Good morning, and welcome to Nordea's first quarter 2026 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 ah ead.
Good mo rning. Today, we have published our results for the first quarter of 2026. It has been an unsettled start to the year once again. The conflict in the Middle East that escalated in March has created further geopolitical uncertainty and is driving volatility in the financial markets. It also has implications for short-term energy supply and inflation. Sustained disruption to global energy markets may dampen economic activity, including in the Nordic countries. While the situation continues to evolve, it's something we are monitoring closely. Fortunately, the Nordic countries have a strong track record in navigating uncertainty. The stability, fiscal strength, and global competitiveness of our home markets make them some of the world's best places to live and do business. This is something I have talked about a lot in recent quarters.
It is, in addition, worth noting that our region is also structurally well-positioned in terms of energy resilience. This is due to its substantial renewable capacity and Norway's role as a major energy exporter. We clearly saw the benefits of that stability during the last energy crisis in 2022. As for Nordea itself, we are uniquely diversified across these attractive Nordic markets. Years of relentless strategy execution have made us stronger and more resilient than ever and leave us very well placed to support customers. That strength showed again in our first quarter performance, with solid growth in business volumes and high profitability. Return on Equity for Q1 was 15.4%. The implementation of our 2030 strategy has started well. One of our key strategic priorities is growth, and here our agenda is focused on six distinct growth areas.
We are seeing good early momentum in Private Banking, Life & Pensions, small businesses, and cross-sales. We are also encouraged by the steady progress we are making in Sweden and Norway. Our two other strategic priorities are to strengthen our customer offering and make more effective use of our Nordic scale. Execution on these is likewise off to a good start. During the quarter, we launched a unified Nordic corporate credit and lending platform. We also took further steps in our deployment of a more scalable and resilient payments platform, all part of our drive to enable outstanding customer experiences and superior efficiency. Let's now take a look at the first quarter and some of the financial highlights. Our Return on Equity was strong at 15.4%. Earnings per share were EUR 0.36, up from EUR 0.35.
We were especially active in our corporate customers, with our corporate customers increasing lending by 11%. Corporate deposits went up 2%. Households were active too, though to a lesser extent. Mortgage lending was up 2% and retail deposits were up 5%. Assets under management increased by 9% to EUR 464 billion. Net Fee and Commission Income was strong, up 6%, driven by growth across fee types. Net Fair Value Result was down due to lower market making income. That followed the sharp increase in interest rate expectations during March as the Middle East conflict intensified, which led to exceptional losses across certain desks. Total income was resilient, with a 2% decrease primarily reflecting lower Net Interest Income due to policy rate reductions and lower market making income. We continue to manage cost with discipline. First quarter operating expenses were flat before foreign exchange effects. Our credit quality remains very strong.
This quarter, we fully deployed the remaining portion of the management judgment buffer we created during the COVID-19 pandemic. We reallocated EUR 160 million to further strengthen our model provisions, and we released the remaining balance of EUR 160 million, which was deemed surplus provisioning. Excluding the release, net loan losses and similar net result for the quarter totaled EUR 61 million or six basis points. Our strong capital generation continued, and our CET1 ratio was 15.7% at the end of the quarter, which is 1.9 percentage points above the current regulatory requirement. With the solid start to the year, and despite the increase in uncertainty in the latter part of the quarter, our full year 2026 outlook is unchanged. We expect a return on equity of greater than 15% and a cost-to-income ratio of around 45%.
Our Q1 Net Interest Income was lower as expected, reflecting the policy rate reductions and lower lending margins. Importantly, we moved beyond the low point in daily NII and returned to growth during the first quarter. This was supported by both higher business volumes and our deposit hedge. Among corporates, we increased lending by 11% year-on-year with all countries contributing. This was the first time we have had double-digit year-on-year growth in any quarter since 2022, and it underlines how Nordic businesses are very adaptable to the changing environment and are showing willingness to invest. Corporate deposits were up 2%. That's modest growth, which we likewise interpret as a sign of increased risk appetite. Household customers also increased their activity with mortgage volumes up 2% from still muted levels. The housing market is picking up, though only gradually.
As in previous quarters, households have been more focused on strengthening their savings and investments. Retail deposits were up 5%. The deposit hedge, meanwhile, continued to provide support to our income year-on-year, improving NII by EUR 55 million. Our net interest margin for the quarter was 1.57%, unchanged from Q4. Net fee and commission income was up 6% year-on-year, driven by growth across different fee types. The higher savings fee income was driven by the higher average assets under management and the positive net flows in investment products of EUR 1 billion, even with nearly EUR 2 billion of outflow related to dividend payments. In our Nordic channels, we continued to see very good customer intake in private banking with solid net flows. In our international channels, we delivered positive net flows again despite increased investor caution.
Brokerage and advisory fee income increased, supported by stronger Debt Capital Markets activity and strong income growth 11% from our secondary equities business. Higher customer activity also drove growth in payment and lending fee income, and we were particularly pleased to have driven good performance in the strategically important cash management area. After a strong start to the quarter, March brought extremely volatile market conditions, driven in particular by the developments in the Middle East. The resulting sharp increase in interest rate expectations resulted in losses in our market making operations in March, undoing the strong start to the year. Consequently, Net Fair Value Results was down 22% year-on-year, reflecting the impact from those March market making losses, which we consider to be an isolated one-off. Customer activity was strong through most of the quarter, particularly in FX and interest rate hedging, as clients actively managed risk.
Activity in equities and securities financing also held up well. Cost development in line with our plan, and we're flat year-on-year, excluding foreign exchange effects. Our strategic investment spend was stable, and we are managing costs with our usual disciplined approach, taking the market environment into account. Including FX, costs were up 2% year-on-year. The first quarter cost-income ratio was 45.5%, which was slightly higher than planned due to the exceptional market making losses in March. The underlying cost-income ratio was below 45%, and there is no change in our guidance that we expect to be around 45% for the full year. During Q1, as part of our 2030 strategy, we announced restructuring initiatives to change the composition of our workforce. With our Nordic scale and with the impact of AI and process optimization, we expect to have fewer employees in the future than today.
The restructuring initiatives are set to affect around 1,500 employees across the group during 2026 and 2027, and from 2028 should deliver annual cost reductions of at least EUR 150 million. This is a part of our 2030 strategy and is in line with the target we communicated at our Capital Markets Day to deliver structural gross cost reductions of EUR 600 million by 2030. In connection with these initiatives, we booked restructuring costs amounting to EUR 190 million this quarter. It has been reported as an item affecting comparability and is excluded from our 2026 financial outlook. Our credit quality continues to be very strong. This quarter, we fully deployed the remaining portion of the management judgment buffer we established six years ago during the COVID-19 pandemic.
All this period, the buffer has been continuously assessed in light of the macroeconomic conditions, and in the knowledge that our loan portfolio performance has been consistently strong. Risk has been assessed to be largely reflected in our modeled provisions without the need for additional management overlays. As a result, the buffer has been gradually reduced and is now fully deployed. On the remaining balance, we reallocated EUR 160 million in the quarter to further strengthen our modeled provisions, while EUR 160 million was deemed surplus and was released. Consequently, net loan losses and similar net results amounted to a reversal of EUR 99 million. Excluding the release, net loan losses and similar net results for the quarter totaled EUR 61 million, or six basis points. We continue to have a strong capital position. At the end of the quarter, our CET1 ratio was 15.7%, 1.9 percentage points above the current regulatory requirement.
Our strong capital position and continued robust capital generation support lending growth and continued shareholder distribution. During the quarter, our AGM approved a dividend of EUR 0.96 per share for 2025, which was paid to shareholders in early April. Additionally, the AGM granted the board authorization to decide on the distribution of a mid-year divi dend in 2026, which would correspond to approximately 50% of the net profit for the first half of 2026. Turning to our business areas and starting with Personal Banking, where we maintained solid business volume, momentum, and customer activity. Despite the market volatility, customer savings and investments activity remained at high levels, and households prioritized strengthening their financial positions. As a result, deposits increased by 5% during the quarter. Net flows were EUR 0.2 billion, still positive despite the market turbulence, though lower than in the previous quarters.
Housing market activity continues to gradually pick up, but remains slow. Even in this environment, we increased mortgage lending by 2% year-over-year. In Sweden, we further strengthened our position in the quarter, capturing mortgage market growth well above our own back book market share. Customer engagement with our digital services continued to increase, supported by our expanded offering of self-service features in our mobile app and online. App users and logins were up 4% and 6% year-over-year. We are also seeing a growing share of savings and investment activity through digital channels. One of the areas we are targeting for growth is cross-sales, and we are seeing good traction supported by successful product launches in savings and by more automated processes for account opening and onboarding.
Net Fee and Commission Income increased by 6%, driven by higher payment, card, and savings income, and net insurance results increased by 46%. Total income decreased by 5% year-over-year, driven by lower net interest income in the lower policy rate environment. Return on allocated equity with amortized resolution fees was 16% and the cost-to-income ratio was 53%. In Asset & Wealth Management, we maintained solid business momentum and delivered a resilient investment performance in difficult markets. Customer acquisition remained strong, reaching record highs in both Denmark and Finland, and supporting net flows of EUR 1 billion in Private Banking. In our international channels, we recorded positive net flows again in the first quarter, despite increased investor caution due to the Middle East conflict.
The wholesale distribution business has shown resilience since the middle of 2025, and positive flows in the current environment testify to the attractiveness of our product offering. Net flows in life and pension were EUR 1.7 billion. We maintained good momentum across our four markets and further reinforced our position as the second largest player in the Nordics. Gross written premiums in the quarter amount to EUR 4 billion, up from EUR 3.7 billion a year ago. Assets under management increased by 10% year-on-year to EUR 185 billion. This was driven by market performance and the positive flows, despite the sharp decrease in investor confidence in March. We continue to progress with our strategic ambition to offer an outstanding savings and investment experience across the region. Among other enhancements made in Q1, we are now using AI to provide timely and relevant information to our customers about the investments they hold.
Total income was up 1% year-on-year, with net fee and commission income rising in line with the higher assets under management. Return on allocated equity with amortized resolution fees was 38%. The cost-to-income ratio improved by one percentage point to 43%. In Business Banking, we maintain good business momentum and grow strong volume growth. Lending volumes increased by 8% in local currencies year-on-year, led by continued growth in Sweden and Norway and stronger activity in Denmark. Deposit volumes also grew by 8%, with all markets contributing. We continue to strengthen our digital offering across the Nordics, a key enabler of our growth ambition in the small business segment. During Q1, we launched a digital onboarding platform in Denmark and Norway, making it faster and easier for customers to get started with Nordea. A wider Nordics expansion is planned for the coming quarters.
We also kicked off the Nordic rollout of our new business insight service, which helps small businesses manage liquidity and cash flows more effectively. In Sweden, this was fully launched in Q1. The launch was well received, and the service will next be rolled out in Finland, eventually to all countries. Total income was unchanged year-on-year, as higher volumes and ancillary income were offset by lower deposit income. Return on allocated equity was 18%. The cost-to-income ratio was 45%. In Large Corporates & Institutions, we drove strong business volumes as we supported our customers in the volatile market environment. It was a solid quarter on most income lines, but extreme market volatility in March negatively impacted our market making result, driven by the unexpected sharp increase in interest rate expectations.
That impact, which we consider to be an isolated one-off, led to a lower net result from items at fair value year-over-year, even though customer activity in advisory and risk management was otherwise strong. Lending was up 14% year-over-year, with all markets contributing. Strong demand from our secondary equities offering and higher lending fees and bond issuance activity supported a 14% increase in net fee and commission income. Deposit volumes decreased by 5% year-over-year, but increased by 2% compared with the previous quarter. Debt capital markets activity remained high despite the market volatility, and we maintained our number one position for Nordic bonds and Nordic loans year to date. We have arranged more than 190 debt capital markets transactions so far this year, so off to a strong start.
Primary equity market activity remained subdued, but our secondary equities business grew by 11% year-on-year. Total income was down 9% year-on-year, driven by lower net interest income and the decrease in Net Fair Value Result. Return on allocated equity was 15%. The cost-to-income ratio was 41%. In summary, this was a solid start to the year, despite challenging financial markets later in the quarter. While there is uncertainty around global growth, confidence among Nordic businesses has not wavered, underlining the resilience of our region. Resilience is a critical asset and one that Nordea also demonstrates. As a large and well-established group, we are continually investing in capabilities that makes us even stronger, including in digital services, technology, security, and risk management.
We are also very well equipped to support customers and all stakeholders, thanks to our unique market position and presence, leading offering, and strong balance sheet. The higher business volumes in both lending and deposits are likewise encouraging and will support our income. Our outlook for the full year 2026 is unchanged. We expect to deliver a Return on Equity of greater than 15% and expect our cost-to-income ratio to be around 45%. Our vision is to become the undisputed best performing financial services group in the Nordics. Thank you.
Operator, we're now ready to take que stions.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Gulnara Saitkulova from Morgan Stanley. Please go ahead.
Hi, good morning, and thank you for taking my questions. On NII, as if we assume that Q1 marks the trough for NII, could you walk us through how do you expect the trajectory to evolve from here, particularly in a scenario where the rate hikes materialize and the key drivers between the hedge contribution pricing and the volume growth? That's the first que stion.
Morning, Gulnara, and thank you for the question. Let's set aside potential rate hikes for the moment. What's driven, I guess, the moving on from the trough in NII is that we've been able to add volumes. How we proceed from here for the rest of the year is really a question of volume development and margins. We're pretty confident that we'll continue to add volumes over the course of the year, and that's going to help move NII forward. Margins are a bit more difficult. We continue to see pressure on the margin side, particularly on household. As we've said consistently, a return to confidence that drives higher volumes is most likely the answer to that. We're pretty constructive on NII continuing to improve. I think the outlook for the full year is kind of in line, maybe slightly better than 2025.
Now, rate hikes. First of all, they've got to happen. We need to see policy rates actually move before we see that impact our NII. Let's see if that happens. Our latest market expectations are that these are going to impact the second half of the year rather than anything in Q2. Then in terms of hedge, we'll work that through in terms of the timing and extent of rate hikes, not expecting to see anything dramatic in terms of impact in 2026. Overall, provided we don't see something untoward on the margin side, you can expect to see a gradual improvement in our NII.
Thank you. A related question on the volumes. As we move through Q1 into Q2, have you observed any meaningful changes in the customer sentiment, particularly in the light of the geopolitical tensions in the Middle East? Given the current backdrop, how are you thinking about the loan and deposit growth across your markets into 2026?
Hi, this is Frank speaking. I think our customers in the Nordics and across the countries, they have acted quite calmly, pushed through their deals. They have been active. There might have been a couple of weeks where it was a bit surrealistic what happened and how the rate changes and so how dramatic it went. There has been no change in behavior. I would say that now we're talking about, of course, the first quarter, but the end of the quarter and the beginning of Q2 has showed good activity.
I think we have, and we have been speaking about it quite some long time, that there comes a point of time where you just have to accept as a business leader that we are living in times where we will have to cope with a lot of volatility and uncertainty and unpredictability, but we cannot continue waiting for the perfect moment. We have to push now for growth, our investments in different strategic parts and whatnot. I think that's what you see now. Of course, we are not forecasting 11% growth year-on-year on corporates the rest of the year, but there's no indications that it will slow down significantly right now. Anyth ing-
Thank you very much.
Good. Thank you.
The next question comes from Magnus Andersson from ABGSC. Please go ahead.
Yes. Hi, and good morning. Just to follow up there on the, I think the corporate lending growth is what is striking all of us. In Business Banking, adjusted for currencies, you grow by more quarter-on-quarter than the market is growing year-on-year. On the Large Corporates side, I guess the numbers there are actually not adjusted for FX, but still, Sweden is super strong. Could you say anything about sustainability of these growth rates on a quarterly basis? Also, you mentioned the new onboarding platform. It is Norway and Sweden growing, which you talked about at the CMD, and just the quarterly trajectory looks quite stunning. My second question is just on capital and share buybacks. You didn't launch a new program now.
Is it because the previous program, which was just finalized, was expected to run until the 8th of May, and therefore we will have to wait until mid-May before potentially you launch another program? Thanks.
Thank you, Magnus. Let me take the first one and then Ian, the second one. Of course, the growth rates of 11% within corporates is a high number and I don't want to commit to that number each quarter going forward. Let me say it in the following way. When growth is higher than expected and when we have lots of credits, I get an overview on who they are and what is the purpose.
Yeah.
It looks very stable, honestly. It's super strong names. It's customers that we have been working with for a long time. It can be, you're just waiting for the opportunity to enter, or we have agreed about doing something more together. There's not really any silver bullet or any single deal that has pushed it very high. That's one. Your second one, which is very positive, is that in the more broad-based Business Banking, it's actually three out of four countries that are growing quite significantly. It's a lot of different deals. I think what we do see now as well is that we start to see some of the proof points of our Nordic scale. We have implemented, as you allude to, the credit platform. We are making progress on our global payment platforms as well.
These initiatives help in the speed, for example, on onboarding. Onboarding for the customers, especially the smaller ones on the corporate side, is super important. That is helpful. We actually also have a data point we have not talked much about, but we have a data point on our small businesses. We have for years struggled with some outflow. Last year we turned it, and this year is actually increased quite nicely. I think the momentum is good. There's no silver bullet. 11% is a high number, so don't put 11% in year-on-year or quarter-on-quarter all the time, but I cannot see why we should not continue to show nice growth within the co rporate side this year with the information we have right now. Thank you. Ian.
You're not feeling that you're sacrificing anything in terms of margins to achieve this growth?
I think that we are well positioned to continue to delivering greater than 15% return, and that goes for the corporate business as well. We are not accepting any deviation to our return targets. Of course, the business knows that. I guess I'm answering.
Yep
I'm happy with what I see right now.
Okay.
Yeah.
Great to hear.
Good morning, Magnus. It's Ian here. You're all familiar with how we think about buybacks, and there's absolutely no change. As I look at the market expectations for 2026 in terms of buybacks, it looks like a pretty sensible estimate versus how we're thinking about it. No interruption to the progress there. You're right, the EUR 500 million program we launched before Christmas, which is we hand over the control of that to the broker in terms of levels of execution and things, finished a little earlier than planned. Q1 was an interesting quarter from a capital perspective. As you see from our disclosures, we generated capital as normal, as you would expect Nordea to do. Quite a lot of that was deployed into growth.
We saw a little bit of elevated market risk capital requirements, as you can imagine, emerging from what happened in March. One of the first times where we've seen those dynamics where we've deployed the capital generated into growth. We're still really comfortable with our plans for the rest of the year in terms of capital return to shareholders, and I say, I think the market's got that right. We still see opportunities for growth out there. We'll work through Q2 and make our decision on the right time to do another buyback. That's really when we've got excess capital that we're prepared to trim. Things proceeding as normal. Don't expect anything in the very short term. You can expect us to continue with our regular consistent buybacks during the rest of 2026.
Okay. Thank you very much.
The next question comes from Andreas Håkansson from SEB. Please go ahead.
Thank you, and good morning, everyone. Well, I really want to talk about capital, but since Magnus covered that, we could move on. I think it's quite refreshing that we are talking about growth rather than just capital distribution. Ian, you mentioned that retail is still a bit tough on the margin side. Could you quickly, because in Q4, we're a bit worried about NII in Norway, and then we're a bit worried about retail asset quality in Finland. Could you just briefly go through the four countries where you see in terms of volumes, marg ins, and asset quality in each of the countries, please?
Good morning, Andreas. Let me start with asset quality, take that one off the table. No issues or concerns there at all. We can set that aside.
I think the growth picture, in each of our markets is, as always, a little bit different. We still, as you see from the publicly available information, we're still the market leader in Sweden, in terms of capturing front book share. In our other countries, things are a little bit slow. We do see underlying growth in Norway, particularly towards the end of the quarter. This is really a function of the market and its slowness. Frank referred earlier in the conversation to the still reticent consumer, I guess. Our economists certainly had high hopes towards the end of last year that consumer confidence would increase and that would lead to higher investment and consumption. We've had an unsettling end to the first quarter that I think holds that back a little bit.
In terms of what we're seeing on margins, still intense competition for those smaller volumes throughout. We're having to be very much on our game, in terms of managing our pricing. We've seen some positive price moves in Sweden. We will have to see if that feeds through into margin improvements. Very competitive in Norway, particularly among the savings banks. It's tough to increase margins in there. When it comes to the Danish market, you'll have seen some of our pricing moves, which is in response to the competition there. I think we see a good response from customers. We're hopeful that feeds through into the numbers and the performance. Finland, as market leaders there, we really want to see the market move a bit more in order to see whether we can improve our NII.
That's on the lending side. Deposit's going well. Deposit margins are stronger than we had planned for, and deposit volumes are good, and that's a really helpful contributor to NII. There's no doubt that it's a tough market on the retail side, and people are fighting for every, I was going to say penny, but we don't have those in this market. Every krona.
The sentiment.
I mean.
Sorry, Andreas, but the sentiment in Q1 is better than it was in Q3 and Q4. It's going slower than we would hope, but it is building somewhat, and we sense more activity across the board. It's different, as Ian mentioned, between the countries.
Yeah. Even if we don't see central banks hiking across the board until maybe late in the year, next year, we're seeing that the IBOR rates in all markets have moved up quite sharply. To what degree is that helpful for your NII in the near term?
It helps a little bit on the treasury side, and I can imagine that it might encourage all of us to look at pricing, because essentially that's what drives a big chunk of the cost of funds for us.
Yeah
I can see that it might encourage a slightly positive development. We really have to see the policy rate changes come through for it to start to move NII meaningfully.
Okay. Yeah. Thank you.
The next question comes from Martin Ekstedt from Handelsbanken. Please go ahead.
Thank you and good morning. First question, the staff reduction program that you announced in Q1. Once implemented, this will deliver around EUR 150 million of annual cost savings, right? Which is about 25% of the EUR 600 million of gross cost takeout that you mentioned that you'll see in the November. As such, I was just wondering, should we expect three more cost reduction programs of roughly the same size in the years leading up to 2030, i.e. the end of your CMD plan? Or will other parts of the EUR 600 million of gross cost takeout be less lumpy, say, and less noticeable, and come from other areas? That's my first question.
Yep. Good morning, Martin, and thanks for the question. No. We're pretty clear that we don't expect to launch another restructuring program. We tested ourselves pretty hard before launching this one about whether it was the right thing to do, both in terms of the way we manage our workforce and other factors. The reality is that we will need to reshape the workforce, particularly in technology. That's where the focus of the restructuring has been. Everywhere else, our cost reductions are expected to come from regular management of FTE, because we will see FTE come down, but that's not going to come through large restructuring programs. Other initiatives such as infrastructure simplification and AI. Of course, the restructuring is big. It's a very important contributor.
Those EUR 150 million of cost savings, yes, they're 25% of the EUR 600 million gross, but we think of it as almost 40% of the EUR 350 million net that we're committed to. That's a long way of saying what I said at the beginning. No further cost restructuring programs.
For the remaining part, hi Martin, it's Frank. For remaining part, of course, there are firm plans owned by a DL team member for each stream that will lead to these cost reductions needed to deliver on our promise of EUR 600 gross, EUR 350 net. Of course there is an execution risk, but we know what to do, when to do it, how to do it, and we'll follow that development very thoroughly. Thank you.
Okay, very clear. Thank you. My second question then around the release of the management overlay buffer in full. That surprised, at least me, a little bit, that you released it in full already in Q1 against the backdrop of increased geopolitical uncertainty. Could you tell us a bit more about how your thoughts went around provisioning in front of Q1, and what scenarios, if any, could prompt you then to start building up that buffer again? Additionally, perhaps, if I may, in what sectors or segments was collective provisioning strengthened by that portion of the management overlay that was used now rather than released?
Yeah. Yes, it's an important question, Martin. First of all, we wouldn't be releasing if we thought we had any prospect of having to restore it at any point. The key thing is, having looked at what remained of a provision that was established for COVID six and a half years or six years ago, we concluded that there was a portion that was clearly surplus. Clearly surplus, not just in respect of its original purpose, but from a thorough review of the portfolio, looking at stress scenarios, looking at our estimate of the impact of the energy prices caused by the escalated conflict in the Middle East. We've looked at this from every angle, exactly as you'd expect. Each time we came up with, of those EUR 276 million of provisions, we would keep EUR 116 million and deploying those into our IFRS nine models.
No longer a separately categorized provision. That 160 was clearly surplus. In those circumstances, we released. Now, releasing provisions, we've been pretty clear, I think, that in 2026 we would take action on the management judgment buffer. We think it's now the right time to move on. We maintain healthy provision levels, good coverage, and have addressed any small areas of concern in the portfolio. These have been small in terms of how we deployed that EUR 116 million.
Okay, the EUR 116 was not earmarked for any particular part of the portfolio?
It has a number of different components. My point is that the bulk of it is not targeted at anything specific. It was really a granular, EUR 10 million here, EUR 15 million here, that kind of thi ng.
Okay. I hear you. Thank you very much. That's all from me.
The next question comes from Markus Sand gren from Kepler Cheuvreux. Ple ase go ahead.
Good morning. We've been talking a bit about cost savings. I was just curious, now it seems like there is new AI tools for cyber criminals. Is that something that is changing your view on cost development, or is that already taken care of, so to speak, in your program for IT development? Secondly, I was thinking about also credit losses, as Martin was alluding to. Now with the strengthening of the provisions, are the 10 basis points that you have in your business plan, is that just a conservative number or is that what you actually think you will have in the coming years? Thanks.
Hi, this is Frank. Thank you for the question, Markus. With the first one regarding cyber, I would say there's nothing new here. It would be wrong to say that we fully understood the Anthropic question and understood what it will create. But we have been, all the time, very clear about that AI will grow, and it will accelerate the growth when it comes to quality and also what it would be able to do for us, for our customers, for our efficiency, for our shareholders and so. But of course, misused, it can also be used against any company, any organization, any country you want. And I think that what we see here is an example of that. That tool was not built for criminals, but it can be misused by criminals, and in wrong hands, it appears to be quite strong.
We have always planned for that. The way we see it is that you have to continuously improve and strengthen your skills and your defense within cyber security, information security. You have to believe that the counterparts or the criminals will have the same capabilities or even better than yourself, which means that you have to continuously invest significantly, and that is what we have in our plan. I think no big change. I think it's just another proof point how fast AI is developing, and you must embrace it. You must deploy it. Doing so, you will get a tool that can be helpful for different purposes, and it can be defense, of course, as well. That's the best I can say. Ian, over to you.
Yeah, Markus, the way we think about credit losses is we have guided to 10 basis points as the, I guess, long-term expectation for the portfolio loan loss levels. I'll come back to what expectation means in a moment. Of course, within that you have our household loan losses, which are much, much lower than that, and the corporate loan losses that from time to time are double digit, so between sort of 10 and 15 basis points. The reality is, over the last six years, we've always been well within our 10 basis points, which says that the portfolio has been performing well. Largely due to much lower levels than normal of corporate losses, so the corporate portfolio has been extremely robust.
At the Capital Markets Day last year in November, I said that despite that experience, I don't think I can stand here and say that we would always expect to see such low levels of losses, and so renewed our guidance for 10 basis points. We'll always strive to keep it well within that. 10 basis points is the guidance. It's a composite for the full portfolio performance, but our track record is much better than that.
Okay. Thank you very much.
The next question comes from Shrey Srivastava from Citi. Please go ahead.
Hi, and thank you very much for taking my questions. My first is, if we indeed do see one or two rate hikes materialize this year, how would you expect pass-through behavior would be to deposit customers relative to the much larger hiking cycle that we had a few years ago? My second one is, we obviously saw the news about Avanza's Danish expansion citing five years to be profitable. Is this something you've factored in to your business plan? If not, how does it affect your outlook? Thank you.
Shrey, it's hard to prejudge what banks will do when faced with rate hikes. I know you're asking for my opinion rather than a prediction. I can't see why, particularly at these levels, where we've looked at what we saw in the last rate hiking cycle. There was a reasonably high level of pass-through on rates at these levels. When they were getting much higher, sort of north of 350, that kind of thing, a much different story, because I think you end up creating an unsustainable position. I think it's reasonable to assume a fairly high level of pass-through at these levels. We'll have to see when they actually happen.
In regards to Avanza, fully as expected, no surprises. We have been planning for more of the platform players coming, and we are investing heavily in that area already, and will continue to do so. I'd say that no, and it doesn't really make any difference to us.
Thank you very much.
The next question comes from Namita Samtani from Barclays. Please go ahead.
Morning, thank you for taking my questions. The first one, just on Net Interest Income. Can you help me think about it beyond 2026, please? Because
The rate sensitivity for 2027 on slide 19 looks flat based on the first quarter end rate, and consensus has net interest income going up 5% in 2027. Do you think the volume growth can more than offset margin pressure and the negative impact from the hedge? My second question, I read this article in Børsen about Nordea's own employees opting out of having a pension with Nordea in Denmark, citing IT issues related to integrating the acquisition from Topdanmark a few years ago. I just wondered what's being done to fix this, and why is the pension side in Denmark not as slick as what we can see, for example, in Sweden? Thank you.
Let me take the first question about the paper that you read apparently in Copenhagen. Our acquisition of Topdanmark's life and pension business is fully aligned with our plan. That business is an SME business, and we want it to be an SME business. It has taken some time to get it separated from the seller, which we knew. It has been difficult from the seller to separate it as it should be delivered on its own legs and not integrated with the seller's systems. That was delivered, as I remember, 12 months ago, and since has the job been about integrating it fully into our systems and raising the quality and of course of the interface so it meets the Nordea standards. They are high, much higher than what this company came from on digital capabilities, which we knew. No change.
There are some that are, for example, brokers that would like to see that we were attacking and more and more active on large corporates in Denmark. That's not our focus, and it has never been our focus or our intention with this company right now. We are actually very happy with the acquisition, and it progressed well. It has taken longer due to the seller's problems by separating the company, but we have full control now and are working with a plan to get it up to the standard you should expect from Nordea. It might be that we one day will go to the large corporate sector as well. It's very competitive. Profitability is low. It might be we will go there.
When we will potentially go there, of course, we should offer our own employees to put their pension scheme, which is a group scheme for Danish employees, to that company. It has been fine with the current company for many, many years. We are not going to change anything for the sake of our own pension scheme, as we are happy with that. That's the facts around that acquisition. I think it came out a little bit different in this paper. Thank you. Ian, over to you.
Yeah. Morning, Namita. Yeah, on 2027 NII, we're not ready to actively plan for NII improvements and rate hikes at the moment. I think it remains a scenario, and I think our slide 19 is a good way to model the impact of that scenario. We've always been, I think, fairly consistent in showing the impact in both the first 12 months and then beyond of a 50 basis points movement. Our guidance has always been based on how we thought about things at Capital Markets Day last year, which is that the drivers of Net Interest Income will be volumes and margins. We were planning for volume growth, both on the asset and liability side, and margin stability. We weren't baking in improvements in margin and a fairly neutral position on the hedge. I think that's still the right way to look at it.
We do see, as I talked about earlier, some quite sort of tough margin pressure on the household side, and we're absorbing that at the moment. I think when we look out to 2027, growth in volumes on both sides of the balance sheet, and margin stability is probably the right way to think about it.
That's helpful. Thanks very much.
Operator, we'll take the last question now.
The next question comes from Nicolas McBeath from DNB Carnegie. Pleas e go ahead.
Hi, and thank you for taking the question. I was wondering, given the more positive view on productivity improvements that you've mentioned through Q1 from AI, I guess in particular in software development, do you see potential to speed up the Nordic Scale initiatives for these processes that you talked about in lending and payments, for instance, as we went through at the CMD last year. Do you see potential then to reach the cost-income targets for 2030, before the timeline, given that you would seem to become more bullish on this technology?
It's a good question, right? I cannot give you a firm answer, but what I can say is that the quality of AI is increasing fast. What also increased very fast is, I think most companies' understanding of where they can deploy AI. When you look at the use cases we have as a foundation for delivering on our Nordic scale benefits, we are on plan, and we will keep being on plan. I do think that we can do even more. It's very difficult not to conclude with what we see when it comes to quality and also different use cases we continue to learn more about. It's very difficult to conclude that we don't have more optionality than we had previously. The question is, how fast can you deploy it and how fast can you take out the cost?
That's still up to be concluded, I would say, but it clearly looks even more positive when we look at it right now compared to just a half a year ago. We are leaning in. We also have to ensure that we understand the risks and we are not taking too much risks. We're leaning in and we are pushing now, and I think when I get questions about it, how I see it, my advice is embrace it, understand the risk, cope with the risk, but embrace it because it is quite impressive what it actually can do for you nowa days.
All right. Appreciate that. Just a quick final question if I may. Given the improved market conditions so far you've seen in Q2 and the decline in interest rates, would you expect much of the market making losses that you mentioned in March to be reversed in the second quart er?
Ian?
Yeah. Nicolas, what happened in March was very much a sort of isolated performance matter on a couple of specific bits of our market business. We talked about desks in the euro and SEK area. We sort of closed out positions where we needed to, moved on. I think the real question is, are we back to normal levels of performance in our markets business following that pretty disruptive market incident? The short answer is yes. We're back to performing normally.
All right. Thanks for that.
Thank you. All right. Thank you all for participating. As usual, just come back to us if there's anything that we can do for you. Thank you. Have a nice day.