Be in a listen-only mode, and afterwards there will be a question and answer session. Today, I am pleased to present Håkan Nyberg, CEO, and Jacob Kaplan, CFO. Please begin your meeting, sir.
Thank you. Welcome to this Nordnet Q3 interim report presentation. We are happy to announce another good quarter in Nordnet history where we see good development and right direction on most metrics. Could you please turn to the next slide, please? For the quarter, revenues were up by 13%, and that gives us a 15% increase for the period January to September. Flowing through the P&L, that gives us a 26% increase in profit after tax for the quarter and making up to 37% increase for the year to date. Please turn to the next slide, please. Highlights from the quarter. For the savers, Q3 has been a bumpy road on a global, European, and from a Nordic perspective. We have developments in Greece, China, the Volkswagen scandal, and also some intense trading in Nordic biotech shares.
All in all, we can see that the Nordic markets are down roughly 10% in the quarter. Denmark still standing out on a year basis with roughly up 20%, which is good. We are focusing on customer satisfaction, and I am happy to announce that from the Finnish Shareholders' Association, we are appointed the broker with the most satisfied customers, and then it is the Shareholders' Association members voting that. Also in Denmark, in a survey carried out by YouGov on our initiative showing Nordnet as having the most satisfied customers measured in the Net Promoter Score or NPS as we call it. Also in Denmark, we passed a milestone in terms of 50,000 customers.
When we talk about, and you have heard me saying that when it comes to customer satisfaction, we have the most satisfied customers in Denmark and Finland, and there we also see the highest growth in new active customers. There is a one-to-one correlation there. Could you turn to the next slide, please? When it comes to customer growth, we are growing in all markets. As I said, we are growing the fastest in Denmark with 39% growth on a yearly basis and in Finland with 15%. As I have said, there we also have the highest customer satisfaction. In Norway, we are growing 14% and we are actually picking up there quarter by quarter. In Sweden, we experience a growth of 9% and there we know we can do more. That gives us a total for the group on 13% growth in number of active customers.
Please turn to the next slide, please. The second long driver we focus on is net savings. Again, we continue to see very strong growth in Denmark with a year-on-year growth of 45%. In Finland, we see signs of improvement even though we're growing 2.3%. That might seem as a low number, but still we have doubled the net savings in 2015 making up to 600 million SEK compared to the same period in 2014 where we had a number of 300 million SEK. In total, in Sweden, we're growing by 2.4% and that includes an outflow from the partnership with Söderberg & Partners of in total year to date 5.3 billion SEK and in the quarter Q3 an outflow of 1.9 billion SEK. On a group level, we're on 10% growth in net savings. Please turn to the next slide.
Again, when it comes to trades, one of our short drivers activity hits our P&L directly. Volatility drives activity and we are up in the quarter 9% compared to quarter two this year and 49% compared to the same quarter in 2015. Volatility drives activity and for our P&L short term that is good. We know from past experience if volatility goes on for a long time, savers can lose confidence and also maybe hope. Let's hope the volatility stabilizes a bit. Please turn to the next slide. When it comes to our lending, we experience good growth in both lending products. Margin lending is up 17% compared to the same quarter last year.
When it comes to our personal loans business, the stagnation in growth in personal loans we experienced in the beginning of the year, we have now turned around and it's now at 8% growth year-on-year. Encouraging growth both, but in the low interest environment, not all of that comes through in the P&L. I hand over to Jacob. Please, Jacob.
Thank you, Håkan. We'll go to the next slide, and you're completely right. I'll cover net interest income in a minute. First, as you will see, the trends affecting our revenue previously during this year continue also in this quarter. Starting to look at commission income, it continues to be driven by high stock market activity. As Håkan mentioned, the Nordic markets have all dropped between 5% and 15% in value during the quarter, and this has created volatility in the market and also activity among our customers. As showed earlier, number of trades are up 9% compared to the second quarter. As we spoke about last earnings call, we launched a new price plan in Sweden at the end of June this year. This has contributed to increased activity in certain segments. It has also affected net commission per trade.
We now have a full quarter with the new price plan, net commission per trade is down from about 25 in Q2 to 23 in the third quarter. The reduced commission level does offset part of the volume increase. All in all, transaction-related commission income increases about 4% to almost SEK 112 million in the quarter. Commission income related to mutual funds is down about SEK 1 million compared to the previous quarter, as volumes in mutual funds were affected negatively by the drop in markets at the end of August. Moving on to net interest income, that's the gray part of the bar, SEK 148 million in the quarter. It is made up of three parts, our personal loans offering, our margin lending offering, and our liquidity portfolio.
Our personal loans business has developed nicely during the quarter, we have returned to good year-on-year growth numbers, as Håkan mentioned, around 8%, and that's after a couple of quarters with slower growth. We've spoken earlier about unsecured consumer lending being very competitive, and it remains so. During this year, we have prioritized maintaining our risk level over just volume growth. Average rates at the end of Q3 are down 9.7%. That's lower than the previous quarter, and that offsets part of the effect from the volume increase when it comes to revenues in this particular quarter. Second part, margin lending, also positive development when it comes to volumes. Same here, we see slightly lower rates compared to the second quarter. Still, it's a slight increase in revenue compared to the second quarter of this year. Final part of NII is our liquidity portfolio.
We continue to see pressure on yields here. Volumes is about level with the previous quarter, with rates close to zero, additional volume doesn't really help much anyway. All in all, we see about a SEK 5 million drop in NII from Q2 to Q3, and that's related to the liquidity portfolio. The last part of revenue, other income, purple part of the bar, is made up of two parts, net financial transactions, that's mainly foreign exchange transactions generated when customers trade outside of their home market. This has been increasing previously during the year as trading activity overall has increased. Our Danish, Norwegian, and Finnish savers are more active outside the home market compared to our Swedish savers. As these three markets grow rapidly, so does also this revenue item for us.
However, in Q3, net financial transactions is flat compared to previous quarter, despite an increase in trades. The reason for that is on the downside, mutual fund volumes traded outside the home market are significantly lower compared to the previous quarter, that offsets the increase from the stock trades. All in all, flat when it comes to net financial transactions in the third quarter compared to previous quarter. In other revenue, we have an item related to license fees and other administrative fees, that is a couple of SEK million lower than earlier quarters this year, but roughly level with what we saw during 2014, slightly lower there. Altogether, revenues total almost SEK 294 million in the quarter. As mentioned at the top of the broadcast, the bigger trends maintained from earlier this year, meaning strong commission income while there's pressure on the NII.
On the next slide, we'll look at our expenses or cost development. Expenses including credit losses amount to SEK 196 million for the quarter. It's a couple of million lower than the previous quarter and about 5% higher compared to the same period last year. The increase in cost base compared to Q3 2014 is partly volume related, but mainly due to us actively adding resources in our IT and product development teams and also our build-out of the corporate pension sales team in Sweden. This year-on-year increase is in line with the guidance we gave in Q1 of growth and expenses in the range of 4%-6% for full year 2015 compared to full year 2014. There's just one quarter left to 2015, and we can see that we will be around 6% growth in expenses for this year compared to previous year.
Moving on to the next slide, please. Operating profit. Operating profit adds up to SEK 98 million for the quarter. It's three million lower than previous quarter this year, but a SEK 23 million or 30% increase compared to the same quarter last year. Next slide, we'll take a look at our financial performance in the different markets. This slide illustrates our business across the Nordics. All four markets continue to develop well during 2015. As you can see in the pie charts here, 40%-50% of our business comes from Norway, Denmark, and Finland. At the end of September, over half of Nordnet's customers reside outside of Sweden.
A small milestone there Also in operating profit share from Denmark, Norway, and Finland increases is 38% year-to-date 2015, as you can see in the bottom right pie chart, and that could be compared to 16% the same period last year. As most of you know, we operate all four countries from a joint platform. Part of the platform is a fixed cost that is allocated evenly to all countries. The effect is that larger business volume also generates better margins, and that's the case. Denmark, though, still stands out. It has roughly two times the number of trades per customers compared to the other markets, and that leads to really good operating margins in Denmark at the moment. We'll take a little bit closer look at the income statement on the next slide. If you can please flip the slide.
Revenues for the three-month period, July to September, total SEK 293.8 million. As mentioned earlier, that's 13% higher compared to the same period 2014. The nine-month period, January to September, shows increases compared to last year by about 15% in that case. As mentioned, the increase compared to previous year lies within trading-related revenue items such as net commission income and other income, while net interest income is lower compared to the same period last year. Operating expenses, just under SEK 188 million. That's up 7% compared to third quarter of last year. Year-to-date operating expenses are up by around 5% comparing the nine-month periods. The bulk of the increase is in general administrative expenses, which includes personnel costs, so that was covered earlier. Moving down, credit losses, they are all related to our personal loans business, that's unsecured consumer lending.
We see that they total just SEK 18 million for the three-month period. This is low, both compared to the same period last year and also compared to the second quarter of this year. Our credit losses do vary a little bit quarter-to-quarter, and I'm not yet extrapolating this level going forward. Year-to-date losses are SEK 31.6 million. That's more in line with our expectations of about 2% credit loss. Tax rate for the third quarter is the opposite. It's on the high side of expectations. Tax rate is just over 22.5% for the third quarter and 19.6% year-to-date. The third quarter does include some non-deductible costs, which increases the tax rate in the quarter. Over time, the main factor explaining our tax rate is the business mix between our different legal entities in each country.
Profit for the period is SEK 75.7 million, leading to earnings per share of 43 öre. That's a 26% increase compared to the same period last year, and the rolling 12-month EPS is at SEK 2 flat per share. Moving on to the next slide, a look at our statement of financial position. Total assets have increased since the start of the year to just over SEK 63 billion. The increase lies within financial assets available for sale and financial assets held to maturity. Both those items refer to our liquidity portfolio. Loans to the public increased since the start of 2015. The increase in assets is mainly a consequence of deposits from the public increasing on the liability side. Increasing our assets and liabilities where policyholders bear the risk. That relates to customers' assets in our pension insurance products. Moving down, shareholders' equity amounts to SEK 1,820 million.
If we go to the next slide, we'll talk a little bit about our capital requirements. I'll walk through this slide from the top. Our capital base is made up of shareholders' equity. This interim report has been audited, so we are including profit from this year, less assumed dividend in the capital base. We have bought back our subordinated liabilities during this year. The final part of that was now in the end of September, so that's not included in the capital base as of this report. Making the adjustments for prudent valuation and deducting our intangible assets, that brings us to SEK 1,237.7 million as a capital base. The risk exposure amounts are increased compared to one year ago. Lending volumes have increased during this year. That is partly offset by lower risk weight in our bond portfolio.
The total exposure amounts to SEK 7,533 million. That brings us to a total capital ratio of 16.4%. This is higher than our target of 14%-16%. Part of the explanation is, as I just mentioned, that we had quite a low risk weight in our liquidity portfolio at the turn of the quarter. Likely, we will increase that some during the quarter. This capital ratio provides room for expansion on the credit side, which we're also pursuing. It's a strong capital ratio, and it does reflect good earnings from this year, which has enabled us to buy back SEK 175 million in subordinated debt while maintaining solid capital ratio. All that said, 16.4% is still on the high side of our target range of 14%-16% for Nordnet going forward. That was the end of my prepared remarks.
Before we're on to Q4, I'll hand back to Håkan for a wrap-up, and we'll take questions after that.
Yes, could you turn to the next slide, please? Looking forward, we will continue to execute on our growth strategy, i.e., focus on customer satisfaction, increase brand awareness, and fuel those two components with innovation, i.e., coming out with good stuff for our customers. Going forward or the last 18 months, and I've said this previously, we've launched a number of products. Going forward, we will put more weight on enhancing the customer experience in the digital world, though we will continue to market and product develop around lending products, especially in this low-interest environment that is essential for us. With that, I suggest we'll open up for questions.
Thank you, sir. Ladies and gentlemen, if you do wish to ask a question, please press zero followed by the one on your telephone keypad. If you wish to withdraw this request, you may do so by pressing zero followed by the two to cancel. Once again, it's zero followed by the one on your telephone keypad to register for a question. The first question comes from Stefan Öman from Handelsbanken Capital Markets. Please go ahead. Your line is now open.
Well, hello.
Hey, Stefan.
Hi there. Could you please elaborate a bit on the possible pros and cons of divesting your consumer credit operation?
Okay. If we look at Nordnet now, it's growing, and it's very profitable, right? I think, especially in this low-interest environment, every SEK that we can lend makes a better profit for us than putting it, trying some yield in the treasury portfolio. Obviously it's profitable, and especially now in the low-interest environment, that would be on the pro side to keep it, of course. On the pro side to divest it, there is a big interest in the Swedish market for unsecured consumer lending. Private equity has taken interest in it and also interest from the public in terms we've seen a couple of IPOs. There is a big interest, and therefore you could expect to get a decent price if you divest it. That would be on the pro side to divest. Our conclusion is it's best to keep it.
Yeah. We should be clear on that. There's no plan to divest the consumer lending business at the moment, everything's for sale all the time. It's a good fit within the group right now, as Håkan said.
Understood. You changed your brokerage fee in the second quarter, but it doesn't really show in the activity in relation to your peers. Why would you say that is?
That's true. I'll be fair, I was also expecting maybe a little more bump in market shares from that. It's hard to sort out exactly what's driven by what. We do see in certain segments where customers have actively chosen on the new price plan that activity actually has gone up in those customer groups. I think overall, we're happy with the change, and we felt that it was a necessary move. I can also say that I've noted the same thing that you're pointing out.
All right. How do you see the need for adding additional people to your organization over the next 12 months?
Well, as Jacob said, some parts of our operation and also staff is volume-driven, but that's a smaller part. If the market conditions allow and we can see the revenues continue to come through, but foremost that we continue to grow on the long drivers when it comes to new active customers and also net savings, then we feel that we have a license to continue to beef up our growth strategy, and we want to increase the capacity in innovation, i.e., more people, product developers, and IT developers. To answer your question, we don't really see the need to do that, but we want to do it to continue and accelerate the growth.
Finally, what's your take on the current status on a possible introduction of commission ban for funds?
We haven't seen any development since the Värdepappersmarknadsutredningen was presented. There's nothing new under the sun really. We see some developments and some preparations in some of the other Nordic markets, and we're following that closely, of course. It remains to be seen. We are strategizing around that, but it's too early to make any conclusions. Too many moving parts, I would say.
What's your current strategy?
The current strategy is that we believe that we have a strong position. We are a distributor. Every manufacturer of financial services and products, they want distribution. That's what we have. We have 460 plus thousand customers, which is quite a huge customer base. We believe that we're in a strong position. Of course, our strategy is to find ways of protecting our P&L. How we are going to do that, it depends on the development from the regulators. It's too early to say, actually.
Okay. That was all for me. Thank you.
The next question comes from Martin Johansson from Nordea. Please go ahead. Your line is now open.
Good morning, Håkan and Jacob. I have two quick questions. My first question is in regards to the consumer lending on the personal loan business. What is the reason for the pickup in growth, and how much do you want to grow this business going forward?
I'll start from your last question, is that we want to grow the business, but we want to keep the integrity of the scorecard. Consumer lending is the easiest to grow. It's just to take on more risk. I believe, actually, what we see in the Swedish market, a number of actors are taking on more risk, but we are not. Keep the risk low, but grow it. What we have done is actually we've done a number of things just to increase sales. We've done price adjustments, but also put retention mechanisms in place in order to keep customers. We work both on the proactive on the sales side and also on the retention side. Those initiatives have given effect, and we are now back on growth of 8%.
Okay, thanks. In regards to my second question, which is related to credit losses, which continues to fall, what do you see as the main reason for this, and how low do you think this number can get?
As I said, it is a low number in the quarter, but there are a number of things that vary a little bit quarter to quarter in that. I think around 2% is still our expectation on credit loss. We'll see. The risk level in the portfolio, of course, develops over time, but it's a little early to say that we're at a lower level right now. We'll monitor it, of course, and speak more to it in the future.
Okay, thanks.
As another reminder to register for a question, please press zero followed by the one on your telephone keypad. The next question comes from Jens Bjerke from DNB. Please go ahead. Your line is now open.
Hi, this is Jens Bjerke. I just wondered about the occupational pension effort that you're trying to grow within. What is your staffing situation there, and how is that progressing that organization?
We're roughly 20 people making up to that effort. If you remember when we announced that we are going to go for a bigger chunk of the market, we said we are trebling the sales force. That is done. All of the people are in place and having geared up. When we see the numbers, both when it comes to transfers but also in löpande premier, whatever that is called in English, sorry about that. We are on or ahead of plan. We're really happy about that.
There was an article today in Dagens Industri about the difficulty of moving from certain pension companies because of fixed fees in moving. Do you see that as a problem?
Yes, of course, it's a problem. It's a problem for us as citizens in Sweden. Personally, I'm a bit concerned about nothing happening in that matter. Just the other week, I went to see the Minister for Financial Markets, Per Bolund, and trying to fill him with enthusiasm to actually pick up that extended transfer rights ball and run with it. We'll see what actually happens. To be honest, I think it's terrible nothing has happened there. Long term, I'm optimistic. When that comes into place, that creates a big business opportunity for us.
I had a question on the commission ban for funds. As you're not giving any advice to your customers, is that applicable for you and Avanza, the commission ban, because you're just a neutral platform?
That's correct. The way that Värdepappersmarknadsutredningen proposes it is that they're not including open platforms such as ourselves in the commission ban. That's a little bit of different track than what we've seen in the U.K. and Netherlands, which moved ahead on MiFID II a year or so ago, and where they actually have introduced a commission ban. That seems to be the base case in Sweden and I think in the Nordics as well, is that there won't be a change there
Having said that, ultimately our customers value transparency quite a lot, and we feel that anything that brings more transparency into how you're paying for services and how services are constructed, in the end, we see that as a positive. We'll see how legislation plays out. At the moment, I think the base case is that, like you said, open platforms will not be included in the commission ban.
Okay. Do you see any negative mix effects in your funds business that ETFs and index funds are growing instead of active funds, which is less profitable for you because the fees are much lower on those products?
Yes. Actually, we've seen that for quite a while. Flows from actively managed funds to more index and also ETFs are a growing part of it. We don't really bother about that. If our customers want to have those products, they want. We're not taking any measures in order to do anything about it.
I think also we should point out that we had this discussion a lot when we introduced the fee-free index funds in each market, the Super Funds. I think most of our customers have a mix. You have both passive and active products. Even though there's a little bit of a move in between, we don't see the end game being that everyone is 100% in index products. I think when we look at our target customers, the sort of self-directed customer who wants to be involved in decision making, they tend to use a mix of individual shares, passive products, and active products. It's a mix between. In the quarter, I think what pressures our mutual fund income is mainly that the volume, the market has gone down, and that has brought the value in the funds down. It's not so much the mix between.
It's a little bit shifting towards interest rates, but slim. I would say that the main explanation is that the volumes overall are down.
One example actually of what Jacob is saying is that if we look upon our customers and the ones who actually have a position in one or several of our index fee funds, they hold roughly 10% in the fee-free index funds, and the 90% is invested in other products that might be shares or other more actively managed funds. I think that what we've seen, it's kind of stabilized on 10% of the customers who holds the Super Funds.
Great. Thanks a lot.
Thanks.
Thank you.
Thank you. There appear to be no further questions. I return the conference back to you, sir.
Thank you all for attending, I'm looking forward to see you around. If not, to talk to you when we present the Q4 and 2015 results. Thank you so much. Have a good day.
Thank you. Bye-bye.
Thank you, ladies and gentlemen. This does conclude today's conference call. Thank you very much for attending. You may now disconnect.