Good day. Welcome to the Q1 2015 Nordea Bank AB earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Rodney Alfvén, Head of Investor Relations. Please go ahead, sir.
Thank you, operator. Welcome all to this conference call where we will talk about our first quarter results. We will also have a Q&A. With us, we have Group President and CEO, Christian Clausen, Group CFO, Torsten Hagen Jørgensen , and Group Chief Risk Officer, Ari Kaperi. I would like to hand over to Christian for an introductory remark. We'll open up for Q&A.
Welcome everyone to this conference call. I will give a few introductory remarks. It is a pleasure today to deliver results, which is actually delivering on all the things we promised in the capital market in 2013. We are building capital and have built another capital. We are delivering income growth. We are delivering lower costs, low loan losses, and we deliver significant increase in operating profits. We talk about ROE is about 14, cost income ratio like 43. It's a special quarter. Our result is marked by the pressure on our deposit margins from the lower rates in two of our major markets, Denmark and Sweden, which is difficult to compensate.
It's important that the other platforms are delivering. That's exactly what we said, both in 2011 and in 2013, that we would build the savings and asset management platform and our wholesaling capital markets platform. We wanted to build a bank that was less capital-intensive, with more cross-selling, with being able to attract savings flows and flows from the corporate sector in order to get the return on capital. That is exactly what has happened here. It's been a quarter with huge inflows in the savings area and asset management area. Actually, we have a 10% inflow of assets this quarter, which is impressive, from all over Europe and also our Nordic markets.
Maybe more importantly, the volatility has meant that we have done a lot of business with our corporate customers when they have hedged themselves towards the volatility in the FX markets and the fixed income markets and the equity markets, by the way. This means that we have delivered on net commission line, and we have delivered on net fair value line exactly as we had planned. These results comes, of course, because we indeed have built the platform. We have a leading position among these customers, and we have the products and services there to be able to capture the flows. It's not an exceptional quarter. It's a very strong quarter on these areas, but we have seen similar results back in 2009, 2010, partly 2011, and certainly 2012. Whenever we see some volatility, we seem to be attracting these flows and these results.
I think it's really proving that our strategy is paying off. With these words, welcome to the meeting.
Thank you, operator. We are now ready to take Q&A.
Thank you. If you would like to ask a question at this time, please press the star or asterisk key followed by the digit 1 on your telephone. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. Again, if you would like to ask a question, it's star one on your telephone keypad. We will take our first question from Jan Walter from Credit Suisse. Please go ahead.
Yes, good afternoon. Jan Wolter here, Credit Suisse. Two follow-up questions, really. First, the quarter was very volatile with a lot of client activity. The NII pressure is evident. How do you see the revenue growth underlying going forward? I know the market has previously talked about around 2%. Is that the area still where we should focus, or has anything changed there? Thank you.
I don't think anything fundamentally has changed. We continue to maintain a relatively cautious view on NII, which I think will keep us back on our income. We still keep up the view that there are many reasons to believe that fee and commission income will continue to benefit us. We also maintain the view that the year-over-year net fair value should improve compared to 2014. The guidance we have given earlier of an underlying income growth in the level of 2% in local currencies, we maintain that.
Thank you. The asset quality trends, if you could comment specifically on the offshore dry bulk and container segments where we've seen freight rates coming down here of late. Thank you.
If I start from oil and offshore. We have three sub-segments which are directly related to oil price development. One segment is oil companies, which are strong ones. These big ones, we don't see any issues there. The other one is direct offshore companies. We have a solid portfolio also there, the contract coverage is pretty good, we don't foresee any short-term bigger issues in this offshore segment. The third segment is oil services, i.e., different type of companies who are providing services to the oil companies or offshore companies. That is perhaps most sensitive sector. It's very small in our book, roughly EUR 1 billion all in all in terms of loan exposures. We have 20 customers in that segment.
Naturally we have gone through every single customer, and the conclusion is that we may have one or at the highest two customers which are a little bit weaker ones, where we don't actually expect any kind of negative events, credit events in the coming quarters. If it continues this forward towards 2016, we may start to see some smaller cases in that segment. All in all, our outlook for the offshore segment is very solid. The dry bulk. You are right. Dry cargo, dry bulk, that is now a weak market that we have exposure roughly to 15% of our shipping book is for that segment. Also there, we don't expect any kind of major credit events during 2015.
Naturally if this rate level continues towards 2016, we start to see some events there, but that is also well under control. The container is the third difficult shipping segment for the time being. I think that you may remember from our previous meetings that our exposure to the container segment is very, very small. In reality, it's close to zero so that we are not so much exposed to the container segment as such. Summarizing all this, we don't see in the immediate future, in the coming quarters any bigger issues on all these segments.
Okay. That's very clear. Many thanks for that.
Thank you. We will now take our next question from Christoffer Rosquist from Barclays. Please go ahead.
Yes, thank you. Two questions from my side. The first one is on pricing of deposits. Just to confirm that I understood it correctly from the press conference this morning that you so far haven't pushed on any of the negative rates in any area of your geographies to customers. If you could perhaps explain a little bit on what options you are considering as we've heard this week some of your peers saying that they rule out negative rates for retail customers. That makes it sound difficult for really anyone in a commoditized market to do that. Perhaps there is a possibility to price other or introduce other revenue streams. Additionally on the corporate book, some of your peers have been very clear on that they will charge negative rates to customers for excess liquidity that they place with you.
If you could provide some color around your thoughts. I had one more question.
We are charging negative rates in Q1. We have a number which we have charged. That has mainly been on the large corporate institutional customers. We are mainly in Denmark. We are testing negative rates on a selective number of larger SME customers. We are charging as we speak, and we have charged not a significant amount, but a sizable amount compared to the total exposure to negative rates we have charged in Q1. As you rightly say, the options of course is depending a little bit around the market dynamics. We can charge selectively as we have a business case approach to charging selective corporate customers.
When it comes to the retail customer, the big household segment, of course this is a sensitive decision and being all alone in charging household customers is probably not a viable possibility. There we would have to wait and see how the market behaves. Remember, we are not a market leader in most of the household markets in Sweden, Norway, and Denmark.
Do you see upside from continued repricing of deposits in the large corporate and SME segment?
I think that we will continue to see that we will, as we have done many times before, charge negative rates to large corporate institutional clients. I think that we will continue testing how far we can go on the larger SME side. I don't think it will be sizable amounts yet. I think we will have to look for the asset side for opportunities rather than on charging negative rates on deposit side on this consensus on changing the approach.
Okay. Thank you. I just wanted to ask secondly regarding capital efficiency and the sectors that you're involved in or where you're changing the shape or size of your business. Now that you're approaching the end of the successful RWA efficiency measures that you've taken, if you're now comfortable with the shape of your business or if there are certain segments that you're looking at that still are not profitable and where you will consider or reducing your exposure or perhaps others where you see a repricing opportunity for the capital that they tie in That you would like to remain in.
I think a little as we discussed the pricing, a little the same you can say. When we look on capital efficiency, you're right, the big program is coming to an end. I think we have for a pretty long period actually applied another approach and which has not at least been done within wholesale banking, the CIB segments, where we gradually are revising or reviewing all our CIB customers, customer by customer, and use of course all measures to secure capital efficiency. That means that certain type of sub-segments or type of customers are deselected. That I think we have done very successfully within CIB.
If I should mention an area where we'll now try to repeat this exercise, that could very well be within the retail corporate segments, mainly medium and large, where we have a huge number of customers and it's a bit more cumbersome exercise. There's no doubt that there's a lot of capital efficiency potential in these segments. That's across the countries.
Maybe I can add, the way we run it actually is that we expect also going forward to have a limit on RWA in the businesses and the software units. The way this works is of course a great dynamic, when you do new business, you have to take out some business. You have to deselect the least profitable customers, or you have to reprice, or you have to get better collateral and less RWA on the customer. You can say you have a good dynamic in this. All business areas are always and will also in coming years be searching for where to take out in order to be able to add in new exciting and profitable business. That dynamic will continue, and we'll probably tell a bit more about it at the Capital Markets Day, exactly how far we can go.
There are no low-hanging fruits anymore. It's not like they're obvious candidates. Both in sectors but also in individual customers, there are always ones that have lower ROIC than others, and that will be a good way to run it, that we search after these and as I said, take them out, reprice or reduce RWA on the exposure by shorter maturities, better collateral, whatever it is. That's the search, and part of it will be deselection, as Torsten says.
Okay. Thank you very much. That was very helpful.
We will now take our next question from Heiner Loose from Goldman Sachs. Please go ahead.
Hello. I got two questions. The first question coming back to your RWA points that you're basically sort of giving clear budgets sort of to the different divisions and risk-weighted assets. Is that sort of partially a function that you basically say you now want to prioritize more profitability given sort of you being a global G-SIB, you probably don't want to sort of outgrow too much and potentially get further burdens put on it? Or is it more that you feel like, okay, you want to sort of make sure that your marginal return is more identical between the different businesses? The second question would be on basically Russia. You basically saw sort of quite a drop in NII, but at the same time sort of volumes going up.
I expect volumes going up is probably largely currency again, but that should have helped you in the NII as well. Are you sort of changing transfer pricing, or are you trying to basically fund the business more domestically now? What's sort of the drivers there?
I'm happy to start on the RWA side and how we manage this. You are right that we have a number of metrics when managing this. The way it works is that each business area are allocated a ROIC target, an internal ROE measure. At the same time, they are given certain strict guidelines on use of capital and on cost. You can say that what we are trying to do is that we of course are bringing the area and the subdivision ROIC towards above a certain threshold. Above that threshold, of course, we expect the areas then to reallocate and prioritize capital. We don't have any masterminding on where exactly the business areas should prioritize, but by setting up this framework and having a relatively strict and granular approach to discussing these reallocations, that's basically how we do it.
Within certain areas, there can then be sub-targets. For example, as we just discussed within retail corporate and some of the segments, the focus is that they have a relatively stricter capital target, meaning that you adjust expectations on income. In other areas, you have a very strong profitability, there you have a sub-target that are more on, you can say, expanding volume and income. It's a relatively granular exercise. That's how we do it. On Russia.
I can start on Russia. First of all, these loan volumes, your assumption is right, reported volumes are up because reported the currency is EUR. The increase is fully explained by US dollar strengthening towards EUR. In the local or this kind of original currencies, the development was minus 2% in the corporate lending book in terms of volume. The biggest driver for the net interest income, the drop is actually the new way of allocate or
What is the return or changes we have made to return on allocated equity? It's more this kind of internal issue, the positive side is then seen in group funding and the negative is here on the Russian NII numbers. What is happening in lending margins, customer lending margins in Russia is still positive naturally, the margins are up. Corporate lending margins for the corporate as such, which is of course quite natural under these circumstances.
This sort of basically charging a Russian business more for the funding. I know on a group level it net sort of doesn't change anything, from a signaling effect, is that basically making clear to sort of the guys in your Russian division that they should try to consume less liquidity or is it more like sort of an effort to push them to reprice even more or is it sort of just something that your audit just told you, "Okay, given the risk in Russia went up a lot, so you should charge more there.
Of course, we are in the legal entity dimension. We are, of course, very sure to apply all kind of necessary transfer pricing rules. From an internal management perspective, obviously follow everything from liquidity to capital. We load the Russian balance sheet to incentivize them, of course, currently to reduce exposures and to be very careful with kind of extending use of group capital or funding. That is something we manage in the management account, you can say setting.
Thank you very much. Thanks.
We will now take our next question from Riccardo Rovere from Mediobanca. Please go ahead.
Good morning to everybody. Listening to the press call this morning, it was not clear to me when management mentioned the fact that you don't have a precise NII target, because the feeling I had is that you didn't manage NII this quarter or in the previous quarter, let's say, trying to offset as much as possible the pressure from deposits. Maybe I got the underlying message right. Would you please add a little bit more color on the comment you provided on the press conference this morning? Thanks.
Yeah. Obviously, we try to manage all the income, whether or not it's NII fee or net fair value. I would say we try to manage all. I think the point that we were trying to make was that for example, if you look on the business areas line, of course, as we just discussed, we try to mitigate the impact of negative rates or lower deposit margins as much as possible by increasing asset margins. We try to compensate very much on the savings and investment side for the pressure we see on deposit margins, and that is a strong correlation. We can absolutely see that a big part of the strong performance in savings and investments is a result of the low rates.
What I also referred to was that if you look on treasury income, of course, to a certain degree, you can choose to have specific targets for what kind of income you want to see on your NII line or your net fair value line. That we have basically given up some time ago. We kind of maximize total income from a treasury perspective rather than having sub targets as was partly the case earlier. It's obviously not so that we don't try to manage also NII. We spend a lot of time on that, but that was in this more tactical dimension I was referring to it.
Okay.
I'm not referring to it in a strategic sense because as Christian also opening, saying that we, from a strategic point of view, want to use our balance sheet less and less, and we want to improve our advisory capabilities, i.e., using the market, et cetera. Especially when we talk about our corporate segment. Also from a strategic perspective, you should expect to see less NII relative to fee income, for example. That was in that dimension I was referring to it.
Okay. Thanks. If I may use a little bit of your time again. This morning, one of your peers mentioned that if regulators in Europe decide for kind of standardized risk weights or to make the leverage ratio not a backstop mechanism anymore, there would be room to, let's say, manage the assets on the balance sheet. They mentioned securitizations, especially in mortgages. Do you see this as a feasible solution if regulation tightens till that level?
Obviously we are following the debate around standardized approach and potential flaws and leverage ratios very much. I think it's still far too early to make any firm conclusions. We think of course that part of the approach is wrong. We actually think that risk models do work, and we think the risk weights of Nordea and also other Nordic banks are just reflecting the lower risk we have. Of course, we think this is unfortunate. The exact impact will depend very much on how exactly
The new these proposals are implementing and how they're calibrated. Of course, it can be everything from a lesser change to fundamentally changing the way we have to think about optimizing the balance sheet. I think it's still premature to discuss it in details.
Okay. Thank you very much. Thanks.
We will now take our next question from Daniel [Stautoy] from JP Morgan. Please go ahead.
Hi, good afternoon. Daniel here from JP Morgan. Just two questions to ask. The first one is on asset management, the second one is on Russia. Beginning with the first one, can you just tell us a bit more about the mix of net inflows that you've seen this quarter? Also related to that, the increase in the average fee margin that you've seen there, was this as a result of the change in mix or perhaps the booking of some performance fees this quarter? Secondly, on Russia, you mentioned in the press conference this morning that as you wind down the retail part of your business there, you intend to keep a corporate presence.
Can you just give us sort of a feel of what you would see as an appropriate size of the loan book over there, and whether you envisage any changes to the funding structure as a result? Thank you.
I can take the asset management question first. The flow is very diversified. Specific continuation of the pickup in our European fund distribution is important to note. Close to half of the flows comes from Europe, in our funds. Please note it's high margin funds we are talking about. It's balanced funds with high margins and equity funds. The rest is Nordic retail and private banking, and that's also a very high level still. It's also actually more than 50% balanced funds with high margins. In general, we are increasing the margins because we are also working very much on value of the flow. We don't go to maximize flows, we go to maximize value of flow. We don't enter into all sorts of institutional sales contracts, which sometimes have very low fees. We concentrate on, as I said, the value of the flow.
It's interesting to note that, and that's actually very important, that more than half of the flows in this quarter is balanced products. This is very important. Only less than 20% is in equity funds, pure equity funds. This is important in this part of the cycle that we advise our customers to take care of their risk right now. Don't just pour everything into equities because you get no interest rates. We make sure that we have these rather amazing balanced funds. As I did last quarter and the quarter before, I can make a little advertisement for our Stable Return Fund, which is the most selling fund in Europe in the first two months of the year of all funds, which is a balanced fund, a Stable Return Fund with low beta.
I think that's exactly what is good for a mass market customer or private banking customer these days. Yeah, even for institutional customers, by the way. This is very important that we control risk well in the flowing flows we have. One day, of course, we will see a reaction in the equity market, then we need to ensure that the risk profile our customers matching this. A move into Europe very much, a move into higher value funds with higher fees. Also the thing about making sure that the risk profile matches the customer base very well. This is, to me, a very, very sound development and makes it, of course, sustainable as we look ahead.
For the Russia, yes, we have made a decision to gradually exit the household business in Russia. In lending book terms, that is relatively small, so that currently it's EUR 0.4 billion reported in euros. Then again, we will maintain our corporate presence so that our core functions always in Russia has been two segments. It's large Russian corporate customers and Nordic or international companies who are doing business in Russia, and that we will keep. Naturally under these circumstances, we will be cautious. We don't have in the corporate book any kind of growth ambitions, so that perhaps it's likely to see that thereby there may be some kind of decrease in the volumes, but not anything dramatic. You ask that will this have impact on our funding composition in Russia? The biggest customer segment, 80% of our book is these large Russian corporate clients.
They are exporting companies and their income is usually US dollar based. Our loans are mainly US dollar based loans, so that the 70% of the Russian loan book is in US dollars. That will not change because we keep this corporate book. The household book, what we are now exiting, that is mainly ruble based and funded by ruble deposits. Of course, that will then little by little disappear, but the basic funding structure will remain in Russia so that then the lending currencies are US dollars and euros, and they are mainly funded by the group.
Okay, great. Just on the point on the performance fees, was there any impact of performance fees on the average fee margin this quarter?
No. There are virtually no performance fees this quarter. We have performance fees in Q4. Actually on a relative scale, Q1 is doing very good. We typically have our performance fees in Q4.
Okay, great. Thank you.
Just to be clear, the performance fees in the fourth quarter was net EUR 19 million.
Yep. Thank you.
We will now take our next question from Jacob Kruse from Autonomous. Please go ahead.
Thank you. On the asset management, wealth management division. You've posted 20% growth year-over-year for the quarter. First of all, I guess your competitor in Sweden, Robur, seems to be saying that margins are trending down and expected to keep trend down on a lot of these products. I guess with competition both from index funds, ETFs, and some money market funds getting cheaper. Are you seeing that? Secondly, what kind of growth rates do you believe that you can achieve in this business, and what do you view as its contribution to revenues on a three to five-year view? Thank you.
Maybe I can start with giving a few comments on asset management. I think that we have now for maybe four or five years in a row, posted close to trend between 8% and 9%, 10% growth in the commission income from asset management or even higher, when we blend it into private banking and everything. It's a very stable growth rate. We don't see pressure on margins right now. There is, of course, some underlying changes coming up in coming years on how fees are composed and how to be charged and so on. As we see it right now, it's certainly so that there's no direct pressure except from some very low yielding funds like money market funds and bond funds. We have also lowered our fees this quarter and last quarter on those products which have virtually no return.
On the balanced portfolios, which is a big bulk of our business in equity funds, we hold up really well and we don't lower fees. Actually, we also don't discount at all to even larger customers, because we have, as I said, a focus on the value of flows. The whole pricing model, as I said, will probably change. It's not clear exactly how and when, but we're prepared for that. Actually, with our asset composition, the way we run the production side, we are welcoming performance fees to replace part of the fixed fees because it will be a pretty stable fee for us, even if we go to performance fees. When we look at our long-term performance, and we look at the composition with less volatile funds.
I think maybe just to make a comment on the growth rate, you can say that the true underlying growth is of course stemming from inflow. Now we are trending an annualized net inflow growth of more than 10% of AUM. As long as rates are staying very low or even declining further, I think we can keep up very high net inflow rates. There is a natural hedge in that. You can say if rates start picking up, we might trend down towards a net inflow growth level of more closer to 5%, 6% type of. As Christian said, of course we have the market appreciation, and no one knows exactly, but by the composition, we at least have lower volatility.
If you put on top an estimate on market appreciation, you have a pretty healthy underlying growth, also in a longer term perspective in this part of the business.
Thank you. Can I just ask you on net interest income as well in Denmark. Danske seems to say that they have managed to mitigate by internal action about half of the negative impact starting in Q2, and also another quarter or so from the expansion of the current account limit at the central bank. Do those numbers sound broadly right for you as well, that most of the weakness in Denmark in Q1 would be reversed as of Q2?
I do not know exactly what they have been saying. However, I can say that I think that what they might refer to is, of course, there were certain changes made by the central bank in Denmark that allow us to mitigate some of the pressure we saw, not least in Denmark on NII. What amounts we can place on the zero rate account in Denmark. They might be referring to that.
Yeah.
If we're talking about mitigating the effect of low rates by pushing through negative rates to customer, et cetera, We are trying, but I don't think we are seeing a major change in the market of someone pushing through more negative rates or lower rates on customers as of now. I think it's relatively difficult with the current outlook to see that we can fully mitigate the low rates in Denmark, to be honest.
Okay. Thank you very much.
We will now take our next question from Omar Keenan from Deutsche Bank. Please go ahead.
Hello, good afternoon. Thanks very much for taking the questions. I've just got one on capital and then one on net interest income. Just on capital floors. We have the proposals from December, what's missing is information about the calibration. One of the European banks mentioned this earning season that the range for the floors being discussed by the Basel Committee is 65%-95%. Just wondering if that's the range that you've heard about. My second question on net interest income, is just on treasury positioning for interest rates. Just wondering what the life of the hedge is, can we expect it to be a positive contributor in the second quarter as well? Thanks very much.
Yeah. On the capital floors, yes, the range of numbers you are referring to, we have heard about. We are basically making scenarios for all of the numbers you were mentioning and everything in between. I think whether or not we choose one or another number, it will, of course, have a immediate implication for capital for Swedish banks. Therefore we can only refer to the fact that we have a strong belief that if we will get a standardized model, if we will get floors within the range you are mentioning, Sweden have discretionary powers to adjust our capital requirements by Pillar 2. We clearly expect them to do so. That's the clear indication we also have. On AT1 and treasury positions, we don't really comment on the exact position.
What I can say is that we do not take a very high risk either in terms of treasury position. We have a very short book. We have very short maturity trades. Of course, you will typically see that if market rates levels are going down, you will see a relatively fast translation into slightly lower income for treasury.
Okay. Understood. Thank you.
We will now take our final question from Andreas Håkansson from Exane. Please go ahead.
Yes. Hi. Thanks. It's a bit of follow-up from the meeting earlier today. Just on NII, we talked a little bit afterwards on the averaging impact on going into Q2. Rod, I think you talked about EUR 36 million headwind, there's one day more, that's EUR 15 million, then it's a little bit of EUR 81 savings, I guess. Outlook-wise, are you looking for growth in NII from the current level, or should we actually expect NII to decline? The second question we also touched upon, but since Christian Clausen is now on the call, I just want to see the 15% quarter one target you talked about in Q4 wasn't mentioned in the report, we saw that Swedbank had a 70 basis points decline in their quarter one ratio in a quarter, which was driven by fairly technical nature.
I wonder if, in your view, is 20 basis points enough of a buffer going forward? Thanks.
I think on NII, I think we will see in the coming quarters that there might be more pressure from lower rates. We have an expectation of lower rates. We might see Sweden adjusting rates further. I don't think we can rule out that we will see some pressure going on. You are right that we had a particular effect in Q1 relating to AT1 cost of EUR 15 million year-over-year, which will be mitigated in Q2 as the redemption of old AT1s will start kicking in. I think that we also said that we do expect NII to be lower for 2015 than it was in 2014, somewhat of a pressure there.
I don't think we have changed as such our view compared to the last couple of quarters where we have had to try to guide it conservatively on NII. On quarter one, I think that, as I said, we will be back on our Capital Markets Day with a quite precise view on our capital policy, on dividend policy, et cetera. I would prefer to go into that discussion in a month's time. I can only say that we feel that we currently are adequately capitalized and don't see any major issues around our capital situation as of now.
Okay, thanks.
We have a further question in the queue from Ronit Ghose from Citi. Please go ahead.
Great. Thank you. It's Ronit. I just wanted to follow up on NII. I appreciate there are some one-offs in the quarter, but could you just talk a little bit more around the Swedish business, please? Because if I'm looking at Sweden retail NII and trying to compare it to the Swedish banks who reported in the equivalent divisions or as close as possible as I can get, your minus 7% Q and Q seems a lot worse than the other banks. I don't know if there's been any kind of internal transfer pricing change in the quarter that's hurting you more, or is it just a different business mix performance, or it just looks like your Swedish NII is worse than peers. Secondly, on the slide 10 of your presentation, the net fair value, where you have of the EUR 644, EUR 304 from other areas, i.e. non-customer areas.
Is this kind of mainly FX driven, or is it both FX and rates? Thank you.
Yeah. On the NII, I think that I haven't done the full calculation on the Handelsbanken result. If we compare with the other Swedish banks, if you adjust for FX, because you have to remember that we have a significantly, especially if you look on the year-on-year run rate on NII, and you look in our business area NII, including retail banking, I think that for all the comparisons I have tried to make adjusted for FX, as some of them have positive effect from FX, and we have the opposite. Then we are actually performing quite well compared to peers.
Sorry to interrupt. I was looking at your disclosure in local currency, so the minus 7 Q-on-Q for Sweden banking. Are you saying that's in your understanding comparable to your peers? Q-on-Q minus 7%.
I was talking about total retail banking.
I was just looking at banking Sweden.
Yeah, Ronit-
I was looking at banking Sweden versus your peers in Sweden.
Okay. Yeah. Ronit, you're absolutely right. The difference between us and the other Swedish banks in the Swedish retail banking specifically is that our loan-to-deposit ratio is significantly lower.
Right.
We have around an high 180%, 190% in Sweden, while our peers have around 300%. When you see that the deposit margins are under pressure, we will get much more impacted on that compared to peers.
Right.
We'll take it offset more on the lending side than what we can do.
You'll continue to suffer more than your peers in Q2 as well with lower rates?
Riksbank choose not to. You're right that we will have a negative impact in Sweden second quarter versus first quarter. We estimate the impact to be around 15.
Great. Thank you. Just on trading, please, or the net fair value number.
Yeah.
The 304 other areas versus 340 customer areas. If there's any more color you can give us, that'd be great. Thank you.
In general, I would say that all 644 as such are related to customer trading. What have happened during Q1 was we had a number of market events that led to the fact that we had a higher trading stock than we would normally have. Relating to that, we had certain gains, of course. For all of it, as we have not increased risk or taking any kind of own positions, you can say this is a result of the market conditions.
Is it mainly FX driven?
It's very much FX driven, but it's also fixed income driven. They are both contributing a lot in Q1.
Great. Thank you.
As we have no further questions over the audio, I would like to turn it back to the host for any additional or closing remarks.
Thank you, operator, and thank you all for participating in this conference call. May I remind you that we have an open lunch presentation tomorrow in London at 12:30 local time. I hope also to see you all at the Capital Markets Day in London, 27th of May. You're, of course, always free to call me whenever you like. Thank you.
Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.