Day, and 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 Alfven, Head of Investor Relations. Please go ahead, sir.
Thank you, operator, and welcome all to this conference call where we will talk about our Q1 results and then also have a Q and A. With us, we have Group President and CEO, Christian Clausen Group CFO, Thorsten Heijn Jorgensen and Group Chief Risk Officer, Adi Kapyrin.
And I
would to hand over to Christian for an introductory remark and then we open up for Q and A.
Yes. 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 a lot of capital.
We are delivering income growth. We're delivering lower costs, low losses and we deliver significant increase in operating profit. So we talk about our REEs about 14% and cost income ratio like 43%. Now it's a special quarter. Our result is marked by the pressure on our deposit margins from the lower rates in 2 of our major markets Denmark and Sweden which is difficult to compensate.
But then it's important that the other platforms are delivering and that's exactly what we said both in 2011 and in 2013 that we would build the savings and asset management platform and our wholesale and capital markets platform. We wanted to build a bank that was more less capital intensive with more cross selling with being able to attract savings flows and flows from the corporate sector in order to get through a return on capital. Remember exactly what has happened here. It's been a quarter with huge inflows in the savings area and as a management area. Actually, we have a 10% inflow of assets this quarter, which is impressive from all over Europe and also our Nordic markets.
But 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. And this means that we have delivered on net commission line and we have delivered on net fair value line exactly as we have planned. And 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 close. It's not an exceptional quarter.
It's a very strong quarter on these areas, but we have seen similar results back in 2,009, '10, partly 'eleven and certainly 'twelve. So whenever we see some volatility, we seem to be attracting these flows and these results. So I think it's really improving that our strategy is paying off. So with these words welcome to the meeting.
Thank you, operator. We are now ready to take Q and A.
Thank And we will take our first question from Jan Walter from Credit Suisse. Please go ahead.
Yes, good afternoon. Jan Wolter here at Credit Suisse. So two follow-up questions really. First, the quarter was very volatile with a lot of client activity. How but the NII pressure is evident.
How do you see the revenue growth underlying going forward? I know the Mac has previously talked about around 2%. Is that the area still where we should focus? Or has anything changed there? Thank you.
No, I don't think anything fundamentally has changed. We continue to maintain a relatively cautious view on NII, which I think will keep it drag 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. And we also maintain the view that year over year net fair value should improve compared to both in. So the guidance we have given earlier of an underlying income growth and the level of 2% in local currencies we maintain that.
Okay. Thank you. And the asset quality trends if you could comment specifically on the offshore drybulk and container segments where we've seen freight rates coming down here of late? Thank you.
Yes. If I start from Oil and Offshore, so that we have 3 sub segments, which are related directly related to oil price development. One segment is in oil companies, which are strong ones, these big ones. We don't see any issues there. The other one is kind of a direct offshore companies.
We have a solid portfolio also there, so that the contract coverage is pretty good, so that we don't foresee any short term bigger issues in this offshore segment. Then the 3rd 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 is kind of a sensitive sector.
It's very small in our book roughly €1,000,000,000 all in all in terms of loan exposures. We have 20 customers in that segment. And then naturally we have gone through every single customer. And the conclusion is that we may have 1 or at the highest 2 customers with a little bit weaker ones where we don't actually expect any kind of negative events, credit events in the coming quarters. But then if it continues this forward towards 2016, we may start to see some smaller cases in that segment.
So all in all, our outlook for the offshore segment is very solid. Then the drybulk, you're right, drycargo, drybulk that is now a weak market. We have exposed roughly 15% of our shipping book is for that segment. Also there we don't expect any kind of major credit events during 2015. But naturally then if this rate level continues towards 2016 then we start to see some events there, but that is also well under control.
Then the container is the 3rd difficult shipping segment for the time being. I think that you may remember from our previous meetings that our exposure to the container segment has is very, very small. In reality, it's close to 0, so that we are not so much exposed to the container segment as such. So that summarizing all this then we don't see in the immediate future in the coming quarters any bigger issues on these segments.
Okay. That's very clear. Many thanks for that. Thank you.
And we will now take our next question from Christopher Rothquist 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 you 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.
And then just 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. But perhaps so that makes it sound difficult commoditized market to then to do that. But perhaps there is a possibility to price other or introduce other revenue streams. And then 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.
So if you provide some color around your thoughts. And then I had one more question.
Yes. But we are charging negative rates in Q1. We have a number, which we have charged. So and that has mainly been on the large corporate institutional customers. And then we are mainly in Denmark.
We are testing negative rates on a selected number of larger SME customers. So 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. And as you rightly say then the options of course is depending a little bit about the around the market dynamics. We can charge selectively as we have a you a business case approach to charging selective corporate customers. When it comes to the retail cost, Donati, the big household segment, then of course this is a sensitive decision and being all alone in charging household customers is probably not a viable possibility.
So there we will have to wait and see how the market reacts as remember we are not a market leader in most of the household markets in Sweden, Norway and Denmark.
So just to do you see upside from continued repricing of deposits in the large corporate and SME segments?
Yeah. I think that we will continue to see that we will I mean, as we have done many times before, charge negative rates to large corporate instituting 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. And I think we will have to look for the asset side for opportunities rather than on the charging negative rates on deposit side on this consensus on changing the approach.
Okay. Thank you. And 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. If I mean, 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 perhaps to others where you see a repricing opportunity for the capital that they tie in that you would like to remain in?
Yes. But 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 with the big programs coming to an end. But 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 CRB segments where we gradually are revising all our reviewing all our CRB 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 and that I think we have done very successfully within CIB.
And 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 caused the countries.
But maybe I can add the way we run it actually is that we expect also going forward to have a limit on RIIIA in the businesses and our subunits. And the way this works is of course a great dynamic. So when you do new business, you have to take out some business. So you have to deselect the least profitable customers or you have to reprice or you have to get better collateral and less REA on the customer. You can say you have a good dynamic in this.
So 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. And that dynamic will continue and we'll probably tell a little bit more about it at the Capital Market Day exactly how far we can go. But no low hanging approach anymore. It's not like the obvious candidates. It's both in sectors, but also in individual customers.
There are always ones that have lower ROI than others and that will be a good way to run it that we search after these. And as I said take them out, repress or reduce re on the exposure by shorter maturities, better collateral whatever it is. That's the selection and part of it would be desalination as Thorsten says.
Okay. Thank you very much. That's very helpful.
And we will now take our next question from Heiner Luz from Goldman Sachs. Please go ahead.
Hello. I got 2 questions.
The first question coming back to your real points that you basically sort of given clear budget 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 your being sort of being a global SIFI. You probably don't want to sort of outgrow too much and get 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? And 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. So are you sort of changing trends for pricing? Are you trying to basically fund the business more domestically now? What's sort of the drivers there?
Yes.
I think you can just
start on the beer side and how we manage this. You are right that we have a number of metrics when managing this. And the way it works is that each business area are allocated a Raukar target I. E. An internal ROE measure.
At the same time, they are giving certain strict guidelines on use of capital and on cost. And you can say that what we are trying to do is that we of course are bringing the area and the subdivision raw cost towards above a certain threshold. Above that threshold, of course, we expect the areas then to reallocate and prioritize CapEx. We don't have any masterminding on where exactly the business areas should prioritized. 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.
And within certain areas, I can then targets. So 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. And there you have a sub target that are more on you can say expanding volume and income. So it's a relatively granular exercise, but that's how we do it.
On Russia?
I guess, that on Russia. First of all, these loan volumes your assumption is right. So that reported volumes are up because reported the currency is euro. But then the increase is fully explained by U. S.
Dollar strengthening towards the euro. In the local or this kind of original currencies, the development was minus 2% in the corporate lending book in terms of volume. Then the biggest driver for the net interest income to drop is actually the new way of allocate what is the return or changes we have made to return on allocated equity. It's more this kind of internal issue so that the positive side is then seen in group funding and the negative is here on the Russian knee numbers. What is happening in lending margins, customer lending margins in Russia is still positive naturally, so that the margins are up and corporate lending margins for the corporates as such, which is of course quite natural under these circumstances.
This sort of basic charging a Russian business more for the funding? Like I know on a group level it's net net sort of does change anything, but from a sort of 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 sort of your auditors 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 acquire all kind of necessary financial pricing rules. But from an internal management perspective, obviously, so everything from liquidity to capital, we load the Russian balance sheet to incentivize them of course to currently to reduce exposures and to be very careful with kind of extending use of good capital or funding. So that is something we manage on in the management accounts you can take in the setting.
Okay. Thank you very much. Thanks.
And we will now take our next question from Riccardo Rovere from Mediobanca. Please go ahead.
Yes. 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 add is that you didn't manage NII this quarter or in the previous quarter trying to let's say trying to offset as much as possible the pressure from deposits. And 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.
Yes. I mean, we 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 then of course we try to mitigate as we just discussed we try to mitigate the impact of negative rates or the overall deposit margins to the as much as possible by increasing asset margins. We try to compensate very much on the semiconductor investment side for the pressure we see on deposit margins. And that is a strong correlation.
So we can absolutely see that a big part of the performance in savings and investments is a result of the low rates. But what I also referred to was that if you look on treasury income, then of course there are you can to a certain degree you can choose to have specific targets for what income you want to see on your NII line or your net fair value line. And 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. So it's obviously not so that we don't try to manage auto 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 referring
to it in a strategic sense because as Gretchen also opening saying that we from a strategic point of view want to use our balance sheet less and less and then we want to improve our advisory capabilities our I. E. Using the market, etcetera, etcetera, especially when we talk about our corporate segment. So also from a strategic perspective, you should expect to see less NII relative to fee income for example. So that was in that dimension I was referring to it.
Okay. Okay. Thanks. And if I may use a little bit of your time again. This morning, one of your peers mentioned that if regulators in Europe go decide for kind of standardized risk weights or to make the leverage ratio not a backstop mechanism anymore, There would be a room to let's say manage the assets on the balance sheet.
They mentioned securitization especially in mortgages. Do you see this as a feasible solution if regulation tightens till that
level?
No. But obviously, we are following the debate around standardized approach and a potential flows 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. So of course, we think this is unfortunate. The exact impact will depend very much on how exactly these proposals are implementing and how they're calibrated. And of course, it can be everything from a lesser change to fundamentally changing the way we have to think about optimizing the balance sheet. So but I think it's still premature to discuss it in detail.
Okay. Thank you very much. Thanks.
And we will now take our next question from Daniel Dautoy from JPMorgan. Please go ahead.
Hi, good afternoon. Daniel here from Just two questions I have. The first one is on asset management and the second one is on Russia. So 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? And then 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?
And then 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.
Yes. I can take the as a management question first. So the flow is very diversified specific. Continuation of the pickup in our European funds distribution is important to note. So close to half of the flows comes from Europe in our funds.
And please note it's high margin funds we are talking about. It's balanced funds 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
value of flows. So we don't go to maximize flows. We go to maximize value of flows. So we don't intend to all sorts of institutional sales contracts, which sometimes have very low fees. We concentrate on as I said the value of the flow.
And then 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 bonds pure equity bonds. And this is important in this part of 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. And 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 1st 2 months of the year of all funds, which is a balanced fund, a stable return fund with low beta. And I think that's exactly what is good for a mass market customer or private banking customer these days, yes, even for institutional customers by the way. But this is very important that we flows we have. One day, of course, we will see a reaction in the equity market.
And then we need to ensure that our the risk profile of our customers matching this. So a move into private to Europe very much, a move into higher value funds with higher fees and also the thing about making sure that the risk profile matches the customer base very well. So this is a to me this is a very, very soft development and makes it of course sustainable as we look ahead.
And for the Russia, yes, we have made a decision to gradually exit the household business in Russia. In lending book terms that is small, so that currently it's 0 point €4,000,000,000 reported in euros. But then again, we will maintain our corporate presence, so that our core functions always in Russia has been 2 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 Ambitious 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. Then you asked that will this have an impact on our funding composition Russian Russian corporate clients. They are exporting companies and then their income is usually U. S. Dollar based.
I will own some mainly U. S. Dollar based loans, so that the 70% of the Russian loan book is in the U. S. Dollars.
That will not change, because we keep this corporate book. Then 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 is U. S.
Dollars and euros and they are mainly funded by the group.
Okay. Great. And just on the point on the performance fees, was there any impact of performance fees on the average fee margin this quarter?
No. No. There are no virtually no performance fees this quarter. We have performance fees in Q1 in Q4 sorry. So actually on a relative scale then Q1 is doing very good.
We typically have our performance fees in Q4.
Okay. Great.
And just to be clear the performance fees in the 4th quarter was net
€19,000,000 Yes. Thank you.
And we will now take our next question from Jacob Kruse from Autonomous. Please go ahead.
Thank you. Can I just on the Asset Management, Wealth Management division? So you posted 20% growth year on year for the quarter. First of all, I guess, your competitor in Sweden, Robor, 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. So are you seeing that?
And secondly, what kind of growth rates do you believe that you can achieve in this business? And kind of what do you view as its contribution to revenues on a 3 to 5 year view? Thank you.
Yeah. Maybe I can start with giving a few comments on Asset Management. I think that we have now for maybe 4 or 5 years in a row posted close to 10% between 8% and 9%, 10% growth in the commission income from asset management and or even higher when we blend it into private baking and everything. So it's a very stable growth rate. We don't see pressure on margins right now.
There's of course some underlying changes coming up in coming years on how fees are composed and how to be charged and so on. But 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. But on the balance 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 are prepared for that. And 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's a pretty stable it will be a pretty stable fee for us even if we go to performance fees. And 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 stemming from inflow and now we are trending an annualized net inflow growth of 10% of or more than 10% of AUM. As long as rates are staying very low or even declining further then I think we can keep up very high net inflow rates. So there is a natural hedge in that. You can say if rates start picking up, we might trend down to more to net inflow growth level of more closer to 5%, 6% type of. But then as questions then of course we have the market appreciation and no one knows exactly, but by the composition we at least have lower volatility.
So if you then put on top an estimate on market appreciation then you have a pretty healthy underlying growth also in a longer term perspective in this part of the business.
Thank you. And 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 Q1 would be reversed as of Q2?
I don't know exactly what they have been saying. However, I can say that I think that might 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 how to what amounts we can place on the 0 rate account in Denmark. They might be referring to that. If we're talking about mitigating the effect of lower rates by pushing through negative rates to customer etcetera then I don't think that we don't see we are trying, but I don't think we are seeing a major change of in the market of someone pushing through more negative rates or lower rates on customers as of now. So I mean, 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.
And 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, but what's missing is information about the calibration.
One of the European banks mentioned this earnings season that the range for the floors being discussed by the Basel Committee is 65% to 95%. So just wondering if that's the range that you've heard about? And my second question on net interest income is just on treasury positioning for interest rates. Just wondering what the life of the hedge is? And can we expect it to be a positive contributor in the quarter as well?
Thanks very
much. Yes. On the capital flows, yes, the range of numbers you are referring to we have heard about and we are basically making denials for all of the numbers you were mentioning and everything in immediate implication for capital for Swedish banks. A immediate implication for capital for Swedish banks. And therefore, we can only refer to the fact that we have a strong belief that if we look at standardized model, if we look at flows within the range you are mentioning, Sweden have discretionary powers to adjust our capital requirements by Pillar 2 and we clearly expect them to do so.
And that's the clear indication we also have. On AI AII and treasury positions, we don't really comment on the exact position. What I can say is that we do not take very high risk either in terms of treasury position. We have a very short book. We have very short carriage rates, very short maturity trades.
So of course, you won't 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.
And we will now take our final question from Andreas Hankerson 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. And Rodna, I think you talked about $36,000,000 headwind.
And there's one day more that's $15,000,000 and it's a little bit of $81,000,000 savings, I guess. But outlook wise, are you looking for growth in NII from the current level? Or should we actually expect NII to decline? And then second question, we also touched upon, but since Christian is now on the call, I just want to see the 15% core Tier 1 target you talked about in Q4 wasn't mentioned in the report. And we saw that Swedbank had a 70 bps decline in their core Tier 1 ratio in a quarter, which was driven by fairly technical nature.
So I wonder if in your view is 20 bps enough of a buffer going forward? Thanks.
Yes. No, but I think on NII, I think that I think we will see in the coming quarters that there might be more pressure from lower rates. I mean, we do expect also we might we have an expectation of lower rates. We might see Sweden adjusting rates further. So I don't think we can rule out that we will see some pressure going on.
You are right that we have a we had a particular effect in Q1 relating to AG1 cost of €15,000,000 year over year, which will be mitigated in Q2 as the redemption of old AT1s will start kicking in. So I think that we also said that we do expect NII to be lower for 2015 than it was in 2014, so somewhat of a pressure there. But I don't think we have changed as such our view compared to the last couple of quarters where we have tried to guide it conservatively on NII. Then on CoTier 1, I think that we will as I said, we will be back on our Capital Market Day with a quite precise view on our capital policy, on dividend policy, etcetera. So 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 Guis 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 equivalent divisions or as close as possible as I can get. Your minus 7% Q on Q seems a lot worse than the other banks. And 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.
And secondly, on the slide 10 of your presentation, the net fair value where you have of the 644, 304 from other areas I. E. Noncustom areas, is this kind of mainly FX driven? Or is it both FX and rates? Thank you.
Yes. On the NII, I think that I haven't done the full calculation on the Hand's Bank result. But if we compare with the other Swedish banks, if you adjust for FX because you have to remember that we have significantly especially if you look on the year over year run rate on NII and you look in our business area NII including retail banking, I think that for all the comparisons I've tried to make adjusted for FX as some of them have positive effect from FX and we have the opposite. Then we are actually looking 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. And are you saying that's in your understanding comparable to your peers? The Q on Q minus 7%?
I was talking about total retail banking, but
I was just looking at Banking Sweden versus your peers in Sweden?
Yes. Ron, you're absolutely right. And 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. So we have around 190% in Sweden, while our peers have around 300%. So when you see that the deposit margins are under pressure, we will get much more impacted on that compared to peers.
So we'll
take it off that more on the lending side and what we can do.
So you'll continue to suffer more than your peers in Q2 as well with lower rates?
Yes. Now, Rigsbank choose not to be, but you're right that we will have a negative impact in Sweden 2nd quarter versus Q1. And we estimate the impact to be around 15, 15.
Great. Thank you. And just on trading please or the net fair value number? Yes. The 304 other areas, there's a 3 gs customer areas.
If there's any more color you can give us that would be great. Thank
you. In general, I would say that all 644 as such are related to customer trading. Now what have happened in 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. And relating to that, we had certain gains of course. But all of us is 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.
And is it mainly FX driven?
It's very much FX driven and it's but it's also fixed income driven. They are both contributing a lot in Q1.
Great. Thank you.
As we have no further
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. And then I hope also to see you all at the Capital Markets Day in London 27 May. And 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.