Ladies and gentlemen, welcome to the Avanza Bank Holding Interim Report January to September 2019. Today, I am pleased to present Richard Josephson, CEO and Birgitte Hagenfeld, CFO. I will now hand the call over to Richard Josephson. Please begin.
Okay. Thank you very much, and good morning, everybody. If we go to Page 2 on the presentation, we can conclude that it's been a strong quarter for Avanza. Our net inflows is up 19% quarter to quarter and 22% for the full 9 months, which is absolutely satisfactory. Total savings capital is up to SEK377,000,000,000.
And also, when we look at the statistics from the New mutual fund association in Sweden, we conclude that we are all taking about 20% of all mutual funds new savings in Sweden for the 1st 9 months. And bear in mind that our total market share is 4.2%. We also did a lot of updates when it comes to our mutual fund offering with the new site on the mutual funds. We did more ESC data through Morningstar. We also have better tools for analyzing funds.
And last week, we released a better engine to filter funds so you can sort them out since we have quite a few on the platform. If we go to the next page, we can see still strong customer growth at 14% better this quarter than Q3 last year, and year on year, it's 4% better. We also have 940,000 clients at the moment, so we are in a good pace, reaching our targets for 1,000,000 clients. When you look at the next page, Page 4, we saw a quarter with very high activity during the quarter. More customers than ever was generating a commission for us, and the commission generating notes was at a record level.
And the good thing about this is that we did not have a fingerprint Bitcoin or anything that was trading extremely high. So overall, it was an underlying good activity throughout the quarter. Going to the next page, you also just can note that our market shares when it comes to transaction on NASDAQ and First North, we were actually increasing that a bit during the quarter, which is a KPI that we keep close eyes on. On the next page, we can see that we have high pace in innovation during the quarter. We have new logins with biometrics.
We also complementary release switch for depositing money from other banks in platform and our customer experience, we can take up mortgage loans from other banks if you compare them to our own offering. And our increased focus on asset under management has been bearing fruit. We also did a bit of society work when it comes to the pension reform that is being in the Swedish parliament to make a change that would be more to the customers and less to the pension companies, and we have been quite successful in that, so do the lobby work, and we will see where it comes out from it. But I think it's a very important issue for the Swedish savers. Going back to next page, Page 7, we also released a new My New Pages, which was a very big change in how the customer will consume Avanza when they're going on the platform.
And we have been getting a lot of good creds from our customers. And new navigation and a more tailor made starting page for each client has been very appreciated by the clients. And I think this also shows that even we know that we have satisfied clients, we dare to always improve and change our customer experience and make it even better. So we will never rest our case when it comes to the UX experience on Amandel Stratford. Going to the next page, you can see strategy for more of your current income is going quite well.
We had a record quarter when it comes to brokerage income, which was satisfactory, but the fund capital is up to NOK 109,000,000,000. The income per fund kroner is down to 33 basis points from 34,000,000,000. But I think that's in line with my expectation, and we will compensate that with volumes. The corporate finance on the Q3 was quite low, which is seasonally is on Q3, but we were part of the EQT introduction to the stock exchange. And actually, 30,000 clients on one side became EQT owners in that issue, and the new owners of EQT was in total 40,000.
So we think that's a proof of the distribution capacity that we have within the company. And going to the next page to sum it up, we have a great growth in the company. We're proving that the pace of innovation has increased. That means that the cost increases last couple of years is paying off. And important for me is that we also just recently did a survey with our employees that we do 3 times a year, and the ENPS is at 54, which is more than a target of 45.
And also, the income growth now for the full year is surpassing the cost growth, and we are comfortable that we will deliver on that target for the full year. We have a great momentum in the company, and we look at the future with a very positive outlook. And with that, I will hand it over to Brigitte.
Thank you, Richard.
So if you look a little bit at the figures, revenues were all time high in the quarter, up 16% compared to Q3 last year, and all revenue lines improved. Comparing the 9 month period with last year, revenues were up 11%, mainly due to higher MII, but also higher brokerage income and some commissions. Operating expenses increased by 10%, mainly due to higher personnel costs. Comparing the 2 9 month period, costs were up 9% and in line with our budget of 10.5% cost growth for the full year. The long term guidance is a cost growth of 9% to 12%.
And as Rick had mentioned, if nothing unexpected happens in the next few months, we believe there's a good possibility that we will reach our long term target regarding income growth higher than cost growth also for the full year. Operating profit increased by 23% year on year and by 11% for the 1st 9 months. Consequently, the operating margin improved to 52% in the quarter, which was 2 percentage points higher than last year. Revenues per savings capital was up 1 bps compared to last year and down 1% compared for the 9 month period, mainly due to higher average savings capital. Cost per percent of capital was down 1 basis point to 16% year on year.
And for the 9 month period, the cost of savings capital was 19 bps in line with last year. Our long term ambition, as you know, is to lower the cost Revenue were, as I said, record high in the quarter and up 10% quarter on quarter and for the first time over $300,000,000 Net brokerage income increased by 20% compared to previous quarter, mainly due to 8.5 more trading days, but also due to higher brokerage income per turnover krona. Income per turnover increased as a result of larger share of the brokerage fee being related to transactions made in loan brokerage fee classes. Number of commission generated customers were record high as was the number of commission generating notes. Brokerage income per trading day increased by 4%.
Compared to Q3 last year, net brokerage was 13% higher. Looking at the fund commissions, they increased by 4% quarter on quarter, mainly due to higher average fund capital. Income per krona of fund capital decreased marginally to 33 basis points, which is the same level as for the 9 month period for the 9 month period. This is a decrease of close to 2 basis points compared to last year and the result of a somewhat higher proportion of index funds. Some commissions were, in the 9 month period, 6% higher compared to last year.
Looking at the NII, it increased by 5% quarter on quarter. STIBOR decreased 1 basis points compared to the 2nd quarter. Despite of this, the return on surplus liquidity improved slightly due to the 3 month interest duration and subsequent lag in the bond portfolio. Income from margin lending and the private banking mortgage improved due to higher average lending volumes. For the 9 month period, the NII increased by 60%.
This is, of course, mainly due to the raise over the repo rate in January and consequently higher SIBOR, which has turned the last year's cost for the surface liquidity into positive yields. All else equal and without taking any changes in customer behavior into account, a 1 percentage point change in the interest rate from here, with today's volume would affect full year NII by around EUR 300,000,000 where the upside effect is larger than the downside effect. However, we don't see a record high as a slight change. Other income increased slightly quarter on quarter, mainly due to higher income from FX and Avanxa Markets. Revenues from Corporate Finance were seasonally low.
Compared to Q3 last year, income from Corporate Finance increased. Income from Unalvan Markets increased by 29%. FX related income was mainly unchanged and payment services commissions increased due to increased trading in foreign securities. Operating expenses decreased by 10% quarter on quarter, and this is mainly a result of the seasonally lower personnel costs that we had in Q3. Compared to the 9 month period last year, personnel costs increased by 11%, mainly due to expanded development capacity.
Also, costs for IC licenses were higher, whereas cost for external services increased. Our capitalization is good with a total capital ratio of 19 point 7% to compare with the requirements of 16.5%, which is including all external and internal buffers as well as our Pillar 2 requirements. The total capital ratio increased compared to Q2 due to the 9 month results being reviewed by the auditors. Consequence of the net result has been included in own funds after deduction of assumed dividend. The main part though is due to the share issue as a result of the exercise of employee warrants, which increased our own funds with about 180,000,000 dollars The leverage ratio for the group was 3.5%.
It is now settled that the record requirement will be 3%, taking effect in June 2019 'twenty one. The leverage ratio will be an important measure for us going forward when managing the capitalization. Since increasing deposits will have a negative effect on the LR ratio, we are discussing the size of buffer needed to comply with the requirements in all kind of market conditions as we grow. But our dividend policy distribute at least 70% of the net profit stays down. And with that, Ricard, I think we can open up for questions.
Absolutely.
Thank you. First question is from the line of Peter Kessiakoff from SEB. Please go ahead. Your line is now open.
Hi, good morning. So I have a few questions. Start off with on the brokerage commission rate. As you mentioned, we get to that you've seen more trading within the lower commission classes. Is that the only driver behind the all time high commission rate?
At least given the data I have, it's an all time high level. Is that there's been no other changes kind of on, I guess, towards pro clients in terms of what they're being charged or anything like that?
Well, we haven't changed any prices or anything like that. But yes, it's the rest of the trades are more business as usual and even more trades. But yes, I would say that, that is the main difference between the previous periods.
Okay, okay.
Would you expect that drift to continue given that I mean, as we've discussed before, you're taking in more younger clients, which then will have less savings on their accounts. So in essence, the brokerage commission rate could, in essence, drift higher due to mix effects. Is that reasonable to assume or think about?
Okay. It's always hard to answer on because as you know, the brokers' revenues are so market dependent and depending on the volatility and so forth on the stock on stock exchange. But we definitely see more new customers or the new customers that we are taking in. Of course, there are not so many day traders out there. So of course, we will take in more and more customers that is trading in a little bit lower volumes and probably lower classes as well.
Okay. Then on the cost side, first of all, the fact that you've launched that one can deposit money through Swish on your platform, does that change the cost picture anything? I mean, is Swish less expensive than Trustly? Could that have a positive impact? Or is that is there only a minor difference?
Well, Swish is better cost or lower cost for us. But then again, you should realize that with Swish, you can only transfer smaller amounts. If you want to transfer larger amounts, you still have to use Trustly. So in some effect, of course, there will be but I wouldn't say that it's not significant.
No. I would say that on the margin, I think, as we add that new clients will get going a bit quicker sometimes.
All right. Then on the cost guidance for the full year with where you reiterate your message, that implies quite a steep increase in cost in Q4. What is that is there anything in particular that is driving that? Or is it just ordinary seasonality and that you will be recruiting a lot during the Q4 for the next year?
We have been recruiting a lot during the year, and some of them won't be fully in place until in Q4. So I would say it's a seasonal effect, and it's normal that we have higher costs in Q4 and in Q1.
Okay. But that would imply that kind of the hirings throughout 2020 should be lower than in 2019, at least how it looks on an absolute level?
Yes. At an absolute level, we are not planning to exceed the total number of employees in a significant way anyway next year.
Okay. Then just the last question. On financial targets, I mean, should we expect Q4 is obviously the next quarter report. Should we expect any kind of new financial targets or updates or anything like that to be expected? Or is
it just a digital fusion? Yes.
Since we hope we are reaching 1,000,000 customers close to after the interim report or the report Q4 report, we definitely will launch our new look forward looking financial target.
Okay. Okay. Thanks for that. I'll stop there.
Next question is from Edmeen Kirich from Nordea. Please go ahead. Your line is open.
Good morning and thanks for taking my questions. So on the 1,000,000 client global you have, given the current pace, you would basically reach that by the end of Q1. How should we view that? Has it been progressing ahead of plan for you? And is there anything special that has driven that sort of above expectations customer position rates?
Well, I was not in the company when they set the target, but I would say looking at the year that we are close to reaching that target to be earlier than we expected from the beginning.
So then again, we had said 2020 never went during 2020.
Income, I'm just wondering sort of with the recent development in the U. S. And we've seen especially new players such as Robinhood from Google sort of intensifying price competition. Do you see any risk for that playing out in Sweden?
In the mid- to near term, I don't see that happening because if you look at the U. S. Market, they have different regulation, which means they can sell the order flows and make money on the spreads in other ways. And if you look at Charles Schwab, when they lowered their commissions to 0 brokerage, this was 3% to 4% of the total income. So the methods of making money on trading is much larger than it is in Sweden where we have MiFID II and best execution.
We have also seen in Sweden a couple of years ago when the deal came into the market with 0 brokerage that they didn't really take any market share. We appreciate we are quite comfortable that our clients appreciate the inspiration or the information, the overview, the decision making tools, and they believe it's worth the brokers they are paying. So I don't expect that to come into Sweden. But then you always keep an eye on price competition. But I think the market has moved from price competition when it comes to brokerage to the UX experience and the customer journey on the platform and in the krona on the brokerage.
I understand. That's very helpful. Just if I can stay on that question. I don't know if you view sort of a first mover advantage to be any barrier to entry. But if you do, would this sort of make you more inclined to expand to other Nordic countries before we see players such as those sort of entering Norway or the likes?
No, I said it before. I think that one of our success factors is our focus on the Swedish market, and we have a goal of increasing our market shares and our asset under management. And we believe we can keep on doing that for quite a few more years focusing on Sweden. So it doesn't change how we look at an international expansion.
Perfect. Thank you very much for taking my questions.
Next question is from Nicholas Macbeth from DNB Markets. Please go ahead. Your line is open. Nicholas Macbeth from DNB Markets. Please go ahead.
Your line is open. Okay. It looks like there is no answer on that line. So we'll go to the next question, which is from Mats Riedel from Handelsbanken. Please go ahead.
Your line is open, Mats.
Yes. Good morning. Sorry for the hang up here on the brokerage income, but that was the main deviation, at least in my models. Is there anything you can say about what the underlying in this? Was it driven by the HUT transaction?
At least when I calculate, it seems like brokerage income per commission note is up slightly in the quarter, which is not as been a trend. It's just on the margin, but nevertheless, it's turning the corner a little bit. And also, I mean, usually, you have a quite seasonal effect in Q4, maybe not last year, but Q4 is much stronger than Q3. Should we expect the opposite perhaps this quarter? What I'm aiming at is, is there anything particular that drove commission income this quarter?
No. I would just say just that we have more clients trading than ever. We have I think it's I think we are seeing results of innovation, larger customer base. We are inspiring our clients to trading. So it's just, I would say, something that we get from just expanding the client base.
But if brokerage per note goes up, is that because they are trading more foreign stocks or more complex products? Or is there anything underlying behind that or just larger tickets or?
No. But as we said before, more trades are being done in lower brokerage classes, which means that the percentage of the trade is a little bit higher. So on an average, it's more that is the reason for the brokerage per tonne over to go up.
Okay. Yes. Thank you.
Next question is from Jens Herrlin from Carnegie. Please go ahead now. Your line is open.
Perfect. Thank you. Jens Herrlin Herr. Yes, some I guess almost follow-up questions. But if we're looking at net inflows and net new customers in what throughout the Q3, there were record numbers.
What's your take on what the on the drivers of that? Is it something that you think is sustainable for the rest of the year? Thinking both there on inflows and customers.
It's always difficult to predict the future, but I think that we are we have satisfied clients. We have launched a lot of new functionality, a lot of new UX experience. We have a solid reputation. You see a little younger people are being more and more interested in finances and so on. So and we have all the ambassadors out there.
Our biggest marketing tool is word-of-mouth. So I think we have reached a position where it's actually if you start saving in Sweden and you ask your friends, the answer will be go to Harmanza, and we are benefiting from that on a broad level.
Okay. So in other words, you actually do think that this is sustainable, something that we should build on You
never know from quarter to quarter, but of course, we are growth. I mean, we want to grow. We want to increase our market share. We want to have more clients. And then it's not a straight line in that growth.
It goes up and down. But of course, we are very optimistic about the future.
Okeydoke. And then yes, some questions on Avanza Markets was actually, when I'm looking at it, it looks like a record quarter. And on the FX side, that $33,000,000 is actually at the top end where you've been trading in the past. Are there any specific drivers for that? Should we extrapolate that?
I don't know why markets were growing or if there was any specific reason for that more than activity in the market, which, of course, is and see this trade our revenues are based on both trades and volume. I would say that if the market is a little bit volatile or moving, then the transactions will be more and so forth. When it comes to the FX, I would say that, I mean, we the FX part of our customers' trading is growing even though it's not growing very fast, but we see that the part of the total transactions in foreign stocks are growing.
And I think that's important note because we also think that we have given best information of what stocks on the site. Of course, that creates more interest and more comfort. So it's both that we increase or we make our offering in foreign trading better, people the customers are more comfortable in trading. So we can sort of see by ourselves effective a bit.
And then finally, you did talk about the leverage ratio. You had 3.5 percent requirements would be 3%. Will this be a constraint for Avanza? I mean, either on dividends or maybe on the types of products that you had in pipeline that you may or may not now roll out?
Well, as I said, it will be a very important part when we manage our capitalization since we will be sensitive to whether customers have still lots of liquidity or not on our balance sheet. And therefore, we are discussing the buffer or the level that we should have so that we always will be the compliance of it. I wouldn't say that it would be a restraint, but of course, it will be an important tool for us to discuss regarding the capital exchange.
Okay. Do you foresee sort of in the medium term, you're having to put in some kind of limits on how much liquidity the customers have or make it less appealing to hold cash? I mean, how would you work on that?
Yes. We are still very customer friendly. I don't think that will be our first move. I think we will find other ways to handle this without being that won't be that negative to our customer here.
Okay. So I appreciate then holding more capital is the other option, right? Or am I missing some?
It's one of the options. We have different kind of tools to handle that.
We have our Savings Account Plus, where you can deposit at other companies through our platform. So the other means of handling that. But as Puneet has said, I think we are a long way from starting to limit how much cash the customer can have because most of the cash the customer have is usually money on the sideline waiting to be invested. So that's part of the volatility, so to speak.
Okay, perfect. Thank you very much.