Ladies and gentlemen, welcome to Avanza Interim Report for January to September 2017. Today, I am pleased to present CEO, Johan Ploghan and CFO, Ittita Hoggeveld. For the first part of this call, all participants will be in a listen only mode And afterwards, there will be a question and answer session. Johan Thorm, please begin your meeting.
Thank you. My name is Johan Traum. I'm the CEO of Landstar. I'd like to welcome you all to this Q3 presentation. I just started a business update, and thereafter, our receivable, Wigipa Horefel, will take you through the financial part.
And the presentation will take approximately 20 minutes, and then we will open up for questions. Now we have the right in the quarter. The starting in the quarter was relatively weaker, and volatility was lower and even lower than in Q2. At the same time, an index of samples in July August. The weaker market development in the mainly quarter to quarter affected both customers' trading activity and some inflow.
The trading volumes per trading day was lower as well as number of trades, even though the number of commissions generating customers were at risk with high levels, which well followed our long term strategy. The market environment affected our trading related income, including both brokerage and FX. In September, however, the index rose above customer activity and some volume effect. Corporate activity was seasonally lower in the 3rd quarter, but pipeline looks good for the current quarter since market conditions remain. The market share of our markets over commission on pre trading name ITPs and ETP was strong at 6% of volumes in the Q3.
Our market share in ETP market was 77%, and ETP activity was good. All together, this gave a net result of SEK89 1,000,000, in line with last quarter but 6% lower than the 3rd 9 month period on year due to higher costs and in line with our cost guidance. Our cost guidance for the full year remains at 15% to 20%, but our assumption is that we will end up in the higher end of the range. Although trading and climate was affected by market conditions, customer growth in the quarter was strong given our ongoing efforts to secure truly appealing offering that is customers, customers, we've seen during Q3, Avastar growing with more than 30,000 new customers, 31,200 to be specific. That is 28% more than the same period last year and record strong for the Q3.
During 9 months here, we have welcomed close to 100,000 new customers for Lonza, and that is 32% more than last year. We have now 670,000 customers on the platform, and customer growth is strongly coordinated with the net inflow and revenue growth long term. Net inflow, however, was weaker in the quarter at SEK6 billion. We saw inflows on both existing and new customers decrease. That is in line with the observed overall low risk willingness in the market.
Net inflow for the 1st time months amounts to SEK 23,000,000,000, an increase of 14% year over year. Overall, we are very confident that our record high yield of our new customers are on the right track on our long term strategy that is our strategic focus. The ultimate market share of net inflow to the 3 d savings market was published and a monthly market share on a rolling 12 month basis was 5.6%, which well exceeds our long term target of 9%. Contributing to a growing market share of the Swedish Danish market. At the end of the quarter, the total Danish At the end of the quarter, total Danish capital at the platform amounted to SEK 222,000,000,000 As you can see from this graph, our market share in Q2 is normally lower.
This is due to the tax refund that is paid to the customers' transaction accounts, which we don't offer. Also, the collective agreement that made in Q2, which is not part of AlarmNet. If we then have a look at the market shares, looking at Nasdaq 1 ex Stockholm and Brazil. In the Q1, turnover was down by 80 percent compared to Q2. Turnover of Belanda, however, was up by 10% and a balance of that gained market share substantially.
Flipping at the Q3 highlights. The largest launch for this quarter was Avanza Alto, where our ambition is to make it easier to start investing. Avan Alto is especially developed for those that want to invest but don't have the time nor the energy to explore how it's done there. The launch of Alainte Alainte Alainte is also expected of broadening our offering to larger customer groups. The interest in advance also has been high even though it's still early to draw on major contribution.
As highlighted Friday, at 3 weeks, we have over €300,000,000 invested in the fixed Alarmza plant, and we find that really pleasing. We want Alaska to be a tool for our customers to succeed with the entire economy and another existing, but small step towards that direction, but the possibility for our customers to view their holdings in cryptocurrencies, for example, bitcoin, through their Avanx accounts. The interest of cryptocurrency has increased dramatically, and this is a way that meet customer demand and stay in the forefront of attacking the market. Moreover, we continue to evolve our site and absolutely innovate with new features. This, together with our strong customer focus, have made it after the 11th most visited site standing with .sde, something we, of course, are truly and very happy about.
Another positive thing in the quarter, in favor of many of our customers and others, it's the government's proposal to regulate a much accompanied charge for pension transfers. Their ambition is to have this implemented by law by next summer. In terms of rights, it's something we have waited for and worked for for a very long period of time. This is also exciting growth factor for Advancer, together with increased transparency in the coming years after year end, which makes it clear what each and everyone is paying for different solutions. And where Amanta is very competitive, where we have a very competitive offering.
The Sabelo Corporation on mortgage loans is working according to plan, and we will get back to that and with the full capital offering in Q4. With this, I would now also like to welcome Armando's new CEO, Ekadir Houtes on onboard as he joins on November 6. It will be a pleasure for me to give these reports to you during my time as the CEO, and I will closely follow the future success and achievements of Randstad going forward from the outside. And with this, I would like to hand over to Gitte to take you through the financial part and then after we will start the 4th quarters. Thank you, Zohra.
So we will start with a financial overview. As we look at the operating profit for the quarter compared to last quarter, it was quite flat even though both revenues and costs were lower compared to Q2. This is giving us a margin for the quarter of 25%. It is then compared with the same quarter last year, the operating profit decreased by 15%. We had profit in higher revenues, mainly an effect of growing comp capital, but we have costs increasing by 27% and that is according to our plan.
And for the 9 month period, costs increased by 19%, which is in line with our cost guidance. And I will come back and elaborate a little bit more on that. But firstly, we start with the revenues. If we compare quarter over quarter, total revenues decreased slightly, mainly due to $6,000,000 lower corporate finance revenue and also lower FX related income. Revenues per savings capital ratio increased by 3 basis points, a result of lower revenues but also increased savings capital.
We see this decline for some customers as an effect of low riskworthiness and for others due to the low volatility in the market, which has been even lower than last quarter. Brokerage income increased. We had 7 more trading days compared to Q2. Turnover per day increased. Broker income and turnover increased slightly.
Number of brokers generated in customer growth available on record high levels. All in all, brokerage income increased mainly due to more trading days. Fund commitment was about flat. We had lower inflows to plant savings in the beginning of the quarter due to a weaker market condition. And in September, we saw higher inflows as the stock market ticked up.
Net interest income decreased by 6 percent, the latest mainly due to increased costs for surplus liquidity as the profit from our customers have increased. Total lending was slightly up, where we saw the margin lending decrease, which is another sign of customers' lower risk oriented At the same time, mortgage lending continues to increase. The repo rate remains unchanged, while Cyber 3 months improved by 4 basis points. This will ease pressure on NII over time. The floor that we have mentioned before on our 1 portfolio has given us some protection against the negative market interest rate since the rate went flat.
This also means less impact on MIR now and up to a rate of a negative 20 basis points. After that, we will see larger impacts on rising interest rates. Some should be aware though that over time, the share of our portfolio weighted to our decreases as the bond matures. And at this point, we have about 25% of this portfolio with the floor. Other income decreased by 25%, and this is mainly due to corporate finance, which is seasonally low in the Q3.
Currently, the late impact of course was down and this is connected to the market conditions, where we have seen less trading in PowerSecure. Comparative in Q4 last year, revenues were up 4%, mainly due to higher fund commissions. Brokerage income decreased, activity is increasing with more customers and higher number of trades. The transaction volumes, however, are lower. Brokers income per turnover increased slightly compared to Q3 last year.
Some commissions increased by 39%, and this is mainly due to higher farm volumes. Our farm commissions now accounts for 27% of the total revenues compared to 20% last year. Net NII was flat. We had a higher expense for deposit and Q3 and resolution fees and increased expenses of surplus liquidity also have a negative effect. Higher lending, on the other hand, has a positive effect on the MiI.
Other income decreased mainly due to less currency related income, Avanxa Markets were higher and corporate finance was flat. So moving on to costs. Operating cost expenses decreased quarter on quarter, which reduced to seasonally lower personnel costs due to summer vacations in the Q3. Basically compared to year on year, we had an increase of cost of 27%. And this is where there's a higher personnel cost, which is the result of increased development capacity with more entry into the IT and product development.
And consequently other costs rose with higher cost of premises than IT and depreciation. If you compare for the 9 month period with last year, we had an increase of 19%, and this is in line with our cost guidance of 15% to 20% for the full year. And as Yohra said earlier, we expect costs to grow closer to the higher end of our previous guidance range to close to 20% for the full year. Thereafter, we expect annual cost to return to 8% to 10% yearly. So cost of savings capital decreased as used by 1 basis points to 20 for the 9 months period despite the increased costs.
And this is in line with our strategy to attract more customers, more premium capital by cost and by mid digits. We still have a strong capital situation in the consolidated situation with a total capital ratio of 18.7% compared to the capital requirement of 15.3%. This includes all our external internal buffers and Tier 2 requirements. As of Q2, the results for the 1st 9 month period is included in the capital base when it comes to the consolidated situation, including the bank and fund companies, but excluding our insurance company. Our dividend policy to distribute at least 70% of net profit to our shareholders remain.
And with that, Joao, I think we can open up for questions. Definitely.
Our first question comes from the line of Ermin Terrich from Nordea. Please go ahead. Your line is open.
Thank you. A couple of questions for me. First off, you commented that part of the reason to the cost inflation is an increased number of employees. I just wonder, are parts of these increased temporary related to development projects that will run like for a couple of quarters? Or is it more long term?
I think that we when we look at the overall cost increases, we are investing in more capacity. And we think that, that will have an impact over time. So we try to look for long term development capacity, and of course, that will translate into new products. But like Sigita said, we think that the cost development this year will be closer to 20% at the higher end of the that we gave previously, and then we'll be back at normal cost increase levels.
Understand. And then with regards to you narrowing down your cost guidance, Should we see this as you planning on doing more investments in Q4 than originally? Or have costs been higher year to date?
I think that this has been fully in line with the cost guidance that we have been giving. I mean, we've got 15% to 20% during the year. And I think
that
it's very very it's really according to plan and the cost guidance that we have been given before. So this is nothing but nothing new in that.
Okay. And then the last question is regarding the excess liquidity. In Q2, you talked about trying to push more customers for the savings, Cronto Plus. As you still have quite a lot of excess liquidity, do you see some other ways you can decrease it going forward? Or is it just trying to calibrate that model?
Well, I think we have to continue to offer our customers choices to think that savings and advance out. So It's one of the decision tools that our customers could do is actually to instead of doing cash in the profit account, actually find something interesting in that same. So Savings Account Plus is one opportunity and the other is another, and we will continue to develop new products and offerings for our customers in order to find the investment opportunities.
But you won't broaden your search. You're talking about the supply of covered bonds being quite low currently. You're not looking into perhaps other investment vehicles to place the funds in as well?
But we continue to be very diverse when it comes to our assets, essentially, liquidity, and we will continue to do that. But of course, we discuss all opportunities there are with low risk. So our main effort is to make sure that our customers have good opportunities in investing their same exact
example. Our next question comes from the line of Nicolas MacPees from DNB. Please go ahead. Your line is
open. Yes, hello. So first a question on the net interest income. I think you mentioned, Birgit, something about easing NII pressure from high rates. Should we expect that already to support NII in Q4?
Or could you give us some indication about the support here that we made eventually? I thought I'd hear you mentioning that we should expect to see some support here from the higher STIBOR on the NII. Could you confirm this or elaborate a bit on that?
Well, as I said, some of our of the loans that we have in the portfolio has rejoined, which have had a fewer. And that fewer will, of course, be shown both in interest rates up and down. And as we are with more and more in our portfolio have less less part of the portfolio has actually has the floor, the impact of the market rate will be stronger to the bond portfolio.
Okay. So less of the bonds have this floor, but shouldn't that mean also that there will be more pressure than on the NII if unless they don't have the floor? Or how should we think about that?
Well, I would say that the floor is more a defense from market rates going down, but it also has it also gives us a similar from being affected of the market rates going up. So as we hopefully, we'll see the rapid rates go rather north and south from here, and we hope that market rates as well will go into that direction. I would see that the FX will be larger on the portfolio.
Okay. But let me put it this way. If we were to assume that your kind of excess liquidity would be unchanged here over the coming quarters and the market rates would also be unchanged? Just taking into account this dynamic that you mentioned about the floors and everything, what will be your expectations then about the NII, assuming that volume stays at current levels?
Well, it's no changes, I would say, that there probably wouldn't be there would be marginal effects on the coming quarters. I don't have the maturity for those who is actually going out exactly when they are going to mature. But I mean that will probably feel the small effects on the coming quarters.
Okay. And then finally on this topic. You reiterated your sensitivity from the changes to short term rates, euros 200,000,000 per 1 percentage point higher RIPA rate. But given that your deposits keeps growing and also your liquidity portfolio keeps growing, shouldn't the sensitivity have come up here in recent quarters? Or is there anything else offsetting that impact from higher volumes and higher excess liquidity?
Well, this is a I mean, of course, there is a range, euros 200,000,000 somewhere in the middle of a range, and the range changes a little bit. And we used to give a more range kind of guidance before, but the changes hasn't been that large. So it's still mean, we are less sensitive to the record changes from here up to minus 20 basis points, and we are more sensitive beyond that. So but it's roughly EUR 200,000,000 still.
Okay. And then a question on costs as well. It seems like your yes, your depreciation increased a lot here in the quarter compared to where it's usually been. It was €5,000,000 in the quarter. And you're right that it's because of depreciation of some trading system.
And it also seems like your intangible assets are increasing quite rapidly. Does this reflect changed accounting policies? Because I know historically, you've been very expensing everything, all your kind of development costs straight through the P and L. Have you changed approach here? That's my first question.
And then my second question, if you could give us some indication what kind of level you think depreciation should be running at per quarter of the coming quarters as well?
We have not changed policy. We still want to take a lot of as much as the cost of cost as possible through the P and L. But as I mentioned before, when the accounting regulation doesn't give us that opportunity, which is in the case in this trading system that we are have been developing for a few years now. We are at the end of that development, and that's why we are starting to depreciate on the trading system through the P and L. So I would say that and we will finalize this by year end, I would say.
And therefore, you should expect the depreciation to be about the same level as we have now.
Okay. Thank you.
Our next question comes from the line of Jens Helens from Carnegie. Please go ahead. Your line is open.
Yes. Good morning. It's Jens Helens Helens. Firstly, on costs. If we're maybe looking into next year a little bit and of course, you're guiding to go in the range of 8% to 10%.
Can you say where you are in terms of your investments this year? Are you going to actually finish by year end? And then maybe give us a bit of color on how you're going to reach the reduction in spending for next year.
I can start off and then maybe get a good maybe comment even more on it. I think for this year, we will look at the pace of the plan that we gave earlier that the cost guidance for this year will be 15% to 20%, and we think that this will be the higher end of it. And then we are according to that, and we will get back to the normal cost guidance. And very much what we forecast will do with our increased capacity in development, and we think this is a window of opportunity in the marketplace to invest in the morning. So everything is according to plans both this year and next year.
That will be my second question.
Okay. So you don't expect then for next year that you will, I guess, need some additional investments to stay ahead of the pack, so to say? What you're doing this year is going to be sufficient for, I guess, a new level of starting point?
Yes. I mean, the for quite some time, we have repetitively said that the cost guarantees is 65%, and then then we'll get back to the 8% to 10%. And we are really following that plan, and we don't see any remarks that we wouldn't follow that plan. And what we have commented on today is to say that it's going to be higher than the 15% to 20% plan. And then we'll get back to the normal cost increase.
We have a level of 8% to 10%. So we were following the plan that we gave earlier. And what you should remember that is that this cost increase has meant that we are we have been adding capacity, and we will continue to have that capacity. So we have a large capacity going forward as well. Okay.
I think that's a good opportunity to focus on what we are able to do with it. For example, the Alcoa launch where we have, in a couple of weeks, attracted SEK300 1,000,000 investment. So there's we really believe there's a window in
the market place to step up there, and that's what we're doing.
Okay. No,
second question on the share of the net savings markets. I know it's very volatile quarter by quarter, but it seems to be coming down a little bit in the last couple of quarters. Is that just temporary? Or are there any particular drivers for that competition heating up or whatever it might be? And do you see this then coming back above your 12 month rolling plan of 9%?
I think that there will always be some minor fluctuations between quarters. I think over the long term trend is that we are really above the target that we set, and that was an increase because we set up a little bit. And we really see that we are well above that one as you see on a sort of rolling 12 month basis. And from quarter to quarter, month, there might be some differences. But we are very confident that we have that we are constantly driving well above the target that we have set up.
Okay. That's perfect. Thank you very much.
There are no further questions registered. I will return the conference back to the speakers for any closing comments.
Thanks, everybody, for listening in, and thanks for the questions that were sent to us. And with that, we'd like to end the session and wish you all a very nice day. Thank you.