nordic environment softer as well. I think given the environment that we've seen and also the uncertainty that we have, I think it will be difficult in the next few quarters to reach the lower end of that guidance. You are right that it is wholesale banking other, and that is really the trading, you could say, the trading activities in our fixed income, currencies, and commodities business that has been challenged. Firstly, remember the composition of Nordea. We're one of the largest traders for our clients in the Nordics.
There's been a huge asset price change in the Q4, in particular, the largest one since 2008, that has had an impact on our trading activity. Also in particular, we hold inventories and trade in the secondary market for our clients. Those inventories, of course, have repriced in Q4, in particular in some of the mortgage and covered bond pools. Especially given our size in Denmark, that has had an impact as well. It is really the trading activities. If we see more liquidity, more activity as we go forward, we believe that this will be recovered. In addition, wholesale, of course, have a lot of initiatives to ensure that they improve and drive this going forward. In terms of NII, yes, resolution fees will be booked in Q1. It will be EUR 152 million of the resolution fees.
I believe we will still book some in the following quarters, around EUR 11 million or so per quarter. The deposit guarantee fees will be booked quarterly next year. In terms of margins, go back to the retail, I think Norwegian interbank offered rate, well, Norway, I think the margins depend very much about the development of NIBOR and how quickly you can reprice that. Right now that is negative, but normally there's more rate sensitivity towards that. Stockholm interbank offered rate is where we, or sorry, Sweden is where we've had more of the pressure, although we have seen it slightly stabilized towards the end of the quarter. In Finland, I think it's still some pressure, but it's been more stable. While in Denmark, the mortgage margin has been reasonably stable. There, of course, the consumer lending business has been coming down.
In Denmark, it's more the lending that remains the challenge.
If I just may, on the resolution fees, to give you the numbers. For this year, we have had approximately EUR 250 million of total resolution and deposit guarantee fees. That we expect to be largely unchanged for 2019. As Chris said, you will see the bulk of the fees in Q1. When you do the quarterly forecast, you should add some EUR 170 million for Q1, some EUR 25 million for the remaining three quarters. Year on year, the guidance is unchanged at large, the same size as in 2018.
This is very consistent with how European banks book the resolution fee. The reason it has not been booked this way is because of Swedish
Regulatory and accounting rules. Given that we are now in the Banking Union, this is in line with other SSM peers.
Thank you. If you could just clarify, I think previously you discussed that the lower Swedish resolution fund fee for 2019 would give in the area of EUR 50 million-EUR 60 million lower resolution fund cost vis-à-vis 2018. This is not the case then?
Sorry, I missed the first part of the question. Could you please repeat?
Sure. I think that previously you discussed that the lower Swedish resolution fund fee for 2019 would give at least EUR 50 million lower resolution fund costs [crosstalk] for 2019.
That's correct.
I think now you're saying that the total cost for resolution fund and the bond guarantee fees will be unchanged 2019 year-over-year.
Jan, the difference is very easy. As you see in the Q4, the resolution fees were EUR 60 million lower, EUR 59 million lower than in the previous quarter. The 2018 level is down. Before we said around EUR 300 million, now it would be around EUR 250 million. The 2019 expectations are unchanged, we came in lower in 2018.
Sure. You're saying that the NII for Q4 is basically the right starting point for 2019 then?
Correct.
Thank you.
Thank you. The next question comes from Maths Liljedahl.
Yeah. Maths, please go ahead. Your line is open.
Yes. Good morning. Sorry to really have a hang-up on the resolution fund fee, could you just clarify what you said, that most of the resolution fund fee will be taken in Q1, the deposit guarantee fee will be EUR 50 per quarter. Was that correctly? If you say the resolution fund fee has been EUR 250 in 2018, most of that effect will be already in 2019 in Q1. Just to clarify. Thanks.
Okay. I'll try and make this clearer. Yes, the majority of the resolution fee will be booked in Q1 in line with European practice. The deposit guarantees fees will be booked quarterly, they will be roughly EUR 15 million per quarter.
Okay. Thank you. The resolution fund will be about EUR 150?
Yeah. The number we would advise you to put in your Excel sheet is approximately EUR 170 million for Q1, approximately EUR 25 million for the remaining three quarters for both resolution and deposit guarantee scheme.
Thank you.
To be clear, the totality remains the same. This is just an accounting change and alignment with European rules.
Yes. Thank you.
It seems to be no further questions. Thank you very much for this event. Thank you for calling in. You're always free to call us later on, and then we hope to meet many of you in London on Friday morning.
Thank you so much.