Thank you. Welcome, everybody. This is Martin Teviot speaking. So jumping straight into Q1, we experienced a somewhat turbulent period on the stock market. We have lots of geopolitical unrest, volatile and falling markets, and consequently, it's a difficult period for retail investors.
Nevertheless, customer inflow has been strong, while net inflow has been weaker as a consequence of lower risk appetites among retail savers. In spite of the market conditions, we reached an all time high number of trades in Q1, significantly higher than Q1 last year, while volumes per trade and consequently revenues per commission notes has been lower. All in all, compared to Q1 last year, commission income has been higher, while fund commissions and NII as a consequence of falling in rep rates has been lower, resulting in an operating profit for Q1 in line with Q1 last year at SEK 115,000,000. Something that I am particularly pleased with is that we managed to decrease cost per savings capital ratio with 14% year on year to 24 bps in Q1. This is well on track to reach below the 20 bps mark as a long term target.
And in the long run, this is tremendous important for our ability to maintain price leadership, while maintaining high profitability and creating shareholder value in any market condition. The 1st month of the year are usually distinguished by strong customer growth when many customers reassess their savings at the start of the new year, and this year was no exception. We attracted more than 26,000 new active clients, and thus we delivered our 2nd best quarter ever in terms of customer growth, only better by Q1 last year when public confidence in the stock market was even a lot higher than this year. You can also see the lower risk appetite among retail investors That's visible in the net inflow figures, which was 50% lower than last year. And if we break down our net inflow numbers, it's clear that the net inflow in Q1 in particular dropped among existing clients, but hesitated to deposit more of their savings to Avanta.
Historic data, though, tells us that this can change quickly as market confidence returns. Long term, client growth numbers is therefore the single most important driver of net inflow and growth in savings capital, and that's the most important long term driver of revenue. I'd also like to highlight the results in the reputation barometer earlier in April that shows that we continue to benefit from the highest level of trust among all banks in Sweden. And with the remarkable growth this year, I see this as a confirmation that we've been able to grow without compromising on either quality or service and that we work to create a better alternative for the savers in Sweden is bearing fruit. We also have some new product releases during Q1.
I think we recently sent a couple of 100 new features on the site where the new mobile Android app was one of the most sought after releases among our clients. We also started to we also delivered real time transfers to advanced accounts in meetings and weekends as the 1st bank in Sweden, enabling our clients to install money even night to weekends where most people most new clients are seeking to become customers. If we look into growth numbers, I think this is worth spending a bit of time on. Over time, we can see that inflow savings and the inflow customers has correlated well, even though that we can also see the effect on the market climate and the risk appetite of our clients are affecting net inflow numbers. I think that what's particularly interesting with this picture is that we saw that the there is a strong sort of solid growth pattern over the past 16 to 20 quarters, even though that we see that the normal Q1 boost effect that we get when people reassess their savings for the New Year was not as strong this year, which is the weakest start of the stock market in many, many, many years.
If we look
at the net inflow numbers compared to the customer acquisition numbers, you said that they are lower over the past couple of quarters than they've been during the period of 2012 to 2,000 and the end of 2014 and beginning of 2015 when we had a really positive development of the stock market for about 3.5 years, and it's a bit that's been a bit slower over the past quarters. This is quite normal if you look at historic data. I think interesting also if you dig a bit deeper down into this, we can see that over Q1, we've actually had more higher number of individual customers with a net inflow than ever before, which is very positive. But the average size of installments have been lower during the past quarters and in Q1 in particular. Mainly, actually, even though there's an effect from new clients as well, the effect is even more significant among existing clients that turns a bit more passive in the market climate, where the net inflow is actually 70% lower than the same period last year.
Positive on the positive note, though, is that we still see more customers than ever actually installing money even though the installments are slower. We expect this to return when market climate is more stable and risk appetites returns to the market. If we look at dig a bit deeper into our customer base, this is a question that we got over the years. We can see that our customer base is also getting younger. Share of the Swedish savings market in savings capital, we have about 2.9% of the entire Swedish savings market, and that's a long runway to go.
But we have a total share of the Swedish population in terms of active clients, meaning money on the account and active on the platform of 4.7%. If we look at, however, on capital per client and wealth creation, because wealth increases with age, which is the light green field in the background, which shows savings capital per client depending on their age. So this is very clear. While we see that the dark green line is actually our existing clients in age. You can see that in the age 30 to 39, we're strongest with 8.9% of the population.
But if you look at in urban areas, taking a snapshot of Stockholm region, we see that in the same age group, we actually have about 18% of the population among men, 9% among women. We see this as a strong long term growth potential as wealth increases with age and our client base are getting sort of older over time. So this is something that is good to know about our client composition.
If you look a bit into
the transactions, we commission notes was actually up 37% year on year, just 14% from transactions. Transactions was up 40%, number of commission notes was up 37%. So Q1 was actually really strong and it's actually our strongest quarter ever in terms of number of transactions and number of commission notes, while volumes were down. People were basically buying smaller postal shares at each trade in Q1 significantly lower what has an effect of people being more cautious on the market. This means also that the net brokerage income per commission note was lower in Q1 than in Q4 even though number of transaction was higher.
I would also like to comment on the development of Alanta markets, which is not included in the statistics shown here. They're traded both on MDx and Olomex, where we have a share of the total EPP market of 75 percent in March, which I think is, for us, being having launched Avanxo markets less than a year ago, I think this is a very, very strong performance and shows that we can really create a clear value for our clients with products like Avanci markets. This is also something that's been driven up commission income, which you see in the result. Lastly, I'd like to just spend a little bit time and focus for 2016. There were some regulatory changes that we believe plays in our advantage over the coming years.
Outcome regulatory changes with MiFID II and other regulations will make it increasingly more expensive for retail banks to offer financial advisory services in the coming years. We also do see a trend towards higher price sensitivity for financial services among the retail segments as well as a growing dissatisfaction and distrust with incumbent banks. We believe this will be a challenge for the industry in the coming years, and we believe that the incumbent banks will start serving an increasing share of retail clients' advisory needs through digital services instead of via branch offices over the next 2 to 3 years. As a growing part of the market will be forced into digital services for their savings and investments, this is a great opportunity to capture growth for Avanza. As the leading online savings and investment platform in Sweden, we believe that these regulatory changes strengthen Avanza's growth prospects over the coming years.
So consequently, we will focus on developing and improving our digital experience further, not at least our online decision support tools and services both over web and over mobile. We're also going to continue to strengthen our leadership in cost efficiency towards our long term target of below 20 bps, which will make it possible for us to stay both maintain our leadership and price competitiveness to the retail segment, while making sure that we can deliver strong value for shareholders over time. So with that, I'll leave over for to Birgitte to walk you through the details of the financials before opening up for questions. Thank you.
So if we look to the financials, the operating income increased by 2% compared with the Q1 last year. This is mainly due to an increase in brokerage income, while net interest income decreased. Compared to the Q4 2015, revenues decreased by 14%, mainly due to lower brokerage income. Operating expenses were up 5% year on year, mainly due to increased staff costs, which were up 13% and relates to increased capacity within our IT, compliance and legal. Operating profit was stable year on year on SEK 115,000,000.
This gives us an earnings per share of SEK 3.35 for the Q1, a decrease of 2%. A larger number of customers and increased trading activity contributed positively to our brokerage income, which is the dark green line, while fewer business days in the Q1 2016 had a negative effect. The brokerage fee per commission note has decreased since most customers now trade in the lower brokerage fee classes. This also affected the brokerage income compared to Q4 2015, a decline of 16%. Lower market interest rates keep on putting pressure on our net interest income, which is the light blue line, in combination with deposits increasing more than lending.
Net interest income was down 28% year on year. The repo rate was on an average 36 basis points lower during Q1 '16 compared to the same period last year. The decline in market value and the trend towards funds with lower fees and the customers taking less risk in the uncertain market resulted in an 8% lower fund commission, which is the light green line. Other income, the dark blue line, increased year on year by 27% due to higher market shares in the ETP market where the launch of Avanta Markets in Q2 has been successful. Avanta Market offers commission free trading in ETPs, and Avanta Markets part of our other income amount to just over 35%.
Other important components of other income are FX income and corporate finance. FX income decreased due to lower trading in foreign securities, mainly funds, and Corporate Finance income was slightly lower than in the Q1 of 2015. If you compare quarter on quarter, other income decreased by 15%, mainly due to corporate finance that had a very strong Q4. FX income was also lower compared to Q4. Revenues for Avastomartes was on the other hand higher than last quarter.
Total operating expenses increased by 5% year to year to 112, percent, but was about the same level as Q4 last year. Personal cost, the dark green line, increased by 13% year on year, and this increase is, as mentioned earlier, mainly due to the expansion in our IT development department, compliance and legal. The later is an effect of the heavy burden on new regulations coming up and will take place in January 2018. Marketing expenses, light green line and other expenses, dark blue line, decreased year on year, but this is more a question of timing. We have changed our cost guidance for 2016 of an increase by 8% to 10% compared to 15%.
Operating profit in the Q1 was stable year on year at 115%, but 18% lower than Q4 due to lower revenues. Operating margin was 51%, slightly lower than the average level during 2015 on 54%. The income per savings capital in Q1 was 48 basis points, a decrease of 9 basis points compared to the corresponding period in 2016. The expenses per sales capital decreased by 4 basis points year on year to 24 percent to be compared with 25 basis points at year end. This means we are well on track to reach below the 20 basis points mark as a long term target.
Profit after tax was stable at NOK 98. Earnings per share decreased by 2% to NOK 3.35. Lending is still on low levels in spite of an increased stock market activity. And if we compare it to last quarter, the total lending is up 2%. It's an increase of 15% year on year.
The margin lending is about the same level as last quarter. The mortgage loan though is up 6% to SEK 2,900,000,000 Deposits, including our external accounts, amounted to SEK 32,000,000,000 and this is a 7% increase since last quarter and a 24% increase year on year. This gives us that our covered bonds has increased by 7% quarter on quarter and 53% year on year, and we now have a portfolio of 7,000,000,000 The capital ratio in the consolidated situation was 17.9% compared to the requirements, including buffers of 11.5%. In June, the countercyclical buffer will rise from 1% to 1.5%, which means that the total requirements will be 12%. The liquidity coverage ratio was 5.56% at the end of the period compared to the requirement of 0.7%.
This strong capital situation entitled us to keep on growing. In April, a dividend of SEK 10.50 per share has been paid out, and we have still a dividend policy that at least 70% of the net profit shall be paid out to cash dividend to our shareholders. Marty, then I think we are ready for questions. Yes.
Thank you. And And the first question comes from the line of Peter Wallen from Handelsbanken. Please go ahead. Your line is open.
Thank you and good morning. I'd like to start off with a question regarding the trading slowdown you saw in March that could, I guess, to some extent also be related to Easter in the end of the month. So is it reasonable to assume that like the trading momentum as of March is also the level for April? Or is it reasonable to expect a recovery there?
As I said, we have the Easter March this year, which naturally affects the trading activity somewhat. I think that when it comes to trading numbers, that's official data you can take in from the stock on stock exchange. I think what's important to see is that if you look at trading activity number of transactions, it's actually still strong. It's been the effect has more been into lower sort of volumes per trade affecting commission income.
Okay.
Thank you.
Given that, I mean, it's if you look at compare Q1 this year compared to Q1 last year, market climate is very different. In Q1 last year, we have a rallying stock market, a rally in China. We had ECB stimulating the market. So it's extremely strong. So given that, I think given that, I think it's still very healthy sign we see that the number of transactions in Q1 is actually stronger than Q1 last year given this market climate.
Okay. And then I'd like to learn a bit more about this ETP trading and Avanza markets. Could you give I mean, the ZTP market, how fast is that growing? And do you think that your market share there is sustainable?
That's a good question, if it's sustainable or not. We think what we tried to do with the Atlanta markets was to launch a more competitive product that's that we saw as an opportunity to make it better for clients by taking away the brokerage fee completely and making a product family with that much more transparent in terms of fee structure as well. The flows in ETPs tend to follow liquidity. So I think that the larger we get on the E2P market, the stronger the value proposition actually to clients as the liquidity is so high now in these products. We don't see that the market in number of clients is growing significantly.
It's still a niche product. It's about half less than 0.5% of our client base that are actually trading in ETPs. It's more than that we see that we managed to capture the main part of that market with this offering, which is, I think, is fairly difficult to compete with for competition. So we have seen no sign that our market shares are flattening out or decreasing. They've been increasing month over month since the launch.
Okay. But is it a reasonable assumption to believe that like the share of your other income that today is represented by Avanxa market will be increasing over time or in this quarter 35% should that be seen as relatively higher level considering that maybe Corporate Finance was not running
as? For a multi markets, I mean, having 70 5% of the market, I think that that's a pretty high level. I wouldn't expect that to become much higher than that. On the other hand, I think that we given that nothing revolutionary happens on the market, I think that's the market share that at least in the sort of medium term, we should be able to keep.
Yes. Okay. Thank you. And then just this extended cooperation with Remium, which will boost your capital by SEK 2,500,000,000 in Q2. Is this the only sort of like one off or I mean one big transaction or flow coming or could it be more coming for example, in Q3 or more already in Q2 that you just not know of yet?
In the case of Remium, this is a one off as they're moving their clients to Avanza platform. And those clients are worth about $2,500,000,000 in net inflow or in savings capital. So that's mainly one off.
Yes. Okay.
So we keep our revenues. There is we count on sort of the same sort of revenue per savings capital ratio as our general customer base.
Yes. Okay. Thank you. And then just a final mine. In terms of this like fee per commission note by down by 22%.
Is this kind of a trend which you should expect to continue? Or I mean if you would see during the year that risk appetite would come back and increase among investors that this trend would be decelerating and you would see sort of like commission not coming up?
We believe so, yes.
Okay. Thank you.
And the next question comes from the line of Richard Hansen from Nordea. Please go ahead. Your line is open.
Yes, good morning. I had a couple of questions on the capital side that might be a bit detailed. But the first one is when you look at the capital requirement for the financial conglomerate and you compare it to the consolidated situation, what is actually when you plan your development and envision your future dividend, what is the main focus area? Is it on the conglomerate or the consolidated situation? Just to give us an understanding because it's changing quite significantly with the new solvency rules and it's a bit tricky to forecast?
That's a good question and I really understand why you're asking it. Well, you should look at the consolidated situation because that's the one that actually is the trigger one for the dividend and the requirements of capital that we've had.
Okay, Perfect. And one question on that calculation. Can you just confirm that in the line equity not part of the consolidated situation, you have deducted dividends for Q1 of 70% of the net profit, which is the reason why it increases from 100 to 168
8? Well, it's a dividend and it's a part of the Avarta the insurance company that's in our total equity for the group.
Yes. So it's approximately 100 for the insurance part
and then 68 69, 68
for the dividend that you expect.
No, that is not the expected dividend since we are not including any of the year results. So that is only the part of the pension company.
But there is no deduction for not audited results there, so you should include it. We can take that afterwards.
We don't but in the consolidated situation, we should not have so it should be in that part in that yes, in that line, you have a deduction for the year results. So we have not included any results for the year.
All right. And on the net interest income, we have now seen 2 consecutive quarters with slightly increase in the NII. Would you I mean the STIBOR will be down if the interest rates stay at the same level in Q2 as well. But have you do you think we have seen the NII bottoming out and will start to increase from these levels in line with the volume growth you are creating?
Well, if we don't see the reprised rates going down any further, I don't see that why the NII should go any further down either.
Do you have any more measurements you can take in order to improve the NII results, such as liquidity or increasing the mortgage lending growth or something like that?
Yes. Of course, we still have an opportunity to grow our mortgage loan. As we said in the report, we rose the cap of the mortgage loan with another 500,000,000 So that could increase, it could not increase more than that. And of course, the margin lending could still go up if the market turns around.
All right, perfect. That was my questions.
And the next question comes from the line of Matti Elsey from SEB. Please go ahead. Your line is open.
Hi, good morning. Mathias here. A couple of questions. I think the first one is related to what Peter asked about risk appetite. So just if you've seen any indication that risk appetite is coming back so far in Q2 given that we've seen a slightly stronger and more stable stock market.
Yes, that's the first question.
We're only we're less than 2 weeks away from our monthly statistics, so we decided to present that then. So we haven't revealed any sort of pre report on the start of the Q2 yet. So we'll wait with that. We're only sort of 2 weeks in Q2. So we'll release that in 2 weeks.
Okay. The second one, just a bit more about your product pipeline and especially wondering around if you have any plans introducing just normal regular bank accounts anytime in the future.
Not short term. We're no such current plans. We normally don't release our future plans before we release
them. Okay. And then finally, can you update us on your sensitivity to higher rates? So if rates are raised by 50 basis points of speed and what the impact would be on your net interest income? And just as related to that, do you plan to if rates are moved to up to 0 to I.
E. REAP rate plus 0.99? Or will you pass on the higher rates fully to mortgage holders or will they stay where they are now?
Maybe the second question first on our mortgage loan. No, the we believe in transparency and holding to our customer promises. So if the mortgage if the repo rate would go up to 0, we will keep our mortgage lending rate at 0.99. It's set to 99 bps above repo rate with a floor of 0, and we'll keep that. If you look at our interest rate sensitivity, the guidance we've been given is that 100 bps in rep rate change will have an effect of SEK 200,000,000 to SEK 230,000,000 in
On the upside.
On the upside. So we take 50 bps in rock rate change that would give us 100,000,000 to 150,000,000 and that's interesting guys.
Okay, great. Thank you.
And the next question comes from the line of Peter Kessiakoff from Carnegie. Please go ahead. Your line is open.
Yes. Hi, thank you. I think 2 or 3 questions from my side. Just on your 5th slide showing the number of new customers and different age spans, as you pointed out, the number the inflow of customers has been significantly higher than the inflow of capital that you've seen from, well, the last year. And just looking at that slide, it seems more and more customers are becoming younger where I would assume that their savings capital
is less. So you mentioned that you're saying
that existing capital is less. So you mentioned that you're saying that existing customers are transferring less to your platform. But I guess on the back of that slide, it seems also that you could potentially see new customers transferring less given that you're attracting more younger and younger people.
Yes. That's correct. If you look at the average 1st year installment for new clients, We're seeing that 2015, they installed a bit less than the year before. And I think that was that is partly that they're becoming younger, partly the market climate. Where the market climate effect is something that we've seen historically as well, which is basically regardless of age.
If you look at the average installment last year, it was SEK 135,000 as the first installment, whereas the year before, it was SEK 165,000. Dollars If you look at new client installment in Q1 versus Q1 last year, we saw a 38% drop from new clients. So we believe that part of that is the fact that it's becoming younger and part of that is market climate. The significant effect, though, is on existing clients, where we saw a 70% drop in installment per client year on year, which is really a sign of cautiousness given the market climate. And this is something that we've seen historically as well.
We saw that in 2011 in Q4. We saw in Q3 and Q4, we saw that in 2008. We're becoming stronger when the market picks up and the confidence returns. So we expect to see the sort of the same pattern this time as well. And we can also we're also seeing a shortage that can return pretty quick when confidence in the market returns.
Okay. So it seems the effect of taking in new or that the new customers you're taking in now are younger than before should have somewhat of an effect, but not a very large one on the inflow. But on the back of what you're saying that you're seeing a 70% drop within existing clients savings. If you look the past, say, 10, 15 years, would you say that when inflow of or when you've seen a similar situation where new customers or sorry, existing customers have transferred less to your platform for a while that you eventually see a catch up, meaning that, let's say, for the coming 12 months, we could see a situation where the inflow of savings is higher than the influence of customers and which takes back much of the lag that you've seen in inflows?
Absolutely. Absolutely. I think if we go back on that slide, that is very visible. If you just to make an easy comparisons with the number of new clients we have taken and if you slash sort of net inflows with our client acquisition, you can see that In 2014, we're sort of peaked after 3.5 years of positive stock market development. We had about SEK 370,000 per new client, if you take that measurement.
Whereas in 2008 and also in Q1 of 2016, it was more of 190,000 to 180,000, which is half that level. So it's we're sort of the average is probably somewhere in the middle. So we see a sort of a reverse effect when confidence in the market returns where there is sort of more of an overshoot in terms of net interest per client. We're now in a sort of underperformance. So we expect that to return when conference returns.
Okay. Then just one last question from my side. As you point out, your market share in the Swedish population among active customers is 4.7%, varying within the different age groups. But in Stockholm, in different age groups, you have 18% on those 30 to 39 year old men. How high can market share go within certain areas?
And do you feel that you need to start seeing higher or more growth coming from people outside the 3 large cities? Just if you can comment a bit on that.
Given our acquisition strategy, which is mainly to grow with recommendations from existing clients, it's more sort of a viral acquisition strategy than sort of a marketing driven one, meaning that when we reach certain tipping points in different customer segments, we tend to grow faster in these segments. So we reached sort of 10% to 15% in a specific segment, and we tend to grow in faster there. Meaning that if you look at urban areas, we're much stronger than the average population in Sweden. If you look at certain ZIP codes, we're extremely strong. So we rather believe that we tend to grow sort of slower in the beginning in a certain sort of customer segment and region until we reach a certain penetration where we start to grow faster.
So given that, I believe that I think that we're going to see even faster growth now over the coming years in the urban areas, especially among the sort of the ages 20 to 50, while sort of other segments have to pick up.
And there are no further questions registered at this time. Please go ahead, speakers.
Well, there's no further questions. So thank you for listening in. Grateful for your participation and all the good questions and looking forward to speak to you again soon. Thank you.