Good morning. Welcome to DNB and this live presentation of our fourth quarter results. We have hardly opened a bottle of bubbly now for two years, hence no Partygate here at DNB headquarters. We might have a chance this weekend as Oslo have lifted all the restrictions, almost. First, we would like to share all the customer activities and results with you, and we have prepared an extended presentation for you today. CEO Kjerstin will tell you more about DNB's profitability and dividend policy. CFO Ida will take you through the financial ambitions. Ingjerd, Head of Personal Banking, will give you the latest from Personal Banking, which is exciting. Head of Wealth Management, finally, Håkon, will dive into savings and pensions.
We will open up for questions in about 60 minutes, and if you are following us online, you are more than welcome to type in your questions in the form below. Kjerstin, please.
Thank you, Thomas, and a very good morning to all of you, and a warm welcome to this extended presentation of our fourth quarter and annual results for 2021. I must start by saying that when we were planning this event, we were really looking forward to finally being back on the road again with all restrictions having lifted. Omicron wanted it different. While not being fully out of the pandemic yet, we have become better at living with it, and the lockdown has been shorter this time, and the impact on the economy has also been less in this wave than in the previous ones.
The numbers we present here today is a testament of a strong resilience in the economy, very adaptable customers, and relentless efforts from a strong team that has worked very hard throughout the year to deliver to our customers. In a few minutes, my CFO, Ida Lerner, will go through the detailed quarterly results, but before that, I would like to make a few remarks on the year as a whole, as well as on selected themes of strategic importance to our business. If I should summarize the year in a few remarks, it would be a very strong performance across the group. Pre-tax profits are almost back up to the 2019 levels and up 28% from last year, reflecting a strong contribution from all areas and very high customer activity.
Net interest income is stable despite operating at a zero key policy rate for the bulk of the year. Fees are very strong. We have a growth of more than 15% compared to the previous year, with high activity across capital markets, asset management and insurance, all of which areas we have pointed to as important strategic areas of growth for us. Costs are up. We continue to work on the initiatives outlined on our Capital Markets Day, but the impact of these does not fully compensate for the inflation and the strengthening of competence in certain areas. Net reversals for the year reflect a very robust portfolio and also a very solid macro situation in Norway.
The result of all of this is a return on equity that picks up sharply from the previous year, ending at 10.7% for the year. Not fully at the minimum targeted level of 12%, but well on our way. We also see a strong uptick in earnings per share, which are up more than 30% compared to the previous year and also increasing compared to 2019. I'd like to make a few remarks on the main customer areas. Pre-tax profit in personal customers is up by 1.5%. A healthy growth in mortgages for the year, 2.7%, and an even healthier growth in deposits of more than 7%. Despite this, we see net interest income reducing by close to NOK 1 billion.
This reflects the fact that we have been operating at zero key policy rates. We do, however, see a very strong pickup in fee-related income in other areas. In particular, I'd like to highlight the activity and growth in saving schemes and also in insurances. In corporate customers, we see a doubling of the pre-tax operating profit compared to the previous year, both reflecting strong customer activity and also net reversals for the year. I'd particularly like to highlight the activity in capital markets, all-time high, and a very strong cooperation between corporate banking and DNB Markets led to our revenue from DNB Markets on these customers to increase by more than 20% for the year. While we certainly benefit from a high activity in capital markets, I would like to underline the increased robustness in these earnings.
We see an increased diversification, both across geographies, across products, and not the least across industry segments. We are also motivated by the feedback from our customers, yet another year confirming our number one position in corporate finance and on equities in Norway. We continue to build capital in a strong year and end the year with a core equity ratio of 19.4%. We are consistent in communicating our commitment to delivering on our dividend policy. Based on our robust capital situation and a positive outlook for the business, the board is proposing a dividend of NOK 9.75 per share. This is fully in line with our dividend policy that you know well, more than 50% dividend per year and an increasing nominal dividend per year. We continue to intend to use buybacks as a tool to optimize.
In view of the temporary dividend ban and the pending Sbanken decision, we have not bought back shares during 2021. We will ask for a proxy in the general assembly and intend to use this as an integrated part of our policy going forward. Our financial targets stand firm. I wish again to highlight that our most important target is to deliver minimum return on equity of 12%. The only change I would like to draw your attention to on this slide is the slight change in capital. That does reflect the amended requirements from the FSA with an uptick of 50 basis points in the Pillar 2 guidance. As we've previously communicated, we assume a full increase in the countercyclical buffer, which then leads to the expected level increasing to 17.6%, well below the current level.
The recovery in the Norwegian economy has been both stronger and faster than expected, and Norwegian businesses have shown a strong resilience and adaptability during the pandemic. The growth last year ended at 4%, somewhat higher than previously expected. After a slow start to the year, given Omicron, we expect the activity to pick up, and DNB Markets' estimate for GDP growth this year is at 3.6%. Already in the autumn last year, we saw that the unemployment was back to pre-pandemic level. We've seen a slight uptick with Omicron, but we expect this to be temporary, as the theme from businesses around is really that they're looking for more people to hire.
Norges Bank is ahead of the curve if we compare them to their peers in other countries, where most seem to be talking about hiking interest rates these days. Norges Central Bank has already hiked rates on two occasions, and their forecast is for an additional five interest rate hikes to come within 2024. The market's view, however, is slightly more hawkish, with an expectation of six interest rate hikes. DNB Markets' estimate is that four of these will come in the current year, 2022. In addition to a high level of activity and rising inflation also form a part of the backdrop for raising interest rates.
It is, however, important to differentiate between core inflation and consumer price index, where the latter also includes energy and utility prices, which tend to be more volatile, and this has certainly been the case more recently. The core inflation in Norway is still well below 2% and expected to stay south of 2.5% in the coming year. Investments in the industry sector is an important driver in the economy, and it's expected to increase in the coming year. Over time, we do expect investments in the petroleum-related sector to reduce somewhat, but expected investments in the mainland economy is expected to more than compensate for this. 2021, yet another strong year in the markets, leads to a further growth in the value of the sovereign wealth fund, again confirming the very strong fiscal position of Norway.
We would argue that altogether this represents a very strong backdrop for our business, going forward. Now let me turn to a few themes that are strategically important to us, with sustainability being the first one. We have committed ourselves not only to net zero in 2050, but also to being a driving force in the energy transition. We work together with our clients to help them achieve their goals, and we see more and more of them setting goals. We've experienced a sharp pickup in activity and interest in this area during the past year. A few highlights in this market, we've seen a doubling of volumes being raised as sustainable or green bonds, and we've taken a leading position in this market.
We at DNB has also raised our first green bond and we received tremendous interest from many new investors, which not only showed an interest, but also took part in the EUR 1 billion issuance. My colleague Håkon will talk more about our activities on the investment side related to sustainability later on. Finally, I'd remind you that sustainability is about more than the climate and making sure we keep the planet safe for future generation. The fight against financial crime continues to be at the top of our agenda, and we work hard to improve our efforts in this area every day. Norway is among the most advanced digital societies in the world, and we continue to leverage our already very strong position in the digital space. We hold several of the leading financial apps in Norway.
30% of the Norwegian population actually use our mobile banking app, and we have 1 million customer visits into our digital stores every month. Each customer visit is an opportunity to learn something and gain insight, and an opportunity to satisfy a need through one of our products or services. We have seen a 62% growth in number of users in our Spare, which is our savings and investments app. We have seen more than 20% sales increase in sales of savings schemes, and increasing share of these sales are happening directly in the app. With cloud-based digital channels, we also see that we can maintain a high pace of change and innovation, continuously meeting our customers' changing expectations.
We are pleased to see that Norwegians continue to prefer to use bank-backed payment options, which we don't see in every country. My colleague, Ingjerd, will say more about this later on. To me, it's a paradox that the more we talk about being digital, the importance of technology, the more important having the right people with the right competence becomes. Building a culture powered by engagement and motivation is something that we've worked on in DNB for over a decade. I'm pleased to see that my colleagues in DNB are willing to recommend DNB as an employer to a much larger extent than we see to be the Scandinavian average. Over the past years, we've seen a clear shift in competence and a much broader diversity and skill set among our employees.
Tech engineers, legal, competence, as well as security experts, forms a much larger part of our group today than it did five years ago. During the past five years, more than 50% of the graduates that we have hired actually have a technology background. We are one of the most attractive employers in Norway, but we're certainly not resting in that picture. We continuously work hard to keep and build the attractivity further to make sure that we continue to have a very strong team. I maintain that our people is our most important competitive advantage, and facilitating further development and growth for our employees is going to continue to be a top priority for us.
On that note, what is more fitting than to give the stage on to my indeed very competent CFO, Ida Lerner?
Thank you, Kjerstin. I would like to start out by showing you that we are well underway to deliver on our financial targets. As commented in the fourth quarter 2020, we saw a temporary reduction in return on equity due to COVID-related events. As you can see from this chart behind me, the trend has now shifted, and the reduction was indeed temporary, and we are now back on the right path. Solid performance across the segments and product areas prove that we are underway to deliver on the overriding target of a return on equity above 12% by the end of 2023. There are several factors that will contribute to achieving this, where cost income ratio below 40% is one of them. Continued growth in NII and commission and fees will be the main drivers for income growth also going forward.
Various cost initiatives will partly curb wage and other cost inflation, and continued focus on asset quality will contain cost of risk. Through positive jaws, low cost of risk, and efficient use of capital, we feel confidence in our ability to deliver on our financial targets, and thereby continue to deliver on our dividend policy. Total currency adjusted loan growth in the customer segments for the full year was 3.6%, well in line with the communicated target of between 3%-4%. Profitable volume growth and increased net interest rate will lay the foundation for further growth in NII. Going forward, we still aim at an annual profitable loan growth of around 3%-4%, as well as maintaining a sound deposit to loan ratio.
Norges Bank forecast to increase the policy rate by another 125 basis points by the end of 2024. The next rate hike is expected to come in March this year. We have seen a significant increase in commissions and fees during 2021, up 15.9%. The all-time high results reflect the strong position within a wide range of product areas, as well as active capital markets. We saw continued solid performance within pensions and savings, as my colleague Håkon Hansen will come back to later on, and a strong result from investment banking supported by active markets and the originate and distribute model in large corporates. We recognize that the results from commissions and fees may be temporarily higher due to high activity in the market and a rebound of COVID-19.
Our ambition of an annual through-the-cycle growth of between 4% and 5% still stands, which is substantiated by the development we've seen in recent years. With macroeconomic development supporting income generation, combined with a further strengthening of strategic positions, as well as a strong cost focus, we remain committed to deliver a cost income ratio below 40% by the end of 2023. We have a robust and well-diversified credit portfolio, with 98.9% of the exposure in stage one and two. In 2021, we had net reversals of NOK 868 million, reflecting the quality of the portfolio and improved macro. As you can see from the middle of this slide, we have since 2015 rebalanced our loan book, which gives a more resilient portfolio.
We have since 2015 reduced our exposure within cyclical industries such as oil, gas, and offshore from 7%-4%, shipping from 7%-2% of our overall portfolio, and we have at the same time increased the relative share of personal customers from 49%-53%. The line on the right-hand side here shows that the average loan-to-value of the mortgage portfolio has gone down to now 56%. Combined with the improved and strong Norwegian macro, we expect to contain cost of risk at lower levels than historical average. Please, however, bear in mind that variations will occur between quarters.
The Tier 1 capital ratio was strengthened by 70 basis points in 2021, and ended at a solid 19.4%, 310 basis points above the Norwegian FSA's expectation, even after taking into account the proposed dividend of NOK 9.75 . The decision on the Sbanken appeal is still pending, and should the bid be approved, it would mean an initial reduction of the Tier 1 capital ratio of 120 basis points. We have received, as Kjerstin mentioned, new requirement and expectation in relation to the supervisory review and evaluation process. The Pillar 2 requirement is now at 1.9%, and the Pillar 2 guidance is at 1.5%, 50 basis points up.
In December 2021, Norges Bank announced an increase in the Norwegian countercyclical buffer from 1% today to 1.5% from the 13th of June this year, and 2% with effect from year-end 2022. In our capital planning, we assume a full Norwegian countercyclical buffer of 2.5%, expected effective from the first half 2023, as well as a countercyclical buffer in other countries to be back at pre-pandemic levels. This gives a long-term capital expectation of 17.6%. DNB aims to operate above the long-term expectation with some headroom. We do not quantify a specific number for this headroom. It will vary with currency effect and other short-term fluctuations. The leverage ratio at year-end increased to 7.3, well above our Nordic peers and a regulatory requirement of 6%.
The leverage ratio is affected by central bank deposits, which fluctuates during the quarter. Adjusted for central bank deposits, the leverage ratio was 8.1% and has been stable over time. The tax rate is expected to be 23%, an increase from previously stated 22%. This is due to increasing income in Norway with a tax rate of 25%. To summarize, the significant headroom of the regulatory requirement, together with a solid return on equity, will ensure a capacity for both growth, a potential cash offer for Sbanken, and to continue deliver on our dividend policy. I would now like to move on to the fourth quarter results. With a profit of NOK 6.2 billion for the quarter, return on equity comes in at 10.3%.
We continue to show resilient earnings and profitable growth across all business areas. Volume growth and repricing effects increases NII by 5.3%. There was a continued high activity level in the capital markets, and net commission and fees were up 22.2% from the corresponding quarter last year. Macroeconomic conditions are good. Our asset quality is robust, reflecting the low impairment provisions this quarter. Due to the consistent level of performance, earnings per share ended up at NOK 3.79 up 15.6% from the fourth quarter 2020. Total loan growth in the customer segments, currency adjusted, was up 1.1% in the quarter. There was a solid growth in corporate customer segments of 2.3%, and a stable development in the personal customer segment.
Moving to the right side, the light green line, you can see the average deposit in the customer segments continue showing strong development. Currency-adjusted deposits increased by 1.5% during the quarter. This leads to a strong average deposit-to-loan ratio in the customer segments of 76.6%, up from 69.6% last year. The net interest margin increased by 6 basis points in the quarter. NII will be impacted by the two announced customer repricings effective from 12th November 2021, and 28th January 2022 respectively. The notice period of repricing of loan for customer gives lag effect. We will see full effect for the first announced repricing in the first quarter, while the second will have a full effect in the second quarterly results. Net interest income increased by NOK 519 million.
The repricing that came into effect on the 12th of November gave an increase in NII of NOK 211 million in the fourth quarter. It is important to note that NII effects from changes in the key policy rate comes when we change customer rates. As mentioned previously, the notice period on repricing of loans gives lag effect. We communicated that the annual effect of the first rate hike would be approximately NOK 1.5 billion. We expect a similar annual effect from the second hike. We cannot give guidance on the effect of future rate hikes, but keep in mind when looking at historical numbers, the NII effect was tapering over time. Amortization effects and fees increased NII by NOK 135 million, supported by the high activity we saw in the quarter.
Higher average loan and deposit volumes increased NII by NOK 86 million. Other NII income includes, among other things, a positive result from treasury. Now moving on to commission and fees. Commission and fees was all-time high in the fourth quarter, up 24.6% from the third quarter, driven by solid performance across product areas. For real estate broking, the fourth quarter was somewhat weaker, but keep in mind that activity for the corresponding quarter in 2020 was exceptionally high. Investment banking fees were up 53.5% from the same quarter last year, driven by high activity within corporate finance and strong performance across investment banking products. Asset management and custodial services increased by 19.2% in 2021, in total are lifted by both positive net inflow and an all-time high asset under management.
Money transfer and banking services continue to increase, up 32% from the last quarter. Still affected by the COVID-19 restrictions, but we see positive development from card transactions in addition to income from Unimicro. Fees from the sale of insurance products increased by 5.8%, driven by increased profitability in the insurance portfolio, both non-life and personal risk, and volume development in defined contribution pension. The costs are up by NOK 675 million from a low level in Q3. The operating expenses in the quarter are affected by high activity. Variable salaries increased by NOK 136 million, reflecting high activity and performance you saw in commission and fees. Fees increased by NOK 129 million, and is predominantly related to initiatives in compliance. The increase in fixed salaries reflects investments in technology and compliance competence.
We also incorporated Unimicro, the SME ERP provider we acquired in 2021, with 116 full-time employees. Increase in pension expenses reflects a high return on the closed defined benefit scheme. The scheme is hedged, and a corresponding gain is recognized on financial instrument. IT expenses increased by NOK 44 million from an exceptionally low third quarter. Costs related to travel and training increased, which is a natural consequence of the removal of COVID restrictions we experienced up until December last year, as well as high customer activity. The Norwegian economy is strong, and we expect, as Kjerstin pointed out, that we go into a period with slightly higher inflation, which will impact our cost levels. Nevertheless, we remain committed to our communicated target of a cost income ratio below 40% by the end of 2023.
We had total impairments of NOK 275 million in the quarter, reflecting the robust and well diversified portfolio. For personal customer, net impairment was NOK 64 million, reflecting continued solid portfolio. There were net impairments for corporate customers of NOK 211 million, and the reversals in stage two were driven by improved macro and improved underlying credit quality. Stage three impairments were primarily driven by a few customer specific situations already in stage three from the outset of the quarter. SME continues to show low impairment levels and strong credit quality. Offshore now only constitutes 1.1% of our total EAD, compared to 1.4% just a year ago, but still remains to be the most challenging part of our portfolio. We reiterate that the overall portfolio is robust and well diversified.
As mentioned before, please bear in mind that losses will vary from quarter- to- quarter. Summing up, our capital position remains strong, and the strong earnings per share provides a firm foundation for delivering on our dividend policy. Return on equity improved, positively affected by increased income and low impairment provisions. Earnings per share were strong at NOK 3.79 . As Kjerstin pointed out, the board proposes a dividend of NOK 9.75 per share and will also ask the general assembly for a power of attorney to buy back shares. As shown in this presentation, we remain committed to our dividend policy and are well underway to deliver on our financial ambitions. With that, I thank you for your attention and leave the floor to my wonderful colleague, Ingjerd, Head of Personal Banking.
Thank you, Ida. I'm excited to stand here to report on strong progress and a positive outlook for the Personal Banking segment. We are a market leader, well positioned for continued growth, and we are a digital leader with a strong position and ability to adapt to the future. My focus here today will be to talk you through how we will continue to drive profitable growth within the Personal Banking segment. I will start by underlining our strong market position in Norway as the major player in both lending and deposits. Our lending portfolio is still twice the size of our closest peer, while our portfolio of deposits is now more than four times the size of the nearest competitor. We have held a strong market leader position for many years, constantly adapting to changing market conditions and customer demands.
This slide shows the progression for mortgages and deposits over the last three years. 3.2% growth for mortgages and 6.2% growth for deposits. For the mortgage portfolio from 2019 to 2021, volume growth is 2.8%. Growth slowed in the fourth quarter, yet I'm confident that we will grow profitability over the coming year. Competition in the market remains fierce, and we have a proven track record of profitable growth through periods with increasing interest rates. This experience is very valuable going into the coming months and years. Our mortgage portfolio continues to be of very high quality, and the portfolio is highly flexible with over 90% floating interest rate. On the chart on the right side of the slide, you see our deposit portfolio over the past three years.
For 2021, we are very pleased to see the deposit to loan ratio at an all-time high level at 59%, and we see a 7.1% growth of deposits for the year. This growth reflect the fact that customers consolidate both their salary and deposits with us in DNB. Deposits are the best starting point for encouraging customers to invest in long-term savings with us, and this growth is in line with our strategy of being the customer's preferred universal bank. To succeed as market leader in 2022, we need to provide our customers with the best digital banking ecosystem and constantly adapt to changing customer behavior. Our efforts, they are paying off with world-class customer engagement and increased efficiency. The star of the show is our mobile banking platform, launched early 2019.
Customer satisfaction and app store ratings confirm that we are providing a state-of-the-art platform which is highly valued by our customers. Nearly one-third of all Norwegians over the age of 16, they bank with the DNB mobile app. Our customers' banking habits are now increasingly mobile first, and this trend will continue, with more than half of all transactions already taking place on the mobile platform. To be the customer's preferred choice going forward, we need to offer engaging and relevant tools. Actually, as many as 50% of our mobile bankers, they use the personal financial management tool that we have developed in the mobile bank. International and global benchmarks, they confirm that these are impressive figures. Digital tools and services are the core of the banking today, and we have therefore substantially reduced number of branch offices the past 10 years.
Our customers still have access to skilled advisors at the call center or in one of our 56 branches across the country. In 2021, we took our distribution model a step further, transitioning to appointment only for most of the branches. This frees up capacity for advisors to spend more time on complex and value-adding in-person customer interactions. We have done this by guiding our customers to handle easier tasks on their own, supported by our specialists at the call center. Overall, this is much more efficient than having customers drop by a branch for everyday banking needs. In fact, we also see a 12% decrease in service inquiries to the call center since 2019. This is proof that the call center specialists, they are expertly guiding and training customers to be more self-served.
In parallel, we have prioritized the development of intuitive and easy-to-use digital self-service solutions. When given the right tools, customers, they really prefer to solve easy tasks themselves. This also very much applies to mortgages. 90% of all mortgage applications are submitted digitally, even though it's a complex product. We are sure that our distribution model is closely following future trends, mobile at the core, supported by easily accessible, skilled advisors. Now on to insurance. Last year, I detailed our plans for non-life insurance through Fremtind, the merger we did between DNB Forsikring and SpareBank 1 Skadeforsikring in 2019. This year, I'm proud to say that we are very much on track on the ambitions we had set for this merger. We have completed the transfer of all DNB customers, old and new, to Fremtind's infrastructure.
By doing this, we have both increased efficiency and substantially improved the pricing models, which have made us more competitive on major product areas as car and home insurance. We now have a much more sophisticated and resilient model for pricing risk, which has increased our income from insurance by 41%. In 2021, we have driven overall sales volumes by a solid 20% for personal customers. There is still too much churn in the portfolio, but with better analytics and more competitive pricing, I'm confident that we will be able to reduce this churn in 2022. For corporate customers, we have seen strong growth also in 2021. We expect this growth to continue as we still have lots of untapped potential for non-life insurance in our corporate SME portfolio.
We also benefit from owning 35% of Fremtind, and our goal is to continue to develop this healthy capital light business further, both as a distributor and as an owner. Last but not least, another strong development in our capital light product portfolio is sale of mutual funds. Nearly all saving agreements are sold digitally, and there is no doubt that Spare, our mobile platform for savings, has helped accelerate this trend. For 2021, the power of mobile sales has really been proven through Spare in the retail segment. Almost 1/3 of total fund net flow and 38% of all savings schemes are actually sold through this app. Since launching the Spare platform in 2017, we have seen an average growth of 40% in active users every year.
In 2021, we saw an even steeper growth of 62% in active new users for the savings platform. Spare provides its users with an intuitive interface and accessible financial information, like our mobile banking platform. Like our mobile banking platform, our savings platform is highly rated and steadily expanding its user base. To sum up, we are proud of what we have achieved in the Personal Banking segment for the year of 2021. Through our digital leadership and ability to adapt to the future and shifting environment, we intend to maintain our strong market position and profitable growth also for 2022. With that, I leave the floor to my well appreciated colleague, Håkon.
Thank you, Ingjerd. The savings and investment market has been booming over the last few years, as I'm sure you all know. We have also seen rapid changes in the Norwegian pension market. I've been given the honor to present an update from this area of DNB's business operations. DNB has a strong and unique position as the number one distributor and the number one producer of savings and pension products in Norway. In a fast growing market, and despite tough competition and new players entering the market, we have managed to keep and even strengthen our leading position over the last 10 years. Strong distribution facilities, state-of-the-art digital solution, and competitive pricing have been important contributors for our current leading position.
As you can see from the left-hand side, one of the main drivers of growth in the Norwegian saving and pension market in recent years is the ever-changing regulatory framework. During the last decade, the authorities have introduced a number of regulatory changes to increase Norwegian savings in pension, equities, and mutual funds. As a result, over the last three years, the number of Norwegians who own mutual funds is up by 10 percentage points from 36% in 2019 to 46% in 2021. Now, over to the right-hand side. Like all other asset managers, we have made preparations to meet the new regulations, including SFDR. All our mutual funds are screened according to DNB standard for responsible investments. Our philosophy is that integrating ESG analysis can both mitigate risk and identify investment opportunities, and thereby improving risk-adjusted returns.
ESG policies apply to 100% of our assets. In DNB Asset Management, we have no non-ESG funds. It is a fact that this part of our industry is still immature. In DNB, we have several decades of experience with climate-focused asset management. Our first climate-focused fund was launched back in 1989. We are currently developing our in-house ESG Lab. We combine external data with in-house expertise, producing a tool for systematic ESG analysis, both on a company and a portfolio level. This enable us to produce high-quality mutual funds with a guaranteed ESG stamp from DNB. Most important, we will use this information to improve our insight and get a better basis for our investment decisions. Now, let's have a look at defined contribution. In Norway, having a defined contribution pension scheme is legally required in the private sector with a few exceptions.
This market is of high importance to us. As of today, we have NOK 126 billion in assets under management in defined contribution. What's important to note is that this portfolio is growing by approximately NOK 1 billion every month. This is recurring income, and this is recurring savings. It is a fact that within defined contribution, the capital is sticky, and for many years to come, the inflow from active employees will be substantially higher than the pension outflow. With a normal market development, and given that we keep our current market share, we will double the volume yet again over the next five years.
On the right-hand side, you can see how we, through our digital solutions, have targeted our communication towards employees, seeking to actively engage them and advise them how to choose the right mix of shares and bonds depending on their risk profile and remaining saving period. As a result, we have seen significantly higher percentage of shares in their pension profiles over the last years, which is good for our customers and good for us. Let's have a look at asset management. We have had several years with strong inflow and strong saving markets. At the same time, we have succeeded with an improved mix of assets and customers. As you can see from the graph on the left, the asset management from retail segment has grown substantially from NOK 68 billion to NOK 189 billion from 2017 until today.
Within this asset mix, I would like to highlight that the share of equities in the portfolio for retail customers has increased from 68% to 79% over the last 10 years. When it comes to volumes, our growth is 50% above the market growth over the last 10 years. The market has grown by 3.7 times, while we have grown by 5.5 times. On the right-hand side, you can see that the commission and fee from retail customers in DNB Asset Management have risen from 35% to 55% over the last decade. Last, I would like to mention it, for the first time ever, DNB Asset Management delivered a profit above NOK 1 billion in 2021. Going forward, we are well-positioned for future growth.
As you can see to the left, we have a strong growth in saving schemes with 600,000 monthly savers, giving a total of NOK 600 million in monthly savings from the retail segment. In addition, as I mentioned earlier, we have NOK 1 billion every month in defined contribution saving schemes. Saving schemes represent recurring volume and sticky money, which is less affected by the market volatility. Furthermore, we have a strong embedded growth in our customer base through Norway's most popular saving platform, Spare. We have been able to bring in new and younger clients, as you can see from the peak in the green line. Last, but certainly not least, we have a unique scalable platform. We have strong in-house production facilities and a leading position, both within digital and physical distribution in all our three customer segments, retail, private banking, and corporate clients.
To sum it all up from me, I would like to point out three key takeaways. We have state-of-the-art digital solutions. We have a unique position within saving schemes, both within private savings and within defined contribution. Mostly, we are DNB with a scalable platform for both production and distribution. Thank you.
Thank you so much, Håkon. Thank you, Håkon, and all the rest of you as well. There we are.
There we are.
We'll open up for questions now. We have sympathy with all the financial analysts today. We know there's a landslide of bank results, and are even more happy than usual to see you today. We'll start with Joakim in the middle here, and then Jan Erik.
Yes. Good morning. Joakim from Arctic. I have three questions at least. I'll try to limit myself. Start with dividends, which was a bit disappointing in my view. I don't understand why you need a buffer of 180 basis points, even given Sbanken pending. Could you perhaps elaborate a bit on your preference towards more buybacks? Or is it that you need a buffer above the 17.6%, in the range of 60 basis points-80 basis points or so?
You're quite right. We have currently a buffer of 180 basis points, and if Sbanken should go through, that would consume 120 basis points, which leaves then a buffer of 60 basis points. We are committed to delivering on our dividend policy, which is composed of both cash dividend and share buybacks. In the cash dividend, it's not only a minimum 50% payout, but it's also an increasing nominal payout per year. It's important for us to keep the long term predictable and consistent. We do repeat our intention to ask the general assembly for a proxy and the use of share buybacks as a more flexible tool to optimize around the desired capital level over time.
Again, I would like to highlight the importance for us to pay out excess capital in order to meet our most important target, which is return on equity.
Okay, thanks. I was just wondering, since you're the first Norwegian bank to get an official Pillar 2 guidance requirement, have the FSA given any guidance whether this will be adjusted from year- to- year, or do you see it as a fixed buffer of 1.5% for you?
That is in line with Pillar 2 overall. I mean, the Pillar 2 requirement is exposed to a qualitative assessment every year. It can go up, and it can go down. There's always been a Pillar 2 guidance, which we used to call a management buffer. It is. It's not a hard requirement. It's an expectations, but it's expressed in the wording as an expected minimum level of 150 basis points. As our CFO pointed out, we do need to hold a certain buffer above that, but we do not specify it, as we also currently have an additional headroom in view of the lower countercyclical buffer.
Okay, thanks. Just on the tax rate guidance, because that was increased 1%, I believe. Could you tell me why?
Well, the main reason for that, if you look going forward, it's due to the fact that we have the higher percentage of our income generated in Norway with tax rate that is larger than what we've had before.
Okay, that's fine. The final one from me is just regarding Fremtind because I guess part of the potential for you as well was increased sales towards SMEs. As I understand, that's still lagging a bit, the personal customers. What is going to drive the increased market share there? Also related to that, given the strong results from Fremtind lately, are you still considering to increase your ownership share?
First of all, we're very confident in our ability to increase sales both in personal customers and corporate customers. I believe the sales in corporate customers doubled actually compared to the year before, but we're still operating in very low levels, so that potential is very interesting. The year as a whole was very strong, both on fee side and net results in Fremtind. It is important that you keep in mind that there was a raise in profitability on a large part of the portfolio, which is a one-time event and, of course, a very particular year given low degree of damages in the results overall. We're happy with our 35% ownership.
We're happy with the cooperation, and we do not have any sort of specific message on the further ownership increase at the moment.
Okay, thanks.
Okay. We'll continue with Jan Erik Gjerland, ABG.
Yes, thank you. Good morning. First on the guidance on NOK 1.5 billion more on net interest income, it looks like it was NOK 211 million before, if I remember the number correctly. That's not, of course, NOK 1.5 billion, but since we have a little bit lag effect, as you pointed to. How much is the real lag effect here? Is it so that we should expect a even higher catch-up in the first quarter, and then it will little bit slow off? Or how do you see the competition on this NOK 1.5 billion? What is driving the NOK 1.5 billion guidance once more?
The communication on that is based on the actual price adjustments we have implemented. The lag effect is only related to the notice period towards customers. Third quarter was affected by approximately two-thirds of the quarter, and then the second rate hike takes effect from the 28th of January, if I remember correctly. The estimate of NOK 1.5 billion for both of those stands. In our view, they were well executed, and we continue to remain competitive and profitable also in the market. Again, you should bear in mind the reference to any potential future movements compared to what we've seen historically.
On the cost side, how should we read the current cost level, so to speak? Is this the new normal, or is it even more catch-up effects on activity and more interaction with customers going forward? We should expect both a wage inflation, maybe around 3%-3.5%, and then even more on the cost side. How should we read this cost line versus where you are coming from, so to speak? Is this the new normal, or is this the baseline?
I think first of all, what's important is to distinguish between what's activity based in terms of the cost that we're projecting in the fourth quarter, where, of course, the variable salaries are purely related to the activity levels. We've said also that during the pandemic, we had low activity in terms of traveling and customer related events, and therefore, that should increase going forward. We have assessed, as also pointed out earlier, the wage inflation is expected to be around 3% in Norway, and that's what we're kinda taking into account here as well. Bearing in mind that the composition of our employee base is that it might be a bit higher than the average wage inflation that we're seeing.
Okay. Can I then have two questions for each for Håkon and Ingjerd? The first one to Håkon. The fees you see in moving from fixed income to equities, how larger is the portion of fees on those funds versus the fixed income funds? Is it sort of the same base platform fee, or is it much higher for the other? Could you just share some views on the income stream in that reduction? That would be great.
The income stream on equity funds are significantly higher than on bond funds. As you can see from the fact book, I think on the bond side, we have probably around 15 basis points, and equities we have around 60 basis points.
Thank you. Very good. On the mortgage side, you had a very impressive 90% application. I did a mortgage myself in DNB once, and it has never turned out to be a smooth process, sadly. How much of the mortgage is now actually done digitally when you start at 90%? How many end out now?
Digital.
Is it 50% or is it 20%?
That's straight through processing the whole process.
Yes. How much more can you save on that process when it's fully digital? Thank you.
I think it's between 15%-20% of mortgages, but I think you need to also separate between existing customers and new customers. Because for existing customers, it's very easy just to increase their mortgage. That's a bigger share of the total volume for existing customers. While for new customers, I think we have. In total, it's between 15%-20%, which have a straight-through process. Then your second question was?
There could be plenty of savings.
What we see is that we are getting more and more efficient for every year, also during the mortgage process. I will not say that it's plenty to save, but we will be more efficient going forward as well.
Thank you.
Thank you. Next time you can give us a call, Jan-Erik, and we'll help you through the mortgage process. We have Johan from Carnegie and then Thomas from SEB.
Thank you. Two questions. First of all, on the Sbanken deal, if it is unsuccessful, should we expect that the capital targeted for this deal will be returned to shareholders fairly fast? If so, are you able to do it through buybacks?
I guess what we can comment is that our dividend policy is consistent, and through the dividend policy, our target is to distribute excess capital to shareholders. This stands whether the Sbanken deal happens or whether it doesn't happen.
Thank you. Coming back to mortgage growth, I think I heard a comment on slow growth in Q4. Just curious on why was that? Was it weak growth in Q4? In fact, I think I see negative growth from quarter end Q3 to year-end. What was the reason for that? And are you growing closer to the market growth rate now?
You're quite right. The volumes in personal customers were stable from third to fourth quarter. Again, I'd like to highlight that the growth for the year as such were healthy at 2.7%. It's not unusual that we see a shift in pace when we shift from a stable market environment into an increasing or even decreasing. It's part of being a market leader. It's fair to say that it came out a bit slower than we had expected. There were some temporary effects with some interest rate guarantees from certain players impacting the situation, and we had some technical issues in our customer journeys, but we're confident in our ability to grow profitably in the personal customer segment also in 2022. I think that's the main message.
On the technical side, was that a big factor for the numbers that we're seeing?
It's a material factor.
Appreciate it. Thank you.
Okay. Thomas Svendsen, SEB.
Yeah, two questions from my side. First, on the costs, you talked about wage inflation, costs there going up. In terms of number of employees, we can see in the supplementary that number of employees is on the rise. What should we expect in the next couple of years within the frame of you reaching 15% ROE?
Well, first of all, I think, as we mentioned also, of the increase in full-time employees, 116 of them are related to Unim icro. So that's kind of related to that. We've also said that we will continue to invest in competence in areas that are strategically important for us or areas where we see that we want to invest in order to position ourselves in the best possible way for the times ahead.
We are very comfortable in terms of both the cost initiatives that we launched during the Capital Markets Day 2019, that are delivering very, very well, in addition to the fact that we work on cost efficiency on an everyday basis to ensure that we reduce our costs where possible and automate processes where possible, but at the same time invest where we see important.
Okay, thank you. In terms of loan losses, you said you expect lower than the normalized, historical normalized level. Could you specify that? Is it much below? I guess it's the 18 basis points.
No, we don't specify that.
The reason I'm asking is just the big gap we see between today's ROE and the 12%, and the quite short timeframe to reach it.
I think we just need to reiterate that we need to work on all elements in order to deliver on the 12% and cost of risk is an important part of that. Of course, we've had net reversals for the year 2022. You shouldn't expect that to continue over time. The most important comments we can give is to the macro outlook and how we view our portfolio. Again, very robust, well-diversified. We do not see any signs of concern, nor in the unsecured portfolio. We haven't seen any impact from rising electricity prices. The SME portfolio also, which is a very good temperature measure for the Norwegian economy, remains very robust, and hence this backs up our expectations in the cost of risk level.
Thank you.
Okay, we might have a few questions from our online viewers asked on behalf of you by Rune Helland, the fittest IR in the Northern Hemisphere. We celebrated his birthday yesterday. Rune.
Thank you, Thomas. Okay, most of the questions from the net has already been answered, but we still have two, three questions. We have a question from Vegard related to cost. Vegard from Pareto. He is asking how much of the NOK 129 million fee increases related to compliance is sticky costs?
Well, we don't specify exactly how much is sticky and how much is not, but as mentioned, it's predominantly related to specific initiatives and projects. Some of them will not be sticky and be more of a one-off situation. We don't specify that in kind of fair share numbers.
A question from Nils Christian Øyen from SpareBank 1 Markets. Growth in RWA has been very low recent years. Could you elaborate on that and on the future potential for classification effects?
Well, RWA has been going down, but that's also related to the fact that there has been a transfer between standard portfolio and IRB portfolio, which of course has a positive impact there. In addition to that, we could mention the reduction of the restructuring portfolio and lowered risk through resolving a lot of the customers and the exposures that are high risk, and they consume a lot of capital in terms of risk-weighted assets.
Thank you. A question from Riccardo from Mediobanca. His question is, investment banking, corporate finance fees, what could be sort of a normalized level?
It's very hard to advise or guide, and we don't desire to do that on corporate finance fees. I think my best reference would be to look at the historical development over time, where we see clearly, I believe, a growth that is higher than the market overall, which indicates that we do take market share in this area. Again, we are a niche player, and we are not impacted by the similar trend as we see for the more medium European players, I'd say towards the U.S. players. We see that we are competitive. For us, it's a sign of strength that we continue to build a broader brand across industries, geographies, and products.
One key example I could also give is that our revenue from our international operations and markets outgrow the growth we see in Norway for this year. The industries that are likely to grow in view of the energy transition and the sustainability trend are areas where we have competence and a strong position.
Thank you. That's it.
Okay, I think that was the end of the Q&A session. Let us remind you that we, as usual, have the investor call at 1:30 P.M. Oslo time. Thank you so much for spending this morning with us. Have a great day.