Good morning and welcome to Nordea's Fourth Quarter and Full-Y ear 2025 Results. I'm Ilkka Ottoila, Head of Investor Relations. As usual, we'll start with a presentation by Group CEO Frank Vang-Jensen, followed by a Q&A session with Frank and Group CFO Ian Smith. Please remember to dial into the teleconference to ask questions. With that, Frank, please go ahead.
Good morning. Today we have published our results for the fourth quarter of 2025. We finished the year well with high fourth quarter profitability, higher business volumes, and lower costs. It was a strong result despite the uncertain environment and despite consumer confidence in our Nordic home markets remained muted. For the full year, we delivered a return on equity of 15.5% in line with the commitment we made three years ago. Our performance reflects the momentum we have built since we set out to reshape Nordea in the autumn of 2019. We have grown our business with existing and new customers and improved our customer experience. We are much more efficient today. Back in 2019, we spent EUR 0.57 to generate EUR 1 of income. Now it takes EUR 0.45 . We are much more profitable.
In 2019, we ranked near the bottom of the world's 100 largest banks based on return on equity. Now we are firmly in the top 20 and among the best in Europe. We are creating sustainable value for shareholders. Total shareholder return over this period amounts to 322% or 26% per annum. I was especially pleased to see us in 2025 on a high note on one other very important metric, customer satisfaction. Our scores are now 4-10 index points higher in all four business areas, and performance has improved relatively to peers. Our results show that Nordea is performing well. By most measures, Nordea is stronger than it has ever been. We carried that strength into our new strategy period, for which we have high ambitions as reflected in our new priorities and financial targets. I'll briefly return to those later.
Being a strong and resilient financial services group, we also have the capacity to support our customers effectively in the current unsettled global environment. While the geopolitical backdrop remains uncertain, our focus is on ensuring we are consistently there for our customers with advice, with our capital, and with a broad range of financial services and a very strong balance sheet. We're well equipped if conditions shift, no matter which direction they will go in. Our diversification is a key advantage among our Nordic peers. We are the most diversified financial services group. Income, lending, and profits are well balanced across sectors and across our four home markets. We also benefit from operating in a home region with strong economies and fiscal positions and stable political systems. These features help us to navigate through volatility and adjust to external shocks.
The largest Nordic businesses are export-driven and will feel some impacts. Still, they distinguish themselves by their quality, innovation, and deep tech and engineering know-how, and very importantly, by their agility and ability to adapt. That formula has enabled them to establish competitive positions in global markets, positions that are durable over time. For all these reasons, even while risks to the global outlook remain and impacts are difficult to assess, I'm confident that our region is well-positioned to continue performing strongly. With that, let's return to the fourth quarter and look at some of the highlights. Our return on equity was strong at 14.4% compared with 14.3% a year earlier. Earnings per share were EUR 0.34, up from EUR 0.32. Corporate lending grew by 8% year-on-year, and deposits were up 1%. Mortgage lending increased by 1%, and retail deposits were up 6%.
Assets under management increased by 13% to a record high of EUR 478 billion, partly driven by higher asset values. Net inflows were strong at EUR 6.5 billion. Total income was flat against the previous year. Net interest income continues to hold up well, supported by higher volumes and our deposit hedge. As expected, in the declining rate environment, it decreased by 5% year-on-year and by 1% quarter-on-quarter. Some of that due to the policy rate reductions in Sweden and Norway in Q3, which had a full quarter effect in Q4. Net fee and commission income was up 3%, with solid growth in savings fee income. Net fair value result was up 28% for the quarter. This was driven by higher customer activity and a stronger result in Treasury and our markets operations.
Costs decreased by 3% year-on-year, reflecting continued active cost management and stable strategic investment levels. Full- year operating expenses were EUR 5.4 billion, fully consistent with our guidance. The Q4 cost-to-income ratio was 46.2%, excluding regulatory fees. Operating profit increased by 3% year-on-year to EUR 1.5 billion. Our credit and asset quality remain very strong. Net loan losses and similar net result amounted to EUR 49 million or 5 basis points, once again well below Nordea's long-term expectation. Due to continued strong credit quality, we were able to reduce our management judgment buffer by a third of EUR 17 million in the quarter. Our strong capital generation continued, and our CET1 ratio was 15.7% at the end of the quarter. That puts us 1.9 percentage points above the current regulatory requirement.
Given our strong 2025 performance, our board of directors has proposed a dividend of EUR 0.96 per share for 2025, up from EUR 0.94 per share for 2024. Today, we have published our outlook for 2026, which is the first year of our new strategy period running to 2030. For the full year 2026, we expect a return on equity of greater than 15% and a cost-to-income ratio, excluding regulatory fees, of around 45%. Following our strong Q4, we were able to close our strategy period, having met or exceeded all our targets. Our initial return on equity target was greater than 13%. As the environment shifted, we lifted it to greater than 15% and ultimately achieved 15.5% in 2025. We delivered on our guided cost-to-income ratio, even with a significant step up in strategic investments, and maintained strong credit quality and capital generation.
All of this enabled strong shareholder distributions. Distributions over the four years exceeded EUR 17 billion. This clearly surpassed our initial expectation and was right in the middle of the updated target level. Let's now return to Q4, starting with a look at our main income lines. During the quarter, net interest income continued to hold up well in the lower interest rate environment. Our NII was supported by both higher business volumes and our deposit hedge. The deposit hedge contributed positively to our income year-on-year, increasing NII by EUR 99 million. As expected, the policy rate reductions affected deposit and equity margins. Our net interest margin for the quarter was 1.57%, quite stable following 1.59% last quarter. We saw an encouraging trend in business activity on the corporate side, with lending up 8% year-on-year. Mortgage lending also increased, but at a slower rate.
The 1% year-on-year increase was driven by Sweden and Norway, as housing market activity continued to slowly pick up. Retail deposits were up 6%, while corporate deposits were up 1%. Net fee and commission income was up 3% year-on-year, driven by savings and higher customer activity levels. The higher savings fee income was driven by higher assets under management, with positive net flows in all channels and higher asset values. The good momentum continued in our Nordic channels, with net inflows at EUR 4.8 billion, roughly equally split between retail funds, Private Banking, and Life & Pension. Net flows from international channels were EUR 1.7 billion, with positive net flows in both wholesale distribution and international institutions. Brokerage and advisory income was lower, resulting from lower debt capital market income.
The clear positive in the quarter was the very strong income growth from our secondary equities business. Net fair value result was strong in the quarter, increasing by 28% year-on-year. That increase was driven by higher customer activity in foreign exchange and interest rate hedging. We also benefited from good performance in treasury and market making. Cost decreased by 3% year-on-year, as planned and in line with our guidance. This reflected stable strategic investment levels and continued active cost management, including a reduction in the number of employees. During the quarter, we continued with our strategic investments in several areas, including technology, data, and AI. At the same time, we are driving operational efficiency and increased productivity. This is our continued focus, and it is leading to more efficient ways of working and a leaner organization.
For the full year, costs were EUR 5.4 billion, representing a modest 1% increase despite the inflationary pressures. The fourth quarter cost-to-income ratio was 46.2%, excluding regulatory fees, compared to 47.9% a year earlier. For the full year, it was 45%, and we are targeting to take this down to 40%-42% by 2030. Our credit quality continues to be very strong. Net loan losses and similar net result for Q4 was EUR 49 million or five basis points, well below our long-term expectation of approximately 10 basis points. The provisions in the quarter were driven by corporates with no industry concentration or specific trends. Due to continued strong credit quality, we reduced our management judgment buffer by a third to EUR 17 million, and it now stands at EUR 276 million. We continue to deliver strong capital generation and maintain our robust capital position.
At the end of the quarter, our CET1 ratio was 15.7%, 1.9 percentage points above the current regulatory requirement. We continued to deploy capital to support business growth, and we also continued to use share buybacks as a way to return excess capital to our shareholders, where we do not find profitable uses for it. During the quarter, we launched and completed a EUR 250 million share buyback program, our fourth of the year. After that, in December, we launched a new EUR 500 million program, which is expected to be completed by no later than the 8th of May. Given our strong 2025 performance, our board of directors will propose to shareholders at the AGM a dividend of EUR 0.96 per share for 2025, compared with EUR 0.94 per share for 2024.
Additionally, the board has proposed a distribution of the mid-year dividend in 2026, corresponding to approximately 50% of the net profit for the first half of 2026. Let's now turn to our business areas. In Personal Banking, we continued to deliver business volume growth, with customer activity again highest in savings and investments. Households continued to prioritize strengthening their financial positions, increasing their deposits by 5% year-over-year during the quarter. Many customers also increased their recurring savings amount, and they put more money into investment funds. Q4 net flows in our Nordic retail funds were strong at EUR 1.7 billion, up from EUR 0.7 billion we had in Q3. With lower interest rates supporting confidence, housing markets continued to improve gradually, but the pace remained muted. We increased our mortgage lending by 1% year-over-year.
In Sweden, we continued to grow our mortgage market share, capturing 27% of the market growth in the period from October to November, compared to a back book market share of 14%. Digital activity continued to grow, with app users and logins up 3% and 5% respectively. In our previous strategy period, we set a target to ensure all everyday banking needs could be met digitally by the end of 2025. We have now achieved this goal, and it has contributed to a stronger overall experience and a record high customer satisfaction level for Personal Banking. Net interest income decreased by 3%, driven by lower policy rates. The lower interest income was partly offset by continued net fee and commission momentum, especially in savings, payments, and cards. Return on allocated equity with amortized resolution fees was 15%. The cost-to-income ratio was 51%, improving from 53%.
In Business Banking, we performed well, driving strong volume growth with the support of our strong digital offering. Nordic SMEs continued to adapt well to the operating environment, with stable interest rates supporting higher demand for lending. I'm quite pleased with the increased business activity. Lending volumes increased by 6% year-over-year, led by Sweden, but with growth across all Nordic countries. Deposits were up 5%. During the quarter, we improved customer experience by simplifying onboarding and introducing a new digital tool to enable customers to get started faster. We want to be the leading digital bank for SMEs, and a big part of that effort has involved making sure our customers' everyday banking needs are met by our digital offering. In 2022, around 40% of our customers' daily banking needs were covered by self-service functionalities.
By the end of 2025, we stood at 80% in line with our target. Total income for Q3 was down 3% year-on-year, with higher volumes and higher net fee and commission income partly offsetting lower deposit income. Return on allocated equity with amortized resolution fees was 15%. The cost-to-income ratio was 45%. In Large Corporates & Institutions, we had a strong quarter, driving double-digit lending growth and higher overall income. Lending volumes were up 10% year-on-year, with particularly strong growth, 20% in Sweden. Deposit volumes decreased by 3% year-on-year. We interpret lower deposit volumes as a sign of increased risk appetite and greater willingness to invest. Debt capital markets activity remained high, if a little lower than in previous quarters, helping us maintain our leading positions for Nordic bonds and Nordic loans overall in 2025.
During the quarter, we arranged close to 140 transactions for a broad range of issuers. That brought the total for the full year to over 600. Our secondary equities business performed strongly, and income grew by 26% year-on-year. Nordea Markets delivered strong results driven by solid trading performance and increased client activity compared with a year ago. Total income was up 4% year-on-year, mainly driven by higher ancillary income. Net fee and commission income increased by 10%, driven by equities, asset management products, and lending fee income. Return on allocated equity was 15%. The cost-to-income ratio improved from 42%-40%. In Asset & Wealth Management , we drove further strong momentum with growth in all our Nordic channels and strong investment performance. Net inflows in our Nordic channels were EUR 4.8 billion, with Private Banking contributing EUR 1.6 billion of that.
In Private Banking, we finished the year as we began, with solid momentum and customer acquisition and high levels of customer activity. Overall, customer satisfaction remained at a record high level. In our international channels, we had net flows of EUR 1.7 billion, which was an improvement quarter-over-quarter. About half of that was from international institutions and half from the wholesale distribution channel. Net flows in life and pension were EUR 1.3 billion. The performance was again strong across our four markets, and we further reinforced our position as a Nordic second-largest player. Gross written premiums in the quarter amounted to EUR 3.3 billion, up from EUR 3.1 billion a year ago. That took premiums for the full year to an all-time high of EUR 12.9 billion.
Assets under management increased by 13% year-on-year to EUR 478 billion, driven by market performance and the positive flows in all channels. Our Empower Europe Fund launched in June continued to attract interest during the quarter. It has now secured a net flow of more than EUR 500 million. The fund invests in Europe's energy independence, industrial revitalization, and defense. We also saw renewed strong interest in our sustainable investment approach. One of our new Beta Plus Funds launched in the summer is already the largest actively managed sustainable ETF in Europe. Total income was down 2% year-over-year, driven by lower net interest income. Net fee and commission income was down 1%, driven by customer preferences from lower risk and lower margin products. Return on allocated equity was 30%. The cost-to-income ratio was 48%.
All in all, this was a good quarter and a year of success for Nordea. We now have two very successful strategy periods behind us, and we are aiming high for our third. Looking across to 2030, our priorities are clear: to grow strongly in several attractive areas and drive faster than market income growth, to further strengthen our customer offering, and to unlock the full potential of our unique Nordic scale. Our Nordic scale is a key source of competitive advantage for Nordea. We have already realized a lot of scale benefits. However, most of the gains still lie ahead. In this next phase, we will take a decisive step to unlock these benefits across Nordea. The priorities and targets we have set are ambitious, and we are fully committed to achieving them.
We are targeting a return on equity of greater than 15% each year through to 2030 and significantly higher in 2030 itself. We are also targeting a cost-to-income ratio, excluding regulatory fees, of 40%-42% in 2030. We are at 45% today, and coming down to our target level will be a gradual process. Accordingly, we expect to deliver a return on equity of greater than 15% for the full year 2026 and expect a cost-to-income ratio, excluding regulatory fees, of around 45%. Rest assured that our plan will be executed with the same rigor and focus we have applied over the past two strategy periods. We do what we say. We look forward to building on our progress and realizing our ambition to become the undisputed best-performing financial services group in the Nordics. Thank you.
Operator, we're now ready to take the questions. As usual, please as a courtesy to others, could you please limit yourself to 2 questions max? Thank you.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Martin Ekstedt from Handelsbanken. Please go ahead.
Thank you and good morning. I wanted to first ask about the management judgment allowance. It decreased by only EUR 17 million this quarter against roughly EUR 50 million each over the previous 2 quarters, right? Additionally, only EUR 10 million of that decrease was an actual release.
So given I believe you've said at the CMD that you will either use or release the around EUR 300 million buffer that you had when entering 2026 with the course of this year, I just wanted to check, should we now see this smaller release in this quarter as meaning it's going to be more back-end loaded, the full release in the year 2026, or are you simply seeing a different credit risk environment currently causing you to take a more conservative stance overall? Thank you.
Yeah. Good morning, Martin, and thanks for the question. You shouldn't read anything different in terms of our intention on the release of the management judgment buffer. We did, as you point out, release more earlier in the year. Actually, Q3 saw quite a big release simply because of a different change in credit conditions, sort of macro-related.
But no, the portfolio continues to perform well. And as you see with the, again, a net release of collective over the period, generally, conditions are improving. So there's nothing to read into that. It's simply that we tweaked it in Q4. Our intent remains the same that over time we will either utilize or release. And as we've said so often in calls like this, but also in other fora, that the strength of the portfolio and also the strength of conditions in our home markets means it's harder and harder to hold onto it. So what we set out at Capital Markets Day remains the case.
Okay, but just to clarify, I think you said that over time you will either utilize or release, right? But I think at the CMD you said over 2026. Is that correct?
Yeah, so that's what we said at CMD. No change.
Okay, okay. Thank you. Then just secondly, if I could focus on M&A for a bit, I just wanted to see when we should expect to see some new acquisitions from you. And it is still the base case that you'll be turning your M&A machinery towards Sweden now, as you've said in the past, after your couple of deals in Norway, right? So the Danske PC Norway deal, I think it was announced in July 2023, i.e., was more than two years ago now. In the past, you said that you're aiming for roughly one deal per year, consuming, was it 25, 30 basis points of capital per deal? Does this also mean that we should see something larger, perhaps from you on the M&A front, given some time has passed now since the Danske PC Norway deal? Thank you.
Thank you for the question. Martin is Frank speaking. We would like to do M&A as long as it's accretive to our business and helpful for our shareholders. But then we need a target, an available target. You mentioned Sweden, and it's right that we have in the new strategy of ours, we have a special strategic focus on Sweden and Norway, but we want to grow in all four countries. So actually, we are, of course, interested in opportunities across the board as long as it fits well to our strategy. That's what we can say. And then these come when they come, and you need two to tango. And right now, we have really not much to say more than unchanged ambition, and we would like to use inorganic as a lever to grow Nordea as well.
Okay, so it's the availability of targets more than anything else.
But it's nothing to do with that.
You've now saved up some dry powder, perhaps.
Yeah, it's nothing to do with appetite. It's nothing to do with capital. It's nothing to do with us not having a clear view on where that we want to grow and who would we really like to team up with. It's basically about availability through.
Okay, understood. Thank you very much.
Welcome.
The next question comes from Gulnara Saitkulova from Morgan Stanley. Please go ahead.
Hi, good morning. Thank you for taking my questions. So the first question is on asset margins. At your CMD, you mentioned that you're not assuming any meaningful margin expansion. Is it reasonable to expect that asset margins will remain broadly stable in 2026? And how does your outlook on margins differs across your key geographies? Across the Nordic markets, where do you see the most margin pressure, and where do you believe margins can hold up or even improve?
Thanks, Gulnara. Good morning. So yes, our base case assumption was that we're not relying on margin expansion. Obviously, very happy to see that come back. But I guess conditions at the moment are, as we've seen throughout 2025, still very thin volumes in the mortgage market. And in those circumstances, we do see some of our competitors reducing pricing to try and chase business and things like that. So inevitably, that puts a bit of pressure on mortgage margins. Another feature we've seen, particularly in the second half of 2025, is we grew really, really strongly in corporate lending. And particularly in our LC&I business, where our lending is at very much the sort of blue chip end, it's been pretty competitive there.
So those two dynamics have made margin expansion pretty difficult to deliver. So we continue to assume that we won't see margin expansion. History has shown us that when conditions ease and when demand increases, as consumer confidence returns, we've seen an improvement in lending margins. And no reason not to expect that, but we do need to see that consumer sentiment improve and the market start moving again on the household side. I mean, in terms of just different markets, there really isn't anything to choose between the markets in terms of what we're seeing on margins, particularly. Our competitors are active in most of those markets, and where we're seeing them acting aggressively on margins, that's right across the board.
But we do, I suppose, have a good sort of, if we split between where things are growing a little bit better, Sweden and Norway, versus things being a little bit more flat from a market perspective in Finland and Denmark. So I think that watching Sweden and Norway from a margin perspective is important. But I don't know, Frank, whether you want to add anything to that sort of perspective.
No, I think you expressed it very well. So no further comments to that one.
Thank you. Another question on Sweden market share. So in Sweden, you have been gaining front book market share. Can you remind us what is driving your ability to stay competitive and grow the front book ahead of the back book? And what do you see as the key levers and competitive advantages that Nordea has in Sweden? Looking ahead, how do you plan to sustain that momentum and what are the targets that you are setting for the Swedish market? Thank you.
Thank you. So we are gaining market share, and that's across the board, I would say, in Sweden. As you know, we have had a special focus on Sweden and Norway for quite long, as we have relatively smaller market share than in Finland and Denmark. I think it's 7 years ago, we decided that now we want to grow Sweden on mortgages, and we want to grow slightly above our back book market share. I think we have done that probably each quarter for the last 6.5 years, something like that. So it's nothing new.
What is probably a little bit new is that we are growing quite much faster than the back book here this year. So 22-ish percentage points of the front book on the mortgage market is where, at least the last data I have, and that should compare with the back book of 14.03 something. So the momentum is strong, but it's nothing new. And yeah, mortgage is not rocket science. It's about getting many retailers about detail. So getting many things right, the customer interface, the digital tools, the self-service, getting the entire organization teamed up around what is it that we aim for, how do we do it, ensure that the value chain is effective, that we respond well, fast, and so on. And then you need to get the pricing right. So I would say we are slightly above average.
So we are not using the tool to buy. We try to position us price-wise where we should in the corridor, but a bit above the average. And that works very effectively. So I'm very happy with the progress the team has made. But that's not really anything new. And when it comes to the other businesses, they had actually very nice growth. So SMEs, within SMEs, we have grown above market for long and continue to do so. In LC&I, in Q4, we had a growth within lending of 20%, quarter-on- quarter— Q4 or Q4 last year or 2024. So it's just, and then corporate banking, by the way, is on fire as well. So we are just in good shape, and the momentum is great. I don't know if that answered your question, but that's probably the most I can say.
Thank you very much.
The next question comes from Magnus Andersson from ABG. Please go ahead.
Yes, hi, it's Magnus Andersson from ABG. You haven't bought us yet, as far as I know. Just beginning with a specific one, NII in Norway in Personal Banking was down 11% quarter-over-quarter in local currencies. If you could please shed some light on that and also related to that comment on the competitive situation in Norway, I think we're getting quite negative signals. Secondly, just on your cost income ratio target, if you could say something about what kind of headcount outlook you have for 2026 and related to costs, anything on the restructuring charge you're supposed to book this year. Thanks.
All right, thank you, Magnus. Ian, should I start with the competitive situation, and then you take all the difficult stuff on the details? Yes.
Thank you. So Magnus, I think Norway is a very competitive country, and that has almost always been the case. But it's just sometimes it goes even further. Right now, there is a very intense competition, and that goes across the board. I think we're doing very well, honestly. But there is a consolidation going on now in the Norwegian market, where the savings banks are becoming fewer and bigger. And then we have the two last players, DNB and us, basically taking the rest. And then you have a lot of boutiques, especially within wealth and investment banking. So it is a very competitive market, but it is also a very interesting market as it's growing. And as we know, the economy in the country is super strong due to the stronger oil foundation. We're well-positioned. We grow across the board. Wealth looks really good. SME, really good.
Personal Banking looks good on lending and really good on doing more business with the current customers, ours, which has been a strategic initiative, basically dress up the customers and cover much more of the needs than just lending. That goes very well. They're doing a great job over there. Then we have Large Corporates & Institutions doing a great job, but it's a tough competition for sure. That also explains a little bit why the lending is down. It is, remember, in Norway, we have our shipping portfolio for the group, and shipping has been consolidating itself heavily, which has impacted. Then it's a very dollar-based business, which, of course, also impacts as the dollar has weakened. I would say, in general, we are very well-positioned, I would say.
But Ian, do you have anything to add to this more like the strategic assessment or the market assessment before you go into the details?
No, I think you've captured it, Frank. So morning, Magnus. So in terms of the detail, yeah, we did see a step- down in net interest income in PEB Norway in the quarter. I guess a few things going on in there. I mean, the rate cut in September further reduced deposit margins, and we saw a full- quarter impact of that in Q4. And then we've also seen, I guess, in response to the rate cuts, which have been a little longer coming in Norway, a lot of customers have been actively renegotiating mortgage rates.
That really started with the first rate cut, and we saw the full effect come through together with a little bit of impact of the September cut in Q4 because we have the usual sort of two-month lag. And then we only got a partial offset from NIBOR because three-month NIBOR didn't move to the same extent. So just a bit of margin pressure in Norway that I think will be felt across the market. I'd be surprised if we didn't see the same things in our competitors there. But look, as Frank says, firing on full cylinders in Norway and really, really pleased with both what we're doing and being able to provide customers with other products and also working with our new customer base that came across from Danske. So I guess those are the moving parts in Norway. In terms of cost, that kind of thing.
So yes, we did, I guess, through good sort of active management, see the headcount come down during 2025. And as we see us continue to implement our Nordic scale initiative with process improvements, consistency, and indeed, as we start to see some of the early impacts of AI, we would expect to see FTE continue to come down. So I think that trend is set to continue. And then in terms of restructuring, no news to report there. We're still going through our necessary processes, consultation, and other things like that. So I guess to repeat what we said at Capital Markets Day, we don't expect it to be material on a full-year basis, certainly lower than the provision we took back in 2019. And we would expect to book that in full in 2026.
But I guess my advice for now is, because I know some people have made a bit of a guess of what it could be, is I'd say leave it out of estimates for now. We intend to treat it separately from our regular performance KPIs. And when we give our detail, we can talk through it fully then.
Yep. Okay. Thank you very much.
Thank you.
The next question comes from Andreas Håkansson from SEB. Please go ahead.
Morning, everyone. So let's start with a quick one, I think. It's following up basically on Magnus's questions on costs. I mean, the 45% cost-income ratio is all good. Could you just help us a bit? You talked about the 2% cost category over time, but it might be a little bit forward-loaded or front-loaded. So should we think about a 3% cost growth to reach that 45% cost-income?
So, morning, Andreas. I mean, I think the sort of broad consensus is in not a bad place. Somewhere between 2 and 3, I guess. The things people should bear in mind when thinking about cost for the year, first of all, do exclude restructuring from that. And then the other is that regulatory fees make a bit of an impact on cost growth. I mean, we've seen really good growth in deposits over the year. Our expectation is that might feed through into slightly higher resolution fee for this year, but we don't have any information on that yet. But otherwise, broadly speaking, I think estimates for cost growth for next year are broadly in the right place.
That's helpful. Thanks. And then a bit country by country for me as well. And we covered NII in Norway, but can we just talk a little bit about asset quality in Finland? I mean, retail, I think it was 20 bps, which is some level where I haven't seen a retail banking for some time in the region and a Business Banking 35. So that's on that side. And then on the large corporate side, we saw quite an increase in impaired loans in large corporate in Sweden and Denmark, which was also, I thought, surprising. So could you tell us a bit about what's happening in those markets and in those areas, please?
Yeah. So I mean, in terms of the large corporates first, these things are all relative, right? There is a fairly sort of low level of impaired assets across the book.
And so where you see a particular situation arise, that can have a sort of magnified short-term impact on the metrics. So there's nothing untoward or systemic going on with those movements that you've seen in Sweden and Denmark. In Finland, on both our SME book and on the retail side, we've got a slightly broader-based book, a bit more consumer finance in there as a proportion than you see elsewhere in our business. And that tends to mean we have a slightly heavier burden in Finland from credit charges. And then we always have a bit of a, I guess, a catch-up on write-off of impaireds and other things towards the end of the year. So again, I wouldn't want you to take anything by concern from that, but we do have a slightly different shape of the book in Finland compared to other countries.
Okay, fair enough. And then just on the countries as well, if we think about net interest income outlook for 2026, I mean, ECB/Denmark hasn't cut since June, and Sweden cut in September. And Norway, we at least believe they will continue to cut a bit further. And with the competitive pressure you talk about, should we see that the NII in Sweden, Finland, and Denmark is stabilizing relatively soon and it will continue to go down in Norway, is that the best way of looking at things?
I think that's a good summary, Andreas. Our expectation, as you say, is for rate stability or sort of rate flat in all countries apart from Norway, and then 1 or possibly 2 cuts in Norway. So exactly as you set out. And what that does is provide a little bit of stability. Into Q1, we've got a lower day count.
So arithmetically, that means that we'd see slightly lower net interest income for the group in Q1 this year than the quarter just passed. And then from there, provided that rate picture plays out as both you and I have described, then it's about volumes and some impact from margins. And so we're confident that we'll be able to grow as the market grows. And so Q1, probably the trough for NII on a quarterly basis. And then with rate stability, volumes should help drive from there.
Thanks very much.
The next question comes from Namita Samtani from Barclays. Please go ahead.
Morning, and thank you for taking my question. I just had one. The margin on the asset management business, if I just simply take the asset management revenues divided by the average AUM in 2025, it was around 42 basis points versus 47-48 basis points in 2022-2024. So I was just wondering why you think that's the case, as flows have been in the higher- margin businesses like Private Banking. And how do you think your asset management franchise stacks up versus peers? Thank you.
Good morning, Namita. And thanks for the question. So yeah, we've talked throughout the year of some of those margin dynamics in asset management and also what we've been able to achieve in terms of flows. So I think to start with, really pleased with the flows, EUR 4.8 billion in our Nordic channels in Q4 and then EUR 1.7 billion in international.
So I think that continued sort of good performance in flows that we saw in Q4 is really encouraging. There's two things playing into your arithmetic there on what's happening with margins. The first is, yes, we have seen a bit of a sort of move in preference in the market towards lower margin product. There continues to be plenty of pressure and competition from passive versus active. Our own response to that has been to, I guess, plan for it and understand that that's what's happening and to respond with new product launches and others. And as we said in our report today, some of our sort of beta plus products that have a bit of active within them, but also designed to compete with that passive threat, they've performed really well in terms of attracting new money.
So a bit of overall margin pressure that we see right across the industry. And then something that we saw quite specifically in 2025 is a bit of a preference amongst our customers for lower risk, but then also lower margin products. So if we look at our life and pensions business, for example, a strong customer preference for our fixed income products, which we're really good at. So there's a margin and a mix impact going on in there that has driven the effect that you've seen. We're really proud of our asset management business. It's performance, it's range of products, it's customer preference, all of those kinds of things. So in terms of your question of how we think it stacks up, I think we're in good shape.
We recognize that it's a very competitive world out there, and the best response to that is to have the best products and the best performance. And we think we stack up pretty well there.
That's helpful. Thanks very much.
And operator, I think we have time for one more question. Thanks.
The next question comes from Nicolas McBeath from DNB Carnegie. Please go ahead.
Hi, and thanks for the last question. So I had a question on the cost income outlook for 2026. So you're expecting 45%, which is flat from 2025. While at the CMD, you talked about fall in cost income every year until 2030. So has anything made you a bit more cautious about the near-term cost income trends? Yeah, so that's my question.
Should I take it Ian? Hi, Nicolas, it's Frank speaking. Our ambition has not changed. What we are saying is around 45. Of course, we are just recognizing that there is a lot of uncertainty, and exactly how the year will play out, we need to be a little bit humble about. But there's nothing negative that has happened, and our aspirations are not different to what they have been previously. We'll just try to reflect the start of the year, and what is happening in the world, of course, can impact the momentum. But let's see. Don't put too much in that. Ian, I don't know, have you anything that you want to add to this specific question?
No, I think you covered it, Frank.
All right. Thank you.
All right. Thank you. Do I have room for another question, or do you have to wrap up?
Yeah, you have it. An extra one is fine. You did only one, so that's fine. So please go ahead.
Okay. Thank you. So then, if I may ask also, what explains the strong growth and increase in market share that we see in the large corporate segment in Sweden and Finland? Are you competing with lower margins, taking up the risk appetite, or what is the recipe here? Any particular segments that account for much of the growth we're seeing here?
So the risk appetite, no. So we are not changing our risk appetite. We have been there for so many years. So we do know that these things you shouldn't do, that's dangerous. Some will do, some are doing it, but we are not. But of course, it's a very competitive market, for sure. So you would like higher margins, but the market is as it is right now.
So then it's about getting more of the customer's business, which we are. Sweden is simply we have changed a bit in the organization, leadership, and also gotten agreed on the ambition level. And it's very visible, honestly. They are super ambitious, they're active, they are passionate, they're leaning in. And that's what you see in the quarter. Then we cannot deliver 20% increase year-over-year for all years, but at least we can take a fair share of the market. So that's one. And the other one was about Finland. No, I think it's just about Finland has been a bit quiet, and we want Finland to be less quiet in LC&I. And I think that what we see now is a response to that. So no magic, it's just hard work, staying close to our customers and being on the beat.
Any particular segments?
Within LC&I?
Yes.
No, I think now we are broad. But of course, yeah, we are broad. I will say we are broadly focused. So there will always be in each country, there is always an industry composition that you have to understand, and you will be exposed to these industries then. But nothing really here that sticks out, I would say, not to my information at least.
All right. Thank you very much.
A pleasure. Thank you so much.
So Ian, before we close, is there anything you would like to highlight before we close the call? Anything we have not talked about or anything that you want to say?
I think we covered most of the key things, Frank. Maybe just a quick recap of the dynamics that we see going into 2026.
So I talked about we expect NII to come down quarter-on-quarter into Q1, mainly because of lower day count. And if we get that sort of fairly stable rate picture that we've been talking about, then I think Q1 2026 should be the quarterly trough. And after that, NII should grow in line with volumes and margin developments. And I think, again, with stable rates, a fairly stable contribution from the deposit hedge. I think as we look at the full year for 2026 on NII, kind of expectations at the moment because of what we're seeing with margins and other things is maybe flat or slightly down for the full year. And I guess consensus is maybe a little bit on the high side there. But so that's NII. The fees and commissions, we ended the year quite strongly.
We'd like to see those activity levels sustained, and confidence is going to be key there with everything that's going on in the world. So I think 2026, all being well in terms of activity levels, I guess we expect NFCI to increase. But estimating the pace of growth is probably a bit difficult at the moment. And then just a watch out for Q1. Q4 had annual and semi-annual fees of around EUR 26 million that won't be repeated in Q1. And so that was sort of lower day count. Probably says that quarter-on-quarter, we might see NFCI a little bit down. But look, I think a positive outlook for the year. And lastly, on costs, as I said, one of the questions, I think broadly speaking, expectations for the full year in a decent place.
For Q1, we might see a slightly higher resolution fee than the EUR 35 million we took last year. We book all of that in Q1, obviously. So makes it a slightly higher- cost quarter than the average. Then we covered restructuring. As I said, I suggest people leave it out of estimates for now. We'll get back to you when we have something to report. We'll exclude it from our KPIs for the year. As a guidance on size, just repeating what we said at Capital Markets Day, lower than the provision that we took in 2019. So I think we've covered the key topics, Frank. I'll hand back to you.
Great. Thank you so much. To all, thank you so much for participating. We're here for you. If you have any questions, please revert. But else, thank you for today.