Please go ahead, sir.
Thank you, operator. I think that was my cue. Rod Alfvén here from Nordea. Welcome all of you who have called into this international telecom conference. With me in the room, we have Torsten Hagen Jørgensen, Chief Operating Officer, and Ari Kaperi, Chief Risk Officer, and also Andreas and Pavel from the IR team. We would like to start with a short introduction by Torsten and Ari, and then we will open up for questions. Torsten, please.
Thank you. I will not go through the slides. I'm sure you have seen them in the web presentation. Let me just make a few reflections on the result and how we see the situation currently. First of all, I think it's positive to highlight that our repricing efforts start proving to work. I think we have moved pretty swiftly on the market side, and we still trust that what we have said for a while, that we see a great potential in our SME portfolio across all the Nordic countries, but mainly starting in Denmark and now Sweden. I think much of this is something we can control. It's somewhat independent on the macro picture and basically also to a certain degree, the competitive situation.
That makes us relatively certain that we will have this sharp turning curve on the NII, and this is through the inflation point in Q4, where I think we will start seeing a year-over-year positive growth in NII. I think this is one good observation. The other one is that we have talked quite a lot about our reliance and investments in some of our strong product franchises and our strong distribution on these products. I think the developments seen on the asset management side, the corporate advisory side, the risk management product side is a proof of concept of that these investments are now paying off, and they make a strong foundation in the NCI line. I think also that Q2 is another reflection of the fact that we are managing costs at the same time as we are investing for the long.
We have the group projects and performance-related salaries up EUR 16 million from Q1 to Q2. We still have cost going significantly lower, including inflation, et cetera. I think it's no issue to our efficiency or running efficiency measures. Again, a good picture there. In relating to this, as I said, I think it's a sign of strength that at the same time as we have the environment we have we are making significant investments, not only euro-wise, but of course also effort-wise in building the long-term foundation for further strong growth and efficient operations. Heavy investments in technology, in simplifying the bank, the products, the processes, the systems, and heavy investments in compliance. I think we should also look on the current performance in light of that these are close to peaking now all these efforts.
Of course, many of them will not have their full payback before some years. Just stating that we are delivering the current financial performance on the back of all these efforts also taking place. Finally, on alluding a little to the capital discussion, I think we again also see that our strategy and our principle. We have a strong principle that we should not generate excess capital. It's a principle view. Excess capital have in history proven dangerous for having around, and management has a risk of getting too risk-happy if there's structural excess capital. We will continue to have the view that excess capital should be repatriated. We will continue to go for enhancing our ROE. Management should enhance ROE and not so much else.
I think that what we're doing on all of the above-mentioned factors is exactly what we should do as management. We feel pretty confident that we are generating a lot of strong profit, and we are managing our balance sheets in a very careful way. To the point of also saying that we are relatively confident currently on that we'll be able to meet also the updated capital requirements from the EBA. That would be my opening remarks, and then I know Ari will say a little on our asset quality.
Yes, thanks. Our loan losses in this quarter were relatively stable level compared to previous quarters, so that we have had this level of losses now in eight, nine consecutive quarters, which is still within this long-term average level of 16 basis points. Now they ended up at the level of 15 basis points. In that way, no big surprises, negative surprises, not positive surprises either in this quarter. One issue which may raise some attention is that our impaired loans, they were up by 4%, roughly EUR 200 million, EUR 225 million in absolute terms in this quarter. The reason for this is three individual customers. The fact that all these customers are quite well collateralized. For example, the biggest one of these, which is representing half of the increase, i.e., EUR 100 million, is guaranteed by ECA, Export Credit Agency.
Means that our individual loan losses for these new impaired loans were relatively small, thereby our provisioning level at the group level is somewhat down. We are highlighting this quarter that what we have said even earlier, that there start to be, and we see clearly increased risk levels in oil and offshore side. We are giving some information on this quarter on those portfolios. The overall size of our oil and gas, plus oil services, plus offshore portfolio is roughly EUR 7 billion. 75% is still considered as healthy, but 25% is with higher risk. We anticipate that from this portfolio we will see increased losses both in individual level as well as collective provisioning level.
Nevertheless, because the relative size of this portfolio in Nordea context is relatively small, so it's only 1.5%, it should not so significant or have showing significant impact at the total loan loss levels at the group. The size of these portfolios in terms of customer amount is relatively small. I'm still in offshore and oil services. I think that I have mentioned this even in the previous discussion, so that, for example, in offshore segment, we have 30 customers. In oil segment, we have 40 customers. We are very able to manage these customer by customer basis and working very close to these customers. Quite many of these offshore customers are now going through refinancings or restructurings. In other parts of the portfolio, the risk levels are stable or even down.
For example, out from these EUR 127 million loan losses we booked in Q2, more than half, close to two-thirds are coming from oil-related customers. That means that then the rest of the loan book is very healthy and of good quality. Back to you.
Thank you, Torsten. [Harris], operator, we will now open up for questions from the audience. Please go ahead.
Thank you. If you would like to ask a question at this time, please press star or the asterisk key, followed by the digit one on your telephone. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. Again, please press star one to ask a question. We have our first question from Willis Palermo from Goldman Sachs. Please go ahead. Your line is open.
Hi. Good morning. Thanks for the introduction. I have two questions. The first one on capital. Nordea is now above the new SREP requirement of 17%, thanks to these 40 basis points coming from a transaction that you plan to close out. A quick question on this transaction is what is it exactly, and is there a risk to lose earnings related to that? Going forward, you mentioned a number of initiatives on top of earning generation to continue to build your capital. What areas of business you're thinking about, or what regions would you think about non-core being able to dispose? The second question is on NII. I understood that the guidance is still to see NII at best being flat year-on-year in 2016. What, in your view, are the main drivers, and from which region would come the increase?
Secondly, what is it in your mind that NII could look at worse this year compared to last year? Thank you.
Yes. Thank you. I think that on the synthetic securitization deal we are about to do I think we have said that the P&L impact will be in the level of EUR 30 million net. I think we at the webcast, we said that this will be shown up on NII. This is actually not the case. The structure will work in the way that it will all be, you can say, circulated via net fair value. If the structure means that we should have a payment, then it would show up as a plus. The other way around, if it's a net premium to be paid, it will show up as a default, you can say, on the net fair value. That's the way it will work.
We alluded to a number of other initiatives that has been started long before this, and it's part of our, you can say, normal ongoing re-enhancement efforts. I.e., identifying customers, segments, business lines that are not profitable and where we think that it will structurally be difficult to, or organically will be difficult to restore the necessary profitability. We can be further risk protection deals, not significantly risk transfer deals like this one. I don't think you should expect that near term. It might be other type of risk protection deals. It might be divestment of certain non-core assets
They will typically not sit in a geographical dimension, they will sit in a business line type of dimension. The fact that we have this plus you can say the underlying strategy we are pursuing especially in our SME portfolio, is why we feel confident that we can deliver on also the current higher capital requirements. On NII, the drivers are mainly the repricing on the lending side. It pertains not least to already having improved quite significantly margins on Swedish mortgages. We have stopped the fall of mortgage spreads in Norway. We have a relatively stable situation for now in Denmark, but we have announced price increases that for real will kick in Q4. In Finland, there still is more potential.
On the corporate side, we have said in connection with the SME strategy that we will do significant repricing on the lending side, and we start seeing that works, not least in Sweden and Norway. Finally, we are also not least in the SME segment, we are also on deposit side working with charging more and more customers with negative rates. That's the key drivers and some flavor also on the geography.
Thank you very much.
Thank you. We'll take our question from Matti Ahokas from Danske Bank. Please go ahead. Your line is open.
Yes. Good afternoon. It's Matti Ahokas here from Danske Bank. Two questions, please. Firstly, on this PD inspection and the SREP outcome, how much would it impact your Core Tier 1 ratio if you would have to use the exposure-weighted PDs? I'm sure you've done a lot of calculations. Some kind of sensitivity on that would be extremely helpful. The second question is on this risky part of the oil and offshore portfolio. Ari mentioned about EUR 1.8 billion. What kind of loss levels do you foresee in this portfolio? Thanks.
Yeah. If I could start, I don't think as such we can refer to a PD inspection. We have a good dialogue with the Swedish FSA relating to the clear statement that Swedish FSA have done on the sector level that they want to, and they think that corporate risk weights for Swedish banks should go up. I think it's also fair to say that this will happen in different ways from the different banks. It's also so that they have not-- If we look aside from the leakage that has happened, it's true that they are having a number of questions relating to our PDs and ADFs. They are making a number of calculations, and we're providing a number of numbers.
They have made the, as we have said, the first type of initial assessment included in the add-on that has now been done. Then they will revert end of September with their final conclusion on corporate risk weight, including the PD issue.
These expected loss levels from this riskier part of the offshore oil portfolio. It's very difficult to give, or actually it's impossible to give any kind of precise estimate. What we have done, of course, already now is that we don't have, for example, in our offshore portfolio, we don't have any individual losses so far. We don't have any impaired customers so far. What we have done is that we have built up our collective provisions for this portfolio. Currently, we have around EUR 90 million of collective provisions just to cover increased risk for individual losses in this portfolio. Also, we have taken some or increased some collective provisions also in some other parts of the bank. For example, in retail Norway, we increased by EUR 10 million of our provisions because there are some smaller oil service-related clients.
I think that the loss level we saw this quarter, which was in this offshore, was EUR 28 million, EUR 27 million of this collective provision increase. We had a few individual losses in other parts of the portfolio, mainly related to oil services clients in the land-based areas. As I said, that roughly half or more than half of our Q2 losses are deriving from these riskier segments. I would say that's my best estimate around the level for the coming quarters, it may be so that if there are no individual provisions coming shortly, we continue to increase our collective provisions just to cater for these increased levels. If we start to see more and more individual hits in these segments, perhaps there's not so much need in short term to increase collective provisions.
Putting this all together, as we have said, that somewhat higher level of losses from these levels now during second half of this year, also it looks like that will continue to
First half of 2017. I don't have more precise outlook guidance to give at this point.
Great. Very helpful. Thanks.
Thank you. If you find that your question has already been answered, you may remove yourself from the queue by pressing star two. Again, press star one to ask a question. Our next question is from Anton Kryachok, from UBS. Please go ahead. Your line is open.
Good afternoon. Thank you for the presentation. Just two questions, please. Firstly, I just wanted to clarify your point on corporate PD reviews. Did I hear you correctly that part of the increase in SREP requirements already comes from the review of probability of defaults and actual default rates in your corporate book? That's the first question, please. The second question on the strength of net interest income in Norway. Can you please share a little more color on what drove that and how sustainable the strength is? Thank you so much.
I think what the way we can phrase it is that as part of our draft SREP letter and on the corporate risk weight issue, Sweden have made an initial assessment on our corporate risk weights that they should increase with 3% at this point. That assessment includes all currently available information you can say. They have not specified anything detailed on PD as part of that, but they have said that this includes what they know as of today, but they have also said that they have not concluded on their review on our PD LGD issue. It might mean that at the end of September, there will be no additional capital requirement, or there might be a higher capital requirement. We don't know at this point in time.
The NII in Norway is improving by, of course, or where we expect it to improve is, as I said, that the very intense price competition we have had on Norwegian mortgages seem to have stabilized. We now have a lower level than earlier, but we have a stabilization on mortgage margins. We have improvement of deposit margins in Norway. Finally, we see that the price increases we did and have been doing in Norway on the SME portfolio will start to show up as improved corporate margins in Norway. We think there are potential to continue to reprice. That's the basis for the assessment that NII will also improve. We also still have some volume growth in Norway, even though it's coming slightly down, I think.
Adding to that also, you can say that if you look at the quarter-on-quarter trend, you're absolutely right that it looks like a very, very strong trend. You should look at the second quarter in relation to the fourth quarter. It was a quite significant drop in the first quarter, that was related to a technical aspect of the NIBOR moving in an unpredictable way, but not in a favored way in the first quarter, then we got it back in the second quarter. Then you can also add that in the third quarter, as Torsten alluded to, we expect an improvement coming from the margin increases we have done in the second quarter. The risk you can say is that there will be a rate cut in Norway in September, which I believe is our economist's view and many others as well.
If that rate cut will come then in September, that will then partly take out the positives that you would see in the third quarter, that will then come in the fourth quarter. I hope that gave you a clear view about the trend in the coming quarters.
Very clear. Thank you very much.
Thank you. We'll take our next question from Jan Wolter from Credit Suisse. Please go ahead. Your line is open.
Yes. Hi, Jan Wolter here, Credit Suisse. Excuse me. Many thanks for taking the questions on the disclosure today. Going back to the corporate risk weight again, are you saying that the 50 basis point increase in corporate risk weights, if we take out the maturity factor adjustment there, which was 20 basis points, those 50 basis point, that is the 3 percentage point increase in corporate risk weights, the bank does not know today whether or not that includes any change in the principle how you calculate the PD, i.e., going from a PD which is weighted by the number of defaults and not an exposure-weighted PD? That's my first question.
I'm not sure I fully understood your question on maturity. The maturity effect is 20 basis points. It is not included in the 50 basis points. Again, the way it's articulated is that all inclusive, the Swedish FSA currently assess that our corporate risk weights should increase with three percentage points, all inclusive, all factors including. They are, however, saying that they make one disclaimer, that is that they have not fully concluded on the assessment of our PD LGD situation, i.e., we need to say that there is a risk that they will come back and say this was not enough, they might also conclude that this was fine. You can say it is an all-inclusive assessment of how much our corporate risk weight should increase.
I think it also shows that the issue is that they have clearly stated that they want corporate risk weights to go up, I think they have also indicated that there are different elements in play for the different Swedish banks, that the corporate risk weight for all the Swedish banks should go up. They have initially assessed 250. The uncertainty factor is the PD level from credit control.
Okay, many thanks for that. Just two other questions. First, if there were to be meaningful RWA inflation from here for one reason or another, would the bank then be willing and have the ability also to mitigate that meaningful RWA inflation? How do you think about that?
No, I think that we need to comment on what we know. We know now that the capital requirement is set for approximately 17% by the end of the year. We know the buffer we have to fulfill, at least 50 basis points. We think that as of now, we think that we will be able to mitigate that. We will wait and see what the result of the final SREP and any other development might be. I don't think we can speculate more on that for now.
Okay, many thanks. The final question on the disclosure today around the Panama Papers. Out of the 562 or so offshore structures in Nordea Luxembourg, do you know today how many of those are U.S. citizens in terms of the ultimate beneficial owners, please?
Now, I'm not an expert in the Panama investigation. I think it's two.
Yes, that was stated in the report, but that was, as I read it, out of the 161 or so which were investigated, or out of the 129 that were investigated. Is that the two, are those U.S. nationality of the total 562 offshore structures, you say?
If I may, let us come back with an exact number. The reason we didn't look into all these offshore structures and the reason is we only looked at what we perceived as the high risk. We didn't go through the trusts and foundations, which are low risk. I would assume, but let's come back on that one, that the nationality on the trusts and foundations are less sensitive. We looked into the sensitive names, and there it was two.
Okay, that makes sense. Many thanks.
Thank you.
Sorry, just to add. Sorry, Jan, to add that zero of those accounts have been blocked.
Yes. Thank you.
Thank you. We'll take our next question from Omar Keenan from Deutsche Bank. Please go ahead. Your line is open.
Hi. Good afternoon. Thanks very much for taking the question. I've got a further question on capital, then a further question on the private bank investigation. Just first on capital, I understand that today, on a pro forma basis, Nordea has 20 basis points of management buffer, shall we call it, before perhaps any incremental impact from any leftover PD investigation. I guess conceptually, in the second half, there needs to be a build of 30 to 130 basis points of Core Tier 1 to get to a 50 to 150 basis point management buffer. Do you expect these measures will come through more in the third quarter or the fourth quarter? Also, could you comment about whether we're thinking about the scale of capital build correctly, if there's something we've not thought about? Then my second question is on the private bank investigation.
I guess the outstanding issue is if there's any fine. Can you give us a timeline on when we will hear from the Swedish and Luxembourg FSA? I guess given the investigation said that these were kind of compliance and governance procedures. Are the lax compliance and governance procedures you found, are they the same shortcomings that the SEK 50 million fine that was paid last year is for? Thank you.
First of all, on the draft SREP, no capital requirement, well of course, is not expected to be enforced before we have the final report. Now, of course, we have a number of clarification and other discussions with Swedish FSA as part of the normal process. On the exact numbers and the exact timing, we will be wiser when we come closer to the final report. I don't think we can comment so much more. We have, as I said, pending initiatives, and we have a current gap based on the pro forma number of around 30 basis points to the minimum capital requirement plus 50 basis points. Again, it depends exactly on the phase-in and exact timing on some of these new requirements. On the Panama case, I honestly don't know exactly.
We know that both the Luxembourg authorities and Sweden will now initiate their own process. They have received, of course, all the material, and I think at least as I understand, Sweden will now start their own process of reviewing all the material, and then they will ultimately come back at some point in time. We don't know their timing on the time they will need to conduct these own exercises.
I can assist that so that the Luxembourg FSA is conducting their inspection right now, so that the original timetable was that it should have been closed more or less already at the same time as our own internal inspection. It started later than planned, and now it's still ongoing. It will be concluded quite soon, and then, of course, I think that we know what is happening in Luxembourg earlier than what is the Swedish FSA's conclusions in due course.
Great. Thank you. If I could just push my luck and add one further question. Just on this interest income, I was surprised by the strength of the lending margin improvement. I think it was EUR 16 million in the quarter. How much of the EUR 100 million is specifically that EUR 16 million? We talked about the EUR 100 million annualized figure, which is EUR 25 million per quarter. Is this EUR 16 million increase, is it most of that done, or is there still more?
I think you relate to some earlier indications we have given of the growth potential. Of course, that was an early estimate, and I think you used the term that what some of the new actions could be on top of the ongoing. I think it's very difficult to reconcile. I can say that the key drivers has been what I have mentioned, and as we say, there are both the development we have seen, the full year effects, and then there are the pending increases, and we have indicated certain sizes for them. Reconciling with EUR 100, I don't think we should try to do. It was an early estimate.
I think it's better. Our guidance is that we will see a sequential improvement from the third quarter. From the fourth quarter we expect a year-on-year improvement. If you just look at the last year's fourth quarter, it was EUR 1,203.
Yes.
Out around EUR 1,170. You should not expect a sharp improvement. There is still room for improvement.
Okay. Got it. Thank you very much.
Thank you. We'll take our next question from Johan Ekblom from Bank of America. Please go ahead. Your line is open.
Thank you. Just two questions, if I may. First, if we can come back to the synthetic risk transfer, just so I understand how this will impact the accounts. Is it right that the loans will get recognized as a derivative instead as of Q3, that you will continue to accrue interest on it and there will be a charge through the fair value line?
Yeah. You can say the reference portfolio, all the loans will stay on our balance sheet, then the CDS we are basically buying from the SPV, that will be accounted for as a derivative.
You mentioned EUR 30 million as the cost. Is that an annual cost, or?
Yes, that's an annual cost post-tax.
Okay. Just to come back to the SREP process. My understanding had been that the PD changes would be a Pillar 1 impact, I guess you're now signaling that this will all be a Pillar 2 impact. Is that something that has changed in how the regulator wants to implement this, or is this your best guess, as of today?
We are not guessing, what is going to happen is that ultimately, of course, this will be implemented as Pillar 1. What Sweden has said is that as they have still not fully decided that we should, as a prudent measure, we should already now start implementing. As the Pillar 1 measure is not ready yet, we will have to do it as Pillar 2. The 50 basis point Pillar 2 add-on will basically at some point in time will be replaced by the Pillar 1 measure.
Perfect. Thank you.
There's a faster way, you can say, to give us equivalent to a three percentage point risk weight increase.
Thank you.
Thank you. We'll take our next question from Adrian Cighi from RBC. Please go ahead. Your line is open.
Hi there. This is Adrian Tschugi from RBC. Thanks for taking my question. Two follow-up questions on capital, please. Positive credit risk migration contributed some 14 basis points to your capital this quarter, despite a deterioration in the energy portfolio. Can you give us any color as to which portfolios you're seeing this improvement? Do you expect an energy portfolio deterioration to impact your CET1 in the second half of the year? The second question also related to the capital. You had no impact on capital from IAS 19 this quarter. Can you please remind us what discount rate you use for your pension liabilities, and do you see any potential impact from this in the second half of the year? Thank you.
Yeah. Sorry.
I can start to comment on this credit quality and rating migration impact on RWA, because actually we have seen negative rating migration and RWA impact naturally in shipping offshore portfolios, energy portfolio, and in some other selective areas. These kind of big portfolios, especially on the retail side, household as well as SME big portfolios, there we have been seeing overall positive rate migration. It's very difficult to give estimation either in this area so that how the future look. Of course, as said, we will expect that the shipping especially offshore ratings will go down and perhaps some other more selective parts of portfolios. Because the relative size, still it's very difficult to see that type of trend that all of a sudden our overall migration should start to be negative to RWA.
Of course, we have to also remember that these are not these kind of static portfolios, we are, of course, driving business more and more to highly rated customers in all areas. Even if individual customer ratings in some areas could go down, the way the exposures to the majority of exposures are going more and more to these kind of high-rated customers.
Okay, thank you.
Any other questions? Okay. Sorry. On the defined pension plan question, I think we had a negative impact of net EUR 89 million in Q2.
As you see, the net OCI was basically zero plus five because we had positive on the currency translation, net of hedges. Those two items almost netted out each other. It's a very small level overall.
Okay, thank you.
Thank you. We'll take our next question from Jakob Brink from DNB Markets. Please go ahead. Your line is open.
Thank you. I just wanted to ask if you could give any discussion around what assets you might be looking to sell, and specifically, would the Baltic business be still core or would you consider selling that, or would this be more the kind of partially held stakes that you would look to sell? Thank you.
No, I don't think we can comment further on it. I think as I said before, that the type of divestments of non-core activities we are looking at currently is you should more think about it in a, you can say asset or business line dimension rather than a geography dimension.
Okay. When it comes to the Baltic, I think we've been very clear now for quite some time that we are committed to the region, we have no plans to leave that region.
Yeah. Okay. Great. Thank you.
Thank you. We'll take our next question from Chris Manners from Morgan Stanley. Please go ahead. Your line is open.
Good afternoon, everyone. Two questions, if I may. The first one is I guess you had a good bump in trading revenues in the last week of the quarter after the EU referendum in the U.K. I just wanted to see how your trading has continued and client activity after the Brexit vote, whether it's maintained at a decent pace or whether you've seen a tailing off. My second question was on the rollout of the new platform. I guess you've actually gone live with deposits for your employees in Finland. Seems to be going well in June. Just maybe if you could flesh out for us what the next steps are and how well it's going, that'd be fantastic. Thanks.
Yeah. I don't think we should start commenting on the development in our trading, I think we ended pretty strong, actually, and if anything, carried that into July. On simplification, yeah, we had a very successful pilot, the next step is to roll this pilot into a real product for external customers. As you know, the current pilot is mainly with employees as customers, next phase in that is to make the pilot a full-scale product, which will happen beginning first half next year. Then, of course, from there, do in-depth you can say evaluation of that before we start accelerating the introduction of more products in more countries. Very positively and according to plan on the core banking platform project.
Super. No, that's encouraging to hear. Thank you.
Thank you.
Thank you. We take our next question from Daniel Do-Thoi from J.P. Morgan. Please go ahead. Your line is open.
Hi, good afternoon. Just two quick questions. The first one on capital, second one on provisions. On capital three percentage point increase in corporate risk weights that you have now estimated. Can you perhaps give us an idea of how proportionally that is distributed across the geographies, or whether that's largely related to Swedish exposures? Secondly, on the provisions, I think you've now mentioned it for the offshore and also for the segment. Could you just give us an idea of what the provisions are for the entire oil and gas book? That's the EUR 7 billion or so that you have on slide 14. Just related to that, the 75% in terms of healthy exposures as you call them, does that correspond to internally investment-rated exposures? Thank you.
If I may on the first one on capital, just to make it clear, it's not us that have made an assessment to and come to the 3% risk weight increase. Just to be clear, it's the number given by Swedish FSA that. They have made an initial assessment of what the total corporate risk weight should be from the Nordea Group by not only Swedish exposures. They have said that as they have not fully concluded their PD/LGD, they think that as of now and what they know as of now, for Nordea, that should lead to a 3% point increase in corporate risk weights across the group. They have then estimated the associated capital required for that. They're taking that Pillar 2, and they will come back on Pillar 1. It's not our own assessment.
You can call it a top-down approach for now by Swedish FSA. That's also why I think I understand all the questions, and we also have a number of questions, but we will have to wait to see the final outcome of this. At least for us, it's of course a clear indication of where we should be heading at least. I think that is what we can say on that.
In this oil segment, if I understood your question correctly, that you asked what is our provision level in the oil segment. Currently we have made roughly EUR 70 million of individual allowances in that segment, so that there are some individual clients with provisions, some impaired loans with provisions, but still the levels are relatively moderate. We don't see that is perhaps the most risky segment, this type of oil companies as such. There are some smaller players which have been hit. This split over healthy and unhealthy portfolio. The healthy portfolio, we have also included somewhat lower rate than this 4 minus, which is our internal threshold for investment grade. That because we're talking about critical portfolio that is then already a little bit below investment grade.
That in our measures or in our rating classes, we are talking about rating classes 3 minus lower.
Sorry. What's the split in terms of investment grade and non-investment grade, please?
Actually, I don't have that split now on top of my head, of all these breakdowns. I have to come back to that because I can't calculate on top of my head what is then this four minus in investment grade, because this is the way we now broke down this portfolio, so that I don't give wrong information.
Okay. That's fine. Thank you very much.
Thank you. As a reminder, if you'd like to ask a question, press star one please. Now we'll take our next question from Per Grønborg. from SEB. Please go ahead. Your line is open.
Yes, thank you. I think a question for me may be a little bit nitty-gritty. You are guiding overall for NII to improve during the second half. I hear that you previously have talked about Danish commercial margins as a driver for higher NII going into the second half. Is that correct? What size of loans, what sort of clients do you expect to be able to hike margins on? Is this company specific or is it something you are seeing overall in the market that Danish margins could be raised going into the second half?
I think we have indicated that there are more to be done in Denmark on the commercial banking side, but we are talking about that a lot has been done. As we also alluded to, for example, we are charging more and more of these customers negative rates. From 25% of the deposits charged negative rate to now 33%. As we have also said before, we have a long, long list of SME customers in Denmark, and it takes time. All the bigger ones have been taken. In Denmark, you can say that the potential are getting smaller, but there is more to be done. What we are saying is that the potential now is bigger in some of the other countries, and we are doing the same there and should expect bigger impacts in Sweden, for example.
Okay. Thank you.
Thank you. As there are no further questions, I would like to hand the call back over to our host. Thank you.
Thank you, operator. Thank you all for calling in and showing interest in our bank and our results. We are now going to London, if you want to call us, please do that within the next hour or after 7:00 P.M. CET. If you'd like to meet us in London tomorrow, please let us know and we will invite you. Thank you very much for now. I wish you all a very nice summer evening. Thank you.
Thank you, ladies and gentlemen. That concludes today's conference call. Thank you for your participation. You may now disconnect.