The Nordnet January to March Interim Report 2015. Today, I'm pleased to present Håkan Nyberg, CEO, and Jacob Kaplan, CFO. For the first part of this call, all participants will be in listen-only mode, and afterwards there will be a question and answer session. Speakers, please begin.
Welcome to this Q1 report presentation. As usual, I have CFO Jacob with me. We are really happy to present this Q1 interim report. It's been a strong quarter financially-wise, growth-wise, but also operational-wise. Could you please take the next slide, operator? It's actually the best financial quarter in Nordnet's history. Q1s are always strong, but this Q1 has been especially so, driven by extreme market condition. We have very low interest and people and capital seek the stock exchanges, but also driving valuation. We will show you that we see the effect of both these phenomena, high activity and low interest rates in our numbers. Revenue was up 17% and profit after tax by 39%. Next slide, please. As I said, best operating profit in Nordnet's history. High growth in terms of customers and savings.
Also, as you know, the number of customers and savings are our long drivers. Of course, partly due also to the low interest and people and capital seeking the stock markets. We've been able to support that growth in 2014 by a number of product launches, and we have also been able to launch two new products during this quarter, new mobile apps for all three platforms, iOS, Windows, and Android, and also just recently the new margin lending product we call the Knockoutlånet with knockout competitive terms and conditions. Next slide, please. When it comes to growth in customers, we see a very strong quarter. We are growing in all markets. In Sweden, we are growing by 8%, in Norway by 10%, Denmark by 33%, and Finland by 14%.
Good growth in all markets, and we have actually increased the growth rate in all four markets. The dynamics are, of course, the same, interest in the stock markets and also helped by our product launches. Next slide, please. When it comes to net savings, we see a real strong quarter growing in all markets, Sweden by 12%, Norway by 25%, Denmark by 42%, and Finland by 2%. We're especially happy about Norway. As you might remember, we have seen a new level of growth in Norway the last part of 2014, and that actually continues into 2015. We're especially happy about that. On overall level, we see on group level the growth is 14%. As you can see on the slide, in terms of total capital, we're closing in on SEK 200 billion . Next slide, please.
As I said, Q1s are always strong also when it comes to activity, but this Q1 has been extremely high activity, and we see that in all markets. Valuations are up, and Denmark is in the lead with a 28% increase in valuation in one quarter. Next slide, please. When it comes to lending, we have seen a pickup in our margin lending volumes, which is really good. The interest of the Knockoutlånet and the Superlånet, as we call it in the other markets, is really high. It's been well-received, and we see volumes also starting to pick up. When it comes to private loans, we're still growing, even though it doesn't really show in the numbers. It's like rounding errors there. We're growing, though, at a lower pace than we've seen historically.
We have now put a new strategy in place to come up to historical growth numbers when it comes to private loans. Next slide, please. With that, I hand over to Jacob.
Thank you, Håkan. We'll start by taking a look at the quarterly trends for revenue and expenses and then look at the profit and loss statement and balance sheet for the period in more detail. Revenues total SEK 330 million for the first quarter of 2015. That's a 17% increase compared to the first quarter of 2014 and a 16% increase compared to the fourth quarter of 2014. The increase versus both periods is mainly within net commission income as trading activity has been high during the quarter in all four markets, as Håkan highlighted. Activity has been high in the market as a whole, but also specifically within Nordnet. We have seen a broad part of the customer base make trades during the quarter. The customer mix has been positive and has held up commission per trade.
FX currency is in our favor this quarter with a weaker Swedish krona, both versus the EUR and the Danish krone. Both compared to the same period last year and to the previous quarter, we have a positive effect. The effect on total revenues, so not just commission, but total revenues, is roughly SEK 5 million versus the first quarter of 2014 and roughly SEK 1 million versus the previous quarter. Within that commission, we also have commission from mutual fund fees. These commissions have increased over 50% compared to the same period last year. The increase is driven by higher fund volumes on the platform. In Q1 this year, SEK 33 million of net commission is related to mutual fund fees.
Moving on to net interest income, which is lower both quarter-on-quarter and year-on-year. The story here is the same as we spoke to three months ago when we last spoke on our earnings call. The drop from the fourth quarter is mainly from our bonds portfolio as market rates have continued lower, reaching even negative territory in some cases. The other components in net interest income include our consumer loan offering and our margin lending product. Consumer loans make up about half of net interest income in the period. As Håkan spoke to, we saw virtually flat volumes in the first quarter compared to the fourth quarter. Some pressure on rates also here, but nothing as dramatic as what we've seen in market rates in general. Margin lending volumes have been sluggish during 2014 in spite of the stock market increase.
As you saw in earlier slide, we have picked up almost SEK 500 million during the first quarter compared to the end of 2014. Part of that is the positive stock market development, of course. We also have a positive response to our launch of the repackaged margin lending product, the Knockoutlånet or the Superlånet. The repackaging does mean lower rates, especially in loans with very low loan-to-value ratios. In Q1, however, there's no real change to average rates in margin lending compared to previous quarter. We'll see how that develops going forward, but our expectation is that the volumes will more than offset slightly lower rates in this product. The last part of revenue, other revenue, mainly includes result of FX transactions resulting from when customers trade outside of their home markets. The increase here is somewhat higher than what at least I was expecting.
It's 52% year-on-year and 50% quarter-on-quarter. Normally this follows overall trading activity, but in Q1 we see higher volumes of trading from outside the home market. Especially customers outside of Sweden trade a lot of cross-border, and we'll see how this higher level, if it's a new higher level that we've reached or how that develops going forward. Nonetheless, it's a very positive effect of our Nordic presence. I think that sums up revenue. Moving on to the next slide, we'll look at cost developments. Expenses including credit losses total SEK 193.5 million, rounded to SEK 194 million there in the slide. For this quarter, this is an increase of SEK 8 million or 4% compared to the same period last year and 2% quarter-on-quarter.
As we also spoke about last time, we have increased the cost level during 2014, mainly by adding resources in our product development team, our corporate pension sales team in Sweden, and also in IT development. On the back of good growth in customers, net savings, and revenues, we've continued to invest in these three areas during the start of 2015. New products have been a way to fuel our increased growth the last couple of years, and this continued in Q1 where two examples are the new mobile apps that were released for all platforms and new margin lending product in all four markets. Our aim is to continue a high pace of development also during 2015. Development, I should mention, it also includes our operating platform, where higher volume increases the need to automate as much as possible.
Looking ahead to the rest of the year, we've decided to change the way we express our view on future cost development. We have previously talked about a target cost level for the next couple of quarters. We now change that to a growth rate for costs for the full year. For 2015, we expect expenses before credit losses to increase by 4%-6% compared to 2014. Note that we have earlier talked about total costs including credit losses, we now change that, not because we expect any change in credit loss, it's just a more traditional way to talk about cost in the bank setting. In essence, this is not a change to our previous communication, we feel that we're expressing it in a more clear way, and we hope you share that view.
As we've said before, we see that operating margins should increase with increasing revenues, meaning that revenues should grow faster than expenses. Next slide, please. That brings us to operating profit. Operating profit is SEK 136.3 million for the quarter, which is an all-time high for Nordnet. It's a year-on-year growth of 43% and a 41% increase compared to the previous quarter. As been said a couple of times during the call already, Q1 normally is the strongest quarter of the year, nevertheless, 2015 has started in a very positive way. Some more encouraging news on the next slide, if we move on, looking at Nordnet and our Nordic footprint. The pie charts here illustrate that around 40%-50% of our business, measured as savings capital, number of customers or revenue, comes from Norway, Denmark, and Finland.
What's encouraging is that also share of operating profit from the same countries has increased to 40% of the total for the first quarter. That's up from around 20% for the full year 2014. As most of you know, we operate all four countries from a joint platform, where a part of that platform is a fixed cost, which is allocated evenly to all countries. Hence markets with larger business volume would also generate better margins. During the first three months of 2015, business volume has been high across the Nordics, and we can see good business leverage and increased margins in all four markets. We're happy about that. Denmark continues to grow very, very nicely, contributing almost 20% of group operating profit in the first quarter.
Finland and Norway show positive development, it's encouraging to see that the good development on the long-term drivers, customers and capital, which we saw already last year, is translating into growth on the bottom line. We go to the next slide for a closer look at the income statement. Revenues for the three-month period January to March total almost SEK 330 million to SEK 329.8 million. It's up 17% to the same period a year ago. As mentioned earlier, the main increase lies within trading-related revenue items, net commission income, and also other income. At the same time, net interest income is lower compared to the same period last year. We covered that, moving on to expenses. They amount to SEK 181 million, SEK 181.7 million, I should say, and are up about 3.5% compared to Q1 last year.
The bulk of the increase is in general administrative expenses, which include personnel costs, and the increase is due to additional staff in IT product development and also the corporate pension sales force in Sweden, which we talked about. Moving down to credit losses we see that they total SEK 11.8 million. Credit losses are slightly higher compared to the same period last year, but well in line with our expectations. Tax rate is just over 20%. It's up a little bit compared to the full year 2014. The reason is that from a tax perspective, a less favorable business mix during the quarter with a larger part of profits coming from the bank legal entity and less from our insurance entities where we have a lower corporate tax rate.
Profit for the period is SEK 108.5 million, and that works out to an EPS of 0.62 SEK per share, 37% increase compared to the same period last year. Moving on to the statement of financial position or balance sheet. Here you see total assets have increased since the end of 2014 to SEK 60,174 million. Increase lies within financial assets and also some within loans to the public. This is a consequence of deposits from the public increasing on the liability side. Also you see assets and liabilities where policyholders bear the risk both increase, and that relates to customers' assets in our pension insurance products. Shareholders' equity increases by a little bit more than SEK 100 million to SEK 1,858 million. I think that concludes the balance sheet. We'll move on to the next slide, and I'll speak a little bit more to our capital situation.
Looking at capital requirements starting at the top, our capital base is made up of shareholders' equity. We deduct profits from this quarter as they have not been subject to audit. During the quarter, we have bought back the first part of our debenture loan. The remaining debenture loan is SEK 45 million that you see in the chart. We intend to buy that part back in September of this year. We also make an adjustment for prudent valuation and deduct the proposed dividend for 2014 of SEK 1 per share, which works out to SEK 175 million. Deduct intangible asset, that brings us to SEK 1,174 million as capital base. Risk exposure amounts have increased slightly compared to one year ago. Lending has increased during the same period, but that's partly offset by a lower risk weight in our bond portfolio.
Total exposure amounts to SEK 7,875 million, and that gives us a total capital ratio of 14.9% and a Core Tier 1 ratio of 14.5%. That can be compared to a minimum Pillar 1 requirement of 8% plus capital conservation buffer of 2.5%. During the third quarter, we expect the countercyclical buffer of 1% to come into effect in Sweden. We need to add the Pillar 2 requirement. Going forward, we aim for a capital ratio of between 14% and 16% for Nordnet. That was the end of my prepared remarks. I'll hand back to Håkan for a wrap-up, and we'll take questions afterwards. Håkan?
Next slide, please. Summary, it's been a strong quarter financially wise, growth wise, but also operationally wise. We will continue to execute going forward. We will continue to execute on our growth strategy. It consists of three components: really satisfied customers that go around and recommend us to their family members, colleagues, and friends. Increasing the brand awareness so we become a choice, and also fueling that with innovation, i.e., coming out with good things for our customers. As Jacob said, the high volumes, and the flow of volumes has put pressure on the parts of our operating platform that are not so scalable. We will direct more resources on that the coming quarters to actually do more automation and increase scalability. That was it from us. Now we open up for questions. Operator, please.
Ladies and gentlemen, if you have a question for the speakers, please press zero one on your telephone keypad and you'll enter a queue. We'll take first question from Mr. Staffan Åberg from Handelsbanken. Please go ahead, sir.
Hi, this is Staffan. You guide for a 4%-6% cost hike in 2015. If we were to assume that current underlying market remains strong, looking at activity and inflow, et cetera, are you comfortable with that range also for the cost growth in 2016 and possibly even 2017?
We expressed it as a number for 2015. As we said before, depending on the market development, we see the opportunity to, when the market develops well and we see a good revenue development, we also have a chance to run a little faster and put some more resources in our development. Consequently, the other way around, should we see a downturn in the market, we can also scale back on some of those things. It depends a little bit on how the market develops and also what type of growth we see when it comes to customers and net savings.
But if you assume that the current underlying strong market remains, would you still be happy with 4%-6%?
I don't really have a firm answer on that intentionally.
All right.
It's not unreasonable. If we see a continued positive development in market, I think, like we said, we will continue to invest and that will Some increase, of course, driven by increasing business volume, but also some increase driven by just more development of new things.
All right.
Maybe I can comment on that. We want to invest in things that can help us grow, continue to grow, or grow even faster, right? At the same time, we are working to actually take out costs from less value-creating things to more value-creating things. We're not only investing on top of our current cost base. We're doing stuff with our cost base also. 4% to 6%, as long as we can continue to improve our cost-income ratio and our profit margin, that is okay, I think.
All right. Also on cost, could you please describe the flexibility in your cost base? Let's say the market collapsed tomorrow. How quick can you come down on cost?
Well, it's a tough question. Like we said, most of the cost that we're adding on is additional staff. One of the hardest things right now is finding the right people to recruit. In a situation where the market turns quickly downwards, that will be a tough decision on what are the initiatives that we see are still worthwhile to continue investing in and what are the ones that we can scale back on. There's not one number to give you that the market goes down X percent and our costs go Y percent. That's what Håkan and I are here for. It's our job. Tough decision.
All right. I got two questions on consumer credit operation as well. First, do you have any plans to expand that outside of Sweden? Finally, how would you describe the competitive landscape right now within consumer credits? You mentioned in the report that you have seen the demand come down a bit recently.
As of now, we do not have any plans to expand that business geographically or to our other markets. Even though with these low interest rates, lending product is high up on our development agenda. As an evidence of that, our new Knockoutlånet we just recently launched is a thing to actually address the low interest rates. One thing is that we believe that we can continue to grow that business in Sweden with good numbers and in a risk-controlled way. It's super important that we keep the integrity in our scoring model, right? Now the landscape has actually changed. The distribution has been taken over by the loan brokers. It's a new ballgame. We are addressing that by putting a new strategy in place to actually come back to better growth numbers.
All right. Thank you.
Thanks, Staffan.