Thank you very much and thank you for coming in to respond to this call today. If you look at Slide number 2, which is performance on target 2018. I can conclude that we achieved 1 of our most important goals and we're satisfied clients. Another important goal for us during the year has also increased employee satisfaction index from 33 to 44, which is by their 1st call target 45, which is arguably a very high number and think that has been a focus for me and the management team, and we are well satisfied with that development. On the cost side, I'll come back to say, we landed on
a 11% increase as we
guided for the Q2 report. 4th. And the goal for reaching $1,000,000 in 2020, we are always at 8 40,000 for the full year 2018, which means that we are well in capital there. One goal that we do not achieve, of course, is that our cost growth has been 11% and our cost growth has been 8%. But I think we have over the past years done a lot of investment before the growth, and I think it will be a tiny payoff.
And Eden Motors also proposing the same dividend as last year, 10.5%. The profit and of course, the focus going forward is not on development issues. And if you move to Slide number 3, it summarizes the year a little bit that the net inflow was 3% up. 2018 to 20 17. We added around 125,000 new customers.
We can see a pattern that existing clients in the turmoil that we have seen in the market is not depositing as much new money as the older clients are doing or the new clients are doing, but we still are quite happy with the customer growth. The customer growth has been a little bit less for the year than it was the previous year. But I think that my experience tells me that the retail clients in a shape the uncertain market are more hesitant to start doing things when the market looks good. Everything is found. People are spending into 1, spending, you know, the things.
I think there's been, 18, of course, that's both the payment and the replacement of staff that has left us, but also new staff. And I think it's important to stress the fact that the recruitment of new talent reached the company has gone very well. And I think we are hard scaling up by capabilities of being able to enhance our development. And that is also one of the reasons that we are cost guiding our 9% to 12% of these costs for the year, but we're also disclosing a cost budget, which is a 10.5% increase from 2019 to 2018. And I think it's important to understand that start related costs in Avanza is in excess of 70% of our costs.
And our business model is that we do everything developing from back end to front end to UX design and to maintaining a system in house. So the scalability of development is further associated with under employee. And since we have high ambitions for new projects, new services, new products, and we also are developing our offerings with different things. I think it's very, very vital for us to actually increase the stock a little bit to be able to get quickly time to market and launch more public services to our clients. I think the year also gave us some confidence satisfaction of clients.
I think we also got the Bank of the Year award from a Swedish well rated newspaper. And I think that's this morning, that is the number 2 when it comes to brand recognition in the financial industry. So I think all in all, our position is quite good even though that the markets, and then we come back to Q4, have really determined. If we change the slide to number 4, we can also see that we are still growing a lot in the younger customer segment or the younger we see it is the 20 plus. The important factor that is that we know that our customers from an average have a little bit higher education than the younger population, and we are growing in our area.
And that means that the customers will also over time make more money, make more savings. I think that's important. And I also think that if you look here at for one thing that we have invested in the asset fund business, which of course, in line with creating your recurring income, the number of monthly the number of customers had monthly savings automatically in our month has decreased by 24% during 2018, which is, of course, very good news. I think where we can improve ourselves in our business, as I said before, is share of wallet. We know that a lot of other customer assets in other banks, which could be best at gathering and that will of course lead to hardware power penetration.
If you go to the next slide, which is a bit more summarizing in detail in Q4, we can see that in Q4, we had the stock and stock exchange fell with 14%. We've seen a lot of customers getting risk down. Being on the selling side, we have seen that our deposit has grown. That means that our customers, in general, have a lot of liquidity at the moment, so to speak, on the sideline waiting to be invested. The relative share of the money market is going to stock fund has been increasing.
But I would stress the fact that we're still happy with our development in our fund business. But of course, a lot of the customers have taken down risk during Q4, which of course is hurting us from 20 PNM perspective. We can also see that during Q4, as I said before, also the inflows from existing capital clients was 40% in Q4, it was 48% in Q3, and that is, so to speak, stressing the fact that the customers are very hesitant to do a lot of things. But at the same time, we've seen that our pro customers and our private banking customers has been keep doing a lot of business with us during the quarter. If you go to the next slide, which would be the market share has stopped the change.
We dropped a little bit in number of transactions, but we don't think that's a worrying sign yet because we can see that institutions that have increased their activity and stopped and changed during the quarter has been for international institutions, which is, so to speak, a sign that we are still the number one player when it comes to transaction and stock exchange. And I will also stress the fact that we are on the strategy of creating more real foreign income to mitigate market fluctuations. Of course, we are in it for the long run. Fabelo, Novus Plus is one part of it. Investing is in the fund business, another part of it.
And of course, we have previously discussed the net interest income. That is, of course, something that looks a little bit better with the rate increase even though it has no significant effect yet. But I also stress the fact that the contract cost guidance, 9% to 12%, we also added both to the company that we want to have 16 dollars per sales per main cost, and we have 20 today. And the reason we have chosen 16 is that we can see that the best international players are there and that those are the ones that we operationally compare ourselves with. So a quarter with a lot of challenges, we think that we handled them quite well.
We can see those commenting in the full year that the 1st 6 months we did a lot of work with NIFI to the PR and a lot of legal investment, so to speak, or regulatory investment. But we've also seen after summer that we did a lot of exciting product launches. We launched the world's cheapest, the global index fund, and of course, the timing was not 100%. We needed the 26 August, and we all know what happened to a global index fund from the 26 August until now. Our margin lending renovation, which we launched on October 3, is also a product that works much better in an ongoing market than an ongoing market.
And as you know, from October, has not been very nice weather when it comes to financial markets, but we think this over the long term, we think that those investments will pay off quite handsomely. And with those words, I leave it over to you, Birgitte.
Thank you very much, Luca. So let's start with an overview. Revenues were in line with the previous quarter, but up 8% compared to the full year 2017. Our full year cost growth was 11.1%, in line with our cost guidance. And cost largely is really low in Q3, which you can see in the comparison to Q4.
Operating profit increased by 3% from 2017 but decreased quarter on quarter. The operating margin dropped to 42% in the quarter, of course, at 43% for the full year, down from 45% in 2017 as a result of investments in further growth. In the Q3, net profit was affected by one off tax cost related to the Swedish Tax Agency's decision to factor insurance company for the community and inclusion. Also, that's effectively according to 'sixteen and 'seventeen. It is also the reason why the tax rate was about 15% for 2018 compared to 'fourteen and 'seventeen.
We believe that for 'nineteen, we expect the tax rate to be somewhere in between these two figures. With a higher average savings capital, revenues for savings capital decreased compared to the full year 2017 and was basically flat quarter on quarter. Cost per savings capital was unchanged, 20 basis points for the full year despite increased cost. And our long term ambition is to lower the cost per savings, that will close to 16 basis points as Richard just mentioned. And this is, of course, a tough target, but achievable and in line with the best international peers.
During the quarter, we increased our holding in Staviello to nearly 30% from just under 20. Stabello is therefore now classified as an associated company in advance of accounts. Our share of Sabela's results are included in the consolidated income. This is only we had a marginal effect on the net profit even though we are convinced that it's a good investment from the chart. Looking at the quarterly revenues, you can see that the revenues were flat quarter on quarter and slightly down compared to Q4 last year.
Net brokerage income was stable quarter to quarter despite fewer trading days. Commission generating notes were down, while turnover was basically unchanged. Brokerage income for turnover fell marginally. Compared to Q4 2017, when brokerage income was at record high levels boosted by the high trading increases certificate, net brokerage fell by 9%. Funds from operations increased 9% quarter on quarter but rose by 14% year on year.
During the quarter, we have seen negative growth in from capital due to market downturn and customers' higher risk aversion. This led to us to a fund outflow, which affected our fund commissions negatively, of course. Fund commissions per fund capital decreased slightly to 33 basis points annualized due to lower share of equity and sector funds. Compared to Q4 last year, fund commissions now for 27% of the total savings capital and 28% of the revenues. NII decreased quarter and quarterly quarter, mainly due to lower average interest rate on margin demand, but also due to higher cost for stated profit guarantee where we had it positive at the one off effect in Q3.
Compared to Q4 last year, the NII increased by 11%, mainly due to higher income from external deposit accounts but also higher mortgage lending. Costs for surplus liquidity were slightly lower. The 25 basis point raise in January will not have full impact. It has no impact on the mortgage for private banking customers and the mortgage lending product is not directly tied to the repo rate and instead it's adjusted by an overall interest rate levels and the competition. So all else is well and without taking any changes in our customers' behavior into account, a 1 percentage point increase in the interest rate with today's volume would affect full year NII by over 250,000,000 dollars Other income increased by 19% quarter on quarter, mainly due to higher income from corporate finance, which is seasonally low in Q3.
Income from Avanta Markets also increased, while currency related income decreased due to lower trading in foreign funds. Compared to Q4 last year, currency related income was fairly flat, whereas income from amounts on market rose by over 30%. The share of equity trading in foreign markets decreased slightly among the ones with customers and accounted for 10 percent of the turnover. Year on year, other income decreased by 9%, mainly due to significantly slightly higher income from the corporate finance in Q4 'seventeen. If you look at the annual development, you can see on the full year comparison that revenues increased mainly as a result of higher fund commissions due to strong fund inflow.
Fund commissions were up 26%, in line with Advanced Growth and provision to increase the share of more stable income to grow and broader customer groups. Net brokerage income decreased due to lower turnover in commission generating notes and higher transaction costs for foreign trading. The number of commission generating customers and notes increased, but customers are trading in lower volume and in lower commission tax. Brokerage income turnover was up 2 basis points higher than in 'seventeen. NII increased mainly due to higher lending.
The average LIBOR rate was 11 basis points higher than last year, which resulted in lower cost to surface liquidity. Higher resolution and deposit fee rate costs were 3,000,000 dollars Other income was up due to increased trading in foreign stocks. Also, income from Avangsa Markets was higher versus revenues from If we look at the cost, the cost increased 15% quarter on quarter, which mainly due to the seasonally low personnel costs in Q3. And if you compare to Q4 last year, costs decreased by 2% due to lower marketing expense. If you look at the annual cost development, you can see that the full year comparison costs were up just over 11%, which is in line with our guidance.
This is a result of higher stock costs and higher other expenses. So we during the year have expanded our development capacity and increased the office space. Other expenses also rose due to higher IT costs associated with the regulatory changes. The annual cost increase going forward is, as Rick had already mentioned, estimated at 9% to 12%, a slightly wider range than the previously had planned before of 8% to 10%. This gives us the flexibility to take advantages of future growth opportunities as customers' behavior and expectation changes.
We will, though, continue to have a strong focus on cost. We make carefully cost budgeted and saw notice 3 times a year and the current budget period for 2019 shows 10.5% growth, but above it increased personnel and IT costs. Capitalization is still strong with the total capital ratio of 19.8%, which is well over the capital requirement of 15.8%, which includes all external and internal buffers and Pillar 2 requirements. In Q4, the risk exposure amount has increased due to higher operational risk amount, which is based on the revenues from the last few years and now includes 2018. Credit risk amounts with institutions lowered due to temporary deposit of surface liquidity at the risk end.
This has had a temporary effect on the LTI ratio well, which reached 8% at the year end, but will return to about 2%, although we see we'll be well over the requirement of 1. And the proposed dividend for AT and T is SEK 10.5 per share, being totaling SEK 300,000,000, dollars representing a payout ratio of 83%. And with that, Rika, I think we can open up for questions. Thank you.
And our first question comes from the line of Ermin Kariush from Bordea. Please go ahead.
Thank you and thanks for taking my questions. So first question, my order was a bit poor, so apologies for maybe some repetition here. But how should we think about sensitivity to the first 25 basis points rate hike increase or repo rate increase from the REX Bank?
The rate hike that we had and which came into place in January this year, we have no impact on our own private banking loan mortgage loan. And the impact on our margin lending, that is a management decision. So it's not one to one effect on that. Otherwise, when it comes to the liquidity and the bond portfolio, it will have full effect, but with at 1.5 or something like that month delay.
Okay. Thank you. That's clear. And then also, you're talking about the cost per savings units. Could you say something about how you see the trend going forward for the income per savings units?
Well, I guess that's harder to predict since it depends so much on both, of course, the market and how much the volatility and trading on the market will be and, of course, the increase in our customer base and the saving capital. And of course, we are broadening our customer base with the newer type of customers, not as trading intensive. But on the other hand, they usually invest in funds, which are more sticky and so forth. So it's harder to have a strong thought about the revenues per savings capital, I would say. Richard, I don't know whether you would like to
I think that we don't really guide about that. We look at I think there are so many factors that could affect that number. And I think, generally speaking, as we concluded, it's a lot about taking the recurring income, which I think
Understood. Thank you. And then just a final question, if we're saying on the fund capital, could you give us any flavor for how much of the fund capital is invested in equities and other asset classes? And also the decrease in Q4, how much of that was due to performance and how much was outflows? That would be very interesting to know.
Thank you.
I don't have the exact number between the different kind of sectors, but I know that about 70% of the down turn on the fund capital was due to market downturn. So 30% was due to net outflow, I would say. The split between different kind of funds I don't have,
We know that relatively speaking, our money market fund was increasing to of course, that's an effect of that.
Understood. Thank you.
The next question comes from the line of Mats Niedel from Handfranke. Please go ahead. Your line is now open.
Yes. Good morning. Yes, NII sensitivity, I think you covered that. But in terms of the costs, how should we think you are pretty firm on the guidance for 2019 of 10.5%, but the 9% to 12% guidance, should we see that just extracted going forward for 5 to 10 years? Or how do you see costs 2020, 2021?
How should we think about that? And then if you could just specify, I saw the move there in operational risk in the quarter. You said it was related to old income levels or how should I think about operational risk going forward?
Well, if we start with the last question, when it comes to operational risk, we are the operational risk for us, the capital requirement of the operational risk is calculated based on the 3 last year's revenue. We changed that in the Q4. So you up till the Q3, it's based on '17, 'sixteen and 'fifteen and then when you do it in the Q4, 'sixteen, 'seventeen and 'eighteen. So there, as the revenues increases, the capital requirements for operation will increase.
Okay, absolutely. Yes. Thanks.
And then the first question was?
Related to costs, how we should think past 2019, like 2020, 2021 and onwards, The 'nineteen to 'twelve, will that be a long lasting guidance?
Yes. You started by asking 5 to 10 years, and I would say we don't kind of Verizon when we are in a too fast environment to have that long term prognosis. But I would say that this is a guidance for year that we can foresee, and that we believe that 10.5% will be now have budgeted. But as I said, we are doing budgets and promoting all this few times a year. And it's important for us that the guidance is not the reason taking on or not taking on the cost.
It's the opportunity in the market that will be the reason for us taking on the cost. As we see as we have seen for a few years, we still see a lot of opportunities and it's important for us to stay ahead of competitors and so forth. It's important for us to be there and do what we believe will increase our growth in the future.
Okay. Thank you. Sorry, if I can just add one. Have you said anything about how much you gained from the lower resolution and fees in Q1 now or around 2019 compared to 2018?
No. We have not on that. But you could see that the fee for resolution fee is going down from 0.1 to 0.09. So of course, it's about 25% going down at the same volumes as now. So of course, there will be a decrease.
But then again, it depends on our balance sheet and our customers' guaranteed liquidity.
Okay. Thank you.
And the next question comes from the line of Peter Kaseyakov from SEB. Please go ahead.
Yes. Hi. Thanks for that. I have an additional question on the cost side. Apologies for that.
But I'm just trying to cost levels or cost growth that you mentioned of 8% to 10%, now 9% to 12%. If you look at net inflows the last 2 years, it's between been between 10% to 11%. And you talk about wanting to see the costs to savings capital level declining to 16 basis points from the 20 where you are now roughly. Is that I mean given now that the new cost guidance implies a higher cost growth annually than what the or in line with at least what the savings inflow has been the last 2 years. Is that do you look at it that way at all?
Or is that or do you expect kind of inflows of savings capital to increase with these investments?
Of course, I think that the quick answer is that over time, we absolutely see that the number of savings capital can increase. And as I mentioned before, one of the things that we can improve is share of wallet with existing clients. And of course, we have ideas how we can
do that.
So of course, to reach the 16%, the percent of savings drawn has a lot to do with a growing of savings capital in our business.
But does that also imply that you expect higher inflow of savings capital going forward than what you have seen in the last 2 years, for instance?
At least that's the ambition. I think that's absolutely our ambition to increase the net inflows. But of course, short term, mid term, that's always a little bit fluctuation from market conditions, But if it's a long term trend, absolutely, we also see that we have without a target to get more than 10% of the market's growth in savings that has been the market has grown, I think, is 8% over the last 10 years, and we take 10% of the market's growth at least. It's also about market share and we have a market share in sales about 4% year ago, it was 3.7%. So of course, we want to be increasing our market shares and the effects of that will be, of course, to our saving capital growth.
Okay. But for you to over say the in the near term to see your cost to savings capital decreasing, you would need to see higher asset value, so implicitly kind of rising equity markets. Is that
Yes. We would need more net inflow at the higher asset and market values on the asset as it comes. Of course, there is always a risk in the short term that if we get the stock market down 30% or something, of course, that will affect this.
And remember, in basis points, it won't happen in the nearest year. I mean, this is a long term target that we are going. So This is a bit away.
Okay. Then just one question on Staviello. I think in the past in the past, I think you mentioned that the total kind of margin on Staviello is 50 basis points and then the 3
participants that are getting a
share of that. And We in such as
We never have we have never stated that we've got more than onethree of that.
Okay. But is it Yes. That is divided equally. Okay. Okay.
But and is that still true? Are you still getting your share of the fees? Or have they changed?
We have not disclosed how much we make on Staviello. We would probably do that going forward. But we make money on Staviello margins reaching our mortgages. But of course, it's a volume business, a scalable business. Of course, I would say that we make money, we have income, but I think the focus that I have when it comes to Staviello is growing the volumes.
Okay. Can I just maybe rephrase the question and see if I get an answer? But when you look at the rate cut that was down in the middle of Q4, I think end November, Was that investors being willing to lower their return requirement? Or was there a change down to the fee that Stabilo is getting?
We don't disclose that.
Okay. Okay. That's my questions. Thank you.
And the next question comes from the line of Jens Helene from Carnegie. Please go ahead.
Yes. Hi. Thanks for taking the call. Firstly, on cost. I mean, one of the targets is to grow cost should not outpace income growth, but for now we've had 3 years where costs have exceeded revenue growth.
And now we have pretty high cost increases going into 2019 and onwards. Is this only then revenue is only going to be driven by market performance? So is there something you can do to change that? I mean, I stated another way, how confident are you that you can reach this in the next year?
What must be the question was?
So how confident that you are that you can reverse the last 3 years of cost exceeding revenue growth, I mean, as one of your long term targets?
We are very confident that. If we were confident that we will create the investments we are doing into increasing revenues over time, we will not have done the investments. I'm very confident in that. But then on that road, I think we have the interest rates not fluctuations. You have the weather conditions in the market that affect us.
But in the long term, we are very confident of that. And I think it's also important, as I said before, that for us to control our cost, it's in one way not so difficult because our costs are, as I said, in excess of 70% staff related. So if we were laying people off, loading the number of employees, we could do that. But we believe and we are 100% certain of that, that we develop everything else. We have high stock related costs due to the kind of business model, the corporate culture that we have, And we also are investing in a broader offering.
And we also not disclosing what we're investing in, but I think you all know that the technology and the opportunities out there, given the new technologies in place, are fantastic opportunities for Avanta, and those are the things that we are allocating are starting to work on.
Okay. Maybe then I have to looking at the revenues a little bit. I mean, brokerage revenue has been fairly flat or stable for the last per quarter for the last few years. And I guess one of the reasons is the brokerage revenue per trade has been coming down. It looks to have stabilized over the last 2, 3 quarters.
And I just wanted to get your view on that. Is that your opinion as well? And do you expect that to then be maintained going
forward? Revenue
per trade, so brokerage income per trade looks to have stabilized after having fallen for quite many quarters. Is that your view as well? And do you see any pressure down?
I would say that it has stabilized and I agree with that. And I think that it's better to look a little bit more on turnover or brokerage stake return over corona, which is about between 9 10 basis points. So that has been quite stable at the time. And but to another way of answering the question, I don't believe that we will have in the short to mid term high pressure on brokerage fees. Then it can fluctuate a little bit quarter by quarter because you see in Q4, growth customers and private banking customers were a bit more active than our retail customers.
But I would say I can see a stabilization we keep going on further.
Okay, perfect. Thank you very much.
As there are no further questions, I'll hand back to the speakers.
Okay. If we have no further questions, we thank you for listening in and wish you a very, very exciting Thursday.
Thank you.
Thank you. Bye bye.