Thank you. Welcome, everybody. This is Martin Tivéus speaking. Jumping straight into Q1. We experienced a somewhat turbulent period on the stock market. We had lots of geopolitical unrest, volatile and falling markets, and consequently, a difficult period for our 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 in the number of trades in Q1, significantly higher than Q1 last year while volumes per trade and consequently revenues per commission note 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 repo rates has been lower, resulting in an operating profit for Q1 in line with Q1 last year at SEK 150 million.
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. In the long run, this is tremendously important for our ability to maintain price leadership while maintaining high profitability and creating shareholder value in any market condition. The first month of the year are usually distinguished by strong customer growth when many customers reassess their savings at the start of the new year. This year was no exception. We attracted more than 26,000 net new active clients. Thus we delivered our second-best quarter ever in terms of customer growth, only bettered by Q1 last year when public confidence in the stock market was 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. If we break down our net inflow numbers, it's clear that the net inflow in Q1 in particular dropped among existing clients that hesitated to deposit more of their savings to Avanza. 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. 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 continued to benefit from the highest level of trust among all banks in Sweden.
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 our work to create a better alternative for the savers in Sweden is bearing fruit. We also had some new product releases during Q1. I think we released a couple of hundred new features on the site, where the new mobile Android app was one of the most sought-after releases among our clients. We also delivered real-time transfers to Avanza accounts on evenings and weekends as the first bank in Sweden enabling our clients to install money even nights and weekends where 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 the inflow of savings and the inflow of 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 see there is a strong solid growth pattern over the past 15 to 20 quarters even though that we see that the normal Q1 boost effect that we get when people reassess their savings for a new year was not as strong this year with the weakest start of the stock market in many years.
If you look at the net inflow numbers compared to the customer acquisition numbers we can see that they are lower over the past couple of quarters than they've been during the period of end of 2014 and beginning of 2015 when we had a really positive development of the stock market for about three and a half years. It'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. 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 for 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. On a 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 appetite returns to the market. Dig a bit deeper into our customer base, this is the question that we got over the years. We can see that our customer base is also getting younger. You can go back one now.
Yes, thank you.
We see that if you look at the total market 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 you look at, however, on capital per client and wealth creation, you can see that 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 you see the dark green line is actually our existing clients in age. But you see that in the age 30-39, we're strongest with 8.9% of the population.
If you look at in urban areas, taking a snapshot of the Stockholm region, where you 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 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 can see that the number of commission notes was actually up 37% year-over-year. There's 40 there, but it's number from transactions was up 40%, number of commission notes was up 37%. So Q1 was actually really strong and was 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 posts or shares at each trade in Q1, significantly lower. As 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 Avanza Markets, which is not included in the statistics shown here. They trade both on NDX and OMEX, where we have a share of the total ETP market of 75% in March, which I think is, for us having launched Avanza Markets less than one year ago I think this is a very strong performance and shows that we can really create a clear value for our clients with products like Avanza Markets.
This is also something that has been driven up commission income which you see in the result. Lastly, I'd like us to just spend a little bit of time on focus for 2016. There were some regulatory changes that we believe plays in our advantage over the coming years. Upcoming regulatory changes with MiFID II and other regulations will make it increasingly more expensive for retail banks to offer financial advisory services the coming years. We also 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 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 2-3 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. Consequently, we will focus on developing and improving our digital experience further, not least our online decision support tools and services, both over web and over mobile. We are also going to continue to strengthen our leadership and cost efficiency towards our long-term target of below 20 basis points, which will make it possible for us to both maintain our leadership and price competitiveness to the retail segment while making sure that we can deliver strong value for shareholders over time.
With that, I leave over to Birgitta to walk you through the details of the financials before opening up for questions. Thank you.
If we look into the financials, the operating income increased by 2% compared with the first quarter last year. This is mainly due to an increase in brokerage income, while net interest income decreased. Compared to the fourth quarter 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 million. This gives us an earnings per share of SEK 3.35 for the first quarter, 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 first quarter 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 2016 compared to the same period last year. A decline in market value and the trend towards funds with lower fees and 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 Avanza Markets in Q2 has been successful. Avanza Markets offers commission-free trading in ETPs. Avanza Markets' part of our other income amounted 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. Corporate finance income was slightly lower than in the first quarter 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 Avanza Markets was on the other hand higher than last quarter.
Total operating expenses increased by 5% year-on-year to SEK 112, but was about the same level as Q4 last year. Personnel costs, the dark green line, increased by 13% year-on-year. This increase is, as mentioned earlier, mainly due to the expansion in our IT development department, compliance, and legal. The latter is an effect of the heavy burden on new regulations coming up and will take place in January 2018. Marketing expenses, light green line. Other expenses, dark blue line, decreased year-on-year. This is more a question of timing. We have changed our cost guidance for 2016 of an increase by 8%-10% compared to 2015. The operating profit in the first quarter was stable year-on-year at SEK 115. 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 nine basis points compared to the corresponding period in 2015. The expenses per savings capital decreased by four basis points year-on-year to 24 basis points to be compared with 25 basis points at year end. This means we are well on track to reach below the 20 basis point mark as a long-term target. Profit after tax was stable at SEK 98. Earnings per share decreased by 2% to SEK 3.35. Lending is still on low levels in spite of an increased stock market activity. 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 2.9 billion. Deposits including our consumer accounts amounted to SEK 32 billion. 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. 53% year-on-year. We now have a portfolio of SEK 13 billion. 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 5.56x at the end of the period compared to the requirements of 0.7x. This strong capital situation entitle us to keep on growing. In April, a dividend of SEK 10.50 per share has been paid out.
We have still a dividend policy that at least 70% of the net profit shall be paid out as dividend to our shareholders. Martin, I think we are ready for questions.
Yes.
Thank you. Ladies and gentlemen, if you have a question, please press 01 on your telephone keypad and you will enter a queue. If you wish to cancel your question, you may do so by pressing 02. The first question comes from the line of Peter Wallin from Handelsbanken. Please go ahead. Your line is open.
Thank you, good morning. I would like to start off with a question regarding the trading slowdown you saw in March, and that could, I guess to some extent, also be related to Easter in the end of the month. Is it reasonable to assume that 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 had Easter in 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 Stockholm 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. The effect has more been into lower volumes per trade, affecting commission income.
Okay. Thank you.
Given that, if you compare Q1 this year compared to Q1 last year, market climate is very different. In Q1 last year, we had a rally in stock market, a rally in China. We had ECB stimulating the market. It was extremely strong. Given that, I think it's still a very healthy sign that we see that the number of transactions in Q1 is actually stronger than in Q1 last year, given this market climate.
Okay. Thank you. I would like to learn a bit more about this ETP trading and Avanza Markets. This ETP 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. What we tried to do with the Avanza Markets was to launch a more competitive product that we saw as an opportunity to make it better for clients by taking away the brokerage fee completely, and making a product family that is much more transparent in terms of fee structure as well. The flows in ETPs tend to follow liquidity. I think that the larger we get on the ETP 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 less than 0.5% of our client base that are actually trading in ETPs.
It's more that we see that we managed to capture the main part of that market with this offering, which I think is fairly difficult to compete with for competition. We have seen no sign that our market shares are flattening out or decreasing. They've been increasing month-over-month since the launch.
Is it a reasonable assumption to believe that the share of your other income that today is represented by Avanza Markets will be increasing over time, or in this quarter, 35%, should that be seen as a relatively high level considering that maybe corporate finance was not running it?
For Avanza Markets, having 75% of the market, I think that's a pretty high level. I wouldn't expect that to become much higher than that. On the other hand, I think that given that nothing revolutionary happens on the market, I think that that's a market share that at least in the medium term we should be able to keep.
Yeah. Okay. Thank you. Just this extended cooperation with Remium, which will boost your capital by SEK 2.5 billion in Q2. Is this the only one-off, or one big transaction or flow coming, or could there be more coming, for example, in Q3 or more already in Q2 that you just not know of yet?
Indicates the Remium. This is a one-off. They're moving their clients to the Avanza platform. Those clients are worth about SEK 2.5 billion in net inflow or in savings capital. That's mainly a one-off.
Yeah. Okay.
We keep our revenues. We count on the same sort of revenue per savings capital ratio as our general customer base.
Yeah. Okay. Thank you. Just a final question of mine. In terms of this fee per commission note down by 22%, is this a trend which you should expect to continue? Or if we 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 commission notes coming up?
We believe so, yes.
Okay. Thank you.
The next question comes from the line of Rickard Hansson 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. The first one is, when you look at the capital requirement for the financial conglomerate and you compare it to the consolidated situation, when you plan your capital 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. I understand why you're asking it. 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 have.
Okay, perfect. 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 SEK 100 to SEK 168?
Well, it's the dividend. It's a part of the insurance company that's in our total equity for the group.
Yeah. It's approximately SEK 100 for the insurance part and then SEK 69, SEK 68 for the dividend that you expect.
That is not the expected dividend since we are not including any of the year results. That is only the part of the pension company.
There is no deduction for not audited results there, so you should include it. Birgitta, we can take that afterwards.
In the consolidated situation we should not have. It should be in that part. In that line, you have a deduction for the year results.
Okay.
We have not included any results for the year.
All right. On the net interest income, we have now seen two consecutive quarters with slight increase in the NII. The STIBOR will be down if the interest rates stay at the same level in Q2 as well. 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 repo rates going down any further, I don't see 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?
Yeah. 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 SEK 500 million. That could increase. It could not increase more than that. Of course, the margin lending could still go up if the market turns around.
All right. Perfect. That was my questions.
The next question comes from the line of [Matty Elsey] from SEB. Please go ahead. Your line is open.
Hi, good morning. [Mattias] here. Couple of questions. I think the first one is related to what Peter asked about risk appetite. 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. Yeah, that's the first question.
We're less than two weeks away from our monthly statistics, so we decided to present that then. We haven't revealed any pre-report on the start of the Q2 yet. We'll wait with that. We're only two weeks in Q2. We'll release that in two weeks.
Okay. The second one, just a bit more about your product pipeline, especially wondering around if you have any plans introducing just normal, regular bank accounts anytime in the future.
Not short term. No such current plans. We normally don't release our future plans before we release them.
Okay. Finally, can you update us on your sensitivity to higher rates? If rates are raised by 50 basis points in Sweden, what the impact would be on your net interest income? Just as related to that, if rates are moved up to zero to REPO rate, would you go back to the old model of pricing your mortgages, i.e., REPO rate plus 0.99, or will you pass on the higher rates fully to mortgage holders? Will they stay where they are now?
Let's take the second question first. On our mortgage loan, we believe in transparency and holding to our customer promises. If the REPO rate would go up to zero, we will keep our mortgage lending rate at 0.99. It's set to 99 basis points above REPO rate with a floor of zero, and we'll keep that. If you look at our interest rate sensitivity, the guidance we've been given is that 100 basis points in REPO rate change will have an effect of SEK 200 million-SEK 230 million.
On the upside.
On the upside. If you take 50 basis points in repo rate change, that would give us SEK 100 million-SEK 150 million in net interest income.
Okay, great. Thank you.
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 two or three questions from my side. Just on your fifth slide showing the number of new customers and different age spans. As you pointed out, the inflow of customers has been significantly higher than the inflow of capital that you've seen from the last year. Just looking at that slide, it seems more and more customers are becoming younger, where I would assume that their savings capital is less. You mentioned that you're seeing 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.
Yeah, that's correct. If you look at the average first-year installment for new clients, we've seen that 2015, they installed a bit less than the year before. I think that is partly that they're becoming younger, partly the market climate. 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 135,000 SEK as the first installment, whereas the year before it was 165,000 SEK. If you look at new client installment in Q1 versus Q1 last year, we saw a 38% drop from new clients. We believe that part of that is the fact that they're 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-over-year, which is really a sign of cautiousness given the market climate. This is something that we've seen historically as well. We saw that in 2011 in Q3 and Q4. We saw that in 2008, where it becomes stronger when the market picks up and the confidence returns. We expect to see the same pattern this time as well. We also see historically that it can return pretty quick when confidence in the market returns.
It seems the effect of 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. 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 you've seen a similar situation where 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 inflows of customers, and which takes back much of the lag that you've seen in inflows?
Absolutely. I think if we go back on that slide, that is very visible. Just to make an easy comparison of the number of new clients we have taken, and if you slash net inflows with the client acquisition, you can see that in 2014, we sort of peaked after three and a half years of positive stock market development. We had about SEK 370,000 per new client, if you take that measurement. Where we are at in 2008 and also in Q1 2016, it was more of SEK 190,000 to SEK 180,000, which is half that level. The average is probably somewhere in the middle. We see a sort of reverse effect when confidence in the market returns where there is more of an overshoot in terms of net inflows per client, where now we're in a sort of underperformance. We expect that to return when confidence returns.
Okay. 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. In Stockholm, in different age groups, you have 18% on those 30- to 39-year-old men. How high can market shares go within certain areas? Do you feel that you need to start seeing higher or more growth coming from people outside the three 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 a sort of viral acquisition strategy than a marketing-driven one. Meaning that when we reach certain tipping points in different customer segments, we tend to grow faster in these segments. We reach 10%-15% in a specific segment, and we tend to grow even faster there. Meaning that if you look at urban areas, we're much stronger than in the average population in Sweden. If you look at certain zip codes, we're extremely strong. We tend to grow slower in the beginning in a certain customer segment or a region until we reach a certain penetration where we start to grow faster.
Given that, I think that we're going to see even faster growth now over the coming years in the urban areas, especially among the ages 20-50, while other segments have to pick up.
Okay. Thank you.
There are no further questions registered at this time. Please go ahead, speakers.
There's no further questions. Thank you for listening in. Grateful for your participation and all the good questions. Looking forward to speak to you again soon. Thank you.