Good afternoon, everyone. Thanks for joining us this session. My name is Gulnara Saitkulova, and I'm very pleased to be joined by Frank Vang-Jensen, our CEO of Nordea. Many thanks, Frank, for being with us today.
A pleasure.
Before we start, we kick off our polling question. What do you think is the most important for Nordea's share price performance over the next 12 months? delivery on cost control, resilient NII performance, capital return ahead of expectations, delivery on ROE targets, strategically and financially accretive M&A, or clear AI strategy with tangible use cases. Capital return ahead of expectations and followed by resilient NII performance.
Mm-hmm.
Frank Vang-Jensen, it's been an eventful year with tariff tensions, geopolitical uncertainty, recent escalation in the Middle East, rising energy prices, and the questions around AI reshaping the broader landscape. To start, how does Nordea stand within this context?
Yeah, first of all, it has definitely been an eventful period. I think it has been a habit that we start the year with a firm plan, and then although things looks a little bit more stable, they tend now to turn out very different to what we have expected. Yet , here we are, considering what has happened the last five, six years, we have delivered each year and are in a much stronger position, probably the strongest position that we ever have been in. Just some data points. We have increased the efficiency of Nordea significantly. We have grown the customer satisfaction across the board.
We have grown our business significantly, and we have delivered a structural improvement that had led to a significantly higher profitability of Nordea, and that's a structural one. That's where we should be, growing from there. Finally, we are a digital leader now in the Nordics and likely also across Europe. I would say that we are in a super good position. Of course, we are just one of a number of competitors, and we are in an environment, of course, that is a bit uncertain right now. I would say that if somebody would wake me up in the night and ask, "Where do you really want to run a bank, if you could decide yourself?"
I would any day say in the Nordics. They're super strong economies. They're very digitalized. They're very efficient. The education level is high. There's welfare system. The prices are highly taxed, but they create a quite fine wealth. The capital markets are strong, especially in a couple of the countries, and it's just a very nice place to be right now. I think we are very well-positioned. Then, of course, it's about weathering what we have ahead of us. I think we are quite good at this.
As you reflect on the past year, what would you say you're most proud of, and where do you see the room for further improvement? Looking ahead further for the 2026, which are the management's key strategic priorities for this year and the main challenges that you are navigating across your core markets?
If you look at 2025, we deliver the return on equity of 15.5%-ish. The third year in a row where we have delivered a return higher than 15%, and it's a real return on equity. It's not tangible. If you would be tangible, we'll add two percentage points on top of that. We have delivered on our second strategy period post the repositioning in 2019 and met or exceeded all our targets. Then we have implemented or we are implementing a new strategy now, which we announced at the CMD in November. All focus is now on getting traction on the implementation, preparing everything that hasn't been prepared yet and get traction on it. That works very well.
I think as always with the execution. One thing is to do a PowerPoint and then have a vision and an idea. Another thing is to get all people, 30,000 in a year, to add up and really start implementing and living it. You should have a huge respect for that, but it's actually progressing very well. My concern and what my focus is now, that's basically ensuring that we are moving forward the task within all the streams. We have a cockpit where we get the main information about how are we progressing, how or where are we not progressing, and why, and then have the discussions.
Then it's of course to understand what is happening in the world, what is nonsense, what is real true risks that we should manage, and what corrections do we need potentially to take. I would say that, in many ways, a similar year to the years where it has brought COVID and inflation crisis and in interest rates and wars and whatnot. This time we're implementing our new strategy, and that's what I pay attention to.
As you touched on your new strategy and your new business plan you presented in November, what are the key takeaways from discussions with investors? Which feedback stood out most to you?
It has been received very well. Of course , we want long investors that want to develop Nordea to get with us and help , also in the discussions about what could we do differently. Where could we have improve? There's nothing we cannot improve in Nordea. We have so much upside. What we laid forward was a five-year strategy plan. The reason for why it was five years is that we want to make Nordea even stronger. We want to implement a strategy that will make us relevant also in five years. We want to be the one that are on the winning side and not basically the challenged side.
To do so, we must implement the strategy and not only operational and tactical, basically, initiatives. That takes time. I do know the market would like, you know. The market is a little bit short term. It's 18–24 months, and then it doesn't add into the spreadsheet. We knew about that, and that was very deliberately. Now, I think the market is growing into our plan, and we will be very transparent about the progress that we're making, but it will take Nordea to a completely new level. We are talking about an improvement of cost-to-income ratio of around five percentage points.
We're talking about a return on equity higher, greater than 15% throughout the period and significantly higher in 2030. It's about. We're talking about an EPS growth of 45%-50% in five-year period. I think the market will, you know, understand and over time also will feel comfortable with the income part of the plan.
It seems the cost-to-income ratio attracted significant attention. Could you walk us through the core optimization levers underpinning your targets? How should we think about the evolution of your cost base through 2026 and beyond? Can you remind us when do you expect most of the efficiencies outlined during the Investor Day to come through? Do you expect the rising energy prices to have any impact on your guidance?
Very simple questions. Starting with the levers of our cost and our efficiency. We have basically two legs in our strategy, two key priorities. One is to grow above market, with a special focus on six growth, strategic growth areas. These are Sweden, Norway, Private Banking, Life and Pension, Small Business, and then, Cross -Selling. We have plans for all of these, and we do think in all humbleness we have a right to win. We have demonstrated in Sweden that we can win. Now, we are trying to do the same in Norway, just, a little bit differently and probably also a little bit more selective within the businesses.
The other areas are areas that structurally are growing, that's very profitable, and we are very well-positioned to take our part. The other one is the Nordic scale advantage we have, which is unique to us. What is that about? This is about that we have simple terms. We have doubled the size of our peers in the Nordics, but it is over four different countries. Today, financial services is very much a scale game. It's run or powered by technology to a very large extent. As we know, technology is a scale game. The problem we have had is that the scale comes across four countries.
If you don't move from local platforms, local processes, local tech stacks, and applications to Nordic-first architecture, you don't get the scale. That is what we are doing now. We are basically lifting our main processes being Corporate Lending, Mortgage, Payment, and Investments and Savings Advice from local processes, different processes to Nordic. We are consolidating our tech stacks. We're retiring our applications, and thereby, of course, being able to save a lot of money. That stream will deliver expectedly around EUR 600 million gross cost takeout, annually, in 2030 , and onwards. We have AI. AI plays a role but a smaller role in the forecast.
If you ask me a year ago, I was quite hesitant to what to put a number on AI. I think it was very hyped, and I was not impressed by the quality of the models. I must say I've changed my mind. The reason for that is that when you understand the quality of the latest language models, it's quite impressive what they will deliver. Then the question is, if you are on top of your data and you get the right data available for the organization, and then allow the organization to chip into the data, you can actually get quite much upside.
We have not put a figure on it. We run as always, as everybody else. We run, you know, pilots, and we are scaling some areas, we follow very closely in the leadership team. Then we let the organization actually do their models if as long as not really dangerous models and so. There's a lot of things happening. But I do think that we have enough now to conclude that there is a quite big upside here, and the main upside will come from efficiency, both on the risk side, the capital side, but also on the operational side. But as I said, it's not the main driver of our strategy.
You mentioned tech. From tech perspective, what's your level of tech spending every year? How do you make sure that you remain on the leading edge of new technologies, in particular on the AI front? What's your management vision on how technology will change the banking industry?
Starting with the latter first. Technology is changing the financial service landscape, even in the Nordics. The Nordic countries are all some of the most digital societies in the world, and it goes fast now. I would say, if you are not prepared, if you are not invested and/or will invest enough in digitalization, data, AI in the future, you will lose. You are simply not relevant. The problem is that the curve the last 10 years has been not that steep. Now , it goes like this. We enter this period, let's call it a super cycle in some way, in a position of strength. We are also investing and have invested a lot.
The last three years, we invested, four years, perhaps. We increased our investments within technology by EUR 350 million a year, and we keep that number now. Each year continues to push forward. We could cut that down, of course, but the price will be paid at the point of time. Technology will be main driver for most financial services companies in the future, and the ones that are not having scalable platforms will get a huge problem, and that goes in the Nordics as well. As I said, we have increased our investments. We'll keep investing heavily. We're not putting a number to the total investment level. We don't have that out, but it's a very significant number.
AI has been a dominant theme, recently. How are you thinking about practical impact on Nordea's cost trajectory? Where do you see the most tangible opportunities for AI across your business?
It's. As I said, it's. I don't think that you will hear many. It might be that I have not listening to the other banks, of course. The ones that will claim that they have found the solution now to really scale it across their estate and they , and see the clear benefits that will make the change, I would question whether that is really right. I think that we have come to a position where we at Nordea are very confident that we can scale it. We have somewhat the recipe, but we are not fully there yet, but we will get there over the next coming years, and then it will have significant impacts.
Where do you see it is. Of course, it is on customer experience side. You'll be more relevant. You're more automated. You will reach out to your customers digitally, and it will happen based on AI understanding what did Frank do and how can we help him. It will keep proposing to our advisors, call Frank because there's these signs. We will also improve the funnel within, for example, mortgages, investments, where we understand much better what are the signs where we are starting to win or to lose and what should we do. Historically, that has been done by machine learning, which is not learning, but it's just coded, and then it will act on some different signals.
Now it becomes much more effective. That's one. The problem by that is that , the ones that will succeed with this will all become better, and they will get the business. The ones that are struggling with the front book already, they will struggle even more in the future. I think that part will be hygiene in the future. It will probably give some pickup on the income side, but the main part will come on the understanding your risk level better, understanding signals, whatnot, how you can optimize your portfolio. It will be about how you can optimize your capital consumption. It will be about how you can improve your models even better.
It will be about fraud protection, detection. It will be about email prevention. It will be about call centers. It will be about back office, and it will be about putting a front on top of your data, ensuring that you can use the data even when we have no lineage in your data. I think, honestly, this is not wishful thinking. This is happening while we speak. That will deliver efficiency, a lot.
At the same time, what are the key risks or competitive challenges do you see potentially emerging from the adoption of AI?
I think there are quite a number. I think the biggest threat that I'm scared about is, or concerned about, are cyber risks and fraud risks. It's a bit scary what we see now with on the fraud side. Of course, we will have to use AI as , to basically defend. It's not fraud against us, it's fraud against our customers or towards our customers, and we will help them to—by the way, it's also trying to pretend that they are me, and it's quite authentic when you see the attacks that we get, right? Cyber risks. Cyber risk is a concerning area for all companies.
It's just when you think about what happens now and how fast they can find the holes in the fence and then thinking about we're also looking into quantum computing in probably four or five years at least, or three to four or five years. We should not take this lightly. You have no alternative. It's just to be at least as strong and hopefully stronger than the attackers.
Switching the topic to volume momentum, which trends are you currently seeing in mortgage and corporate lending across the Nordic markets? How should we think about your long-term growth ambitions for 2026? How would you characterize the evolution of customer sentiment in Q1 this year across your key segments?
I think we are looking good. We are in a strong position. Last year, we were growing our corporate book by 8% on lending year-on-year, so that's not a bad number. We are clearly gaining market shares. The weak point of the Nordics is the consumer confidence. The rates has to a large extent been floating rates, and as the inflation has increased, rates also, then it has hit the basically consumption capacity, and people has been a bit concerned. Then adding a war, and an uncertainty has led the consumer confidence come down. That leads to lower transactions in mortgages, which then is visible in our numbers.
We are growing 1%, and that's way too little, but we are not growing weaker than the market. We are actually gaining market share. For example, in Sweden, our front book is growing 25% and our back book is 14%, and we have kept winning for five, six years now, each quarter adding to the back book. Of course, we would like to see the market is growing faster. How should I put it? The customers are in a good position. We are drowning in liquidity. They have so much deposits. They pay their bills. We basically face very, very limited credit losses and late payments, so it sits in the head.
You need to translate and allow yourself to dream and then start to spend some money. It is coming now. Sweden, starting with south. Denmark, in a good position. It's building. It's happening in the larger cities. Norway had a crisis for five days, and then they were back. Finland is having a bit, they are more gloomy now. It's not bad, but there's no growth in the market and the reason is just that the culture is a little bit more concerned than the other countries. Then we have Sweden, and Sweden is actually moving forward now. It develops quite fast now.
Let's see what will happen now, post or whatever will happen with the war now in Middle East. Actually, the sentiment in Sweden has been building. I'm quite positive. Let's see how it would have developed now.
Zooming on Sweden, because we have fiscal measures implemented there for this year, would you expect that this could help to uplift the consumer confidence and loan volumes? When do you think that could happen? You mentioned you've been gaining the front book market share there. Can you talk about what's driving your ability to outgrow the back book? What do you see as your core competitive advantages in the Swedish market?
The initiatives that has been implemented in Sweden are very welcome. I don't think they all are needed, honestly, but it's an election year, and as long as it's not bank taxes and other things, then they are very much welcome. I think that the , why do we win? That's the key question. Who are our competitors? 70% of the market or so is led by or covered by the four large banks. We are the only one of the four large banks that gain market share, and we have to be doing that each quarter the last consecutive six years.
What is that we do differently? It's not rocket science, honestly. It's about having a strong digital capability, strong digital experiences. It's about having a digital experience that connects very well to a human, either by video or in person when it's needed. It's about having an automated process where you grant the credits, the ones that are just ordinary. You grant them digitally, meaning that it's a time to yes, which is very important. It is about aligning the entire value chain, to retail is about detail. You need to get all the details right. When you do that in scale, it's fantastic. If you get the details wrong in scale, it's a disaster.
It's about creating getting the entire organization across the entire value chain in a country, getting them to , aligning them with an aim to win, creating a hunger and an intensity in the everyday life, and ensure that you keep pushing, and you really feel the hunger for winning every single day. If one is starting to show that I'm not hungry anymore, then, you know, shuffle around in the team and get some new energy, and then we'll take the person in another role and so , to ensure that we really are on the ball every day.
That's basically what it's about. It's not rocket science, but you need to have the digital capabilities. You need to have the yes to, the time to yes, low. You need to combine the talents in a very nice way, and then it's about leadership and engage people.
Mm-hmm. Turning to the competition, what are your observations at this stage? Do you see any shifts in the competitive behavior compared to the last year? In which segments or geographies you're experiencing the most pressure?
On competition?
On competition.
It's quite crowded right now, but it's actually not more different than it has been in the previous years, I would say. There's a tendency to many people say, "Oh, this time it's very different." Why? I don't think it is. All the years I have been working in the Nordics, that's many. When we have these periods of low growth market growth, the competition increased even further. Even though in the Nordics, Nordic players are mostly focused on profitability and are quite disciplined, there are players that are tempted to focus on volume to show they're alive, and that of course shake the market a little bit.
Then there is sometimes some that wants to follow just to state that they also are alive. Eventually, the Nordics are very disciplined about capital consumption and returns, and especially the Swedes and the Finns, and it will bounce back. Right now, yes, the margins are thin, but we have seen that many times before, and it will bounce back.
At your Investor Day today, you indicated that you do not begin meaningful asset margin expansion in your plan. In your view, what would need to change for the margins to strengthen from here? And how does margin evolution differs across the Nordic markets? Where are you seeing the most pressure from the margin perspective, and where is the environment more benign?
What needs to change to believe in market expansion would be underlying markets growing faster than they do today. You know, there will be more and more of the banks that will , the ones that basically drive the price or the margin pressure. They would start to focus on delivering a return that is meeting the expectation of their investors and thereby aligning more to where the market is. Right now, there's no such signs, but corporate lending has increased, and I think if it could keep up, it will help. Within mortgages, the margins are thin, but not problematic, I would say. They're still a very profitable business across all four Nordic countries.
I have a number of questions, but maybe we can pause and see if the audience have any questions. Let's now turn to fee income. Which key categories do you think will drive the operating momentum for 2026? Which initiatives are you undertaking to support growth? Where do you see the opportunities to strengthen the market presence and increase the product penetration?
I think, if you look at the growth progress I have mentioned, we of course, expect them to contribute to our income. A lot of that is fee generation as well. Where do we see the fee generation come from? Asset Management is one, so the Savings part. Payment is growing fine as well. That's tied to the strategic priority of Cross-Selling. It's also the growth in Sweden and in Norway. We have Life and Pension. There's also Fee Business. It's growing very nicely. I would say that the Fee Business is expected to be a huge contribution. The jury, of course, is out on the NII. I would say that we have probably started to see that it's contributing now, but let's see how the first quarter will go.
In the Asset Management, given the ongoing shift towards passive investing, how are your beta plus and hybrid products positioned to compete? Which client needs they're designed to address? How do their margin characteristics compare with fully active or fully passive strategies?
Our response to the passive sleepy money is Enhanced, and it has been very well received by our clients, our customers. It's a product that is attractive to the ones that are tempted to do passive, as it's cheap, but still want some active on top of it. That could be, you know, it's rule-based, it could be selection, deselection, whatnot, and they like that. The pricing of the product is between an active and a passive. I actually think it's very compelling, and it has been very well-received, product. It is offered through all our channels, so it's for retail customers, it's private bank customers, life and pension, but also institutional customers. I think it's a very interesting product.
Can you talk about the capital? Can you remind us what are the key capital headwinds and tailwinds we should be aware of for Nordea? Is there further scope to enhance capital efficiency, including through the securitization? As we look towards 2026, how are you thinking about the capital allocation priorities between organic growth, M&A, dividends, and the buybacks?
Yeah. We have a very strong capital generation, and nothing is expected to change there. We continuously want to be excellent in generating capital, then deploying capital, and distribute the capital. As you might remember, our dividend policy is 60%-70% out as dividends. We have delivered on that all the years, unless the years where we had a ban. Then basically we generate 20–30 basis points each quarter excess capital. What is not used for inorganic growth or extraordinary organic growth would be subject to buybacks. That allows us to distribute on the basis points or something like that.
If we can find targets, M&A targets that would be relevant, either as a scale , or a strategic , or topic, then of course, we would be positive to that in the Nordics. What we should consider on top of that? You have the models. We have new approvals pending. We have approval on our retail models, and we are removing the add-ons now. There will be EUR 4 billion-EUR 6 billion recorded as an upside here, say 5-ish, around it. We have a new model application in place from the corporate side. We have not planned for any relief there, so let's see how it will go.
We have some , Basel IV are coming. The headwind is around EUR 10 billion. Of course, we have mitigating actions that we are working with. It looks very steady, I would say. No surprises. We should be able to deliver a very strong capital distribution to our shareholders for the coming years. We have said during the five-year period, we will distribute more than EUR 20 billion.
What underpins your confidence that 150 basis points management buffer is the right level for Nordea?
We are running with a high CET1, I would say 15.5-ish percentage points. That's as a Eurozone bank, which means that our models are scrutinized much more than they would have been, if we were not in the Eurozone. Trust me, we have been running subsidiaries in all the four Nordic countries, so we know where we come from. When you look at the total capital requirement of Nordea, it's actually very high. That's a funny and sad part, which of course we are challenging heavily. The micro requirements to Nordea is among the best in Europe, and they should, in my opinion, as we are a very low volatility earnings bank.
We are probably one of the most lowest risk banks you can find in the Eurozone, among the universal bank, which it allow us when you look at the requirements from the SSM. The four Nordic countries has a tendency to add macro buffers on top of that. Our point is actually that there are overlaps here. You could ask the question, why would you need to add so much on top of something that has been scrutinized so much as it is by the ECB. There's no really good reason for it more than it's not really aligned across Europe.
This is a structural problem that we have in regulation, and it needs to change. Because what it does actually is that , Nordea runs with 30% higher total capital requirement than the average of a SSM bank. Although we are considered to be one of the lowest risk and highest profitable banks. How do you think a U.S. investor think when you look at what are the most the less riskiest banks and most profitable ones are having the highest capital requirement? Does the system work in Europe? The fact is , that it doesn't work because it's not aligned right now.
We need a much more better alignment between micro and macro, and then we need a capital that actually look into the total capital stack. This is a bit out of control. The commission is on it. I have never, ever heard more active discussion about how do we align this and how do we improve it. The fact is , that we have 30% higher capital requirements in Nordea compared to a European standard average bank, which of course, is weird. I think that everybody understand that we will have to change this, so I trust it will be changed.
Turning to M&A, you've demonstrated a strong track record when it comes to the bolt-on acquisitions, with the previously executed SG Finans, Topdanmark Livsforsikring, Norwegian personal customer business from Danske Bank. How are you thinking about M&A opportunities going forward? What are the key criteria that needs to be met for transaction to make a strategic and financial sense for you? Are there any particular geographies that you keep an eye on?
We are Nordics, so you will see us growing in the Nordics. I don't know, one day it might be that we will believe in growing outside Nordics, but not in this [strategy] period. We have clearly, upside. We have soft scale in Sweden, we have soft scale in Norway, but we have enough scale to ensure that we have what it takes to outgrow the market. We have these growth pockets of ours where we want to grow. These are strategic focused areas of us. Everything that we can do to add growth, so basically size, scale, but also if there are strategic capabilities we would be able to add, we would like that.
That's why we are very positive to either scale or strategic capabilities if they are available, and that could cover all the four Nordic countries. But that needs to not necessary, but it's easier to dance if you are two, I think.
Turning to asset quality, given that the cost of risk have been running below your normalized level of 10 basis points, do you think there is some upward normalization likely , given the current uncertainty? Where are you most cautious today in your portfolio?
Say it again. The first one was?
On the asset quality, do you think?
Yes.
Will the cost of risk increase from here? Across your portfolio, where is the most caution for you?
No, it's a good question. I don't think so, but I think it would be also wrong of me to say that what happens in the Middle East now, of course, can have ripple effects and can impact the macro and so, and then it will hit the entire real economy and likely less to Nordea than rest of Europe. You should not be naive here. If it continues and we don't get a peace and the energy prices will keep high or stay high or even higher, if they just stay at around $100, I think it's no big issue.
Then of course, it's hard to see, how it will impact the economy, but it will probably have some impact. Nordea is a very low risk, a very diversified, low volatility earnings bank, and we will keep being so. We cannot run with one basis points of credit losses, right? It will be higher, likely. Right now there's nothing that indicate to any, you know, anything dramatic. We just need to understand what happens in the world needs to stop. If it doesn't stop within a month or so, I think it will be problematic. But again, who knows?
On the return on equity, so you delivered 15.5 % ROE for last year and 14.4 %:in Q4. You're guiding to about 15% throughout the strategy period to 2030. Can you remind us the core assumptions underpinning this guidance, and what are the main upside and downside swing factors?
On return on equity?
On return on equity.
What we have said is that, and this is real return, guys. Some of the guys we spoke to today said that they probably we should start to talk about tangible. I don't like that, but it might be that we should show that as well. It's 2% higher than just as a service information. What we have said is greater than 15% throughout the period, significantly higher in 2030. What are the levers? Yeah, it's basically just delivering on our income growth pockets and doing with the capital discipline we are used to, and then ensure that the efficiency that we are forecasting actually also is implemented. I would say that it looks quite good.
I think the return can. When we say significantly, then of course, it's something we have thought considered very well. The uplift, of course, is coming from the cost-to-income ratio improvements of five percentage points, if we deliver on the 40%, which we will do everything we can , to do, and then stay disciplined on the capital consumption. That's a very strong part of our culture nowadays. We're super disciplined on how we spend the shareholders' money, and that will not change.
Okay. I think we are running out of time. Thank you very much, Frank, for joining us today, and thank you for this discussion.
A pleasure. Thank you so much.