Okay. This is Richard Youssason. Thank you for listening in on our Q1 result presentation. I will start off by just commenting on the sanction that the pension company within Avanza got in February for $35,000,000 dollars administration fee. And all in all, it was due to poor implementation of the Solvency II regulation that went into place in the 1st January in 2016, and we agree with the authorities of the implementation by itself.
But you also see that the actions we have taken actually from a little bit more than a year ago, where we have changed the Board in the company. We have one Board member left. The rest of the Board is new, and we also put on new Board members in the annual meeting here in March. We also made the CEO change who left the company. We now have an experienced pension CEO in the company.
So we're quite confident for the future because the pension company is, of course, still a very important growth area for us. And we can also see that the occupational pension capital has grown 27% year on year. So the underlying growth in the company is giving us proper confidence. And the ongoing monthly inflow just from premiums paid in by corporate is in the excess of $200,000,000 a month on a rolling 12 month basis. Also commenting on the pension company, we have talked a lot the last couple of years of the legislation when it comes to moving pensions into Avanza from other pension companies and the hassle that has been in the legislation.
We got the new legislation proposal right now, which was, at the first glance, quite promising. But digging into it a bit deeper, there will still be incentives for companies losing volumes to charge for embedded value 10 years back, which is quite sad for the Swedish consumers. But of course, we cannot just feel sorry for ourselves in that respect. So we are working a lot on even though the processes are quite burdensome to increase the moving of pension into Avanxo from other company, and we see there is a customer interest for that. So all in all, we have great confidence that our pension company, our pension offering and using the pension company as asset gathering tool will increase the inflows into Avanza in the next couple of years.
Coming back to a bit more short term, we can see that the quarter we considered a decent quarter. We still had a continued growth in number of new clients, which is that we are tracking to 1,000,000 clients next year. The net inflow was satisfactory looking at the quarter, which showed different phases in the quarter. I would say that the quarters, even though the stock exchange increased in January, activity didn't increase in January as much as the stock prices increased. But going into the quarter, we saw picking up of ANSA client trading activity.
We saw the fund volumes coming back on average it was a bit weak in the quarter, but at the end of the quarter, the volumes were at very, very good levels. So that makes us confident going forward in the future. We can see that increased interest from clients investment in fund. Brokerage was up, but the turnover decreased from 9.8 to 9.4 basis points. We also saw as a seasonal effect not that many corporate finance activities, but we also have in the pipeline, we are confident that if nothing happens with the market conditions, the Corporate Finance business will pick up during the year.
And we also saw that volumes in our mortgage plus, together with Sabelo, reached over $7,000,000,000 We also noticed that somewhat a little price war has emerged, and we also see activity with the larger banks calling the customer who wants to move the mortgages and try to have like a recovery unit to keep them. So I think there will be intense competition when it comes to mortgages going forward, but we are confident that we will be able to handle that quite well. Going to the next slide, we can see that the turnover of the stock exchange, we actually increased our market share a little bit when it comes to number of transactions. We see that the institutional investors part of the trading was decreasing and turnover was quite stable. So we are keeping our position as the number one on transaction on the stock exchange, which, of course, is important for us to keep volumes up and to get good prices for our clients.
Moving on to the next slide. Of course, it's a lot about costs. We have a budget that we have communicated, 10.5% increase in cost during this year. We are confident that, that will be something we can deliver on. And I also think it's worth noting that compared to other similar entities like Avanx Hunt, we have over 70% related to start cost because we do everything almost in house.
That means that increasing start cost is increasing our ambitious when it comes to time to market, to development and also to give our clients a better customer experience and good services. And we still have a target to reach 16 orders per seine s kroner in cost, which is the number 1 in the industry to have that. We think we will do that both by being cost efficient, but also by growing the savings capital over time. And that, I think, will be the way to fame for us. And other costs, just mentioning, is actually market data that we give to our clients, premises and some IT costs.
So I think our cost structure is quite simple. And if we want to increase time to market, increase our ambitions, of course, we will increase cost when it comes to staff. Going to the next slide. Of course, we have also done other things during the quarter. One is we have a new starting page for our clients, which is always a tricky thing to do because customers are used to the starting page.
But the customer seems to like our new starting page a lot. We have also education and the savings school that we have to reach new clients, new clients group. Also, I think we have done something excellent for the consumer in the transparency, where they can see exactly what they have paid during 20 18 in fees, how much was Avanza, etcetera, etcetera. And that's, of course, is something connected to MiFID II, which over time, I think, will be very beneficial for us because I think the transparency and the security for the customers, what they are paying is going to be important factor in the future. When it comes to new products, we have launched Avanza Agenda Tracker, which is an alternative to ETS, and we now have over in the excess of 25 Avanza Trackers on Avanza Market, which is appreciated by the client because to have an alternative to the ETFs has been in demand from our clients.
We also see the Avanza Global, our global index fund that we launched at 26th August last year, which I must say was not the best timing because we all know what happened to the market. I think the world index peaked on 29th August. But now we've seen good inflow in that fund, and we have around SEK 2,000,000,000 in it. And also in Avanza Emerging Markets, which we launched here 2 or 2.5 weeks ago or something like that, we have seen great interest from the clients. It's a well priced, well positioned product for our clients, And we have almost $500,000,000 in just a few weeks in Capitorn, and that's a more niched fund for our clients.
So we are very satisfied with that development. Going forward, I think one thing we like to note out also is that we have launched our 1st real open banking services, and I think it's, in my opinion, the best in the industry, and this makes it a lot easier for our clients who have securities assets and mutual funds in other institutions to transfer them over to Avanza. And now this is done in collaboration with TIM, but it's also we can see early days that the clients are using it more. They are moving more funds. And also in every move, they move more funds than they did previously.
And this means that you can move your mutual funds from 1 bank in Travansta in less than 60 seconds, and you don't have to fill out any forms or anything. And I think this is something that's promising for the future in connection to our ambitious, of course, to increase the share of wallet with the existing client base, this is one puzzle piece of the puzzle that will enhance that strategy and I think also enhance the customer experience. Going forward to the next slide, of course, cost growth, which will lead to increased growth and shareholder value long term. This is very important for us. We are confident that we are investing in the right things.
We also see that time to market is going to be more and more important. We launch our platform every Thursday morning, and you can see that, that's future. We also see customer satisfaction is also dependent on that we can be fast, new things on the platform, new things on the mobile phones, and the customer expects things to happen around such a creative wow factor that we want to do. But also, we see that we are becoming more and more relevant to the larger audience, the people who are not that into the market. We see good flows when it comes to monthly savings and customer who also comes to Avanza are becoming a bit more active while they are Avanza clients as they were in the previous banks.
And of course, both customer growth and share of wallet is very important for our growing the net inflow. Of course, also in the quarter, the repo rate increase helped our NII. And of course, the full effect of that, I think, as I will mention, it will come in the late part of the quarter. So that's always continuous growth, customer satisfaction and strong innovation is extremely important going forward, and we are confident that we are on the right track growing the business. And with those words, I will leave it to Birgitte.
Thank you, Rika. So we will start with a financial overview. The revenues were in line with the previous quarter and slightly down year on year. Operating expenses year on year were up 8% as planned for and in line with our budget of 10 point 5% cost growth for 2019. Compared to last quarter, costs were down due to the timing from Swedish SSA of €35,000,000 regarding the pension company, which was reported in Q4.
Please note that the costs for Q4 have been amended compared to the preliminary financial statement. The costs, excluding the fine, were up 6% quarter on quarter. As from last year, Sabiello is classified as an associated company in Avanxo's account. Therefore, our share of SABELO's results are included in the consolidated accounts. Stabilo's results burdened the operating profit with about $2,000,000 in the quarter.
We are convinced this is a good investment long term even though the effect for the profit negatively in the start up at stake. Altogether, this gives us an operating profit of €100,000,000 in the quarter, a decrease compared to Q4 of 10%, excluding the fines, and a decrease of 16% compared to Q1 last year. Consequently, the operating margin dropped to 37% in the quarter, down from 44% a year ago, a result of investments in further growth. Revenues per segment capital was stable compared to Q4, but down 4 bps year on year, mainly due to higher average savings capital. Cost per savings capital, which excludes the pie, was up to 1 was up 1 basis points quarter on quarter to 2021 and stable year on year.
A long term ambition is, as Frederic had mentioned, to lower the cost per se in the ratio to close to 60 basis. It is in line with the best international peer. As said, total revenues were flat quarter on quarter, slightly down compared to Q1 last year. Net brokerage increased only slightly quarter on quarter despite some more trading days and increased number of commission generating notes and higher commission generating volumes. Brokerage income per turnover decreased from 9.8 to 9.4 basis points, the result of a larger share of transactions in fixed commission classes.
Compared to Q1 2018, when brokerage was boosted by the high trading increase certificates, net brokerage decreased by 8%. Brokerage income per turnover decreased from 10 to 9.4 basis points, while at the same time, turnover decreased by close to 1%. The number of commission generated new increased slightly, whereas the volume was down slightly. Customer securities are traded at lower volumes and in lower brokerage fee costs. Some commissions decreased slightly both quarter on quarter and year on year.
Quarter on quarter, this is an effect of lower average fund capital after the big downturn in Q4. Some inflow was good in the quarter, though, and the markets were up. And as of March, the capital is back on high level. Year on year, the annualized fund commission per fund capital decreased by close to 3 bps to 33, an effect of customers investing in funds with lower management fees. The NII increased both increased by 30 4% both quarter on quarter year on year.
This is the result, of course, of the rate referral rate in January and consequently also higher cyber, which decreased the cost for our surplus liquidity. Since our bond portfolio is managed and average interest duration of 3 months, the interest rate hike was not fully materialized until in March. Income from margin lending was only slightly higher than Q4 despite increased volumes. This is due to a lower average interest rate, which in turn is a result of the improved customer offering in October. All else equal and without taking any changes in customer behavior into account, the 1 percentage point increase in the interest rate from here, as today's volume would have a full year effect of interest income by nearly EUR 300,000,000.
Dollars Other income decreased by 16% quarter on quarter, mainly due to lower income from Corporate Finance and lower other condition income. Income from Advanced Markets and FX was stable in the quarter. Compared to last year, income from corporate finance was lower as well as the currency related income, which last year was positively affected by the high activity in Canadian shares. Income from Advanced Markets increased. So looking at the cost, you can see that in Q4 'eighteen, we were burdened by the fine of $35,000,000 in the pension company.
If we exclude the fine costs if we exclude the fine, costs increased quarter on quarter by 6 percent, mainly related to personnel costs and marketing expense. Due to the introduction of IFRS 16 in 2019, leases are now on premises are now recognized as a write off asset and the lease liability in the balance sheet. This reduces cost from premises, including in other costs, the green line, while the depreciation increased by about the same amount, which is the yellow line. At the same time, an interest expense of about 500,000 dollars per quarter in 2019 arises in the net interest income. Compared to Q1 last year, costs increased by 8%, also here due to higher personnel costs and higher marketing expenses.
Personnel costs rose due to an increased number of employees, mainly related to expanded development capacity. Capitalization is good with a total capital ratio of 17.2%, which is well over the capital requirement of 16.1%, which includes all external and internal buffers and Pillar 2 requirements. Part of significant holdings, which is Fabiola Group and our pension company, is now deducted from the capital base. The aggregated sum of significant holdings can up to 10% of core Tier 1 be managed through capital requirements for shares with a risk weight of 2 50%. The part that exceeds 10% of core Tier 1 must be deducted from the capital base.
The Q4 figures have been adjusted accordingly. Please note that the figures for Q4 have also been changed compared to what we previously reported due to the timing from the Swedish FSA. The decrease in total cash flow ratio compared to Q4 is mainly due to higher risk exposure amount for credit risk regarding institutions and covered bonds. We had a one off effect in Q4, where we temporarily had a deposit of ZAR2.9 billion at the Central Bank with a risk rate of 0% compared to the institutions that cover bonds with risk weights of 20% 10%, respectively. This also had a temporary effect on the LCR, which reached 8% at year end but now has returned to above 2%, well above the requirement of 1%.
The leverage ratio for the group 2.9%, which is just under the required level of 3% that is expected to be implemented in the second half of twenty twenty one. And with that, Ricard, I think we can open up for questions. Absolutely.
Thank you. And the first question is from the line of Peter Kessiakoff from SEB. Please go ahead. Your line is open.
Yes. Thank you. First of all, just going back to your comments, Rickard, relating to the new tool that you've launched together with Tynq and you mentioned that you have better flows on the back of that. Would you say that we should or would you dare to guess that we should see a positive impact from that in the net flows in April? Or is the magnitude that big that we can see it on a group level?
And to answer that question, I think this is one piece in the puzzle to enhance our customer to gather more of the savings into Avanza. But how large effect it will have on Methi Insulin total, I think it's just a bit too early days to make a judgment of that so far. But of course, it will have a positive effect. But the magnitude of the positive effect, I don't want to comment on right now.
Okay. Then just my second question relates to your other income, where you have the other net commission income, which is a negative number of SEK 11,000,000 in the quarter. And to my as I understand, a part of that or a majority of that is marketing expenses. And when I then add the marketing expenses that you have on your P and L, it looks like the overall marketing costs for the whole group is up close to 40% year on year. First of all, is it do I understand correctly that other net commission cost is mainly marketing?
And why, in that case, would marketing expenses be up so materially year on year? And is this a new level, you would say?
Well, first of all, that is the main part is not marketing. Marketing is some part of it, but it's not the main part. And the effect of the marketing has been up when it actually comes to what we mean in operational cost call marketing, that's just a well, sometimes we take the cost in Q1 and sometimes in Q2. So we had a good something to talk about in the Q1. So other income is a lot of other cost, including search engine optimizing, but that is not the main part.
It's also cost for our mortgage products. It's cost for all other kinds of revenues that we have, cost for our customers, traders, cost for information on website and so forth. So it's a lot of different costs.
Okay. But the level of SEK 11,000,000 negative that we have now, is that a level of what we should expect onwards? Or was it a temporary increase, for instance?
Well, actually, it depends. It depends on what our customers actually are using for on the platform. So I couldn't say if that is an ongoing trend or not. Okay.
And then just on Stabilo, which, as you mentioned, burdened the P and L by just above SEK 2,000,000 in the quarter. Is that the run rate that we should expect throughout the year? And then secondly, as you mentioned before, you have some income from Stabelo in terms of distribution fee. Would you say that if you look at the whole P and L effect that the Stabilo Corporation, is it still loss making? Or are we close to breakeven?
I think that we don't comment on our relationship with Staviello when it comes how two reasons for that. One is, of course, it will take time because before it has a significant impact on the P and L, that's for sure building a mortgage portfolio. And the other side of that is that there's a lot of people in this city starting mortgage funds at the moment, and we don't want to disclose how the relationship between Stavelo and Avanza is in any further
details. Right. Then just my
Just a comment, Peter, on the 2,000,000 in the quarter, of course, that is dependent on how many new mortgages Sabila actually get. So of course, it's hard to say. If we get a lot of new mortgages, then that cost will probably increase. And if they will get much fewer, that will probably decrease.
So. Okay. Then just a final question. On the leverage ratio, which is then above below 3%. And I think that if I understand it correctly, you haven't audited the results in Q1.
So it should have been above 3% if you adjust for that. But do you feel that you need to do an additional Tier 1 issue before the leverage ratio legislation comes into place in 2021 or
Well, actually, we haven't put our foot down when it comes to that. As you see, we are constantly bit by bit getting up to the 3%. And of course, it depends on what level we decide to we have to have. I mean, 3% is the lowest level when we come to that at the end of 2020 1. So we haven't really finalized the discussions on how we should make sure that we, at all times, are above 3%.
It could be a Tier 1. It could be core Tier 1 capital lowering dividends, but we haven't discussed that yet.
Okay. Thank you.
Next question is from Nicholas Macbeth from GMP. Please go ahead. Your line is open.
Thank you. First of all, on the
NII impact here in Q1, you're right that the
full impact on the bond Thank you. First of all, on the NII impact here in Q1, you're right that the full impact on the bond portfolio from the REAP rate hike came from March. And could you quantify how much of the total NII benefit from the rate hike that came in Q1 and how much you would expect to remain also into Q2?
Well, I can, of course, not quantify that in numbers. But what I can say is that we had the full effect by the end of March. So of course, we haven't seen the full effect in the quarter from last year. You have to do your calculations yourself.
Okay. And then also on Stabilo, could you say anything about the outlook for volumes? And also, there's been some comments from SABL over the past few weeks about considering to broaden the offering to also to higher loan to values and possibly also with down payments and bridge loans and so on. Is that something you improving
and broad in improving and broadening the mortgage offering. I think it's not today I can disclose what we are doing when we're doing it. As always, when we will do something, you will notice it. But I don't want to comment on my future plans with Cabello also because I don't We believe also that there's a lot of things going on in the mortgage market, and we like to keep those cards close to ourselves. But the answer to the question is that we are working on if I go down the road and be additional, of course, our offering with Traveiro will be different and more fully than it is today.
But I don't want to disclose any time lines for that.
Okay. Thanks. And then finally, question on the mutual fund margin, which was down a bit here in the quarter. What do you think will be the kind of trend from here? Do you see further pressure on the margin given that you've kind of launched some very low cost mutual funds of your own?
Or do you see potential for recovery on the back of rising stock markets and the inflows into equity funds, which typically have higher fees than maybe fixed income funds?
I would comment on it like this. I think that one of the result, of course, is that in certain types of conditions, the customers go to index fund, money market fund, low income funds. So once the risk is on, we get people investing in higher funds. So of course, that fluctuation will be there. What I stated previously and I say today, I think there will be a price pressure on mutual funds.
I think that a bps or 2 down is probably a long term trend, but I'm also confident that we will compensate that well with volumes. I think the transparency we got with Mid Fit too, I think we in the industry thought that all the customer would care a lot about this in the 3rd January 2018. I think it takes a little bit time for customers to value the price for the products when it comes to making the investments. So I think that you result on that, but I think that the margins on mutual funds in the industry is going down a little bit compared to today. So I think that number will be a bit lower in the future.
Yes, makes sense. Okay, thanks.
Next question is from Ermin Kirich from Nordea. Please go ahead. Your line is open.
Thank you and good morning. So my first question is on the commission on turnover. You say this came down to 9.4 basis points in the quarter. This is mainly owing to more commissions being done on a fixed rate. Is there anything in the trend or so that points to that
we communicated because we noted that during Q1. I think it's 1 quarter is still something that will come for the future. I think we have to wait and see to give a good answer to that question.
And then on the cost inflation, so 8% year on year now in Q1. Could you give us any flavor on how
Could you repeat the beginning
of the question? It was some disturbance.
Sure. So on the cost inflation, you're currently below your run rate for the full year you've guided for of the 10.5%. Could give us any flavor on how to think of the phasing to reach those 10.5%?
I think we stated our guidance. We have stated that our cost budget for 2019 is a cost increase by 10.5%. So we do not change that comment.
I understand that, but I was more thinking throughout the year as you start the year on a lower pace.
Yes. I wouldn't I would say, yes, you don't have to expect large fluctuations in the increased ratio quarter on quarter. But of course, there will be some changes as we only used 8% this quarter, but pretty even over the year.
Okay. And then the last question just on I'm sure you've seen Swedbank also issued this new offer offering basically the corresponding of Avanza start but with savings capital up to $100,000 for their clients. Do you see any impact from this? And I mean Avanza has historically strived to be sort of price leader. Could we expect any changes from your side to adapt to this?
Or you rather wait out and see any effect it has first?
I don't think we will I mean Suezbank launched this yesterday, so we have not seen any effect yet. But I think that we are confident that our offering, our customer inflows, our customer satisfaction and what we give to our clients is a very strong offering compared to all the peers in the industry. We are always following what our competitors are doing, but we are not going to rush and do something just because WebBank did something because they don't lead our agenda. But I think that if you look at this free trading, we had it since, I think, 2016. So it's not a new invention into the market.
I think the new invention is that they do it for 100,000. I think Nougat has 80,000. We have 50,000. So time will
Next
I just have one last question. So, Richel, you mentioned again in the CEO comments that the higher costs would contribute to increased growth over time. Are you worried that we might not see that sort of the revenue impact until 2020 or even later?
I think that we are concerned that our growth has to be sort of transforming into higher income, but we believe that the long term target is growing number of customers, growing savings capital, and we believe that we are confident that we'll grow income over time. That's the comment that I have because I think that we are more and more of this network, customer satisfaction, customer experience, brand recognition, brand name is extremely important to gain the clients and keep the clients. And we think we're quite good at that, and we think that we will get paid over time for sticking to our strategy.
Okay. Yes, because of course, you are succeeding in terms of customer numbers. Maybe as a follow-up on that, do you think that you can reach this revenue growth without adding on new products then? Can you reach the a faster revenue growth than cost growth with the product base that you have today? Or do you need to add on something different?
If you look at the long term, we added the mortgage loan, which is still early days. I mean, we launched it, I think it was the 4th of April last year. So we have $7,000,000,000 down the road, and I think the potential is much higher. That will, of course, increase our income. And as I said before, I still think we have great opportunities of growing our mutual fund business, both by the bank and the pension company.
That all in all, it's about growing the volumes, the saving capital that will generate more income or the business volume within Avanza. But I think that we have the product and services in place, but I also think that we have to do more work with existing processes, existing services. We can make them easier, better, easier to use. That will increase the activity among our clients As our open banking initiatives with moving securities has shown, that's one piece of the puzzle in getting more share of wallet, which will be transformed into more income over time for Avanza.
Okay. Thank you very much.
Next question is a follow-up from Peter Kessiakoff from SEB. Please go ahead. Your line is open.
Yes. Hi. I just had a follow-up question. Just to, I guess, pick your brain, Rick, at a bit. If I look at products that have been launched over the last, I don't know, 6, 9, 12 months, You have the global fund.
You have the emerging markets funds, which you released recently. Within brokerage lending, you can borrow up to a certain amount for free. So a lot of the products that have been launched have been to kind of reduce margins or to lower the price towards customers quite significantly. When looking forward and the products that you might consider or looking at launching, is this the overall theme that it is to lower the price of existing products? Or should we see that there's some element of broadening the product base?
I will not comment on future products because we never comment on that. But I can put it like this. If you look at the global index fund, of course, it's a very cheap fund for our clients. And if you look at the Emerging Markets Fund, it's also a very well priced fund for our clients. But what we see is that when customer comes to Alarmza and buy the global index fund, 90% of them buy something else with a higher margin for us.
So it's a little bit having these products in the window, so to speak, to get the customer to go in and invest in other products with higher margin. And we can see very clearly that, that works when you see new clients entering Zalmanza, buying the emerging market funds, 90% of them also invest in something else with higher margin. So that's the basic idea behind it.
But I think in the past, I think Avance has communicated that the price point has become less well, it's less of an important factor for the clients when they move to Avanza. It's rather the user experience, for instance, and that the platform is simply great. Would you say that, that has changed then?
No. I would say that I would emphasize that that's absolutely still in place, that the customer experience is extremely important, say, to gather new clients. But I would say that the Avanza Emerging Market and the Avanza Global Index Fund is more of creating wow factor becoming the talk of the town, becoming people to get interested in Avanza to get more inflows that will be invested in diversified portfolios for our clients. So I think it's not eitheror or it's probably both.
Okay. Okay. Thank you.
And there are currently no further questions registered. So I'll hand the call back to the speakers. Please go ahead.
Okay. Thank you very much.
Thank you. Bye bye. Bye.