Hello, welcome to the DNB Q2 conference call. My name is George, I'll be your coordinator for today's event. Please note that the conference is being recorded. For the duration of the call, the lines will be in a listen-only mode. You will have the opportunity to ask questions towards the end of presentation. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero, and you'll be connected to an operator. I'll hand the call over to your host today, Mr. Rune Helland, Head of IR, to begin this conference. Please go ahead, sir.
Thank you very much. Hello, everyone, welcome to DNB's second quarter analyst call. Here in Oslo to answer all your questions. We have in addition to Kjerstin and Rasmus, Maria Ervik Løvold from Personal Banking, Marianne Wik Sætre, Corporate Banking Norway, Harald Serck-Hanssen, LCI, Alex Opstad, DNB Carnegie, and Eline Skramstad, Head of the CRO. Before we open up for questions, Kjerstin will give you the highlights for the quarter.
Thank you, Rune. Thank you all for taking the time to be with us today. Just a few highlights on the quarter that we believe is a good quarter demonstrating high activity across all of the business areas, with also DNB Carnegie and Wealth Management as the strong drivers on the fee side. The backdrop of all of this is a very resilient and robust Norwegian economy that continues to demonstrate the same, even though there are still turbulences in the world economy and the Middle East around us. We continue to see a sound development, continue to expect the GDP growth in the mainland economy of 1.5%, and continue to see low unemployment.
As you probably already have noted, there was an increase in the key policy rate by the Central Bank during the second quarter. Expectations of one more, most likely in the third quarter of this year, before the key policy rate again is expected to come down in the second half of 2027 to stabilize around the level of 4%. Resilience in the economy as previously indicated, and a sound growth level driven by consumption as well as a high savings rate among the population. Coming into key specifics of our numbers this quarter, we deliver a return on equity of 14.6%. Growth in both fee-related and interest-related activities are the drivers for the results. You may have noted that our net interest income is down by 1.1%. The growth is offset by some elements of competition and product mix effects.
To be more specific, if you look at the spread development net of revenue related to interest on equity and treasury elements, it's a reduction of NOK 264 million, which is evenly spread among product mix effects as well as competitive pressure. It's also worth noting that the volume growth that comes primarily in corporate customers Norway and LCI comes towards the end of the quarter. As such, the average volumes are down or stable, I would say, in the quarter, whereas the end of quarter numbers shows a growth of 1.4% for the group as a whole. Net commission and fees up by 4.6%. Key drivers, investment banking, where corporate finance grows by close to 20%. The other strong driver for growth is asset management that is up by 13% with a very robust development of-
Ladies and gentlemen, this is the operator. We appear to be experiencing a temporary interruption to the conference. Could you please stay connected and we'll wait for the speakers to redial. Please do stay connected. Do not hang up. Thank you. Ladies and gentlemen, this is the operator. We're still waiting for speakers to rejoin. Please do stay connected. Thank you. Ladies and gentlemen, once again, just please stay connected. Ladies and gentlemen, please stay connected. Ladies and gentlemen, please stay connected. The speakers should be rejoining shortly. Thank you. Ladies and gentlemen, we are still waiting for speakers to reconnect. Please stay connected. Ladies and gentlemen, please stay connected. The speakers should be joining us shortly. Ladies and gentlemen, just for the sake of being silent, I'll put the music back on, and we will switch music off once the speakers rejoin. Thank you very much.
Sorry for the interruption. I believe the speakers have rejoined.
Yes. We can hear you now.
Okay. Could you please proceed? You did drop about three to four minutes ago.
Have they gotten the highlights?
It was the lady who was speaking, sir.
Yeah.
It was before we went to Q&A.
We should just continue with the Q&A?
If you want to pursue the highlights again? Or do you want to go to the Q&A, sir?
We are asking if the highlights were heard or not.
In parts. You were speaking and then the line went silent.
Okay. Approximately at which point? Would you be able to share that, so I don't do a repeat of the whole thing?
I would say you were safe about three, four minutes into it. Everything's fine. Thank you.
Yeah. We'll go directly to the Q&A. It's all available anyway.
Let's go just directly to the Q&A.
Okay, perfect. Thank you very much. Ladies and gentlemen, just as a quick reminder, if you have any questions, please press star one on your telephone keypad. Thank you. Our very first question today is coming from Shrey Srivastava of Citi. Please go ahead.
Hi, thank you for taking my questions. This point has come a bit earlier than I expected. My first question is on the competitive dynamic in the Large Corporates segment. I understand the margin decline this quarter is to do with the mix of business you are pursuing, it's clear not only from yourselves but also from what your peers have said, that environment is becoming increasingly more competitive. Is there anything you can share on the outlooks going forward for margins potentially across the Nordics, since you particularly highlighted outside of Norway? My second one is, you've seen an interesting dynamic where you obviously have this pressure on margins in personal customers, you also have this very strong flow dynamic as well. Obviously, that's margin dilutive since you earn a lot more on deposits, certainly current accounts.
I just wanted just an update sort of from a sector perspective, on how the customer is thinking about their decision between Sort of deposits and fund savings and how it affects your margin outlook going forward. Thank you.
Thank you for your questions. As a general statement, I would just reiterate that we do see and live with competitive pressure across all the parts of our business. At the same time, my assessment is that all of the areas is managing this competitive pressure in a very rational manner, and we can confirm that the growth that we take on our books also in this quarter represents profitable volumes to the bank. Just to reiterate the movements in NII, when you consider the movement on spreads, you have to look at the movement net of increased interest on equity and treasury, which leaves 284 basis points as a movement, and approximately half of this is related to competitive pressure. Approximately 1.5 basis points across the entire book.
For Large Corporates in particular, when asked, Harald, he can develop if he feels like it, but we are winning transactions not purely on price. We are winning transactions on areas where we have industry expertise, where we combine this with products and services on the advisory side from DNB Carnegie. Or in other areas such as commodity derivatives or trade finance or value chain supply chain, supply value chain financing are areas where we find that we have differentiating offerings to competitors. We are talking about part of the product mix effect stemming from the fact that the growth being delivered this quarter in Large Corporates comes from lower risk volumes than we have in average on the portfolio. This can be seen two-fold in our numbers in other areas. One is through the deposit migration and a lower share of high-risk exposures in the LCI book.
Secondly, through the fact that the growth is capital efficient this quarter. A 3% growth in large corporates, but only a 20% sort of consumption of capital net of migration and other instruments applied to increase efficiency of the growth. Again, these are lower margins nominally, but profitable to the bank. In relation to personal customers, if you look at the segment in isolation. There are lag effects stemming from the movements in the money market rates coming prior to actually the rate hike from the central bank in expectation of it, and then a notice period from the repricing being announced up until it takes effect. There was an announcement of a repricing towards customers, but this will start taking effect from mid-July only.
We are, as a group, more or less NIBOR neutral, this will have different impact if you look at the different segments as such. Personal customers is really the area that gets the increased funding cost before they get the impact from the repricing. Above and beyond this neutrality, it's really the repricing impact of the customer that gives a positive effect for the bank as such. Maybe just a last comment on clients. We find that our clients are very rational and focused on, in particular, the rates on their mortgages. We have seen also an increased awareness of the type of accounts that they hold their deposits within. I would say the Norwegian market is very immature when it comes to considering savings and interest rate funds compared to bank savings. It's very much still a bank savings environment.
Even though we see an increasing interest and activity in saving in mutual funds, it's not so much driven by the price difference as such, but more sort of an increasing pattern of behavior. Movements are relatively slow on the deposit side, and the mix still roughly 25, 75 transactional accounts versus savings accounts.
Great. Thank you very much.
Thank you very much for your question, Shrey. We'll go to Gulnara Saitkulova calling from Morgan Stanley. Please go ahead.
Hi. Good afternoon. Thank you for taking my questions. To follow up on the spreads, as the rate hike feeds through with another rate hike possible later this year. Could the higher rates help to ease the competitive pressure? Or do you think the pressure and the customer switching will continue to intensify around the periods of change in the interest rates? What needs to change in your view for spreads to begin recovering? Do you think the net interest margins have now bottomed, or is there still further downside to come? Can you further elaborate how DNB is responding to more competitive environment across the different areas and divisions of DNB Group? And what actions can the bank take to mitigate the ongoing margin pressure? Thank you.
Thank you for your question that revolves around competitive pressure and margins. I would start by highlighting that we are very clear in prioritizing profitability over growth as a starting point. Also add that, of course, it's important for us to see that we are competitive and win customers also in an increasingly competitive environment. We do get confirmation that this is indeed the case. One example of this is if you look at personal customers, we have the same volume of inflow of requests for financing certificates this quarter as we had in the same quarter last year. We are more selective on the business we decide to write, as we do focus on profitability. Another testament to this is talking about the record number of new customers in the Large Corporates area in the Nordics outside of Norway.
We already see that these customers use our products more broadly and all on average have a return that is above the return requirements. I would say our way to respond to a competitive environment is to be very targeted, in terms of focusing where we believe we have our competitive advantages. This is also how we win businesses through preference and not price in its entirety. On the margins, it is limited how specific we can be. Of course, as you know, an announced repricing will have a positive impact to our net interest income. The fact that the volumes added this quarter comes late in the quarter should also have a positive impact on our net interest income, all being equal in the third quarter.
As for customer behavior, we have also stated that this quarter is more related to house swapping or actually customers buying new homes than bank swapping as such. As people are sitting a bit more still when we are in the announcement period of a rate increase. How this will develop, it is a bit difficult to say. It depends on if and when there will be another rate hike from the Central Bank. All in all, I think we continue to expect Norwegians to be very focused and interested in how much they pay for their mortgage. We also continue to expect the Norwegian market to be a rational market. All the major players being active in this market is targeting return on equity as their most important financial metric. Of course, competitive pressure will vary somewhat from quarter- to- quarter.
Over time, we still definitely continue to expect this to be a rational market.
Thank you. Can I follow up with the second question? With your Capital Markets Day coming up later this year, could you give us an early sense of the key strategic themes and priorities you expect to address? Should we anticipate an update to your financial ambitions, or is the focus likely to be more on confirming the current strategy? Thank you.
I think there's nothing new to provide at this point in time with regards to our Capital Markets Day. We do them every second year. Every Capital Markets Day, we review and look at our financial ambitions for the coming period, and we try to give you a more detailed guidance as to the outlook. I think you can expect us to address our future ambitions as well as building up to our strategic initiatives in order to deliver on those.
Thank you.
Okay. Those your questions, ma'am. Next question will be coming from Namita Samtani calling from Barclays. Please go ahead. Your line is open.
Good afternoon, thank you for taking my questions. My first question, you commented on corporate customers, Norway and commercial real estate growing strongly there. I just wanted to understand the rationale for that. Do you see good pricing there, or what attracts you to that segment, as I would have thought it's quite a competitive space to be in? My second question, I understand growing in Large Corporates is low margin business, and it's impacting NII, but the rationale is that it's high ROE business. Is this a strategy that you expect to persist for some quarters? I'm just wondering how you think about this strategy and whether it's a long term strategy or are you being opportunistic here?
My last question, when you think about rate sensitivity to 25 basis points, I think just previously over the past few years, it's been in the range of NOK 0.8 billion- NOK 1.2 billion. Do you include interest on equity and the treasury impact in that? What are the factors in the past that have made it NOK 0.8 billion or NOK 1.2 billion? Is it just purely competition I need to think about there? Thank you.
Thank you. I'll ask Marianne to comment a little bit more in detail on corporate customers Norway. Please bear in mind that we have talked about this growth as a combination of increased volumes across commercial real estate as well as the growth across the various regions in Norway. With regards to Large Corporates, I would say, of course, we have an overall strategy of maintaining a very strong asset quality and diversified exposure in our book. We do not specifically target specific buckets of risk. Our strategy is based on profitability. After Marianne, maybe Harald also can comment a little bit more on that, and I can come back to the rate sensitivity.
Yes, we can see the growth through the whole Norway, and it reflects the market in Norway as a whole. There is growth in all different areas there geographically and also in the industry concerning both in the seafood area, the finance, DNB, and also in the industry concerning the coastline of Norway. We can see it through all sectors and all geographical areas of Norway, and it reflects the market as a whole.
I think on the Large Corporates side, I think you're correct, Namita, because we focus on total risk-adjusted return on the client over time. As you point out, the margin is slightly down, but you will see that the cross-selling or the non-lending income is up in the quarter. That is really what is our primary ambition.
A short comment on rate sensitivity that we do not comment specifically as such, but we have said that the historical movements should be a good reference, and I think you're correctly referring to what the movements have been. With regards to the various moving bits and pieces in the P&L, we've said that we are more or less neutral to NIBOR movements. In order to achieve that neutrality over time, it impacts also interest on equity and treasury. Which means that the net impact to us as a bank stems from the actual repricing to rich customers and only that. That will be the combined impact from repricing loans from the public to personal customers, where still more than 90% of the lending book is floating and a large part of the deposits.
In corporate customers Norway, also a larger portion of the deposits and a small portion of the loans are floating base priced. These are the impact that will hit our book movements on interest on equity and treasury needs to be seen in context with the NIBOR neutrality.
That's helpful. Thanks very much.
Thank you. We'll now go to Markus Sandgren of Kepler Cheuvreux. Please go ahead, Markus. Line is open.
Yeah. Hi, everyone. I was also having a question around margins, but not so much for the quarter, but more big picture. Margins in Norway has always been much higher than in Sweden and Denmark, for example. I guess it's totally that you have much higher rates, but nevertheless, the margin seems to be much higher regardless of what the level is. How is your thinking about when competition is picking up and you have several of the other big banks in the Nordics that wants to go into Norway, and they can apparently live with much lower margins in the other countries. What do you expect that to bring to the competitive situation in Norway longer term, that is not for the next quarter? That's my first question.
I'm not sure what data points you are referring to. To my knowledge, we've had periods where margins in Norway have been more competitive than in Sweden, and we've had also vice versa for a certain period. The most recent statistics we were looking at, I believe the mortgage margins in Norway dropped below the level that we have seen in Sweden. I'm not sure that I have the exact same data points as you have. Again, we have everything else being equal, a higher level of capital than certain of our peers. We have been having that, and we've dealt with that for years. Beyond that, there's a harmonization of risk weights being applied. We are confident that we are able to compete in this market at rational levels. Again, we understand that this market is attractive because it is a rational market.
I think the closest comparison would be Sweden, because Finland and Denmark are a bit atypical on mortgages. We continue to expect fierce competition, both from local and Nordic players, but are also confident that we will be able to continue to grow profitably in these market circumstances as we feel that we show in this quarter as a testament to that. It was also maybe worth noting, what many of you probably also saw after the release of the first quarter earnings, a narrative from some of these players that they were seeing the competition in the Norwegian market as fierce and indicating maybe an increased focus on profitability.
Thanks. Secondly, on capital. Now with the new buyback program, you're coming down to 1% in CET1 buffer. Is that what we should use as buffer going forward, or are you heading somewhere else?
We continuously work to optimize our capital position to return excess capital to our shareholders. We do not provide or have a spoken buffer on top of the capital requirements from the FSA. When you see that we are initiating share buyback programs, it is a signal that we are more than comfortable with the buffer that we do have. Yeah.
Yeah. Okay. There's no known head or tailwinds on capital requirements?
We see no headwinds or tailwinds to know of in the future. Correct.
Okay. Thanks a lot, and good luck in your new endeavors.
Thank you, Markus. Thank you.
Thank you very much, sir. Our next question will be coming from Sofie Peterzens of Goldman Sachs. Please go ahead, Sofie. Your line is open. Thank you.
Yeah. Hi. Thanks a lot for taking my question. Here is Sofie from Goldman Sachs. I was just going back to the competition. When I look in your fact book on your market shares, it seems that you have been quite consistently losing some market share in Norway, both on the lending and deposit side, and retail customers and corporate customers. How should we think about the market shares going forward? Do you expect market shares to stabilize, or is it fair to assume that you will continue to give up some market share to ensure that you just capture the profitable growth? That would be my first question. My second question would be on the press conference earlier today, you mentioned that 50% of your corporate loan growth comes from outside of Norway.
Could you just elaborate why you wanted to grow LCI outside of Norway and where the focus is? Is it mainly Sweden or is it also some of the other Nordic countries, U.K. maybe, or U.S.? If you could just maybe comment a little bit around the 50% of the corporate loan growth that comes from outside of Norway?
Sure, Sofie. Thank you for your question. With relation to growth, our focus, number one, is really on profitable growth. Of course, we are also focused on keeping the relative value of our position, which is a leading position across all of the markets we are active in within Norway. From that perspective, there has been no material weakening of our position. On the contrary, we are able to deliver growth, and we capitalize on the diversity of our growth platform in order to deliver on that throughout different cycles, I would say, with varying competitive pressure. With regards to the growth in the quarter in the Corporate book and internationally, I will hand it over to Harald.
You are right, it's a diversified growth across Norway and international. I think this robustifies the growth platform also above and beyond the pace of economic growth in Norway, where the Nordics also have been an increasing strategic target for us. Harald can comment some more on this quarter specifically.
Thank you, Kjerstin. If you look at the first half of this year, there's been a strong growth in the Nordic, it's not limited to Sweden. We also take advantage of the strong position that DNB Carnegie has in Finland and Denmark to grow our business there, albeit from a lower level than we started in Sweden. Because we have lots of success stories also in Denmark and Finland, there will be more to come. When it comes to the rest of our international platform, we aim to maximize returns over time, to support our clients. It will vary. If you look at 2024, we had a very strong growth in North America. If you look at 2025, we had a strong growth in the U.K., and the countries handled from our London office.
I think that will vary and be based also on which industries are most active in that period.
Okay. Thank you. That's very clear. If I may, just one final question. On Luminor, could you just comment what your plans are with Luminor? And would you consider kind of buying back the company?
As you all know, we are a 20% owner in Luminor, where Blackstone owns the other 80%. We still believe that there is strategic attractiveness in those markets, but have no comment beyond that as to future plans for that investment.
Thank you.
Thank you for your questions, ma'am. We'll now go to Johan Ekblom of UBS. Please go ahead, Johan.
Thank you very much. Just two quick questions. First, on asset quality, we're clearly seeing lower than expected credit losses in the income statement. If we look at this development in Stage- 2 loans There was a very big increase in the quarter that looks to be broadly spread on everything except for personal customers. Is there any methodological change or anything that's driving that, or is this just quarterly volatility? I think it's a 20% increase in overall and 40% increase in corporate Stage- 2. That's the first question, maybe super quick on margins. I know we've spoken a lot about it, if I look at the waterfall you provide in your fact book and add together the margin on lending and margin on deposits, it used to be NOK 100 million headwind a quarter.
It's been NOK 500 million a quarter the last three quarters, if you're NIBOR neutral, I guess we can ignore what happened to market rates there. Is it only a step-up in competition that has driven that change over the last three quarters? Or is there anything else we should bear in mind when we think about the walk-forward on NII?
Thank you, Johan. Eline will look further into Stage- 2, I can't say I recognize the numbers. It seems a very large increase compared to the fact that we have a positive migration for the portfolio overall, that is visible through our development in capital. They will look into that and come back to you. I think for margins, again, NIBOR neutrality overall over time is the key message. I'm not saying that it's 100% that, given the combination of our assets and liability mix, the broad part of our margin-based funded loans goes to fund our margin-based customer loans. That also means that you cannot only look at the spread development, you also need to look at interest on equity and treasury. I'm quite sure you find a different number than the delta of NOK 500 million per quarter in the past three quarters.
What has been the main characteristic in the previous three quarters? It's been, yes, a competitive environment, reducing interest rates and the impact of the repricing from that by the central bank. Even though we are saying that we are more or less NIBOR neutral over time, we are not neutral to the absolute level of the key policy rates, and this is the key explanation for the movement.
Thank you.
Okay, questions on Stage- 2, I think we need to come back to you on the migration there. If you look at the numbers for this quarter, the impairments are linked to the Polish legacy portfolio, mainly. We will come back.
Yeah, I'm just looking at Table 1.5.1. St age- 2 went from NOK 130 billion in March to NOK 154 billion while personal customers went down, that they increased all on the corporate side. Yeah, we can follow up on that later. Thank you.
Yes. I think this should be related to the growth in the quarter, which comes in all its majority across corporate customers, Norway, and Large Corporates, and they come towards the end of the quarter. This is also maximum exposure amounts. They may vary somewhat from the drawn amounts, which are the volumes that we are referring to when we talk about growth for the quarter as such. Again, if you look at the risk composition of the portfolio overall, that is all accounted for through the development in the capital and the risk exposed amounts. You will see from those numbers that the growth we delivered this quarter, both drawn and in terms of exposure, risk exposed amounts, that these are capital efficient developments. There shouldn't be any reason for concern regarding that development.
Thank you.
Thank you very much, Johan. Ladies and gentlemen, as a reminder, if you have any questions or follow-up questions, please press star one on your telephone keypad at this time. We'll now go to Riccardo Rovere of Mediobanca. Please go ahead.
Thanks. Thanks a lot for taking my question. Good afternoon to everybody. A couple, if I may. The first one is, the loan book is at least the one in the balance sheet is down first half versus the end of the year. You stated that you are prioritizing profitability versus growth. I was wondering what should we do with the 3%-4% loan growth that you have always had in mind. Is that still kind of valid? This is the first question. The second question I have is something somehow related to that. The loan book is down a bit in the semester. As far as I understand, you have executed another SRT, as you stated, if I'm not mistaken, during the press conference this morning.
You stated that you prioritize profitability versus growth, you stated that the product mix in the margins also is due to the fact that in Large Corporates there is some sort of maybe better growth in low margin areas or lower risk. Why are there credit risk-weighted assets up quarter-on-quarter and in the semester, up by NOK 15 billion. There's not any material number considering that the book is down and considering this sort of low risk appetite that you have mentioned. How do I square the circle here?
Riccardo, the book is not down. Average volumes are flat, the group as a whole, ultimo quarter, grows by 1.4%. There's a 3% growth in Large Corporates this quarter. There is 1.5% growth in corporate customers in Norway, if you look at the volumes at the end of the quarter, a 0.6% growth in personal customers. We still maintain our ambition to grow 3%-4% a year. If you look at our growth in the last 12 months, we have delivered 4.3% growth in lending and 5% growth in deposits. I think that what we show in this quarter is that we are growing according to plan, that we are able to leverage the growth platform that we have within and outside of Norway, being a bit more selective on the personal customer side, focusing on profitability in the markets where competition has been pretty intense.
This is also presents the explanation for the growth in the risk exposed amounts, which is less than the nominal growth. The SRT should also be seen in that context.
Well, okay, fine. If you look at the balance sheet in the quarterly figures, which is Table 1.1.5, the book was NOK 3.4 trillion. Now it's NOK 3.33 trillion.
Yeah.
I'm just looking at your numbers, okay?
Yes. Well.
Maybe it's the repos, I don't know.
It's the repos.
It's down NOK 17 billion. Okay, fine. Fair enough. Okay.
Exactly. I apologize.
All right.
That was where the delta is. If you're looking at the outright balance sheet numbers, it's the reduced activities in repos this quarter.
All right. Okay. Fair enough. The 3%-4%, that's unchanged, that stays.
That's unchanged, and that has been delivered upon and a little more in the previous 12 months period. I would say so far this year as well, we are on track to delivering on that, and we continue to see opportunities for profitable growth across all of the customer segments. We think that we have a pretty positive message on growth this quarter. It's more meaningful for you to look at the development in the segments as there can be a higher volatility in the volumes related to repos without that really impacting the flow and the P&L numbers as much.
All right. Okay. Thanks for that. The other maybe very quick question I have is, at these levels, do you still see the buyback as the best way to return capital to shareholders? Don't you think that at 17% return on equity, maybe you could redeploy this capital within the business rather than through buybacks at 1.8 x to 1.7 x the tangible equity?
Well, we do not have any perspective on the value of our share when we initiate our buyback programs. What we have is a strong track record on delivering on our dividend policy, paying more than 50% of annual net profits and year-over-year increase in dividend per share. That remains our key priority. When it comes to opportunities beyond the 3%-4% stated volume growth, we try to optimize our capital the best way, we still see share buyback as an efficient tool in this way.
Sorry, Rasmus, you said what tool? I missed that.
The share buyback that we were referring to. We see that as an efficient tool on returning excess capital to our shareholders.
Okay. Efficient, you said. Okay.
Efficient. Yes, correct.
Okay. Got it. All right. Okay, thanks.
Riccardo, just maybe one more thing, just reconfirming that we're very committed to the originate to distribute model that puts a high focus on turning the capital quickly around and generating a higher growth in fee-related advisory and other type business, rather than maximizing credit growth. We believe, made the experience that this is the best way to optimize on return on capital over time in particular, in the Large Corporates and International area.
Okay. Thanks.
Thank you very much. Next question is coming from Jacob Kruse of Autonomous . Please go ahead, Jacob, your line is open.
Thank you. I guess two questions. Firstly, on the commission income, you had this target back in 2014 of 9% over the cycle. Could you just update on how you think about that in light of the current environment and in light of what you're seeing in your business? Secondly, on the margin and I guess commission income side, you have this margin pressure here, and as I understood it, you talk about some of the pressure on the margin being offset by a depth of fee revenues, but they seem to be tracking below your ambitions. I guess my question is, where you do that kind of fee business for cheaper lending, do you risk ending up with a lower long-term profitability book on the lending side in exchange for potentially less sustainable fee revenues? Thank you.
Thank you, Jacob. The answer to the second question would be no. It's not that we compromise and do non-profitable lending business on the back of increased fee business, but nominally, the margins can be lower, while the return as attractive for low risk exposure. This has been one of the characteristics of the growth in the Large Corporates area in the two previous quarters. This is not a strategy as such. This has just been where we have seen the most profitable opportunities in the two recent quarters. We do try, regardless of which level of risk the exposure is at, to maximize the cross-sell and the pocket of revenue on each and every client, also finding that they are more satisfied the more they use the breadth of our products. We maintain the ambition to grow fees and commissions by 9%.
Of course, the backdrop of the 9% was based on executing on the communicated synergies from the Carnegie transaction that was closed now a little more than a year ago. I think we are pleased to see the development in both of these two areas, asset management and investment banking, in this quarter. As such, I think it's also fair to say that we have not taken fully into account the headwind of the credit insurance that is more of a capital efficiency tool and the cost of the SRT that also lands in the fee bucket to that extent. I think I can add that this is really a very good quarter that brings testament to the potential and the value from the merger between Carnegie and DNB Markets.
We also see that driving attractive business on the Large Corporates side in the Nordics across all of the three Nordic countries outside of Norway. We think it's a very promising development. We are just in the starting phase, so to say, of realizing the value and the potential in that combination.
Okay. Thank you very much.
Thank you very much, sir. Our next question will be coming from Simon Rønne of ABG. Please go ahead.
Yes, thank you. Hi again, everyone. Maybe more of a housekeeping question. On the corporate customer Norway deposit margins. I had expected some temporary benefit from the increase in NIBOR on the non-NIBOR linked deposits before the customer reprice. Yet the reported margin was stable, basically flat quarter-on-quarter. Is there anything special offsetting that expected tailwind? Should we think of the portfolio now being largely repriced, or should there still be some repricing to come in Q3 and then turning a slight headwind on the margin? Thank you.
Thank you, Simon. Very good question. There is a particular reason for why the deposit margin on corporate customers is stable, and you were quite right to expect that it should have improved. There is a couple of movements that we do think about when we talk about the portfolio and asset mix effect, particularly in the deposit base of corporate customers Norway. Firstly, all employers in Norway pay out extra salary to their employees in the month of June, the so-called holiday payments, and these usually sit in accounts which are very attractive to us and low yielding to the client. That is an outflow of deposits in corporate customers Norway. In addition to this, corporate customers have taken on new deposits or deposit growth from the customer category larger organizations. Now, these are profitable deposits, but they are much more competitive in terms of margin.
Thus, they are nominally taken on at a lower margin than the average deposit base in corporate customers. These are the two elements that lead to a stable deposit margin. As for the repricing, it has taken effect in corporate customers, but only for two weeks in the second quarter. The majority of the repricing impact also in corporate customer Norway is coming in the third quarter.
Okay, understood. Thank you very much. Have a great summer.
Thank you so much, sir. Ladies and gentlemen, as a final reminder, if you have any questions or follow-up questions, please press star one at this time. We do have one follow-up question coming from Markus Sandgren of Kepler Cheuvreux. Please go ahead, sir.
Yeah. Hi, thanks. Just a quick follow-up. On tax, it seems like it's bouncing up again. Is it 23% still what you expect going forward?
We expect 23% for the year and also in future years. Correct.
Okay. What was the reason for the higher tax rate this quarter?
This quarter was due to GloBE Tax, which is a fairly new regulation here in Europe, coined to address the big tech companies, but also hitting across industries, and it's relating to a one-time cost tax effect that actually dates back to 2024.
Okay.
Which drove higher costs this tax, this quarter, and we're expecting 22% in the next two quarters.
Okay, thanks.
Thank you much, sir. We have another follow-up question. This is coming from Riccardo Rovere of Mediobanca. Please go ahead.
Thanks. Just a quick one on SRT. Could you please shed a little bit of color on the risk-weighted assets saving that you achieved with that in the second quarter? In general terms, do you still see fairly large room to utilize this tool to mitigate RWA growth on top of the loan growth? Thanks.
The impact of the SRT this quarter is roughly 10 basis points. We will consider deploying this tool further but have no concrete plans. We will do this in a gradual and careful manner.
Let's say you can still do something. I mean, you have not used all the available resources to do this?
No. We have done a couple of transactions, we're taking a pretty conservative approach on this.
Okay. Fair enough. Thank you.
Thank you much, sir. We do not appear to have any further questions at this time. I'd like to call back over to the speakers for any additional or closing remarks. Thank you.
If there are no further questions, I would like to take the opportunity to hope and wish you all a great summer. Thank you so much.
Thank you. Bye.
Bye-bye.
Thank you. Ladies and gentlemen, that was the end of today's conference. Thank you for attending. You may now disconnect. Have a good day and goodbye.