Welcome to the DNB quarterly conference call. My name is Caroline, and I'll be your coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on listen-only mode. However, you'll have an opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to ask a question. If you require any assistance, please press star zero, and you'll be connected to an operator. I will now hand over the call to your host, Rune Helland, to begin today's conference. Thank you.
Thank you so much, and a very welcome to all of you to the fourth quarter's earnings call. Around the table here in Oslo, we have, in addition to Kjerstin and Ida, we have the Head of Personal Banking, Maria Lovold, and of course, the Head of Large Corporate, Harald Serck-Hanssen, and the Head of Corporate Banking, Norway, Rasmus Figenschou. We also have Head of DNB Markets, Alexander Opstad, and also, of course, the Head of Wealth Management, Håkon Hansen. Before we open up for questions, Ida, we'll take you through some of the highlights for the quarter. Ida?
Hello, and thank you all for taking the time to participate in this call. I'll start with a bit of a brief update on the Norwegian macro, which continues to be robust. Full-year mainland GDP growth is projected to be 0.9% in 2024. In 2025, we expect an uptick in growth to 1.5% and further slight increases in the coming year. Household consumption increased towards the end of the year and was clearly up from the first quarter last year. This is supported by the increase in real wages and, of course, low unemployment levels that remain at around 2%. The housing market increased in activity levels during the second half in 2024, and we continue to see a good activity level also moving into 2025. Inflation levels have come down but remain higher than the central bank's long-term target of around 2%.
Wage growth was around 5.3% in 2024 and is expected to be around 4.4% in 2025 and 3.5% in 2026. As you know, the Norwegian central bank has kept the key policy rate at 4.5%, and it's expected to start to decrease it by 25 basis points in March. Our macro economists in DNB Markets expect two further cuts from there to end at a terminal rate of 3.75%. I would, however, also like to add to the fact that Norway is a small economy and, of course, also dependent on the overall macroeconomic development globally. If we move on to the results from DNB in the fourth quarter, there was a strong performance in all customer segments as well as in all product areas. The return on equity of 19% in the quarter showed a strong growth momentum and activity across the board.
If we adjust for an extraordinary low tax rate, the return on equity for the quarter was 16.1%, also well above our long-term target of being above 14%. Net interest income was up 3.7% from the third quarter 2024, driven by profitable lending and deposit growth in all segments, where we saw loan growth of 2.5% and deposit growth of 4.7%, higher financing activity, and a solid income from treasury-related income. Net commission and fees was up 12.3% from a strong fourth quarter 2023. We saw an all-time high fourth quarter, driven by strong results across product areas, but I would in particular like to point to Debt Capital Markets as well as Asset Management that continues to deliver strong results in this period. We have a robust and well-diversified credit portfolio.
99.3% of the portfolio is in stage one and two, and we have impairment provisions of NOK 157 million in the quarter. The board is proposing a dividend of NOK 16.75 per share, an increase from NOK 16 last year. Also, well in line with our dividend policy of focusing on an increased nominal cash dividend year on year and utilizing share buybacks as a flexibility tool to optimize the capital position. Ending the year with a capital ratio of 19.4% also provides a solid foundation to also meet regulatory headwinds as well as absorb the capital effect from the Carnegie acquisition, but also continue to deliver on our dividend policy in the years to come. And with that, we would like to open up for questions.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. We will take the first question from line Gulnara Saitkulova from Morgan Stanley. The line is open now. Please go ahead.
Hello. We can't hear you. Sorry.
Hi, can you hear me now?
Yes.
So I have a question on the spreads. So the contributions from the lending spreads on NII this quarter was positive. Can you touch on the outlook for lending and deposit spreads into the coming quarters? And would it be fair to say that NII has reached its peak in Q4, or do you think the peak is still yet to come? And another question on the competition. What are you seeing in terms of competitive behavior in Norway? How did it evolve so far in Q4? And do you see that there is less pressure on the competitive front? Thank you.
Thank you so much for your question. I think it's fair to say that it is to be expected that when rates start to move downwards, there will be a negative impact on NII, and you might see an impact also on the NIM, whereas the volume-based spreads towards customers should stay more stable. This is more a general comment than a guiding as what the actual development will be depends on the decisions that are to be made at some point in the future. But what we are seeing now from a macro and estimated rate path going forward is an aggregate of three rate reductions as opposed to 14 increases. So we will still be at a level that is very attractive in terms of running our business. With regards to the competitive behavior, the Norwegian banking market is a very competitive but also a very rational market.
We continue to see the banks targeting return on equity as their most important target. Competition is fierce. There is capital that needs to be deployed in the market. But what we are seeing in the macro revisions is also for the expectations towards credit growth to go somewhat upward. So we do expect the outlook to be beneficial for future profitable growth and for competition overall to stay rational.
Thank you.
We will take the next question from line Shrey Srivastava from Citi. The line is open now. Please go ahead.
Hi, and thank you very much for taking my question. One on capital for me, please. So you've mentioned the 210 basis points of overall headwinds, but then you also have the capital paid out from the insurance company not only in Q4 but in Q1, and you still have the benefit of Sbanken to come with no significant restructuring charges expected on the Carnegie acquisition. So my question is this: what stops you from having a quantum of buybacks similar to last year? And could you provide some color on your thinking around this? Thanks.
I think, I mean, first of all, you're right in all the different elements that you point to, which is important. In addition to that, of course, we have a strong profitability in the group, and that is also something that supports the quarter-to-quarter CET1 capital ratio over time during the year as well. I think what we are pointing to, and what I would be happy to reiterate as well, is that we stay firm in terms of our dividend policy. We will prioritize nominal cash dividend increase year over year and then utilize share buybacks as the flexibility tool. We are also pointing to the fact that we expect the board of directors to request the similar authorization from the Annual General Assembly as they've done over the previous years.
That also means that if they get that authorization, we could potentially, depending on the capital situation and the outlook, look to seek approvals for further buybacks later on this year.
Understood. Thank you very much. And my second one is if we could just get an update on how the Sbanken portfolio is performing relative to the rest of the group? Thanks.
The Sbanken portfolio is performing well. I would say it's part of a growing activity, and the team has done a lot of the initiatives to improve the offering, and we see that customers are increasingly happy with the services that are provided, but beyond that, we do not split, I mean, it's part of the same overall portfolio now, so we do not split growth and activity numbers on the two brands.
Understood. Thank you very much.
Thank you. We will take the next question from line Namita Samtani from Barclays. The line is open now. Please go ahead.
Hey, and thanks for taking my questions. Just firstly, do I understand correctly on Carnegie that the acquisition will be closed in March or April, and that's when you integrate the Carnegie numbers into the DNB numbers?
Yes. Well, we are still awaiting for an approval from the NFSA. Apart from that, we've received approvals from all the regulatory authorities. And then, in addition to that, we will also need an approval from the U.S. authorities, but that is more of a shorter process, which we expect to be able to conclude fairly shortly after the receival from the NFSA. We haven't got a timing from the NFSA, but if we get the approval from them before mid-February, we're saying that we expect to have the legal closing of the Carnegie transaction in the beginning of March, which means that Carnegie will be incorporated from that moment legally and also from a reporting perspective. Then, of course, onward from that, we will work even closer together with the team on Carnegie, which we have been prohibited from due to competitive reasons.
That gives us an opportunity to work even closer together with the team to really see what will be the offering when we are combining the two strong entities together.
I think that's helpful. And could you also speak about some of the moving parts of costs we should think about into 2025, such as wage, inflation, and IT fees?
Yes. We haven't quantified IT expenses or the different charges, but what I think I can just point to, as I mentioned briefly initially, was also that inflationary pressure has come down, but it's still the core inflation was at 2.7%, still well above the long-term target of the Norwegian central bank. And then we also expect wage growth to continue to be higher in 2025, around 4.4%. And of course, that also affects our cost base. And also one of the reasons why we also are continuously focusing on cost efficiency. We will continue to invest in our digital offering towards our customers. We operate in a very digital society, and our customers expect digital solutions that are top-notch. And therefore, we will continue to invest in that.
But there are no bigger investments, kind of massive changes in terms of the ongoing investments compared to what you've seen in the past year.
Okay. Thanks. And just quickly, finally, the large corporate lending by country, was it mostly in Norway, or was it mostly in the U.S.? Just any color by geography would be helpful. Thank you.
The growth in four quarters is approximately half in Norway and half outside of Norway, and the industry where we see the most growth is the energy sector, more specifically renewables.
That's helpful. Thanks very much.
Thank you. We will take the next question from line Johan Ekblom from UBS. The line is open now. Please go ahead.
Thank you very much. Just two areas. I mean, on the Sbanken model kind of into or move to IRB, can you remind us if you had said anything on timing and quantum of that? And then secondly, maybe if we can just dig a bit deeper into the NII trends. I think you said this morning that there were activity-driven boosts to NII in the quarter. And I guess one thing we see is this very large increase in large corporate lending. So when we think about the trend into kind of a 2025 run rate or potential moving parts, how much of the Q4 NII would you say is this kind of temporary activity-driven boost that I guess may or may not recur? But just to get us a sense of what quantum is these volatile items.
Yes. If I start with Sbanken, what we said when we made the acquisition was that it would have a positive impact on the quarter-to-quarter CET1 capital ratio of 30 basis points. And what we are now saying is that we haven't moved the portfolio over to IRB. But on the other hand, every time we refinance a facility in the Sbanken portfolio, that is automatically moved over to IRB, which means that we are kind of gradually moving the Sbanken portfolio over to IRB independent of the approval from the NFSA. And I just want to correct what I said in terms of the effect. We said that the effect would be 20 basis points when we made the announcement of the acquisition of 30 basis points. But gradually, this portfolio is being moved over to IRB models.
Due to the fact that this portfolio is also a portfolio that has a higher turnover in terms of refinancing activities, and that also means that we are slowly and gradually moving over to IRB on Sbanken. But we haven't quantified how much of the effect is still remaining. Of course, as you know, with the changing regulatory requirements in terms of the risk-weight floors, there is a smaller impact compared to between the standard models and the IRB models than what it was when we made the acquisition.
Thank you, Ida. Johan, I'll try to shed some light on the NII. I would like to start by saying that, of course, the attractive growth that we have seen in the fourth quarter leads to a higher pace of run rate into the year. That's important to note.
Secondly, there are activity-related elements in the numbers, but there are no sort of large one-offs that might not happen again. So we are talking about numbers and a development that will depend on the future and how that develops. But there are a couple of moving parts that we've talked about that were positively impacted in the fourth quarter. One of them was the activity-related NII on refinancings and new business activity that provided an effect of NOK 182 million fourth quarter. It's usually a quarter with high activity on transactions. There is also the treasury result that gives a positive delta of NOK 173 million. There are some beneficial effects on treasury also on interest rates that might go that are likely to go a bit lower once rates turn in the other direction.
I think the last item that I would like to mention now that we have key policy rates at a meaningful level, four and a half. There is also some temporary funding element from the return on deposit account to customers that is paid towards the end of the year. All of these three elements, you really have to assess and make a view on. The first two, we provide you the numbers. The third one is not as large a number, but it still counts. Beyond that, I would like to just remind you to keep in mind, as I know you all are aware of, that there is a couple of less interest rate saved in the first quarter compared to the fourth quarter.
Thank you for that. When I look at your interest rate bridge in the Fact book, I guess those effects will be in the other NII. Is that correct?
Yes.
And I mean, the other line that the amortization effects and fees has kind of been zero over time, but it's been a strong tailwind for the last three quarters. Is there anything structural there, or is that just also in the activity bucket?
It's nothing structural. It really depends on the number of refinancings that are happening, the number of new transactions that we underwrite and/or syndicate where you are booking and accounting for the fees at the closing of the transaction. And if there are restructurings that lead to refinancing, but it really belongs back into the first bucket. I mean, there are no other elements that impact the amortization and refinancing. So high activity leads to higher fees.
Perfect. Thank you very much.
Thank you. We will take the next question from line Patrick Nelson from Goldman Sachs. The line is open now. Please go ahead.
Yeah. Thanks a lot. And thanks for taking my questions. I just said two. The first one was just I wanted to come back to the fee growth target that you outlined, which at Investor Day above 9% per year. And also now today, given the strong development we saw in Q4. So I was wondering if you could provide some color on how you believe DNB can perform in the coming years more on a standalone basis. So more like a number that we can like for like compared to your previous 4% to 5% growth target in terms of fees, if that's higher than before or if it's the same. Because I appreciate that there are some cyclical elements and some other things related to M&A also affecting comparability there.
The second question was just in terms of the structural rate sensitivity in your Large Corporate division. Is there something that we should consider there when we compare it to the rate sensitivity in Personal Customers, or is there anything to flag there just on so less related to specific guidance, but more the structure of the business? Thank you very much.
Thank you for your questions, Patrick. We did indeed say, as you were mentioning, that we expect a higher pace of growth in fees and commissions compared to previously, as we outlined the target of above 9% per year through the cycle for the coming three-year period at our Capital Markets Day. We have been delivering consistently above the four and a half, above the four to five, sorry, in what we are more often referring to the growth engines in the fee and commission group, which is investment banking and DNB Markets as well as wealth management. In the time ahead, we continue to expect these to be the main contributors to a higher growth pace. IBD, I mean, there are elements of market volatility that impact the numbers. We have in this quarter particularly referred to the Debt Capital Markets being exceptionally strong.
ECM has not been that strong, so I think this also proves that there is a robustness and an increased diversity in the products that we are offering. In assets under management, we are gradually building a stronger base of assets where we have consistently been delivering positive flow throughout the year and building the base systematically with assets under management from defined contribution as well as from saving agreements, and we continue to see these volumes ticking in on a monthly basis, providing a very attractive floor, if you will, to the volumes. Beyond that, there is obviously a dependency on market valuations and how the market develops, but there is a robustness there in terms of the net flow, in particular from retail customers. We have seen very positive developments on banking services. We have seen on guarantees.
They are reflecting a broader customer base and increased activity and an increased attractive offering from our side. I think that goes without saying as well, and above and beyond this, of course, we do expect that we will see a positive result from the merged entity, DNB Markets and Carnegie, both related to our investment banking activity, related to Private Banking, which is also in big part the management of assets, as well as Asset Management in total. I mean, these are the foundation for the ambition that we have outlined to grow fees more than 9% annually, and when assessing the NII sensitivity, I think, or rate sensitivity, it's important to think about a few elements here. More than 90% of our mortgage loan book is fully floating. Around 30% of our loan book into more small and medium-sized enterprises are fully floating.
So they are a core element in terms of if and when we reprice and if and when that happens, that will have an effect with a lag effect as well. In large corporates, the absolute majority of all our lines are margin-based on top of a reference rate. So therefore, you have a different dynamic than what you would have in the personal customer segment.
Great. Thank you very much.
Thank you. We will take the next question from line Riccardo Rovere from Mediobanca. The line is open now. Please go ahead.
Thanks. And good afternoon to everybody. Thanks for taking my question. Three or four, if I may. The first one is when rates will start going down and we know that rate cuts will not be or should not be that big, do you think it's going to have any impact on the loan growth in the country for DNB in general, or too small to really have an impact on easing financial conditions? This is the first question. The second question I have is on DNB Life. Would anything go against accelerating the repatriation of capital to the parent company, given that the solvency ratio is still, if I'm not mistaken, 250%? And if you correct me if I'm wrong, the number you have in mind is kind of 150%-140%. Is it possible to accelerate it?
The third question maybe is for Harald, I would say, with the pretty significant shift that we are seeing on the other side of the Atlantic towards, let's say, brown energy, because this is what's happening, is this an opportunity for Norway and DNB or not? Or would this wipe out opportunities in the green transition and this kind of thing? And the other thing I wanted to ask you is if there is anything that we should consider as one-off in investment banking fees and why trading in the quarter, trading revenues were so low. There is something that you call other mark- to- market, which was significantly negative this quarter. I don't know what this refers to. Thanks.
Thank you for your questions, Riccardo. They are good as always. I will leave the second one to Ida, and I'll leave the tail of the third one to Harald, and I'll try to do the first and the fourth one and the start of the third. But the activity in the housing market in Norway is very high and already intensified, we believe, by or stimulated, if you will, by expectations of a rate cut. And what we need now to stimulate activity further is increased construction activity of new houses and apartments. And the government just issued a statement earlier today that they will look into this because they see that it's necessary to do something about the supply side. And the latest forecast from our macroeconomist is also for a higher credit growth than we believed previously. And now we are expecting north of 3.5% for 2025.
So quite a benign environment for our business. The movements in mark-to-market values in other financial income is related to short-term hedging of shorter-term funding, where there is a fair value accounting of the swaps, but the nominal accounting of the short-term funding. So these are really financial elements that provide some volatility. There was a positive element in the third quarter, but nothing that alters the bottom line over time. With regards to what we often refer to as trading, which is the very sort of smaller positions that we take on the interest rate and currency in Norwegian kroner, the results were actually quite positive in the fourth quarter.
With regards to the third, and if there's an opportunity for us related to more fossil-related energy, I think I'd prefer to use that term. I can say that overall, we remain very committed to our strategy of being a positive force into the sustainable transition. I mean, there's a lot of opportunity in that for us, but we also continue to do fossil. So maybe Harald, you can develop a little bit on these opportunities.
Yeah. Thank you, Riccardo. I think you've asked similar questions in the past. And I think if you look at our Fact book, you will see there's a 10% increase in oil, gas, and offshore exposure in the fourth quarter. So I think that to some extent answers your question. We do take advantage of the opportunities that we see, and we can use our balance sheet as a facilitator. But most importantly, I think we will use our competence and our capital markets capabilities in order to, and our client base, to do a lot of cross-selling. And that is why this segment has been so attractive to us, is that we've been able to combine the use of balance sheet and brain to a large extent. Having said that, it's also a balancing act, and we will continue to also monitor this against our transition plan. So yeah.
Yes. And turning to DNB Life, you're right in saying the solvency ratio is very strong at 262%. The long-term target is 140%. So of course, you can say that there is a very strong solvency ratio at the moment that we also pointed to at the capital markets day. When looking at distributing excess capital or upstreaming excess capital, there are a few things that we need to look into. First of all, there is a guarantee portfolio that is in runoff, and this will need to be done in connection with the runoff of that portfolio in order to make sure that we do it in a good and structured way. In addition to that, it requires an approval from the NFSA. So we will, from an ongoing perspective, seek for approvals from the NFSA for the upstreaming of capital while the ordinary dividend is not.
I would also think I would like to point to what we have done and what we worked with in the DNB Life insurance portfolio. As we're now seeing that the guarantee portfolio is coming into a runoff, we've also taken down the interest rate sensitivity, which historically had a larger sensitivity towards interest rate movement. That has now been taken down and moved far more to hold-to-maturity portfolio, which of course also gives a stabilizing effect in terms of the opportunities to continue to upstream capital to the parent as well as deliver on a strong ordinary dividend in the years to come in connection with also the growth that we're seeing in the defined contribution area.
Thanks, Ida. Just a quick follow-up on this. This exercise is something that can be done once a year, or can it be done semi-annually, or maybe once a quarter, something like the NOK 1.5 billion extra dividend from the insurance operation, DNB?
It doesn't have to be an annual thing. We can do it more often than that. But again, I would like to point to the fact that we started the first time we received an upstreaming of capital was last year. And as you saw, we also had it coming, or the year before last, and then we had it coming last year as well, an increase from NOK 1 billion to NOK 1.5 billion. And I think also important to do this in a structured and a well-functioning way also going forward.
All right. Okay. Okay. Thanks. And with regard to the investment banking fees, is there anything we should consider as supernormal in this quarter? Because also DNB Markets activity over the past couple of quarters, actually, since the start of the year, if I may say, the revenues from customer-driven activity have gone up quite significantly. I was wondering whether this is something that you looked for, or maybe the conditions in 2024 have been so particularly good that that translated into better activity for DNB Markets, just because its current conditions were particularly favorable.
Ask the Head of DNB Markets, please.
Thanks for that question, Riccardo. It's Alex here. I think one thing to keep in mind, there are no one-offs in the investment banking numbers as such, but there is, of course, a seasonality in the numbers so that the fourth quarter tends to be the strongest quarter each year. I'd say that the business throughout the year is very well diversified. I think we've highlighted this quarter and also in previous quarters that the activity in DCM has been particularly high, and breaking that down, it's particularly been in the Nordic high-yield markets. We expect that market to continue its structural growth, but I can point out that last year was a new all-time high in terms of issuance for that market. But we attract more and more international issuers to the market, so we expect the structural growth to continue in DCM.
Perfect. Thanks, very clear.
Thank you. We will take the next question from Martin Nilsson is from Handelsbanken. The line is open now. Please go ahead.
Thank you. So as another potential source of capital upside, could you please provide us an update on Luminor? So as I recall, your view on this is that it's a financial investment, and the expectation is that you would exit together with a private equity majority owner if and when Luminor is sold. Is that correct, or any update around this process?
We haven't provided any updates on that, but you're right in saying that this is a financial investment, and we're following the developments, but there are no news in relation to Luminor or any transaction in the foreseeable future.
Okay. Understood. And then if I could quickly ask about Danske's Personal Customers business that changed hands to Nordea in the quarter, that one saw quite a bit of churn between signing and closing. Did you notice quantifiable positive impacts from customer flows or such, or did those go elsewhere? Savings, banks, etc. Thank you.
I think we would like to comment just in general that we've seen a very high customer activity, both related to customers buying new homes or apartments and customers from other banks choosing DNB and our offering during the fourth quarter, and this has been a very positive development.
Okay. Thank you.
Thank you. We will take the next question from Joonas Tuominen from Jefferies. The screen's open now. Please go ahead.
Good afternoon, everybody. Joonas Tuominen. Two questions, please. First of all, on your credit quality again, how much more improvement can we see in the stage three exposure you still have on your balance sheet? Is there a point where you say, "This is a structural amount," which will stay, or should we still see further improvement that the shift from stage two to stage three will remain very low in the next years? And secondly, just a quick one on the tax rate for the next years, please.
Yes. In terms of the credit quality, I think what we have seen over the past few years is that we've seen some reversals, in particular related to the offshore segment that had a bit of a challenge situation a number of years ago during the pandemic or around there. So we have taken some reversals related to that. I wouldn't say that, I mean, this is not a static situation. We will always have customers moving from stage two to stage three, and we will have customers moving back to stage two and stage one from stage three. I wouldn't say that there is a significant potential to look at the impairments we've taken in stage three today. This is our best estimate as we stand today and also what we believe is the correct assessment.
And again, we will most likely see customer-specific events also going forward, as has happened historically, and losses will vary quarter on quarter. In terms of tax, what we're saying is that we maintain the same level of expectation that we had last year, saying that we expect a tax level of 20% in 2025, but our long-term target and expectation is a tax rate of 23%.
Okay. Thank you.
Thank you. We will take the next question from line Herman from Pareto Securities. The line is open now. Please go ahead.
As well, thank you. Just following up on loan losses, could you comment a bit on what's driving specifically reversals within commercial real estate currently? Are these macro modeling changes or specific exposures?
In commercial real estate, what we have done is that we've historically taken a bit more conservative view than what the model output would predict. What we're seeing now is that there's actually a positive development in terms of commercial real estate. We're also seeing that there's more of a balance between the sellers and the buyers. We're also seeing that there continues to be a very solid development in terms of office premises and the development in our portfolio. And therefore, this is our best estimate as we are today. But there are no significant reversals in terms of model-based perspective on customer-specific situations that could always be, but that's individually set.
Good. Thank you.
We will take the next question from line Sofie Peterzens from JP Morgan. The line is open now. Please go ahead.
Yeah. Hi. This is Sofie from JP Morgan. Thanks a lot for taking my question. So in the fourth quarter, you did some securitization. Could you kind of comment on how we should think about the P&L impact of this securitization and also how much it helped your capital in the quarter, and what are your plans for SRTs in 2025 and 2026?
Securitization, as well as insurance, is an important tool that we use in terms of originating, distributing and also working in terms of capital optimization, in particular in the large corporate area, but also in the small and medium-sized enterprises. When looking at what we did last year, this is the first securitization that we have done, and we've signed a transaction with the European Investment Bank, which is a first step in terms of looking at securitization from a broader perspective in Norway. Not saying that we will do a lot going forward, but I think this is an important tool that we have a very good dialogue with the NFSA around as well. This particular deal is related to more green financing and transportation tools such as cars and also vehicles in relation to construction, but more green transportation than anything else.
I think when we look ahead, we believe that securitization is an important tool that we would jump back to be able to utilize even more going forward, also taking into account the capital intensity that we see in the large corporate area to be able to turn around the capital even quicker.
In terms of the cost for the SRT, it's booked in the fee line under guarantee?
I need to come back to you on that in terms of where the fee is booked, but I'll come back to you on that, Sofie.
Okay.
But in terms of we are not quantifying the effects on the direct effects on the quarter one capital ratio this quarter, but we're saying that that's also part of why we're seeing a positive development in terms of risk exposure amounts as well.
Okay. Clear, and then my second question, you mentioned in the earlier answer that long-term you would expect a 23% tax rate. Would that already be in 2026, 2027, or is it kind of 2028 or beyond, kind of 2027 sometime, 2020, 2030, or when should we expect that 23% tax rate to kick in?
What we're saying is that we expect a tax rate of 20% in 2025, and onwards from there, we expect more long-term a tax rate of moving to 23% again.
Okay. Okay. That's clear. And then my final question would be on dividends. Would you consider moving to paying kind of the dividends semi-annually or doing interim dividends?
Our understanding and also bearing in mind the situation, we haven't assessed that and have not made any decisions in relation to that and need to look into that more deeper, but again, we don't have any plans to do that going forward.
That's very clear. Thank you.
Thank you. And we have a follow-up question from Riccardo Rovere from Mediobanca. The line is open now. Please go ahead.
Thanks for taking my two follow-ups, if I may. The first one is again on DNB Life. If I look at page 71 of your Fact book, and I add up the profit for the fourth quarter of 2024, I guess roughly must be NOK 1.6 billion, give or take, and you are paying out 1.5, if I'm not mistaken. I'll say 1.5 because you say it looks like you have paid out kind of 100% of the profits of DNB Life. How can the solvency go down if you don't accelerate it from 250 to 140? How can it get to 140 if the NOK 1.5 billion does not get significantly higher? Because otherwise, with 100% payout, it's going to take really ages to repatriate the capital.
The other question I wanted to have a clarification in NII, when I see the amortization fees at NOK 100, amortization effects and fees NOK 180 million in a quarter, is there anything odd in that? Maybe because rates are supposed to start coming off, or how should that part of the NII move with rate cuts in the first part of 2025 or throughout the course of 2025?
Thank you, Riccardo. There is nothing odd in the amortization fees in the fourth quarter. Fourth quarter is typically a quarter with very high customer activity, and many are looking to close the transactions they're working on prior to year-end. And this is an element that will vary from quarter to quarter, and it will depend on the actual customer activity in the specific quarter. So it's hard to give you any guidance on the actual moving bits and pieces. With regards to DNB Life and the solvency ratio, this is impacted by several other elements in addition to the annual profits. More particularly, I mean, the future obligations under the insurance contracts are discounted at the future expected rate, as well as the assets of the company. So the actual rate level is material in calculating the solvency ratio.
We have lowered the rate sensitivity, thus made the solvency ratio more robust, as Ida referred to in her previous comments, when acquiring more hold-to-maturity papers at a rate level that is above the guaranteed level of return to customers, and I thought less rate sensitive, but this is still an element that impacts the solvency rate from quarter to quarter.
No, no. I understand that, but let's assume rates stay where they are or where they will be in six or twelve months. That part should not be there anymore, so I understand there are plenty of moving parts in these things, but to make things easier, at the very end of the day, is the profit you make and the profit you pay out, and if you pay out 100%, everything else being equal, how can it go down materially?
Hi, Riccardo. It's Håkon. Hello also, Herman. In addition to 100% of the annual profit, we also pay extraordinary dividends, last quarter in 2024 of NOK 1.5 billion, and we guided on the Capital Markets Day that we will pay out in the range of NOK 30 billion over the next 10 years in ordinary and extraordinary dividends.
Okay. All right. Okay. All right. Thanks.
Thank you. It appears no further question at this time. I'll hand it back over to your host for closing remarks.
All right. Thank you so much, everyone. Thank you for your good questions and participation. We hope you all have a good rest of the day. Thank you.
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