Okay. Well welcome, and thank you for listening in. It's Rikard Josefson, the CEO of Avanza speaking. I will give a business update of Avanza third quarter, then I will hand over to Birgitta for a bit more on the financial side. As you remember, in July, I said that the second quarter was a dull quarter. We were not happy with our performance. I think that we have taken good steps in the third quarter. The net inflow is 73% better than in Q2 and 42% better than in Q3 last year. We are happy with the net inflows. An important part of that is that in the second quarter, the net inflow was only 28% by existing clients, and we usually say that half of our new flows is from existing clients, and in the third quarter it was back to normal level at 48%.
Also we could see the customer growth coming back due to July with good corporate reports. I think the activity among clients, people coming back from vacation in August, which was a good month for new customers. All in all, it was quite a good quarter, both inflows and in number of new clients. If you look at the next slide, I think it's an important part of Avanza's development, and this is just an example how we have enhanced the experience of placing a fund order, which also shows that the customer who are starting to buy mutual funds, the rate of the customer who completes the process has gone up quite a lot just because this in some sense, simple improvement.
I think this is an important part of Avanza going forward, is that we release a lot of new products and services, and we enhance the customer experience. We also take a very deep look in the mirror at looking at the existing processes offering services that we have. And we can see that by improving those existing processes, we can make the customer activity go up and the customer experience go up. We have a lot of housekeeping to do in keeping even better services. Another interesting thing that we can see is, of course, that the customers more consume Avanza in the mobile format. Now that we move, for example, made it possible for a customer to transfer funds from other banks to Avanza in the mobile apps.
The four out of 10 transfers is done in the mobile phone, which is a dramatic change in just because we put the services in there. I will not dig into the details, but we have placed more and more services in the mobile phone, and we see a great appreciation by our clients of that. 30% of our clients today only interact with Avanza through a mobile phone. The mobile has come to stay, and it's one of the areas where we are improving ourselves, and we are intent to improve ourselves even more going further.
If you take the next slide, also one of the example of the product launches we did, we launched our global index fund, which is actually the cheapest index fund in the world with a five basis point management fee and total cost for the customer at 10 points. It is now the fifth most popular fund to own in Avanza. We have 50,000 owners of the fund. An important part which shows that the product launch like this works quite well is that 90% of the money new clients bring into the company is invested in other products than the global fund. Also existing customers, the cannibalization of other funds with higher margins is surprisingly low. We can see that the fund is relevant for a customer who invest in it, but they don't only invest in this fund.
I think that you can see some similarities to the launching of Avanza Zero in 2006. We are very happy with that. We also in 3rd of October, that will be in Q4, launched our new margin lending product, which is too early days to comment on the success of it, but we can see that the customer really appreciate it. A number of customer who wants to have some moderate margin lending on the portfolio has increased a lot. I think we're very, very happy with that. It's too early days to conclude the long-term effects on that. If you take the next slide, we also can see that the activity has transferred into increase in market shares in number of transactions in the stock exchange.
That is of course important for us because the larger market share we have in transaction, the better terms we can get and the more we can give extremely good prices to our customers. It's something that we follow quite carefully. In the last quarter we are very happy with the development. We can also see that the activity from foreign players have decreased. If you take the next slide, it's also a piece of our strategy and it shows the income split with Avanza. As you can see, the red is brokerage income. Q3 was a good brokerage quarter for us. The proof is in the pudding and the strategy that we have is to create more recurring income.
We see quarter by quarter now that the mutual fund income is stable and increasing. Which is part of the strategy of taking down some of the top-line volatility within Avanza. But we will always have volatility in the brokerage income, and we love brokerage income, but we want to grow other income as well. Other income, I think Birgitta will come back to a little more in detail, but I think the slide shows that our strategy actually works. As always for Avanza, the key success factor for us is customer satisfaction. We will get the result from the SKI measurement in, I think, December, and we think that our customers still appreciate us a lot that the signs we have. We want to continue growth in both number and customers and volumes since I think Q3 was quite good, and create possibility for strong innovation.
As we said in Q2, we took the decision to hire 20 more development into our development team, so 20 new employees. It's a strong competition, but with our culture, our values, we are surprisingly happy to see the attraction that we have as an employer and that we are attracting a lot of new talent. We are onboarding a lot of new people because we have some replacements also. I think we are at the moment recruiting around 30, 40 people, and our employee branding has been successful. We are getting a lot of new talent within the company who wants to share the culture and the values that we drive this company upon, and that's very satisfactory from my point of view. With those words, I would like to hand over to Birgitta and go through the financials.
Thank you, Rikard. As always, we start with a financial overview. The revenues for the quarter have increased as a result of the higher customer activity, both compared to Q2 and the Q3 last year. Due to growth in savings capital, though, we can see that revenue per savings capital is flat. Costs are seasonally low in Q3, which is it seemed compared to Q2. For the nine-month period, the cost growth has slowed down, and it will slow down even more for the full year. Cost per savings capital was down to 17 basis points in Q3 and slightly down compared to last year, and flat at 19 basis points for the nine-month period. We believe that we can reach below 20 basis points also for the full year, given, of course, continued strong growth in customers and savings capital.
The operating profit increased both quarter-on-quarter and year-on-year. You can see that the net profit was affected by higher tax expenses in Q3 due to higher tax on intermediary commissions. A decision from the Swedish Tax Agency, which we communicated already in the Q2 report. Another effect on the tax is that the operating profit in the bank in relation to our insurance company was higher than in Q2, which gives an underlying higher tax rate for the group in the quarter. This is due both to growth in savings capital within the bank versus the insurance company, but also an effect of increased lending, which is only a banking product. We can also see that the operating margin rose to 49% in the quarter, but was 44% for the nine-month period.
If you take a little bit more look at the revenue, total revenues were up 10% quarter-on-quarter and 18% compared to Q3 last year. The market environment improved from the dull Q2 leading to increase in brokerage income, where we can see that the customer activity has increased and more customers made share transactions in the quarter. Commission-generating trades were up significantly. Turnover in commission-generating trades was higher in relation to Q2 and mainly flat compared to the same period last year. More customers trade but at lower volumes per trade, and a larger share of the trades were made within the lower brokerage classes. This means that in these classes we have higher brokerage revenue per turnover SEK. Another effect is that during this quarter, we had six more trading days compared to the last quarter.
If we look at fund commissions instead, we had a continued increase. We had good net inflow and growth in capital, which means that savings capital in funds have increased by 19% during the year. Fund savings now account for 29% of total savings capital and 30% of the revenues as Rikard showed you just a few minutes ago. Fund commissions per fund capital was flat at 35 basis points compared to previous quarter and slightly higher compared to last year. The Auto funds that we launched a year ago are now one of the most popular products for monthly savings. The NII increased mainly due to increased lending and lower costs for state deposit guarantee than we previously estimated. The mortgage lending continued to increase. Margin lending also increased, reflected by the more positive market sentiment.
The improvements that we have made in the margin lending in Q4 are not expected to have material impact. Majority of the capital is in standard rates. The volume growth required to reach break even are not that large. Costs for surplus liquidity increased slightly as deposits were higher and STIBOR was about flat compared to Q2. Compared to Q3 last year, the NII increased mainly due to higher lending, but also due to lower costs for surplus liquidity. Other income are seasonally low in Q3 due to less transactions within corporate finance. During the quarter though, we have seen that the equity trading in foreign markets has increased among Avanza customers and now accounted for more than 10% of the turnover. Trading in foreign funds are though slightly lower. The revenues in Avanza Markets are a bit up compared to Q2.
Looking at the cost side, operating expenses increased by 12% compared to Q2, which is mainly due to seasonally low personnel costs. Compared to Q3 last year, costs were higher, 9% higher, mainly due to higher personnel costs and higher costs for premises. Costs are according to plan, and growth is attributable to the capacity expansion that we started in 2017. The cost growth for the nine-month period was 16% compared to 20% for the first six months. The costs are estimated to come down to close to 11% for the full year, of course dependent on how quickly we can onboard our new employees and get them in place. We still have a strong capital situation with a total capital ratio of 18.9, which is well over the capital requirements of 15.8, which includes all external and internal buffers and as well as Pillar 2 requirements.
As you know, we continue to have our dividend policy of paying out 70% of the year results. With that, Rikard, I think we can open up for questions.
Yes. Please start asking your questions.
Thank you, ladies and gentlemen. If you have a question, please press 01 on your telephone keypad and you'll enter a queue. There will be a brief pause while questions are being registered. Our first question comes from the line of Pieter Kasiakow from SEB. Please go ahead. Your line is now open.
Yes. Hi. Thank you. I will start to ask my questions. One or a few questions. The first one is on the commission rate classes that you have and the changes that you made, I think it was during end September, early October, where the monthly limitation on class changes is removed. Have you seen any impact from that, people switching around more and perhaps having the more optimal commission rates during each single trade?
No, I think the customers gave us great credit for doing that, but the number of customers who actually change class every day is extremely limited, so I see no effects of that.
You would not expect at this point, at least sorry, any decline in average commission rate on the back of this?
No, not on the back of that.
Okay. Correct me if maybe I heard wrong here, but did you mention that, I think it was you Birgitta that mentioned that the government fees were lower than you expected in the quarter?
Yes.
What was the impact of that? How much relates to the previous quarters?
I think that we made an adjustment for previous quarter of about SEK 1 million or SEK 2 million or something like that. We don't get the calculations regarding the state deposit guarantee until in the third quarter for the existing year. That's why we estimate the cost in the beginning of the year, and then we have to change it when we get the final invoice from Riksgälden.
Okay. In essence, maybe SEK 1 million should be removed from the NII in this quarter relating to the other. Okay. Just on the mortgage lending class offer with Stabelo, where the rate was lowered quite recently. What was the reason behind that? And are you happy with the volume growth that you're seeing within that mortgage loan?
The reasoning for it is that you always adjust prices when you offer to a client. We're quite happy with the development and with the volumes. We see that the processes are working, and as I said previously, this is a marathon. We're just starting. We always adjust our offerings. It's according to plan, and sometimes you lower rates, sometimes you increase rates, and this time we had an opportunity to lower it four basis points, and we did so.
Okay. In essence, you're happy with this growth rate also going into 2019, and it's in line with your expectations. Is that how I should read it?
No, we don't disclose how we think about 2019 when it comes to growth. I still think that we launched this offering in, I think it was April the 6th or something like that. We are still adjusting processes, making the UX experience and so on. I think we are a bit too early days still to conclude anything that we are planning to do. As I said previously, this is a long-term commitment from Avanza into the mortgage markets, and quality user experience is on the agenda more than short-term growth.
Okay. Then just one last question, more on the technical side, coming back to the tax rate, which you mentioned was higher in the quarter on the back of more profits being generated in the bank. If we look at the current earnings trends and where profits are growing the most, I would assume it's within the bank. On the back of that, we should expect a gradually higher tax rate for the coming years. Is that fair to assume? Then I exclude the corporate tax changes that we're getting in Sweden. Implicitly, the underlying tax rate should be gradually increasing. Is that it?
Well, we see that more net inflows are coming into the ISK compared to the endowment insurance. That drives savings capital to the bank rather than into the insurance company. On the other hand, we have an insurance company with the occupational pension which are growing. Of course, in the occupational pension, you usually have more or less than 95% or something like that in funds. Of course, we see a growth in the insurance company when it comes to occupational pension, the ISK are taking more savings than the endowment insurance are doing. As I said, also the lending products are purely banking products. Of course, when the NII increases, that revenue will stay within the bank.
Okay. Thank you very much. I think I'll stop there for now. Thanks.
Thank you. Our next question comes from the line of Nicholas McBeath from DNB. Please go ahead. Your line is now open.
First, a question on the product launch pipeline. You mentioned two new products, the global index fund and the new margin loan. Is this it? You've been speaking about quite ambitious pipeline and a lot of investments going into new products. Should we expect more here in Q4 or early next year, or was this the kind of products you've been speaking about in recent quarters?
I think you can expect more from us, both when it comes to services, product improvement. As I mentioned during the presentation, that we are increasing our offering in the mobile phone and so forth. We still have some things left in our goody bag.
Then a question on the NII sensitivity. You kept your guidance SEK 250 million. How should we think about the gradual impact here? Should we take 25% of that as the NII delta from an initial rate hike if the first rate cut is 25 basis points? Or how should we think about the first impacts from rate hikes, let's say, if they come now, maybe in December or in February?
As we said before, we have a floor when it comes to our mortgage loan. The first 30 basis points won't impact those revenues. The margin lending product is a decision. It's not closely connected to the repo rate, that needs a decision from us. When it comes to our bond portfolio, we have a three-month rate when the rate is reset in the mortgage fund, and on an average 1.5 months. The effect won't impact the NII immediately. Of course, the part that we have lended to our credit institutions are closely connected to the repo rate.
Okay. Also, I think you mentioned some data early in the call. I think I missed the details here, Rikard, can you please repeat the inflow split here from new and existing clients?
In Q2, the inflows from existing clients was 28%, normally the inflows from existing clients is around 50%, in Q3, the inflow from existing clients was 48%. The existing clients started putting money into Avanza again, which they did not do in that extent during Q2.
Okay, thanks. Final question, if you have any reflections on the kind of turmoil that's been written about your closest competitor, Nordnet, in media here in the third quarter. Do you see any potential impact on the competitive environment, or have you noticed any customer flows from Nordnet on the back of this turmoil?
No, we don't comment on Nordnet. We respect them as a colleague and a competitor in the business. I have no further comments on that.
Okay. Yeah, that's all my questions. Thank you.
Thank you. Our next question comes from the line of Mattias Lindeblad from Handelsbanken. Please go ahead. Your line is now open.
Thank you. Good morning. Yes, I also had a question related to the NII sensitivity. The correct thinking here is that it will be more a progressive scale. If we see one big STIBOR going from -50 to -25 or flat, we should see that that's a very limited impact. I wonder have you done any sort of analysis on if you expect clients to put more into deposit accounts and then cannibalizing on the other savings products when this happen, or if you have been thinking about that? The second question is, I guess more on, we see that commissions per trade now at least were stabilizing. If you can comment how you see price pressure in the market. Thanks.
Well, when it comes to the NII sensitivity, of course you will see an impact if the reference rate will be raised, even though you have some delay when actually hitting the NII. You have the second question, I forgot what that was.
No, it's more on, we saw that commissions per trade were flat in the quarter. Have you seen that price pressure is abating a little bit in the market? How do you see this going forward?
I think that we always see competition, but at the moment, I think the price levels are quite stable and in the midterm future, I don't see price being the most competitive tool used in the market by the different players.
Okay. Thank you.
Thank you. Our next question comes from the line of Jens Hallén from Carnegie. Please go ahead. Your line is now open.
Yes. Thank you. Good morning. It's Jens here. Three questions from me. First, just to that I understood you correctly on the costs. It sounded like you were confident or very confident you would get down close to 11. Is this probably an indication that you think you will end up above the 11, somewhere between where you are now and the 11? Or did I misunderstand?
We haven't changed our cost guidance since Q2, it's the same. As we said already in Q2, this is an increase depending on how fast we can get the new employees within the company. Of course, there are some uncertainties whether it should be actually 11% or somewhere just under that or over that.
Okay, fine. I guess quickly on the margin lending. I think previously it's been more the behavioral aspects of Swedish customers that has been limiting the volumes. Do you expect to see a change that the Swedes will now start doing margin lending or using their shares as collateral for these types of loans now that you have a 0% rate? Do you think it's going to be significant?
I wouldn't say significant, but I would say it will increase. I think more people will start using lending when they come to managing their portfolios, but I don't think it will dramatically increase that everybody will start lending on portfolios. Of course, we also will see margin lending in other price classes than the zero one. I think that people are getting their eyes on the effects you can have by leveraging your portfolio. Of course, in the long term, we believe that our margin lending will go up. It's also due to the market environment. When the markets are good and equities are increasing in price, margin lending increases, and when markets are down, margin lending decreases. I think more people will add that tool in the portfolio to be ready for different market conditions.
Okay. Perhaps we should see this as a, maybe not a marathon, but a half marathon to use your analogy on Stabelo.
I think it would be the 3,000 hurdle or something like that.
Okay. Perfect. Thank you. I guess on the tax, just getting back to the tax. You guided for normal tax rate of between 14% and 15%. Did you say that remains the case despite the move from insurance into bank, or do you expect that range to change?
In the near future, I would definitely say that it's still between 14% and 15%, but then, of course, it depends on the growth that we have and where we get the growth, if we get the growth within the bank or within the insurance company.
Okay. In the next few quarters, you don't expect that range to change dramatically?
No.
Okay, fine. If I may ask a final comment. In the CEO comments, you talk about the challenges or the stickiness in moving your pensions, and of course, we've been talking about that for a long time. Do you see any change or just everything on hold now that we have a little bit of a political mess?
I think something that has happened is that we were expected to get the new legislation in Sweden this summer, and it didn't come through. A lot of talk from politicians and the help that we thought that we were going to get from change regulation didn't come in place. Second of all, I think we are having activities to help our customer move the pension. The effect is not up to my expectations yet. I have to be honest about that. The third thing is that we don't have a government, so you don't know who to lobby on. I think the question will not be debated in the politics in Sweden before we have settled down and have a government in place, and who knows when that will be.
Okay. No, I understand. Thank you very much. That's all from me.
Thank you. Our next question comes from the line of Ermin Keric from Nordea. Please go ahead. Your line is now open.
Thank you, and good morning. I think most of my questions have already been asked, but I just found your comment interesting regarding you taking market share on the Nasdaq transactions. I think you said that if you take a higher market share, you can get a better price, which you can then offer to your client. Is that how we should think about it, that if you see improvements there, you will pass that on to the end consumer?
I think that if we get better prices, better margins on our products, we create a greater profit. Then how we decide to pass it on to customer or keep it within Avanza, that's a management decision by Avanza. I think that's more connected to the comments that I did earlier in different situation, is that if we see that our operating margin is above 50% quarter by quarter, then I think we will ask ourselves, "Can we invest more or pass it on to the customer?" That will be one component in that puzzle, so to speak.
Okay, that's very clear. That's actually everything for me. Thank you.
Thank you. As there are no current questions at this time, I'll hand the call back to you, speakers.
Okay. Thank you very much, and looking forward to talking to you all again in January.
Bye-bye.
Bye.