Good morning and welcome everyone to this Capital Markets Day when Nordea Bank will present the new financial targets. My name is Rodney Alfvén. I am heading up the investor relations here at Nordea. We will start off the day with an opening remark of the chairman of board, Mr. Torbjörn Magnusson. That will then be followed by presentations by our President and Group CEO, Frank Vang-Jensen, and the Group CFO, Christopher Rees. There will be a break, and then we will have the presentations by the four BA heads, Martin Persson, Erik Ekman, Sara Mella, and Snorre Storset. The journalists here, you are most welcome to take contact with Petter Brunnberg, who will then take care so you can get interviews with management. With this, Torbjörn, please welcome.
Thank you, Rodney. Good morning, everyone, and welcome to Nordea's Capital Markets Day. As you're all aware, we released our Q3 results yesterday together with some one-offs linked to a new financial plan with new targets for the coming three-year period. This morning together with you, we're going to try to shine some light on the decisions and choices that we have made in that plan. I came to Nordea's board in March, about 18 months ago, with I think very much the same questions as probably some of you have had and maybe you all still have. Why is it so difficult for this company to meet its targets? Why are the explanations for that so complicated and vary so much over time? Also, why are the cost levels so high really compared to its peers for the company?
Well, my own background is very much in operational improvements, in constant cost-cutting. What I have seen at Nordea very much reminded me of the success factors for that kind of work, because it all goes back to always, I think good business governance and a really strong power of execution. In other words, charging large committees to do cost-cutting in a matrix organization is not necessarily a recipe for success. The previous boards of Nordea have done a lot of cleanup, focused the company on less risky business, and pushed some rapid development of risk management. What remains is a group with obviously less risky assets, less risky organization, with a focus on the Nordic business and four divisions, a much simpler structure. That's not a bad starting point for us at this point in time. The new phase for the company is different.
There's a different agenda, and we need to face the consequences of that. On costs firstly, it is obvious that the company has not faced the consequences of being a Nordic company to the full. Very little shareholder value has come out of benefits of scale so far in Nordea. Secondly, another area that I think has suffered in the previous period is business acumen and the enjoyment of doing business, passion for the customers. Market shares in most lines, most geographies have fallen. They have fallen for three years, and they have fallen quite sharply. Thirdly, I should point out one operational area which has not suffered, and that is clearly credit quality. If anything, I think the credit organization is even stronger than it was before the previous phase. Back to market shares and customer focus. The board saw this.
The board started working with management early this year. It's been a joy to see the energy release in the organization once customer focus found its way back to communications and the corporate culture. We have taken back lost ground more quickly and more rapidly than the board had predicted when we started that work. The board also noted that one of the business areas had actually not waited for the board to do that Personal Banking under the then new head of Personal Banking, Frank, had started doing this before the board took this initiative. On costs, to my relative surprise, I must say, coming from another industry, nominal cost targets are perhaps dominant in banking. Nordea has, to be fair, met its cost target over the past year, will meet the cost target this year.
Of course, it means very little when the income falls more sharply than costs. The targets have to be reset and has been reset now, as you have seen, reformulated so that the company and company management cannot see something as a success which the shareholders see as failure. With all this in mind, the search process for a new CEO was not that complicated. We needed somebody with a passion for customer processes. We needed a parsimonious, thrifty person, and we needed somebody that could make decisions and make sure that they were implemented and followed up. Frank Vang-Jensen has all that in spades. The board has now worked closely with Frank to design a simple, executable path to better returns to shareholders. I have met a number of shareholders, a large number of shareholders in the past six months.
The persistent request has been, "Give us a credible plan for gradually better and better returns over a period." Nordea has a board with bankers and ex-bankers as the majority. They are either still in operative positions or have just left their operational roles. This board with these bankers, these operational people, they have been involved very much so in the design of this new plan together with management. Now, furthermore, the management team that you are going to meet today certainly believe and are committed very much to the same goals that we have in the plan, and they will do what is necessary to reach those targets. What we present today, going linguistic for a section here, is a plan with targets. It is not ambitious, a word that I dislike in this context.
We, you, are allowed to have higher ambitions than this, but the targets are now set. Unlike the past, the variable remuneration of this company will now be hardwired to reaching and moving towards those targets. If you allow me to repeat myself a little, the new financial plan is not complicated. You will hear today a number of things that you have thought of about Nordea in the past few years. I think that's a very good thing. This is a simple plan. This is an executable plan. This is something we know how to do. There will be talk about customer journeys. There will be talk about processes, staff reductions, and lots of business as usual things, and we know how to do that. I'm sure that the business model for banks will be discussed over the coming years here and in other places.
I'm sure that will be difficult discussions. I'm sure that we will take part in them. However, we have an agenda internally, so we know what we will do in Nordea over the next few years, and that would make us a much stronger bank, a more customer-focused bank, and much more resilient to whatever happens in the banking world outside of our company. Final words. Delivering a plan is actually not a great achievement. A plan is not results. Execution has started. We enjoy that. We're excited by this. We understand that the onus of proof is certainly on us to show to you over the coming period that we gradually, but in a determined fashion, come towards our targets quarter by quarter and show you that we have chosen the right actions and the right path for the future of Nordea.
With those words, Frank, I hand over to you.
Good morning and good to see you. Thank you, Torbjörn, for setting the scene and kicking off the day. We have been looking very much forward to meeting you all. Let me say it up front, we are painfully aware that the bank recent years hasn't performed as expected. Our results have not been where we want them to be. The financial performance must be improved. Today, we will explain how we will do that and what will be the expected outcome. Nordea is now entering a new phase. The new phase is about to retake lost ground and make us truly competitive again. It's a phase with three clear priorities. One, to optimize our operational efficiency. Two, to drive income growth initiatives. Three, to create great customer experiences. You, of course, hear similar messages about banks all over Europe.
The usual topics, cost control and focus on profitability. Why should you take note now or trust that we have a credible plan? We have published plans before. What is different this time? These are all valued questions. It might sound strange, but we do not have a performance gap because of a wrong strategy. Our strategy is in place. We need to fix the basics, not look for fancy, complicated solutions, rather than getting things done and the right things to prioritize our work. What does that mean? It means focus on what creates value for our customers and for our shareholders, and then stick to it. It's about priorities and focus. It's not that complicated. It's just hard work with many tough decisions, a clear focus, and a tight follow up. Make sure that the things we do or decide also gets done.
The good thing is that our people know what to do. We have now decided on a new business plan and we have set new financial targets. It is a plan, as Torbjörn mentioned, that the leadership is fully committed to, and this work has been led by me and the business area heads. The recipe is simple. It's all about execution. Following time plans and do it in a resource-effective way. I don't believe in magic. I believe in hard work, deliver on our commitments, and personal accountability. Give people power to do their utmost, then support, challenge, encourage, and repeat. It is about delivering every day, and a little bit better every single day. We have now changed the way we lead the bank to improve execution. Improve execution focus through clear roles and simplified, changed governance structure. I'll be back to that a little bit later.
Today, we will address how we will meet our targets, how we truly will deliver on our mission as a strong and personal financial partner, and to be a good investment for our shareholders. That is our commitment to you. I joined Nordea two years, five months, and nine days ago, and I have been in the banking industry for 32 years. I've compared my previous experience in the banking industry to those I have observed in Nordea. I see many strengths. Our foundation is strong, very strong. We have great people and highly competent teams. We are a Nordic universal bank, the only truly pan-Nordic bank, and we want to be the leading in all segments we operate. We have de-risked and diversified part, or divested part of our business. Our credit quality is solid. The credit portfolio well diversified.
As a matter of fact, more diversified than any other banks in the Nordics. Especially when we talk about the Nordics, one of the strongest economies of Europe. In addition, the balance sheet is very solid. We are now operating in one legal structure, four Nordic home markets, four business areas. No more, no less. Our business areas are all leading in their field. A large customer base in Personal Banking with over nine million customers, and in Business Banking, more than 500,000 customers, corporate customers. We bank with almost all the Nordic large caps, more than any other bank in the Nordics. We have the strongest customer satisfaction within this area. We have a leading position in Asset & Wealth Management with more than EUR 300 billion AUM. Second to none in the region. This is an attractive starting point to develop from.
After a couple of years of intensive investments, upgrades, and mitigations, we have built a strong compliance foundation for all our operations. We have invested heavily, for example, in AML and KYC functions and processes. For example, many of our competitors are now following in our footsteps. We have already taken many steps forward. Let's face it, this has led to a partly inward focus. That is not good, but it was what was needed then. A lot of our focus has been on internal processes, procedures, and remediation processes. We haven't focused enough on what we all are here for, our customers. Making life better for them and doing business, much more business. This is why you hear us addressing operational efficiency and determination when it comes to simplifying the way we run the bank, the way we make decisions and develop new services and products.
It must be done faster, leaner, and in a less expensive way. We will do it. These reflections have led me to the conclusion. We have a strong foundation, very skilled people, and a solid balance sheet. We don't need fundamentally to change our strategy. We need to get things done. A clear shift in our execution capabilities. We need to step up. This is why Nordea is entering a new phase. The new phase of Nordea is not a slideshow or a project. It is our way of working from now on. It is how we run the bank today and tomorrow. The new phase of Nordea is about execution and retake lost ground. I want the bigger picture to be clear and easy to understand. I also think that we need to have perfection to nail all the details, too.
For the bigger picture, we have only three key priorities we are going to follow. Number one, we will optimize operational efficiency, make our engine faster, simpler, and leaner. Number two, we will make sure that we drive income growth initiatives. Number three, we will create great customer experiences in all business areas to each and every one of our customers. Let me double-click on each of these priorities. Operational efficiency. In the current environment with fierce competition, new players, and low interest rates on top of that, we need to improve our efficiency significantly. We need to optimize our engine room and lower our cost base. In a low-growth environment, cost control is key. Ultimately, this is a leadership issue. I want leaders to look at all corners of our business and scrutinize. Everything will be challenged. Nothing is too small or too big.
I want to create a strong cost culture, a culture where leaders and all employees in general are proud of being the ones having the lowest costs. It also states fewer people here on the slide. Yes, that is the reality. Since 70% of our cost base is people-related, the targets we have are not possible to deliver without having impact on our employees. Unfortunately, we will be fewer employees going forward. The main parts of the reductions will take place in the head office and central functions. In general, while impact in customer-facing units will be much smaller. I believe that it is possible to achieve this without hurting the business. We have better digital solutions and tools today. Our sales and service productivity should improve. I also want to be open here.
It is not the first time we're talking about cost savings in Nordea, and we have had many cost programs. Here comes my view on cost programs. I don't really like cost programs. I believe in a strong cost culture that creates competitiveness. By that, you can give long-term commitments to customers and to shareholders and become sustainable. We will deliver better results with a strong governance and a continuous follow-up and benchmarking on the cost development. Per business area, per unit, throughout the entire organization. Ultimately, this will strengthen our cost culture. The plan covers all elements of costs, workforce planning, external consultants, salary principles, meetings and travel culture, suppliers, the level of needed support from the head office, and et cetera. Based on this plan and the targets in it, we will take action, deliver, and follow up.
I give accountability to leaders and empower them to make decisions because I trust people, but I will follow up closely the progress, the targets, support, and guide when needed. Another important measure is that we will take the next steps to leverage our scale. We will simplify processes and organization. We have centralized all operations into one unit, one technology, one finance, and one communications function. This we did not have one year ago. Now we need to leverage this consolidation. We are the biggest Nordic bank, and we will leverage on our Nordic scale and at the same time be very local in our customer interactions. Getting that balance right is crucial. A good example of the benefit of scale is the upside in simplifying our products, processes, and applications. We have been simplifying before.
You have probably heard a lot about that. For example, we still have 600 account products. We only need half of that. The number of account products will be down by at least 40% in 2021. We've had a good start already by reducing 60 products. The same applies to our systems. Collateral systems will become fewer. Almost 50 payment systems will become five. Such elements, and we have many of them, will optimize our operational efficiency and make us able to meet our cost income for the next three years of 50. The outcome we will have, or the outcome will have lower costs, better functionality, and a more efficient and less complex engine.
Even though cost control is a starting point, finding the right balance between cost and income, we will not meet the targets in our plan without retaking lost ground in the markets and turn around the negative income trend. I have strong expectations on our growth initiatives. Simplified processes and freeing up more time for meeting customers. All people in the group must focus on our customers. To give a very clear example and direction, there are only two types of employee groups. One, our people working directly servicing our customers, and two, all the others, including me, who are here to help the ones that work directly servicing the customers in all channels, digitally and physically. We have seen continuous signs of improved business activity in the last quarters, step by step continuously.
Chris and the business area heads will show more details, but I'm personally very happy to see that asset under management inflow now is not only recovering but actually growing again, and we have much, much more to be done within the important area of savings. I'm also satisfied, very satisfied actually, seeing improved activity and increased market shares in the important mortgage business, and that's across all markets. We have been losing ground for the last three to four years, but now we are starting to pick up in all markets. For example, sales record in Finland, and for the first time in more than three years, we are back in business growing and taking market share in Sweden. Also, in corporate lending, we are now growing steadily. Our main focus is on organic growth. We will invest in prioritized segments in the core of our business.
We are also ready for tactical M&A bolt-ons within our core segments. If we see room for income growth, we will size the opportunities. Create great customer experiences. At the end of the day, long-term success can only be achieved by creating great customer experiences. I meet customers every day, and the reason for that is I want to listen, learn what our customers ask for, how customers experience us, and how we can improve. For me, Nordea has always been known for strong expertise. Just a couple of examples. Last week, I joined a corporate advisory meeting. The customer was bidding for the competitor in that industry. We brought in our specialists, and within 48 hours, we had granted the acquisition financing. Tight timeframe, quick and professional execution. A bit different field.
Some weeks ago, I visited one of our mortgage units a Sunday and participated in a customer meeting with a young female who had just fallen in love with an apartment, her first one, and asked for our help. We were there, as we are now, all days and evenings and Saturdays and Sundays. We advised her, granted her a loan, and helped her to realize her dream. A Sunday afternoon in our new way of working in our branch network, anywhere, anytime, and on every platform. This is Nordea. universal bank with high competence teams to meet the most demanding customers. On the other, we are a bank for every need, anytime and anywhere. We will continuously deliver on this as a safe and trusted partner, which will do things in a right way, in good order, with the right values.
We have the ambition to be leading in many dimensions. One is within sustainable banking. Nordea is one of the founding banks for the UN Principles for Responsible Banking and giving or providing commitment in this field. In our business, we make sustainability concrete and real to our customers. Green bonds, green funds, green loans, green mortgages, and sustainability as a part of our advisory sessions. We have taken lead in this field, and we will accelerate to keep that position in the future. Nordea is a Nordic bank, but I don't believe there is such a thing as a Nordic customer. Customers are always local, all individuals, having their own hopes, ambitions. At Nordea, we can create great customer experiences by combining our cross-border teams, high-competence people, and our ability to invest in the core services. That is us, personal and local with a Nordic mindset.
You have heard about our new business plan and the three key priorities, this is worth very little without the term execution, not to done in a very good manner. I believe we have ensured that thanks to these three objectives, we have clear targets and priorities. These have been made in an interactive process, and all targets and priorities are strongly anchored in the BAs and support functions with solid plans. In addition, awards and performance bonuses will be closely connected to delivering on these targets. I have given increased accountability to the business areas. The business areas will have full P&L responsibility and accountability. This means that they are responsible for all income, costs, customer experience, deciding on investment priorities, and to manage their capital efficiency.
Business areas define demands on group functions and what they need to perform and achieve the targets. Thereby having much more direct influence over corporate costs. Business areas will be follow up on the targets and appropriate operational KPIs. Cost-income ratio and RoCE are key targets. The third part of execution-oriented approach is a simplified governance structure. More personal responsibility, fewer larger committees, and not a complex matrixed organization. We want clear roles and clear responsibility. Easy to understand, easy to figure out, and who has the responsibility and the decision power, and easy to follow up. We'll review the organizational structure and make the needed adjustments in the coming month. Nordea is led by a business-driven process from now on. We want to be clear, simple, consistent, and more accountable. It is our way to meet the expectations and targets.
We have set our financial targets for the coming three years. They are in 2022, cost-income target of 50%, return on equity above 10%. We have, of course, made detailed peer comparisons before deciding on these targets. When we deliver on the targets, it will mean a significant change and value creation from where we are today. I believe we will be competitive when reaching these levels. My focus is now, together with the Leadership Team, to deliver on the targets. Once that has been achieved, we decide what are the next steps and levels. Our capital and dividend policy are as following with full year 2020. Capital policy, 150-200 basis point management buffer above the requirement. Dividend policy, 60%-70% payout profit to shareholders. Excess capital is intended to be distributed to shareholders through buybacks. We will use our capital efficiently.
Let me go back to this in a minute. The dividend policy has been set to reflect the current environment. Target is clear, stable, and competitive dividends to our shareholders in the future, but also to create business flexibility and secure that we develop the company for the long term. With these targets, we will bring the cost efficiency and profitability to a healthy level. We will deliver these targets, and then we continuously will improve our performance from there. Each of the BAs has solid plans to reach the targets and are fully accountable. In Wholesale Banking, we have set a new strategic direction and with a repositioning in markets. This will lead to a considerable capital and cost reduction. This is the first step to improve Wholesale Banking's performance. It will be a more focused and more profitable Wholesale business.
All business areas need to reach a profitable level where they add value to the group. We will take all necessary actions and decisions to do what is needed. I'm convinced that this is the best plan for Nordea for the coming three years. I'm also convinced that we have a great upside in Commercial & Business Banking. We have shown a stable development the last years, but more can be done. That will be delivered by an improved sales productivity and continuous lower costs, but also showing great, strong actions to improve customer experience. In Personal Banking, I might be a bit biased, but the task is straightforward. Better customer experiences, full focus on business activity with a strong cost discipline. In Asset & Wealth Management, it is about leveraging our fantastic platform and strong investment performance.
Asset & Wealth Management is our growth engine. I expect higher sales, activity, and financial effects from the investments made. As Snorre will tell us how that will be executed in the years to come. I'm not only expecting BAs to work with hard prioritization and capital allocation. We will also take a more active group approach to how we allocate capital between business areas. We'll make sure the capital is employed where the return outlook is the best. With profitable growth opportunities in Personal Banking and Commercial & Business Banking, more capital is expected to be allocated to these two areas. The growth outlook for Asset & Wealth Management is indeed attractive. However, the capital need is limited. On the other hand, we will make a considerable decrease in Wholesale Banking capital base.
All in all, the active capital and resource allocation means that we allocate capital to areas with an attractive organic growth outlook. Investments and resources strengthen long-term competitiveness, including IT and product development. Room for M&A bolt-ons will strengthen our core business. Stable and predictable dividend policy with a potential to do buybacks and contributing to a return on equity above 10%. All actions will be measured carefully against each other. If the return is not satisfactory, the capital will be reallocated or distributed to our shareholders. Let me sum up. Our new phase has begun. With the updated business plan and new financial targets, focusing on optimizing operational efficiency, driving income growth activities or initiatives, creating great customer experiences, we will relentlessly focus on execution, follow up, and make sure the necessary actions are being taken.
We will create a performance culture. I will do what is needed together with the leadership team to make this happen. With these elements and the upside I have seen in the business areas and in the bank in general, I'm convinced that we will improve Nordea's financial performance and bring significantly more value to all our stakeholders. Let's look at the numbers. Chris, please, on the stage.
Thank you, Frank. Good morning and welcome. As Frank said, we made a strategic review resulting in a new business plan and new financial targets. Before I take you through the financial construct in more detail, I want to highlight three things. First, we have a strong financial foundation, and with a new capital and dividend policy, the flexibility to run and grow our business. Our financial performance is not competitive to our peers, and we are not delivering the returns that we are capable of delivering. That is why these plans focus so much on operational efficiency on both cost and income. This plan is an appropriately ambitious plan and with a genuine capacity to deliver. Let me start setting out how Nordea looks from the CFO seat. First, we have a strong financial position.
We have all the tools in place to deliver to shareholders. Our strong credit rating is a competitive advantage. We have some of the cheapest funding compared to our Nordic peers and compared to the European banks. Our capital base is fully loaded and at target. Our credit quality has been proven over many years. Our outlook remains solid. Our liquidity is comfortably above all regulatory minimum. Our business have a proven ability to generate surplus capital. We also have a diversified business model across geographies with a roughly equal contribution of income from all the Nordic countries, and we have an even split of income contribution from both household and corporates. Our composition of earnings have improved with net interest income now being about 50% and with items on net fair value below 15%. As a result, we have had low volatility of earnings.
On top of that, we have already done the work to focus the bank and to de-risk the franchise further. As said, we have not delivered for our shareholders in recent years. Just to be blunt, the next slide will show that. If we go back a few years, our return on equity was competitive versus peers, and we did have a cost-to-income ratio below 50%. Our revenue has suffered since then. Both the chairman and Frank talk about the divestment and de-risking of our non-core assets such as the Baltics, Luxembourg, and Russia. The cost did not follow out with the same speed. More seriously, we also suffered from lower performance and loss of market shares in the Nordic markets. At the same time, we made the necessary investments in our IT infrastructure and digital platforms.
We invested over EUR 800 million in a more sustainable and compliance operation, risk and compliance operation. Simultaneously, we undertook the enormous and important work to move from four banks across the geographies to one bank. Subsequently relocated to Finland and into the Banking Union under a new regulatory regime. All of this led to our cost-to-income ratio being uncompetitive. Our shareholder returns are lower than peers. Most importantly, the returns are lower than what our franchise is capable of delivering. Following the strategic review, we now have new targets. Our confidence in achieving these targets is validated by the fact that we have achieved them before in the not too distant past, that we have now dealt with a lot of the issues of recent years, and we therefore now have the platform to deliver them.
It is worth explaining why we have chosen these targets. The return on equity is the primary target and is obviously the one that is most correlated with the shareholder returns. As the chairman earlier said, we have previously run with a hard cost target. We have delivered on this target, but this has actually not served our shareholders well as our cost-to-income ratio has gone up steadily. Therefore, for this plan, we have chosen cost-to-income ratio as we believe it is better aligned with shareholders' interest since it commits us as a management team to always manage our cost base to the income that is available. Before I explain how we deliver on those targets, I just want to briefly touch upon the assumptions in the plan. We assume that the economic environment that we face today does not improve.
Crucially, we assume that interest rate remains as they are today, i.e. negative for longer. That is both policy rates and the yield curve. We continue to expect margin pressure in certain parts of business, and certainly no recovery in any margins in any business. On GDP, our assumptions are between 1.5%-1.8% across the Nordic region, which is pretty much in line with consensus. Those are the underlying assumptions. Let me start by addressing the fact that our cost-to-income ratio is too high. How we will return it to 50% whilst absorbing the necessary investments and cost inflation in our business. We expect an underlying cost base in line with our guidance for 2019 of EUR 4.9 billion. This is adjusting for the one-offs, but it is including the resolution fees.
We target gross savings of EUR 700 million to EUR 800 million over the planning period. We are accelerating our plans for 2020, and as a result, we specifically aim for a cost base below EUR 4.7 billion in 2020. We are committed to continuous reductions thereafter. This plan also includes cost to achieve. In total, we expect net reductions from 2019 of at least EUR 350 million by 2022. As I said earlier, our target is a cost-to-income target of 50%. That is in order to balance income and cost together. How will we deliver it? Our cost ambition, alluding to what Frank said earlier, is not about a new diet or a short-term fix. It's about a change in lifestyle. That means we need to stop doing things. We need to do things differently.
In our plan, the biggest driver of cost is of course a reduction in headcount as it is in most banks. This cost takeout in this plan is at least EUR 150 million more than the previous plan, and given staff is around 70% of the cost base, this will inevitably lead to further reductions. As of today, we are not in a position to communicate the planned reduction in headcount. As you will understand that there are some important local union and people processes that we respect and we need to go through in the right way, and these processes are currently ongoing as we speak. Frank mentioned that the majority of these reductions will be in the head office functions and central functions.
That is partly because many of our large change programs after the last few years, that built up very, very fast, are now delivering and are part of the daily operations. We are further increasing our nearshoring to our operation center in Poland. That will be over 20% of our staff in the next few years. We will reduce our Nordic and Polish consultants by a further third, and we will continue to automate, but more importantly, reduce both product and processes. Frank mentioned some statistics on the product closures that we've made. Over the years, we have built up many different local processes in the various business areas. For example, in credit processes and in KYC processes. What is different now is that we have consolidated the IT and the operations in single units.
That makes it easier to standardize, automate, and streamline the processes to be able to leverage them across the whole region. There will be no more acceptance of several systems built up in different areas for the same purpose. That is part of this lifestyle change. Now, while we will continue to invest in technology, there is also scope for a reduction in run costs, decommission legacy local platforms. To give you an example, we have many local net banks, and one of our local corporate net banks will now be decommissioned and replaced by a Nordic net bank. We are aiming to close our application by 20%. Of course, we are moving to the cloud. You've heard much of this from us before, so what's different?
Well, I'll try and give you one further example. We have spoken to you about the scale benefit of being Pan-Nordic. Last year, we rolled out our new mobile banking platform in Finland. This year, we rolled it out in Sweden. As we speak now, it is actually live in all of the four countries in the Nordics. That means when we create an app or a feature, or we roll out a new tweak on a product, we only need to do it once. Not four times, but once. This we have not been able to do before. This we can do now. You will note that this does not just improve cost by doing it just once instead of four, but also leads to a better customer outcome. Our plans are not just about costs.
We are confident that the building blocks are in place to improve revenue growth and take back the lost ground that the Chairman and Frank talked about. There are various reasons for our loss of market shares, but there is no doubt that the vast amount of change and the speed of change over the past few years, have led us to lose focus on our most important asset, which is our clients. That period of significant change and restructuring has now come to an end. The evidence on this slide shows how I, as a CFO, can gain comfort that the expectations of improved market share has substance. Frank mentioned mortgages, on this slide you can see, on the top right-hand side there, that we have improved our share of new mortgages in Sweden, which everybody likes to talk about.
Our share of flow is now in line with our share of stock. Although we have a lot more work to do, we are growing and gaining share in all countries, and activity metrics that we follow up on customer meetings in personal banking is up by 20%. Sara will talk a bit more about that later. We see similar evidence in corporates, especially in Sweden and in Norway, where we have the opportunity to grow and to grow with good returns. Going forward, and in this plan, you'll see it on the numbers on the chart, we expect to grow broadly in line with recent growth, both in household and in corporates. In our savings business, we now have had three consecutive quarters with positive inflows, which represents 4% of assets under management, if annualized. Snorre will talk about that a little bit later.
Let us now turn to capital. This has been a journey. As you know, Nordea entered the banking union one year ago with the aim of joining a stable and predictable regulatory environment with a level playing field. During this period, we have operated under a so-called transitional capital regime, which was based on the nominal capital commitment we made as part of our application to the banking union. It's been an intense transition as we, in just one year have undergone the same exercise that many SSM banks did over many years, such as TRIM, the comprehensive assessment, the AQR, which by the way, we were one of the first banks who had the new AQR manual that incorporated IFRS 9 accounting standards, and we have received further clarity now on our systemic risk buffer and countercyclical buffers.
We will soon receive our final SREP decision that will be valid from the 1st of January 2020. As such, we are gaining further clarity, and we can now announce the new capital and dividend policy. In terms of the capital policy, we will operate with a target management buffer of 150 to 200 basis points above the regulatory requirement or the MDA level. This strikes the right balance between an ample buffer to our MDA, whilst for our shareholders avoiding being excessively capitalized. We have chosen a buffer and made it relative to our requirements rather than a specific CT1 target, as we still foresee some movements in the requirement level with especially local supervisors revising macroprudential buffers and also the path to Basel IV.
Based on our current draft SREP, we can expect a Pillar 2 requirement, a P2R, from the SSM of roughly 1.75%. This is in line with many SSM peers. This would imply a pro forma CT1 requirement of just over 13% in 2020. Please note there are also some local supervisors that are increasing the countercyclical buffers in 2020, so towards the second half of 2020, we expect to have a pro forma CT1 about 13.3%. As such, going forward, we expect to operate around 15% CT1 ratio in the first quarter of 2020. Now, in terms of the uses of the capital, I want to say a couple of things. First, it is to be compliant to our requirements and our capital policy. That's priority one.
Two, we aim to support the organic growth of our business in our core Nordic markets with our core Nordic clients. Of course, we recognize the importance of dividends to our shareholders, and hence our new policy has a high payout ratio of 60%-70%. This payout policy will enable us to generate capital on a quarterly basis supporting this capital policy and our ambition to pursue profitable growth, as well as to cushion against adverse external events that we can't foresee. As Frank explained, any surplus capital will be distributed to shareholders and with a clear management intention to do that via share buybacks as a tool to optimize long-term shareholder value. If appropriate and accretive to shareholders and complementary to our Nordic franchises, also tactical bolt-on acquisitions.
Now, let me now bring together the financial plans to explain how they will drive return on equity higher. Firstly, we expect to grow revenues. This is a combination of higher volumes as our market shares continue to improve, both in our lending and in our savings products. This will be partly offset by lower margins, reflecting our assumptions also on the entire interest rate curve remaining unchanged from current levels. Secondly, we are target a significant reduction in costs, as we outlined earlier. Finally, our capital allocation within our business will change. We will become more forceful in actively reallocating capital to higher return business, both within the business and also across businesses. Martin will soon talk about the Wholesale Banking strategy. The Wholesale Banking repositioning of their business will result in a 20% reduction in capital consumption over the period.
Of all income, cost, and capital, all of this taken together will cause our return to go above 10%. Let me end on a personal reflection. As many of you know, my family wishes to relocate back to the U.K. In the spirit of Brexit Britain, my family's taking back control. As a departing CFO without agenda, my view on this plan is that there is an appropriate amount of stretch in it, and equally, there is a genuine capacity in it for Nordea to deliver these targets in 2022. I have personally bought shares in Nordea in support of that belief and in the team's capacity to execute and deliver.
With that, thank you. We are now going to take a break for 15 minutes, so I'll see you at the coffee, but please come back here in 15 minutes promptly as my GLT colleagues will go through the strategy in their businesses. Thank you very much. Welcome back to the second session of this Capital Markets Day. I forgot to actually say one thing in my opening remarks. There will be a joint Q&A session after all presentations. They will have the opportunities to ask all sorts of questions, and also from the webcast. We will now go into the BA session of this Capital Markets Day. I will start to introduce my dear colleague, Mr. Martin Persson.
All right. In response to a challenging market environment, a punitive capital situation, and to meet our customers' evolving needs and demands, we are today announcing a new strategic direction for Nordea's market-leading Wholesale Banking business. This plan will enable us to become more profitable, improve shareholder returns, and drive long-term growth in our prioritized areas. As an integral part of the new strategic direction, we are increasing our focus on our core Nordic customer base to capture and offer new opportunities and services. The strategy will allow us to focus on our core strength, reduce capital consumption, complexity in costs, while creating a more agile business model for an evolving market environment.
With this, we target a reduction of approximately EUR 1.5 billion of economic capital and EUR 8 billion of RWA, and approximately EUR 200 million in cost takeout, corresponding to a gross reduction of approximately 20% of both capital and costs, with significant return improvement from current unsustainable levels. Building on our core strength as a true Nordic Wholesale Banking, we will invest more in our advisory services within our core areas, such as ESG, where we are building leadership as well as expanding our customer offering in advising and distributing green bonds and loans. We're also strengthening our core transaction banking and trade finance services. Finally, we will launch Wholesale Banking X as the incubator unit for new business initiatives aiming to fuel our income growth. What is the new strategic direction all about? It rests on four main pillars.
Number one, we will reduce balance sheet commitments where we do not meet cost of capital and/or are unable to reprice to a more sustainable level. In addition, we will enhance our focus on supporting growth sectors and businesses which are compliant with the UN sustainability goals, and thereby also reduce risk and complexity in our EUR 50 billion lending portfolio. Number two, in our markets business, we will streamline our business model by simplifying our product range and reduce the capital consumption by approximately 25%, especially in the FICC area, whilst further leveraging our partnerships and infrastructure providers for global commoditized products. Number three, with ESG as a core business, we will continue to develop the offering beyond the successes we have had with loans and bonds.
Additionally, we are launching Wholesale X to proactively deploy digital capabilities and business acumen in pursuit of creating the future solutions for our customers. Number four, internationally, we will prioritize the critical Europe and U.S. markets for our core Nordic corporate and institutional customers to further develop our service offering outside of the Nordic region. A new global support desk will be established in the Nordics to strengthen the continued support to our core Nordic customers globally. Let me now take half a step back and take you through the starting point of what we do in Wholesale Banking, our strong customer franchise, and the need to reduce capital consumption before we get into the details of the new strategic plan.
Nordea's corporate and institutional customer segment spans from daily banking needs, that Erik will take us through in the next session, to the larger and more complex customers that sits in Wholesale Banking. Our corporate and institutional banking capabilities range from core recurring services such as loans, deposits, payments, AutoFX, spanning into the more advisory-led capital light capabilities, as you see on the bottom left. We have had significant headwinds from falling interest rates, whilst capital requirements have increased significantly over the past years. This combination has been difficult to mitigate, especially in our markets business and more specifically in our market-making area, which essentially accounts for the full EUR 300 million drop in Wholesale Banking income since 2017. Our starting point in creating a less volatile, smaller, and a more profitable Wholesale Banking business is strong. We come from an all-time high customer satisfaction among our large Nordic corporates.
We have very strong product capabilities. The result of our DCM franchise, shown in the middle here, is one of several tangible examples of that, being a dominant player in the Nordic region with 17%-18% market share that are supporting our corporate customers with ongoing loan-to-bond migration. To the right, you can see our very strong capabilities in the sticky, prioritized, and crucial transaction banking offering. A very strong starting point. Our profitability is simply too low. Wholesale Banking is currently around 20% of income and cost for the group, whilst our capital consumption is 30%, resulting in the current unsatisfactory profitability. In response to the challenging market environment and punitive capital situation, we have developed a plan that, as I mentioned earlier, builds on four main pillars. First, reduce low-return assets. Secondly, streamline markets business model. Thirdly, invest in ESG and WBx.
4, optimize our international footprint. This will lead to a gross reduction of approximately EUR 1.5 billion in economic capital and EUR 8 billion of RWA by 2022. Further, significantly reducing our complexity and volatility will take out approximately EUR 200 million in costs with a significant return improvement to 10% from current unsustainable levels. To zoom in a bit further on the respective pillars, I can add that in the low-return assets area, we will reduce low-returning on-balance-sheet commitments, review selected subsegments, and increase active capital reallocations. When it comes to streamlining our markets business, we will run a significantly more capital-light operating model with a targeted 25% capital reduction. We review our products to reduce both complexity and cost, we will increase digital distribution and leverage more on our existing and new partnerships.
Regarding investments in ESG and Wholesale X, we intend to take a market-leading role in ESG advisory-driven offering, where we see a clear and strong customer need that spans far beyond our current stronghold within green bonds and loans. This is also clearly the most frequent demand-driven discussions I have with our large corporate and institutional clients currently. In fact, a discussion I had as recent as yesterday with one of our most important corporate customers. Wholesale X is a new unit driven by data and digitalization that will operate as an incubator, reviewing opportunities with the aim to find new business models across all our business units to fuel our income growth.
Finally, to optimize our international footprint, we will leverage our U.S. stronghold through our New York branch, and we will create a global customer support unit and team up with partners to enable a strong and broad continued service coverage outside our Nordic region. Let me give you a few proof points from our current activities underpinning this plan. On the left-hand side, you can see our current corporate economic income split by customer turnover. Economic income is here defined as income minus expected losses, minus the tax, and minus cost of capital. Approximately 90% of our economic income comes from customers with a turnover below EUR 5 billion. We will reduce balance sheet commitments where we do not meet cost of capital and/or are unable to reprice to a more sustainable level.
On the right-hand side, we have split economic capital and income for markets to illustrate how complexity can drive capital consumption and reduce profitability. We will simplify our product range and reduce capital consumption, especially in the FICC area, and leverage partnerships and infrastructure providers for global commoditized products. To conclude, Wholesale Banking has tremendous relationships with our corporate and institutional customers, strong market positions, and market-leading competencies and talents across all our four Nordic markets. As Frank has clearly stated, we are now fully committed to execute on our new strategic direction, centered around four main areas that I have gone through with you today that will enable us to become more profitable, improve shareholder returns, whilst remaining the first choice for our top talents to work and develop.
This will lead to a significant improvement from current unsustainable profitability level, still trailing Nordea Group average return, but contribute positively to Nordea's cost-income ratio by 2022. Thank you. Let me now hand over to Erik, who is running our strong Commercial & Business Banking, who will walk us through the strong trend that we have seen since 2016. Erik.
Thank you. Thanks. No, I guess not. There we go. Thanks. Commercial & Business Banking or CBB. In Wholesale Banking that Martin just presented, Nordea serves the 500-600 largest corporate customers in the Nordics. Commercial & Business Banking, we serve all the other corporates. It's everything from large listed companies to a chess club with 10 members. We serve some 550,000 customers. The customer segment has both complexity and large number of customers. The common denominator is the corporate entity. Why is CBB such a nice business and a privilege to represent? In short, it is a stable business that has good momentum, and I believe more potential. We know what works, thanks to our customers, and we can improve on our operational efficiency. Why is it stable and has good momentum? Well, income per FTE has increased with some 20% between 2016 and 2018.
ROCAR has increased with some 1-2 percentage points between 2016 and 2018. We will continue to improve. Income per FTE is expected to grow with approximately 10%-15% between 2019 and 2022, and ROCAR is expected to continue to improve with about 0.5-1 percentage point per year till 2022. How can we know what works? Well, it is really thanks to our customers. We have a people-intense business model complemented with digital. What we can see is that when our customers have interacted with our staff, customers are happy, employees are happy, and we make good business. How can we then improve our operational efficiency? We are developing a digital-intense business model complemented with people. This is really where we need to improve, and it has potential.
Customer satisfaction is way too low, and there are many customers in this segment, resulting in a big impact on our public perception and brand. We have a plan on how to turn this challenge into an asset. On this slide, you can see our two major customer segments. Let's start with the one at the top, business banking. In the business banking segment, we have about 20% of the customers and 80% of the income. It is a people-intense business model being geographically close and/or via online video meetings, complemented with digital. How do we make the money? Our strength is that we have people in front of the customer that knows the customer's business really well, and that Nordea is able to provide a wider diversity of specialists than any other Nordic bank.
It becomes good business by balancing the customer's needs and willingness to pay with the exposure we provide of specialists in front of the customer. That's the value creation by the customer responsible. This also results in good business selection by targeting customers who have a potential wallet that can motivate this level of service. It also shows the importance of all the different product units, which together with the customer responsible form a value-creating totality. One data point of this importance is that CBB is the largest customer segment in Markets, and Markets is the largest product unit in CBB. When our staff interacts with our customers, our customers are happy, our employees are happy, and we make good business. In that sense, we're in a very good position to actually know what works.
It is a consistent message from the customers I meet that they value the knowledge that the customer responsible have about their business and the specialists that we're able to make available to them. Of course, we need to do more of what works. The way we will do it is to reduce the massive time spent on non-customer interaction. The key to succeed is to improve on operational efficiency. To summarize and connect to the three main messages, this section really relates to stable business with a good momentum. We know what works, and we can improve on the operational efficiency. What about Business Banking Direct, then, the other major customer segment? Customers are happy with us when they interact with us in person, via online video meetings, or on the phone.
They're not happy with us if a big part of the interaction is digital, or that they don't really get that people-based interaction fast enough. Online, this is by far our largest customer segment with respect to number of customers. It also contains a large number of customers that may either have a other bank as their house bank and only use Nordea for payment services, or be a chess club that only have the need for very basic daily banking. This is where we need to develop a scalable digital model complemented with people. By making it easy to do the basics, we will improve customer experience and improve cost to serve. Put it another way, we need to deliver an omni-channel on a digital foundation, delivering a personal customer experience.
Just imagine a startup that already has the right to contact 200,000 customers and that the contact information is easily available. That would have an interesting valuation. Through delivering digital tools, we can turn this challenge into an asset. How does this then connect to the three main messages? There is definitely potential in this area, and we can improve on the operational efficiency. How well are we doing with the entrepreneurs? Their customer satisfaction is significantly better than online, so I would say rather well. Also here we need to improve. They are happy when they interact with our staff, but we need to develop better digital tools for both the customers and for our staff to reduce the cost to serve and enable people interaction where it really creates value.
One of the tools that we have developed already is an online video meeting capability. The customer is on video, the customer responsible is on video, sharing material that everybody can see. The customer responsible can patch in and out different specialists during the meeting. In addition, if the customer participates with more than one person, they can be at different physical locations on separate video links. This new capability is already in production, and it has been and will continue to be an important lever to increase our productivity. This is a good example of an omni-channel on a digital foundation delivering a personal customer experience. This is appreciated by the customers because they can be where it's most practical for them to be, and we can deliver a people intense service model at a materially lower cost. How large part of Nordea is CBB?
We're about one quarter of the total business. The ROCAR and the cost income ratio is not good enough compared to peers. In Q3, we've reported a cost income of 54% and a ROCAR of 10. Since 2015, we have continuously improved both the cost income and the ROCAR. We will continue to improve till 2022. Our distribution channel is at par with competitors or maybe even a bit better. With distribution channel, I mean income per FTE, where the FTE number represents the number of people in our customer responsible unit. When comparing income to FTE, which of course have many challenges as a measure, but still tells a story, we have improved with about 20% between 2016 and 2018. We expect to improve with about 10%-15% till 2022.
We have also improved our ROCAR since 2016 by about 0.5 to one percentage point per year. This is the ROCAR changes produced in the distribution channel, keeping external changes constant, like capital models and resolution fees. We expect to improve in our distribution channel with about 0.5 to one percentage point per year. What's our thinking on how we should deliver improved cost income and ROCAR? For 80% of our income, we're in a very good position. We know what works, we have a good track record of continuous improvement. We will continue to do business selection, pricing, cross-selling, customer acquisition. We continue to leverage specialists across the bank, put them in front of the customers, creating good business by balancing the customer needs and willingness to pay with the amount of specialist exposure. We will develop a digital scalable model for daily corporate banking.
This will foremost improve the customer experience in the large tail of customers in business banking direct or online. This will also reduce our cost to serve. If we make it easy for the customers to solve their daily banking needs, we will free up resources to be used where we both create customer value and good business. We have started to roll out our new digital front end. It is in production in Sweden and in pilot in Denmark and Finland. We will have it in production in all four Nordic countries by 2021. In addition, we have created an online video meeting capability that enables us to offer a people-intense service model to significantly lower cost to serve.
We're able to deliver a customer experience with multiple specialists and at the same time increase productivity, making it possible for us to offer it to customers in all geographical locations. In 2018, we delivered some 29,000 video meetings, and for the full year 2019, we expect to have done some 40,000. We need to free up time to increase our time with customers, resulting in more happy customers, more happy staff, and good business. The two processes that are by far the most time-consuming are KYC and credit. On average, they represent today some 40%-45% of the time in front office. By improving the instructions and our digital support, we will have a better customer experience and reduce the cost to serve and have more time with our customers.
This is about continuous improvement, which we've delivered since 2016, and we will continue to deliver this till 2022. We need to become much more like the manufacturing and producing industry, always focusing on continuous improvement, allowing the one closest to the problem also be a part of the solution. There is not one big or two big things that will make this business jump. By continuous improvement, we will find those 0.5 to one percentage points ROCAR improvement per year in the years to come. As Frank said, it's about getting the basics right, continuously making the instructions easier to follow, continuously making the digital solutions easier for customers, staff. There is a great potential to improve the basics. Our staff are spending close to 20% of their time on KYC and 25% of their time on credit. This is the potential.
By reducing this with some 5- 10 % points, we would significantly contribute to our cost targets during the next three years. In addition, the customer experience today is not good enough. With better instructions and better digital tools, both for customers and staff, we would have a better customer experience. We would free up time to do the things we know works. When we meet the customer, the customers are happy, our staff are happy, and we create good business. To summarize, CBB is a stable business that has good momentum and more potential. We know what works, thanks to our customers, and we can improve our operational efficiency. This will deliver 0.5 to 1 % point improvement of ROCAR per year and reach a cost income of mid-40s by 2022. Thank you.
Please welcome Sara on stage, that will tell us how we will get the business in Personal Banking going.
Thank you, Erik. I'm really excited to be here and share our plan, how we will improve customer satisfaction and cost efficiency in personal banking. This plan, to me, is both robust and inspirational. I'll start by highlighting few key points in our plan. First of all, in this changing banking environment, we believe in relationship business model that includes high availability and competent advice to our customers, and this is enabled by great digital customer experience and an omni-channel service model that we offer. Secondly, now that we have our new mobile platform in place in all of the four markets we operate, like Chris highlighted. Our ability to start capturing the scale benefits has just improved significantly. That is both in growing sales as well as increasing cost efficiency. Thirdly, we are focusing on profitable growth in three income-generating areas, which are home, savings, and consumer finance.
Today, we see good signs of improved business momentum already. Before now going deeper into these topics, let me just quickly tell you, where do we come from and where are we today? Our foundation in personal banking is great. We have a broad customer base of nine million customers. We have been successfully building an omni-channel service model where our customers can choose which way they want to bank with us. Omni-channel offers both digital and physical advice and multiple ways for our customers to interact with us, whether that's online meeting, visiting a branch, chatting to us, calling us, you name it. We also have a long history and a culture of being good at in cross-selling. Yes, we need to do more. We are not happy where we are today. We have potential for more.
Our market position actually allows us to grow and take market share. That is especially in Sweden, which is the biggest economy and market in the Nordics. In regards to customer satisfaction, yes, we need to do much more. This plan includes actions for it. Good news is that there is a good traction already, and that's especially in the mortgage business, as you already heard from both Frank and Chris. In Sweden, we are growing and we are taking market share. That is actually the case also in all of the markets. We are growing in mortgage business. The turn has happened. We are on an upwards trend. Now, let's zoom in to our plan, and I'll start with the digital platform. Before that, I'll tell you actually today's share of business that personal banking represents.
We bring 41% of the income of the group. Our costs are 40% of the group's cost base, and we consume 33% of the capital. The clear focus is, as already said, to improve cost efficiency going forward. Now to the digital platform. Today, large part of our customers are already banking with us digitally, using our digital services. Please note that the very same customers are banking us also other ways. It is not digital only, but we do see the digital usage increasing with speed. The logins in our mobile bank are four times more than the logins in the net bank, in internet banking. There's a clear difference in the mobile bank, and that's increasing month after month.
What we have learned is that the customers using our digital services, they are more satisfied, they are more active, they are more engaged, and they're also more profitable. Digital customers bring twice the income compared to non-digital customers. This is interesting, customers using our mobile bank bring three times the income compared to non-digital customers. What our customers tell us is that we have a top-notch mobile bank. That can be seen in the ratings in the App Store, where the customer experience that we offer is at the top, both in iOS as well as in Android. That's great, isn't it? What is the one thing that our customers wish from us, ask from us? That is us to be more proactive. Let me tell you, we will.
That we have the digital platform in place, we tap into a huge potential of care and sales interactions with our customers and opportunities to improve customer satisfaction. With this setup, we shorten the time to market and we have fast rollout cycles of bringing new services to our customers in all of the four markets we operate. This is exactly the scale benefits that have been highlighted already. This is about lowering the development cost, doing only once, not four times into four markets. We have said that we will deliver a mobile platform. That is now done. We have delivered, and this puts us in a unique position in the Nordic market. With our geographical print and with our broad customer base, no other bank can bring services to that market that broadly, that quickly. Let's talk income. Let's talk relationship business model.
When we think the needs our customers have, the daily banking errands, those need to be dealt quickly, easily, and also whenever it suits our customers. That we have in place in our digital platform. When it comes to consumer finance, that needs to be fast and easy. Then when we come to more complex needs or big economic decisions that our customers have in their private life, like, "Can I afford my dream house? How do I fund it? How to invest, what to do with my savings and pension?" For those needs, we offer advice. Customers seek advice, they need advice, and we put focus for those needs, and we offer good advice. When the easy things are dealt digitally, this frees up time for more demanding advisory. We are there for our customers in their big life events.
That offers, those interactions offers us good opportunities to cross-sell and upsell. With every mortgage discussion, we make sure we also advise our customers the advantage of start saving or ask how they have taken care of their risks in their life. We show care, and we turn all of the interactions into opportunities for us to do good business with our customers and do business with lower risk as we know our customers. Now, let me give you a few examples of actions we do to generate income. In order for us to continue the good business momentum in mortgage business and actually accelerated it, we are delivering, for example, digital mortgage application process. We are bringing self-services to refinancing and top-ups, making it very easy for our customers.
The customers who need advice and want advice, they can have it from their home sofa with the capabilities and solutions we have on online and video meetings, like Erik pointed out. It's also very important that we have a strong local presence. We work with local real estate agencies, and we know the market. In addition to that, we also make sure that there's a high availability for our customers for mortgages. How we do that is that our advisors in the branches are also part of a nationwide pool of advisors to serve across the country to especially make sure that in the growth areas, when there's a higher demand, we are available. This has actually been one of the drivers for this turnaround, I could say, in the mortgage business we've seen. High availability and fast response.
In savings, high focus on our premium customers, using data analytics to be really relevant when we are proactive contacting our customers. We're also turning non-savers to savers with our digital advisor, Nora is her name. With our broad customer base, we're really lowering the bar to start saving. Nora has had over 70,000 savings advisory sessions just in one quarter, and we are only in the beginning here. As you know, small streams add up to nice volumes. That's the beauty of retail. That's the beauty of mass market. When it comes to consumer finance, we target to low and medium-risk customers, and we are fully leveraging the capabilities and solutions that Gjensidige Bank has brought to our group. That is especially for us to excel in the broker platforms.
All in all, we will be more proactive with all of our customers, both automated way and tailored way, and turn the different interactions to good sales. Now the actions in regards improving cost efficiency. We have three areas or types of actions in that. First one is how we will improve the efficiency in our service model and in operational efficiency overall. The second is how we will optimize the service and the machinery around us. The third one is the leadership actions and behavior. In the first part, it's very much about leveraging the digital platform that I've been pointing out already. One more example. We are listing the top 20 reasons for our customers that are calling us. That is in order for us to reduce the traffic and incoming calls in the contact centers.
One by one, we're taking them out by bringing self-services to those needs. In our branch network, we are increasing cost efficiency by transitioning to fewer but bigger branches that are then supported by smaller, low-cost satellites, you could say. We're also continuing to improve the processes, automating and simplifying them. One example is that as we are providing a instant loan offer or promise to our customers in their mortgage within the minute that they submit their application, that is supported by AI and robotics. Today, already 72% of the loan promises given in Sweden are supported by AI and robotics. When it comes to optimizing the machinery around us and the service supported for us, we are engaging with the different service providers to reduce cost. One area is IT, Chris already mentioned, to increase efficiency there with automating operations and nearshoring and so forth.
In addition to these bigger and structural things, then there's hundreds of smaller things that we need to look into and go into details. There we come very much to the leadership behavior. Our team leaders, branch managers, all of the leaders will take more ownership, better, stronger ownership of their own cost base and to optimize their own cost base. That is to free up time to cut costs everywhere they see that there's a possibility for it. That can be marketing, recruitment, premises, travel, training, all things. Think of it, just all of the leaders just taking incrementally a little bit off more, couple of percentage more. It's the same here. The small streams add up to nice volumes. Again, we are in the basics of retail and in the basics of using our broad amount of people to work for the same goal.
With the high focus to our customers and taking the new way of working and the leadership, we will have the operational efficiency as a discipline going forward. This plan will take us to new levels in cost efficiency, and we are targeting 2022 to have a cost income ratio approximately 50% in Personal Banking. That is thinking the nature of our business, purely household business, that is highly competitive in the industry, and this is contributing to the group's target as it should. Thank you. Now I will invite Snorre to come on stage and tell us a bit more about how Asset & Wealth Management is the growth engine.
Thank you, Sara. Asset and Wealth Management has good business momentum and also a positive outlook despite the challenges facing the overall industry. Even though we have a solid performance, we also recognize that there are plenty of opportunities to improve further. Let me start by sharing with you some of the key messages. Asset and Wealth Management is a top-line business. Net flows is the key indicator of success and customer satisfaction. After four spectacular years in 2013 to 2016, we were challenged during 2017 and 2018. Now we are back on track. Again, we are delivering 3%-5% net flows in terms of assets under management. We expect that we will stay there, that this is also a realistic target for us in the years to come. EUR 10 billion-EUR 15 billion in net flows.
The key driver behind this is our globally competitive asset management business. Half of the assets managed in our asset management business comes from external, institutional, and wholesale distribution business. The other half comes from the Nordea distribution. If you look at the growth over the recent years, the strongest growth has been within the international, institutional, and wholesale within multi-asset solutions and fixed income products. Having a globally competitive asset management business is also key for our integrated wealth management, because we are facing the same competition on the asset management products which are important here in the Nordics as we do internationally. The EUR 3 trillion Nordic wealth management market is important. It is big and attractive, and we have a unique position due to three different elements. First of all, we have a top-notch discretionary asset management and mutual fund offering.
Secondly, we have better specialist advisory capabilities than our Nordic peers. Thirdly, we are more local than our international peers. We see that the private banking markets, for instance, in Norway and Sweden, which are two of the fastest-growing private banking markets in Europe, are attractive opportunities for us. We also see that we have around 3 million customers in personal banking, which Sara was mentioning. They have the propensity to save, but they are not saving with us yet, and we can reach them through digital solutions. We also are too small in the occupational pensions area, particularly in Sweden and Norway, and we will take our share there. We will regain our share there. There are ample opportunities for further growth. Let me, before I go into that, also talk a little bit about the net flows until now.
During 2013 to 2016, Nordea was placed as a top 10 asset manager in Europe in terms of net flows. We were on the top 10 list four years in a row as the only European asset manager. Our blockbuster product was a stable return product, and that product reached full capacity in autumn 2016 and had to be closed for new sales. At the same time, the absolute return sector overall performed weaker, and we started to see outflows.
This together with a perfect storm where a number of, or a handful at least, of Nordic institutional customers chose to insource mandates in plain vanilla areas, and also MiFID II implementation leading to slower growth in the retail distribution as well as a decision by us to increase the thresholds in private banking, meaning that we had to hand over a number of smaller customers to personal banking and spend time on that, led to the negative figures you see in 2017 and 2018. All this is now behind us. We have new blockbuster products in European covered bonds and our liquid hedge funds. We have a mandate with Hancock opening up the U.S. market, and we see interest in Latin America from family offices and institutions. We see that many distributors are using fewer counterparties, leading to a larger share of the total flows to us.
We also see that Private Banking can now do new business with high-net-worth customers instead of spending time on handing over smaller customers. We see that the corporate growth is coming in the occupational pensions area in Sweden and also in the new fund account product for corporates in Norway. We are back on track in terms of flows. This also shows that we have a diversified distribution platform in Asset & Wealth Management. Let me talk about that. It's really three different areas, approximately the same size in terms of assets under management. It's the own distribution in Asset Management, it's the Wealth Management part called Private Banking here, and it's also the rest of the group, Personal Banking, Commercial & Business Banking, and Wholesale Banking selling our Asset Management and life and pension products.
The own distribution in asset management is the institutional and Wholesale Banking distribution. Last week we had a board meeting in asset management where we discussed the way forward. A couple of things to note. Italy is now the largest single market in this area, followed by Germany, Spain, and the U.K. Only in fifth place you find the biggest Nordic market, Denmark. In Italy, we have grown from EUR 5 billion to EUR 10 billion in assets under management the last five years. We are among the largest non-German asset managers in the German market. We also see a remarkable success in Spain. We had zero in Spain five years ago. Now we have EUR 5 billion. We see that there's a good opportunity to grow further this business. Moving on to private banking.
This is the largest private bank in the Nordic countries with mature markets in Denmark and Finland and significant growth opportunities in Norway and Sweden. The rest of the group. Here, Sweden is an important market because Sweden is half of the Nordic savings market. In Sweden, it is the case that there's a high correlation between where you have your mortgage and where you have your savings. As Sara was mentioning, we have very good momentum. I think even Frank mentioned that we have very good momentum in our mortgage business in Sweden. This actually also means that we expect an even better momentum going forward in the savings business as well. We are back in positive territory, we will be back on track in terms of the 3% to 5% here.
The good customer satisfaction and the positive trend we see in CBB is helping our occupational pensions growth because it's really a cross-sell of occupational pensions. Moving on to financials. We represent 19% of the income of the group, but we have a lower cost income and also we are capital light in asset and wealth management, meaning that we have a 29% ROCAR, a high profitability. We are a top-line business, and asset management is the largest part of the top line. How will asset management combine the stable contributions from the internal distribution with a continued international expansion? The foundation of this is well-performing products, of course. 88% of the composites have outperformed the benchmarks year to date and 79% over the last three years.
We have good processes in place to see where we create value and why we create value, and to ensure that we offer the right assets to our customers. 50% of our funds are four or five-star rated against the industry standard of typically 40%. We are also increasing distribution reach, and we can now go together with John Hancock into the U.S. retail and smaller institutional market with a very strong partner. On top of that, we have added own resources on the institutional side to reach the larger institutions in the U.S. In Latin America, they are buying into our strong ESG capabilities from family offices and institutions. We are leading in the ESG area. Ever since signing the United Nations Principles of Responsible Investments in 2007, we have been in the forefront in ESG.
The UN does an annual assessment, this year they have given us an A score in every single category. Citywire published earlier this month, the so-called H&K Responsible Investment Brand Index, showing that Nordea is among the top 10 ESG managers in Europe. CFI have now five years in a row said that Nordea has the best European ESG investment process. We have a good capability, but we are investing further in it. We now have 24 funds across all categories of equities, fixed income, balanced, and thematic funds to meet the needs in the Nordea distribution and support the sustainability ambitions of the group, but also the increasing needs from institutional customers. We are furthermore expanding our product range in the alternatives area, liquid and illiquid alternatives.
One of the new blockbuster products I mentioned, our liquid hedge funds in the Alpha family in the Multi-Asset Team is important here, and this is particularly important for institutional customers. Finally, on the product side, we have also recently launched the next generation or the fourth generation of discretionary solutions. This is important for our institutional customers in CBB and also for our private banking customers. All in all, we now have 50 products that are catering to the needs of Nordea distribution as well as externally. We have the product we need, but how can we then capitalize on this also in our internal distribution?
We are investing in private banking in Norway and Sweden, the fastest-growing markets in Europe. We do this by adding resources. We also do it by working smarter. In a pilot we did in Finland recently, we saw that we could release 10% of our advisors' time simply by removing some of the non-value-adding activities from the front line and by training them better in the tools. This gives us the opportunity to have more customers per advisor, more income per advisor, and also more assets under management per advisor. We have only 2% market share within occupational pensions in Sweden. We expect that actually to triple over the next four-five years. We see already that year to date, we have grown by 17% in this area and 40% since we said that we wanted to have this ambition.
In Norway, we also see that the strong position we have in the Norwegian corporate market is helping us to grow, both within occupational pensions and within this fund account product I mentioned. In occupational pensions last week, we went out with the three new customers in that week alone from Norwegian corporates with 11,000 employees and EUR 38 million in annual premiums. This is a nice business as well. The 3 million customers that have the propensity to save but are not saving with us yet in personal banking can be reached by Snorre, as Sara mentioned. Also the new mobile bank means that savings go digital. 60% of fund transactions in Sweden and Finland has become digital transactions this year. EUR 1 billion in flows in Sweden and Finland have become digital flows this year. It's a very important part of our future growth.
We are also asking all customers in personal and private banking whether they would like to take ESG into account in their portfolios. 20% of personal banking customers and 40% of private banking customers say that they would like to have a sustainable selection of funds. These are some of the areas where we see that we can grow income and also improve the efficiency of our franchise. All in all, we see that although we already have a solid performance, we see that there's ample room to improve further also within asset and wealth management. We will deliver a cost income ratio below 40% in 2022. With continued growth in our institutional and wholesale distribution and significant stable contributions from the Nordic distribution within Nordea, from private banking, from retail, both in personal banking and CBB.
This therefore means that asset management will continue to be a broad-based, highly profitable, and attractive business also in the years to come. Thank you. Ladies and gentlemen, I will now introduce the rest of GLT to come up onto the stage.
[Foreign language]
All right. Let me summarize a little bit from today. We have shown you how we will improve financial performance in Nordea and deliver our targets. We have three key priorities. Optimize operational efficiency, drive income initiatives, and create customer experiences. It's about execution, and this team will deliver, and that is our commitment to you. Now it's time for the Q&A, and Rodney, please help us.
Thank you. You will have the opportunity to ask questions. Please wait for the microphone, then state your name and firm loud and clear. There's also a possibility for you on the web to ask questions, we will read them in order. I think we'll start with Andreas Håkansson. On the third row here. We can do Matti afterwards, followed by Peter Kessiakoff .
Thanks very much. Andreas Håkansson from Danske Bank. I'm looking at your return on equity target, I can understand your cost target and I can believe in it, I can't get to a 10% return on equity target. When I model it, the reason I can't get there is that my capital base is too high, mainly because I forecast a 65% payout ratio. When you say above 10%, do you actually then plan for something more than the 65%, i.e. the buybacks you talk about? That comes back also to the fact that you seem to be over-capitalized already 1st of January next year. If you set 150 to 200 basis points target, are you going to stick to that and actually action on it quite soon? That's the first question.
Thank you. Chris, will you take that please?
Yes. In the plan we do state that we want to distribute excess capital to shareholders. Over that planning period, that is what we assume, and we are committed to utilize buyback to do that. That when you do your calculations, please take that into account. Can you hear me or?
Yeah.
I have too much. There's a lot of disturbances. Okay. Okay. Okay, fine. First answer still stands. As we go into 2020, as you heard also, the counter-cyclical buffers are coming up, and actually we are more at target above that. We will continue to monitor the flight path of our capital and have the conversation with SSM in terms of our position. We do want to have a healthy buffer above that policy and agree that with the SSM. Again, we are committed to excess capital going back to shareholders via the tool of buybacks.
Thanks. Can I just follow up? I would hope that Torbjörn would have been on stage actually, because over the years they've always been saying that they might do buybacks and people say, "No, Sampo doesn't like buybacks," and we heard a story. Sampo is clear that buyback is now a viable option for them?
This is a Capital Markets Day for Nordea. That question you need to ask to Sampo. You have heard our commitment to you and our intentions going forward.
Thank you.
Matti Ahokas also from Danske Bank. If you look at the slide that Chris presented with the return on equity versus peer, the dip started in 2017, which was also the time when Nordea Group started to think about the re-domiciliation to Finland. Far now one year has passed since a new domicile, and at least to the outside it seems that the cost and capital benefits have not been what maybe you expected. Could you comment on this? Is it just a pure coincidence that the profitability dip happened at the same time as the re-domiciliation? Thanks.
Thank you. Chris, I guess that's one for you. I can take the high level, but please start.
Yeah, I think firstly we entered the banking union to have a stable regulatory environment. Remember, we were regulated when we were four legal entities by four regulators. In Sweden the intention was to have a stable regulation. Regulation is a lot more than capital. Of course, we are just one year in. We are going through the assessment. We still have our model development program that needs to be delivered. There over time, we believe that this is the right decision. At the moment, we still have a few items to go through.
Sorry if I may have a follow-up, but is it fair to assume that the benefits have not been exactly what you were hoping for?
We still have a long way to go, and right now we had the capital commitment, which is actually the same as it was when we were in Sweden. As we go forward, we hope to have further benefit in stable regulation. There is more. In the medium term, we think it's the right thing.
Okay, we'll go for Peter, followed by Robin and Sophie.
Right. Thank you for that, Peter Kessiakoff at SEB. The first question is to Frank. One of the arguments behind Nordea's high cost base over the years has been that it's still run as four banks. Since the merger the synergies have not been taken out. Now that you've been at Nordea a few years, what's your view on that? Is that still the case, or do you feel that it's one bank?
I think it is one bank. I don't see any signs of it. I also hear that it's like four countries still, each of them being one bank. I don't see that. I see it is run today as one bank, four business areas, four countries. I see that we don't have really taken the hard choices when they come to really benefiting the scale. What I mean by that is, for example, why do we still have 600 account products? Why do we have four different systems in almost every place? That is what we are addressing at the moment. Trust me, there are many topics where we can challenge it.
That will lead to more common, and also, I should say more disciplined IT development, because we'll make a clear distinction now where do we want and what is very important to win and be perceived as local, and what is it really that is wise to do Nordically. Finding that balance is the most important part, and that we will focus on.
A follow-up on the ROE. When I look at the ROE bridge that you have in the slides, and I guess this question is directed to Christopher, but you have that Wholesale Banking capital allocation is part of the improvements in ROE. Could you explain what that actually is? Is that the RWA reduction that you plan to see that will be distributed out so the equity base is lower? Is it a reallocation where you assume lending grows in other areas?
It is actually all of the above. i.e., firstly, the cost to income is improved and has a benefit. Secondly, the RWAs will be released, and they will of course be invested in other more profitable parts of the areas, and the excess will be distributed to shareholders, yes.
On that part, is there any assumption of any capital release from the corporate risk weight models, new ones?
Thank you. That's a good question. The assumptions in the plan is current capital position and the requirement, I said. There has been no assumptions on the plan for models.
Okay, one follow-up on that, I guess, to Martin Persson. Do you expect any income impact from the reduction in economic capital and RWAs in the Wholesale Banking business?
Yeah, you should also add the cost, right? The cost and capital plan. I'll answer both in one. Yes, we do. I think we have said that income will be affected. It's unrealistic for me to say and plan otherwise. It should be less than the cost takeout. Something like EUR 150 million. That's what we have tried to estimate in these three years. The cost is also important for me to give some dynamics on. The EUR 200 million is typically well-balanced between the business cost and the cost associated around the bank, i.e. the supporting cost that sits elsewhere. That's roughly half and half. With the remaining part in the business, less than half will come in the core Nordic business. You can say that less than 25% of the cost takeout will happen in the Nordics. That's also an important element.
When it comes to the income view, we have worked very hard not to have unrealistic income assumptions in this three-year plan. If you take 2018 as the most recent full year, all three income lines of NII, NCI, and net fair value will be lower in our modeling in 2022. 2019 is slightly more tricky or more technical because we have had three significant items affecting our P&L this year. They are, of course, the ACR in the most recent quarter, the IAS accounting impact, i.e. the revenue recognition that all banks have seen in the last few quarters, and it is the negative valuation adjustments. Those three together is a EUR 270 million item hitting our cost income in 2019. Some is income, some is cost and loan losses.
The base of 2019, we're not going to guide or disclose in detail, but please bear in mind that we have had some serious technical impacts this year that I sincerely don't want to see in the next few years ahead.
Right. Just a final question. I'm just wondering on the personal banking side, where you have a slide that ranks the mobile apps at the top in each individual country. Why do I see that customer satisfaction is among the weakest for Nordea in each single country when the mobile app is highly ranked? Is there something else driving customer satisfaction perhaps?
What we see actually is that when we measure customer satisfaction right after when there's been a customer meeting or customer has been in interaction with us, it is much higher than those surveys that we ask, you could say randomly in the street that, "How do you see and how do you perceive Nordea?" There's a clear difference between the customer satisfaction with the customers who've been interacting with us and with overall perception. That has to do with our overall reputation with broader topics than just the services that we offer and so forth. We are working every day to close the gap to improve our reputation so that it would be overall known that the meetings with us and the interactions are better than the overall perception is.
Robin, followed by Sophie and Mats.
Thank you. Robin, Rane Kepler Cheuvreux. On retail banking, Sara, I understand you have been thinking a lot ahead of this presentation, ahead of the new plans. It would be interesting to hear some more how you think about the digital transformation and the dynamics around maybe aggregators and how that might affect the competitive landscape and how to avoid that margins get squeezed. You assume that margins will not increase and perhaps also continue to be pressured, but how to avoid too much pressure on the margins?
Well, actually what we now saw in Q3, that the margins were stabilizing. Of course, we don't know about the future, how they will develop. We assume margin pressure. Meanwhile, we also work every day to improve customer satisfaction and bring services to our customers to engage them so that the banking relationship is not just about margins, that it's much more. That's the overall plan. When it comes to digitalization, as said, it is core part of our business and our services to our customers. We listen to our customers, and we move on that road, taking with the very good care of our customers so that we go with the same pace as our customers expect to have services from us.
All right. Thank you very much. In the first quarter, you took a provision for AML related perhaps sanctions. Obviously you made an assessment to calculate the EUR 90 million figure. Has there been any development that this assessment of the EUR 90 million has changed, or is EUR 90 million still a good provision you think?
I can tell you that one. We're in talks with the authorities, and when we have or if we have something to disclose, we will bring it to the markets. We have not done that in regards to the EUR 90 million.
All right, thank you. One last question to Chris. The 150-200 basis point buffer is, at least in Nordic context, quite tight. What is the sensitivity to, say, FX movements, rates movements of the capital? You don't see that as a problem since the tightness of the buffer?
No. The 150 to 200 basis points is, of course, a buffer to our requirement under the SSM. It starts basically Q1 2020, so it includes the P2G. In terms of the tightness, given that we now have a proportionate dividend payout ratio, actually the volatility and it's much more easier to manage a tighter range when you have a proportionate payout ratio in terms of dividends that we have not had before. Yes, there is some sensitivity for FX, but it is less than it was previously. For us, it's much more stable as we go forward.
All right. Thank you very much.
Okay. Sophie, followed by Mats, and then I'll have some questions here from the webcast. Third row here.
Yeah. Hi, it's Sophie from JP Morgan. I would have a follow-up question on the buyback. You're still waiting for more clarity on your models. My understanding is that you're also waiting for the MREL requirements. Realistically, when could you start with the buyback? When is the earliest that you could potentially ask ECB for the approval, and when do you think you could then potentially get the buyback, given that we have seen with some other European banks it takes quite a long time to get buyback approvals?
Chris, please.
We do, as you say, await the MREL. We will have that in the beginning of next year. As you pointed out there, we still have the model development program. We will continuously monitor our capital flight path, and we will have continuous discussions with the SSM on that. When we have a good, healthy buffer to the capital policy that we have, we'll engage further in those discussions with the SSM. It is a matter of continuously monitoring the flight path as we go forward. We need clarity on MREL as we go into next year.
Thank you.
Sorry, I would have a follow-up question on that. Why do you like buybacks over special dividends? Because your stock is trading close to book value, what's the rationale behind doing buybacks?
Well, if you think about what's happened to Nordea over a period of time in terms of revenues, they've come down, but RWA has gone up, but the equity base has remained as is. If we have excess capital, we would like to do buybacks because that will also improve EPS. Quite frankly, having a lot of feedback from all of you in this room, buybacks is clearly something that some of our investors prefer.
Thank you.
Could I just ask a final question? On the cost saves of EUR 700 million-EUR 800 million, yesterday you took restructuring costs of EUR 204 million.
Mm-hmm. Yeah.
which sound very low compared to what we have seen for other banks. Should we expect more restructuring costs going forward? Could you also give a little bit more details on where the EUR 500 million-EUR 600 million of cost saves are coming from? We know that only EUR 200 million come from the Wholesale Banking, where is the remaining, which divisions are the remaining cost saves coming from? Thank you.
I could take that. No, we don't disclose that information. It will be brought across the different areas, and there are solid plans behind that, but we don't disclose the internal split.
Thank you.
Okay, next from Mats.
Yes. Thank you. Mats Herdal from Handelsbanken. I still have some problem here to get my top line going in Nordea. Do you have any concrete plans? You say that you want to be Nordic, you also want to be local. You're reducing risks. In which customer segments would you like to move forward? Obviously, customer satisfaction is high when they are meeting with you. I can understand that, but how do you approach new clients and those kind of things to get growth going? Thanks.
Yeah, I think actually it's what we have shown today. We don't want to be a Nordic bank. We are a Nordic bank. We are truly pan-Nordic bank, we are a universal bank, we are leading in within all areas of the bank. Four countries, four BAs, we have a leading market position, three in one country and two in the rest. Can we improve? Yes. We have had challenges and still have with the customer experience. That we are very much focusing about because we believe it is a very important part of driving income long term. We do see growth possibilities in all the BAs area of responsibility. The question is how, the levers are different between the BAs. Sara talked very much about an omni-channel strategy.
We have been a very face-to-face driven branch office earlier days, then we went very digital, perhaps a little bit fast. Now we're combining it all. That will create improved customer satisfaction or at least customer experience, and then it's up to the customer to vote, and it will lead to more business. When it comes to the really face-to-face relationship driven business, but also digitalized, at Martin's, then of course it's another dynamic. When it comes to Commercial & Business Banking, we are somewhere between. Lastly, we have as management, well, which is a different logic. We have a product owner that you dream about delivering smooth customer experiences internally. Then win the game out there. I think the Handelsbanken deal is one of the recent things that shows we have a huge upside.
You might even need more advisors or branches then.
I don't think so, and it's not because we don't believe in branches. We truly do. What we believe in having a model, and we call it an omni-channel model, where you can say the mobile app is the remote control to the bank. You can handle everything on the sofa, you can handle it in the bus or in the office, but you choose whether you want to have a face-to-face meeting, a telephone meeting, a digital meeting, use your app 24 hours a day, seven days a week. That's up to the customer to decide, and we are there for them. That's the way we want to run the bank.
Okay.
We have a few questions here from the webcast. We'll start with Magnus Andersson from ABG on IT. You have invested a lot in IT in absolute and relative terms in recent years. Any changes to your IT investment strategy/capitalized investment levels going forward? That's the first question.
Who would take that one?
Could I get it again, please?
It's about IT. Any changes to IT investment strategy/capitalized investment levels going forward?
Yes. As we mentioned, we will invest in our core segments. That's actually one of the areas where we think we have a scale benefit. If you look at our expenditure, we have for some years had an increased level. That will come down a bit now, I think we have actually a good upside, good potential in being even better prioritizing what we spend our money on, that's why we come back to the governance model. The BA heads are taking these priorities within the business, thereby we choose the actions that is really most important for the business. That's one. The other thing is, as you know already, if you're not very disciplined about making IT investments and getting the teams together, the output often is not as good as it should be.
Managing the IT development, getting all together, creating a strong output, that is actually very important. I believe we have an upside here in our process. Adding that together, I think with a little bit low investment, actually we can increase output. That is my belief.
Now a few ESG related questions from Nicolas McBeath from DNB. Have you quantified your lending potential into sustainable finance like renewable energy and energy efficiency over the coming years? What kind of other ESG products mentioned for Wholesale Banking do you target beyond green loans and bonds?
Martin, Snorre perhaps, a little bit Sara as well.
Yeah, I'll do it quickly. Yes, I think we have. I think we want to bank with customers specifically in the corporate segment that has the ESG agenda very high. That is our new philosophy and the bar. That doesn't mean that certain sector is black or any other colors, right? We want also to contribute specifically in our strongholds of shipping, for example. I think we can take a very important sustainability role in financing and pushing and advising the shipping companies that needs to improve and that wants to become a leading ESG transport company in, for example, the shipping area. Yes. The other products per se, we have the largest sustainability conference in the Nordics every year in September. That is in place. We have a number one position in the issuance of corporate bonds in the green bond areas.
That is also in place. What I mean with taking it beyond bonds and loans is basically that the need for our corporate and institutional clients in getting help in this area, and I call it then this is something we need to get paid for. It's advice, it's expertise, it's advisory sessions of how they can position not only their financing, but also the entire corporate positioning in the ESG area. I think there is an unlimited scope, and so far, Nordic region is leading this, but there has not been a clear leadership in this segment. I think we claim to have a small leadership, but I think we can do much more, and we intend to take that role.
On this topic, we actually listen our customers carefully. What is it that they expect from us on this? In best cases, we actually give them ideas how they can, for example, reduce their footprint or do good, and that is through savings, for example. We have a good offering of sustainable savings to do. We have also been introducing green mortgages both in Sweden and in Finland. Going forward, it is about listening, what is it that our customers expect, and then we will match to it.
Thank you.
A question from Riccardo Rovere, Mediobanca. May you please indicate if there could be anything that could derail the cost savings, i.e., trade unions resistance or anything else? This is asked by Italian.
Yeah. I think my answer would be we will do what it takes to deliver our targets. Could there be anything that pops up that we're not in control of and after really have used all our toolbox are not able to handle? Yeah. It would be stupid not to say that, I can't see it right now, to be honest. Let's see. It's up to us to prove that we will deliver.
Chintan Joshi from Abaco. You indicated in Wholesale Banking that revenue loss would be around EUR 150 million against cost save of EUR 200 million. Can you also indicate the revenue loss for the full group for the EUR 700 million-EUR 800 million cost saves that have been indicated?
Chris, I think that's a question for you, please.
As I mentioned actually on the ROE bridge, in terms of getting to the return on capital. This discussion here today and the BAs going through the strategy was about how they improve the business momentum. The overall revenues is increasing with the volumes, with the savings, and what you've heard here today. As you also mentioned, a lot of this will be about making the engine room more efficient and freeing up time to the front office. There is some revenue attrition, but overall, this group is increasing all the revenues, and that is actually part of this plan in 2022. It's cost and income. It's the operational efficiency. It's not just the cost, it's the income, too.
Finally, from the webcast before going back to the room here. From Magnus Andersson, follow-up. Is a lower amortization level of IT intangibles part of your cost cutting, or will you shorten the amortization period? If that is the case, from how many years to how many other years?
Chris, please.
Yes. As you know, we took an impairment in this quarter. We are reviewing all of the governance around the capitalizations. That means, given the new changes in the IT environment, we will shorten the amortization life. The full benefit of the impairments are not in this plan because they will be offset by the depreciation on the existing stock. We are also tightening up the governance around the capitalization. I think there was an early question on that, and that is to actually have much more discipline in terms of the IT costs. In terms of the impairments, yes, it is a tailwind as we go into the next few years, but it's not the full amount because we will increase the depreciation on the existing stock.
We are working through that with our auditors at this point in time, and we will guide the market when we have that clarified.
Thank you.
We have quite a lot of people wanted to ask questions. We don't have unlimited time, could you please limit to one question? Adrian started with Jens, following by Jens. Here. Fourth row.
Hi there. Adrian Cighi from RBC. One follow-up on capital, please. The 150 to 200 basis points buffer. Does this include a potential for TRIM or other regulatory headwinds, given your targets are in 2022 when Basel IV is expected to come in? What's the expected impact from that? Thank you.
Well, we've effectively, as part of the transition into the union, gone through a TRIM, and we are delivering new models to the ECB next year. That will also be there. We have not assumed any benefits or challenges from that, given that we've effectively gone through that. Of course, with the proportion of dividend, and we are fully loaded and at our target. We feel we have a good flight path into Basel IV.
Thank you.
Okay.
A question on the target. Why do you think that the 10% ROE target is sufficiently ambitious, as I think you talked about before? If we do the comparison to your peers, they are closer to 11% right now. Arguably, that also includes Danske Bank to 30%, perhaps an easy comparison. It's just to get a feeling why the 10, and why do you think it's sufficiently ambitious?
Thank you. If you look at the two financial targets, the cost income, we today are run rate 58%, we target 50%, we do that within three years. Is that the end game? No. Within three years, I actually find it as a quite ambitious target. As I said earlier, the journey will continue every single day also after that period, of course. That's the one. Of course, we have looked into how does the Nordic market look like. As you know, there are huge differences between the average cost and income ratio in the different countries. When we look at our size, which creates much more stability when it comes to also going through the cycles because of our diversified portfolio, we believe that target is the right next step.
When it comes to return on equity, we say above 10, and we are doing around eight now. Now we go for above 10, and then we do see no, at the moment, hinder for why we should not be able to meet the best of our competitors on that note as well.
Within the 2022 timescale?
The target is above 10%.
Till 2022.
Please, over there. Adrian, yeah, please.
Anders Svanborg, PFA Pension in Denmark. Given your unchanged interest rate assumptions, I struggle to understand why we are not talking about repricing on the lending side on mortgages, for example, in order to mitigate some of the negative impact from interest rate environment. On a country-by-country basis, particularly related to mortgages, I think that customers are getting a great product at a very low price.
Yeah. Should I take that one? I do understand the logic, and the problem is just that mortgages is a commodity. If you look at each country, there is a range in which you, in my opinion, needs to be within. We have tried to be outside that range. You, of course, can increase the net interest income for a while, but then you start losing market share. That's not a sustainable way of pricing. You need to be within the narrow range, and that is what we are now. We don't want to be the price leader, and we don't want to be the one with the prices above the range. That is actually leading to a good, stable, profitable business that is today some 20%-25% of the income base in Nordea Group. That's why we act as we do.
Okay. Please move to the same line. Exactly. Please. Thank you.
Hi. Thanks for the presentation. This is Antonio Reale from Morgan Stanley. I just wanted to check, forgive me for the numbers, but I think it was slide six of the CFO presentation where you showed EUR 4.9 billion underlying cost in 2020, which based on the 2%-3% cost inflation and net of the EUR 700 million-EUR 800 million cost cutting you target, I get to about EUR 4.6 billion-EUR 4.7 billion cost in 2022. Which on 50% cost income, is about, well, EUR 9.2 billion-EUR 9.4 billion ballpark.
I wanted to check with you first if that's sort of the right thinking. There is, on my numbers at least, quite a bit of revenue growth embedded in your targets. Which the question here is, based on the attrition comment you mentioned and the macro assumptions that you've assumed in the plan, what makes you confident you'll be able to achieve that number? Thank you.
One second, Chris, please.
Yeah, I think if you look at the numbers, I think you should run the ranges as 2%-3% inflation and then a range down. You look at the scenarios. We are not going to guide for a fixed number for 2022 because our target is cost to income. That is what we have to look at. I also said that the net cost take out will be minimum EUR 350 in 2022. Then we have some tailwind from the impairments. At the end of the day, the target is cost to income. If I were you, I would just look at those ranges and look at some scenarios, and you'll get to a good number. If you look at income growth from the volumes and the AUM, I think you get a sense of where it is at.
I can't, and we won't guide for a fixed target in cost for 2022. We are guiding and targeting cost to income.
Okay. Here we have two questions. Jacob, if you start, and then hand over the mic, please.
Thank you. Jacob Kruse from Autonomous Research. I just wanted to clarify the old cost target that you set out in 2017, I think it was, of EUR 900 million gross cost reduction. Are they still happening, or are those part of the EUR 7,800 million, or should I just forget about that and focus on the current plans as what we're looking at going forward? Thank you.
Thank you. Chris, please.
This is the new plan. Of course, a lot of those costs have actually would have been taken out in 2018 and in 2019, the number that we are guiding for is actually in line with the guidance that we have given and the target that we have. We reached that in 2019. This is the new plan, and it is more aggressive than the previous plan, even in 2021. It is at least EUR 150 million. Net savings more than that in 2021. Forget the old plan. This is the new plan.
Thank you.
Thanks. Richard Smith from KBW. I guess I did similar math to Antonio and was coming to something like a 3% per year income growth. I was just wondering, in terms of your ROE bridge, how much margin pressure are you assuming within that? If you could put any numbers around that would be great.
We are assuming some margin pressure. If you look at what's happened over the last few quarters, and Sara mentioned it also, it stabilized, for example, in Sweden this quarter. The pressure is downwards, but let's call it the second derivative of it is more positive, so it's deteriorating slower. Unfortunately, I know you like it, I'm not going to put any numbers on it.
Okay. It doesn't seem to be any further question from the webcast. No, we have one here, please.
Maria Hackley from Citi. A quick question on Wholesale Banking. Maybe I missed that. Is there a reason why you haven't included cost-to-income target for this particular division, and if it's part of KPIs for leadership?
Wholesale is at all times a return business. It's a capital game. We have been seeing capital add-ons very significant. Only this year, we're almost at EUR 1 billion new absolute capital add-ons this year. I think a competitive cost-income ratio for a wholesale business, if we are on track on the return, should be below the group average, which is 50%, right? That's what I tried to imply also in my presentation. We have to drive wholesale on return, and then we should end up in a competitive cost-income ratio. That is not the primary target in this case. As I said, we had EUR 270 million hitting 2019 P&L, and we had a Q3 cost-income ratio of slightly above 50%. Let's see where we're going to end up, but I'm not going to guide on cost income.
Okay, we have one here as well, please, on the fifth row here. No, fifth. No, fifth. There.
Yes. Thank you. Marco di Matteo from Goldman Sachs. I just wanted to ask, first of all, on how you think about moving from, let's say, a hard cost-based target to more of a cost-to-income, and the way you plan to, on one hand, maintain the discipline that that hard cost number can instill in the organization and also maintain the flexibility to meet the cost-to-income to what could be, let's say, unforeseen changes in your revenue assumption. If I may, I just have a quick question on Wholesale Banking as well. This is a business where scale is important, fixed costs are high. You're now refocusing on the most profitable and core part of the business. Looking ahead, would you be open to, and do you think you would benefit from cooperating or partnering with other institutions in some of these areas?
Thank you. Let me start with the cost income, and then Martin, you can take the next one. Why we choose cost income is because it is an income and a cost game. You need to work with both levers, and only focusing on a strict cost target and then not taking income into calculation is not really giving a good balance. That's the reason for having a cost income. That's one. Just to give an example, when our income growth, our cost, of course, needs to grow less. If the income go down, our cost, of course, needs to decrease even more. That is the logic behind it. We have communicated cost income as our external targets, and we will continue to follow that. Of course, internally, we also are very focused on what is a reasonable yearly spend of cost, of course.
Back to Martin, please.
The answer is yes. Yes, absolutely. Partnerships is going to be a much more important driver for our efficiency and return game, both in the markets area, where we have global commoditized products. If there is an IT game becoming global, I think it's difficult for a regional bank longer term to be the best owner of those areas without mentioning exactly which. Also in our international footprint, to make sure that we are following specifically our corporates out globally in the areas where we might not have the regulatory risk reporting scale as we have in the home markets. Yes, absolutely, in both our big legs of markets and our Corporate Investment Banking business.
Okay. Johan, please.
Yes. Johan Eklund from UBS. Just two quick questions. First, can we get a confirmation that in the cost bridge into 2020, there is no material benefit from lower amortization, i.e., the old guidance that amortization should increase next year is still valid, or at least it's not a big driver of the benefit? Then after that, just coming back to the Wholesale Banking business. You're targeting a 10% return on capital in the next three years, and at the end of that period, as someone mentioned, we'll be heading into Basel IV, and I guess a lot of the Basel IV inflation is going to hit your business. How should we think about the profitability of that business in a longer-term basis? Is this just the first of many restructurings, or what's needed to make sure that it's an acceptable return on capital also beyond 2022?
Thank you. Very good question. I think both FRTB and Basel is beyond the plan, to be fair. We are, of course, already now planning, analyzing, calculating the effects on both our corporate and the markets business for both those streams. I am not happy with 10% ROE core in 2022. Also, when Frank and I have discussed, and the team, let's now put realistic targets that we can meet from, in my case, a very low level. I'm not saying that 10%, everyone should applaud that longer term, That is the first and serious and realistic target that also my management team can fully back, at least in the near future.
Just to add, as I also said in the beginning, that every one of the BAs, of course, should be able to meet and add value for the group. That, of course, we will focus on, but we are where we are now. We have the plan. We'll take it to there, and then we continue. We will look at each of the businesses, and they are needed to deliver value for the group.
I think we have two final follow-up question, and then handing over back to Frank. Peter?
Yes. Thank you, Peter Kesisoglou, SEB again. On the IT platform or the platform change, which was launched in Q3 2014, and then in the investor update that we got in 2017, it was said that decommissioning of the old platforms would be a benefit on the cost side, especially going into 2021. How much of that is part of the cost savings in your plan, and what's the actual time plan for the platform change? Are there any particular dates to where you think that decommissioning will be larger, where you expect any material movements? Last but not least, could you say how much of current business flows that is actually going through what you would consider new platforms where you replaced part of the core?
Will you take it or?
I can take the-
Yes, do that.
first part. This is related to Ncore, the core banking platform. What we said, it remains i.e., we will have all the main core components on the platform as we go into 2022. In the plan and thereafter, we will start decommissioning some of the old system that relates to. However, as I also mentioned, given the results yesterday, we are decommissioning other item structures, other platforms, but not related to CBP. CBP is not, in terms of cost, part of this program. That comes 2022 and thereafter.
Comes at 2022 or after?
The decommissioning starts in 2022.
One final from Andreas and then back to Frank.
Thanks. Frank, I think actually you answered it already, since you focus so much saying that it's a cost income target. Does that really mean that if your revenues fall more, which some people seem to believe, that the cost base would then be adjusted down accordingly?
Yes.
Thank you.
Okay, Frank, please.
All right. I think we have reached the end of this day. It has been a very big pleasure having you here. We are grateful for that. I think we have had some good dialogues. I think we have also had a good chance to show you what our actions are and to be continued. Now it's time for lunch, and I hope you'll join us outside. Thank you so much