Okay, it's 10:00 A.M. Hello everybody, and welcome to Nordnet and the presentation of our financial report for the second quarter of 2022. My name is Johan Tidestad. I'm the Chief Communications Officer at Nordnet, and I have some nice company here as always. Our CEO, Lars-Åke Norling, is here. Hello, Lars-Åke. Lennart Krän, our CFO, is also here. Good morning, Lennart.
Morning.
You who follow Nordnet, you know Lars-Åke and Lennart from before of course, but you might not know the third person we have with us today, Marcus Lindberg, our newly appointed Head of Investor Relations. Hello, Marcus.
Hello, Johan.
You've been with us now for around a month and met some of the people on this call, but not all of them, so if you could please shortly introduce yourself, Marcus.
Sure. I was appointed head of IR about a month ago here, very happy to be here. Before this, I was head of IR at Tele2, which is a Swedish telecom operator, and in the past have also been a research analyst at Morgan Stanley, where I covered banks among other things. Again, very happy to be here.
Thank you. Marcus is first port of call for IR questions going forward, and his contact details are available on our corporate website, nordnetab.com. Back to the Q2 report. Lars-Åke and others will make a presentation of our business and financial numbers. We estimate that will take something around 20 minutes, and after that we'll open up for questions. You will all be muted during the presentation. Lars-Åke and Lennart will go through what they have to say first. When we come to the Q&A session, as always, you have two alternatives to ask questions. Either you click on the button that says Raise Hand, and I will then enable you to talk, and you can ask your question verbally, and you can also send in your question in writing.
If you want to use that alternative, you use the button that says Q&A at the bottom of the screen and write your question, and I will read it out loud. I'll also come back to that later when it's time. Of course, the presentation itself will be available on our corporate website directly after this event. Okay, let's start the presentation. Lars-Åke, please go ahead.
Thank you, Johan. We can go to the next slide. First, some key highlights. As you all know, we have a considerable macro uncertainty due to the war in Ukraine, high inflation, interest hikes, but also now fear of recession. This has led to the first worst start in the global markets in 50 years, and of course, that also impacting the sentiment for savings and investments in general. As part of this, we have seen continuous growth in both customers and net savings on a monthly basis. For the quarter, we added 32,000 new customers and SEK 8 billion in net savings. For the full half year, it's 90,000 new customers and SEK 30 billion in net savings, which is good considering the market we see today.
We also now see that higher interest rates starting to give high results in net interest income. We're gonna talk more about that later. We have a new all-time high in our lending portfolio, and where we have a very strong growth in the mortgage portfolio and also actually we are up year on year on margin lending, even though we have had rather turbulent markets. We have a positive interest rate sensitivity both on our lending portfolio and our liquidity portfolio, and again, we're gonna come back to that. Continuous strong cost control, this is one of the main focus areas for us, and that we will of course continue with also going forward. We also launched some exciting new products in the quarter. One is electronic trading on the London Stock Exchange.
That's been very appreciated by the customers, and we also now launched the first funds in our fund company. Go to next. Looking a little bit at financial highlights. We increased the customer base with 15% online year-over-year. We terminated now 52,000 customers in our AML cleanup project, and that project is now closed end of quarter two. The full savings capital impacted by this is SEK 400 million, which is very low. As we said before, this is customers with very low activity and have no impact on our PNL as such. Savings capital flat year-over-year with a decline in the markets offset by net savings. Trades down 20%, mainly due to the negative market sentiment.
Revenue is down 30%, where we see a drop then in brokerage revenue, OK development in the fund business, but then an increase in net interest income. Cost control is still strong, and we are aligned with our guidance, with the cost of 5%. We are slightly below that. The cost increased 4%, and this is mainly within the product and tech area where we also said we're gonna increase the cost. Adjusted profit before tax is down 22%, SEK 420 million, but for the full half year, we do SEK 1 billion profit, which we think is good considering the poor market for the first half year. Can go to next.
As you know, we have very strong long-term growth, both in customers and in savings capital. We have increased the customer base with 80% since 2020, up to 1.6 million customers. Those customers coming in has been very good customers. I'm gonna touch a little bit more on that on the coming slides. We also on top of that have low churn. Even with a slight decrease in trades per customer, the big increase in the customer base gives us a new level of trading revenue in any case. We are very well-positioned also when the market turns, when sentiment picks up and activity also picks up again. Can go to next. I'm gonna cover a little bit about our cohort for 2020, 2021, and 2022.
As I said, overall it's good customers. They're slightly younger than our average customer base, but that's always the case. They're low churn, and they age and stay with us on the platform. We also see that it's a higher share of women now coming in, 39% of the new customers in 2022, and we're very happy with that because that means we start to address the full market. We also see in the graph down to the left that customers put in savings capital on the platform as expected, and the net savings for the first half this year is 44% coming from the 2022 cohort and another 40% from 2020 to 2021 cohorts.
We also see in the last graph there to the right that the new cohorts is slightly little bit more invested in funds. Also the newest cohort, the 2022 cohort, they have more cash and they are prepared to start trading once the market gets a more clear direction going forward. Go to next. We also see that the new customers the new cohorts have higher margin compared to the older cohorts, and that's due to country mix. We have more customers outside of Sweden in the new cohorts, where we also have a higher margin and especially from a higher share of cross-border trading. We see that the preferred channel with new customers is clearly the app. It was the web in the older cohorts.
We see the share of customers trading during H1 is fairly equal between the cohorts, the new cohorts, and also the pre-2022 2020 cohort, a little bit higher in the 2022 cohort. But the number of trades per customer is a little bit lower in the new cohorts due to we have more active, more heavy traders in the older cohorts. Good. We can go to next. This is showing a little bit of the long-term trends for customer growth, net savings, trading per day, and annualized profit per customer. As I mentioned at the beginning, we have a very tough start in the global markets, worst start in 50 years, and this has of course impacted some of the growth drivers.
We saw that quarter one held up fairly okay, but if you look at quarter two, we are clearly below the trends for customer growth, net savings, and trading. When the market turns, it gets a better direction, we expect the trends to revert back to more normal levels. In the last graph, the profit per customer that you see down to the right is still clearly above trend, and that's due to that we have maintained costs basically flat for more than four years in spite of them almost doubling the customer base. Go to next.
This is a little bit the customer net savings growth per month, and we saw that in quarter one it was fairly okay levels, but we dropped down to around 10,000 new customers per month in quarter two and around SEK 3 billion net savings, also in quarter two. For the full year, we have 94,000 new customers and SEK 30 billion in net savings. Again, considering the market climate we're in, I think that's a very, both are very strong numbers. We go to next. Just want to reiterate then that we are the only pan-Nordic digital savings and investment platform at scale. We have well distributed revenues, 40% come from Sweden and 20% each in the other countries. Still higher customer growth outside of Sweden, where we also have higher revenue margin.
Go to next. A little bit how the different markets have developed, and we see quite different performance in the markets during the first half year, where Sweden is down 30%. Norway's is almost flat year-over-year and Denmark and Finland are somewhere in between. We benefit clearly from being diversified and being in four markets instead of just one market. Both that we get, of course, an access to a bigger addressable market, almost two and a half times, but also that we distribute the market risk over four markets. Clearly now we have stronger growth both in savings capital and customers outside of Sweden. Go to next. A little bit on the revenue then. We see continued high revenue driven then by resilient margins and diversified income streams.
If you look at the bar graph down to the left, net interest income has been growing with 20% for the last three and a half years. Fund business, fund revenues 28% and the brokerage 51%. I think going forward, we're especially gonna see then a big increase in growth rate in net interest income from increased interest rates. When it comes to revenue margin, we see the revenue margin then is stable on the deposit, but here we're gonna see quite a big step up in the quarters to come and going into 2023 from the interest rate increase. We see the trading margin, the blue line in the middle is going down due to less trades per customer due to market sentiment.
The blue line on the bottom is the fund margin, which is fairly stable, a little bit down due to a shift from active to passive funds. Go to next. We're gonna talk a little bit more about net interest income, and especially around the liquidity portfolio. We see that the liquidity portfolio will generate roughly SEK 900 million in 2023 versus zero in 2021, assuming the quarter two volumes, currency allocation and credit spreads. If you look at the graph up to the left, we see that we have around SEK 90 billion in deposits and equity, and that SEK 27 billion of those are in our lending portfolio and SEK 61 billion is in our liquidity portfolio.
If you look at in the graphs then to the right there is a net interest income breakdown, and we see that most of the interest income has been coming from the lending part. The red part is from securities lending, but almost nothing is coming from the liquidity portfolio, basically zero in 2021. Also very low in first quarter 2022, but now in second quarter we see a pickup in the liquidity portfolio, and that's gonna continue now with, I think, around SEK 300 million total in liquidity portfolio revenue in 2022 versus 2021 and additional than SEK 600 million in 2023. 2023 versus then 2021 is SEK 900 million up.
It's a little bit offset due to we stopped charging negative interest rates in Denmark that offsets it with around SEK 50 million, so it's still marginal. This is assuming then the volume that we had in deposits per country, where Sweden is the largest, and then a little bit, give or take, same level in the other countries. The interest rate path that's the market consensus now I think is shifting a little bit due to the ECB hike. This market consensus might be a little bit low. Can go to next.
Little bit also on the trading, due to the very big increase, almost doubling the customer base since 2020, we have a big, by far largest share of our customers trading is going down a little bit in quarter two, but still, a lot higher than we saw in 2018, 2019 or before we started the real customer growth. When it comes to trades per customer per quarter is going down a little bit this quarter due to, again, market sentiment, but the share of cross-border trading remains on a healthy level of about 25%, and that's due to the country mix. Go to next.
Also trading, trades per customer per day, follows the normal seasonality, where we have a high in January and February and a low point in June, July, and then goes back up again. If you look at then the 2022 trades per customer per day follows the same pattern, but it's slightly below than the trend of 2018, 2019, and again, due to the less trading due to the market conditions. When the market picks up again, we foresee that trading is gonna come back to more the normal trends that we saw in 2018 to 2019. Can go to next. We continue strong focus on cost. Cost control is, of course, very important for us. We managed to keep the cost more or less flat for more than four years.
This is also a key focus area going forward. The initiatives we talked about, just to reiterate, it's that we can onboard a lot of new customers on our scalable cloud-powered tech platform without driving costs. We work a lot on process simplification, automation, we basically automate everything that we can. That's a win-win. It's a win for the customer because it works better, but a win for us because we scale better. We have a very efficient customer growth that's mainly driven by word of mouth and PR, so customer acquisition costs are low. Churn is low on the platform. That means also high lifetime value. Lifetime value versus CAC is very good numbers. Also, of course, we work very actively with our third parties. Go to next.
We can't really control the markets, but what we can control is to deliver on our brand promise to build the best platform for savings and investments. We've been very active this quarter with both a lot of new features in our app and on web, but also a number of product launches. One is that we now launched three allocation funds per country in a new fund company. Also on top of that, a digital tool called Nordnet One for selecting funds and an easy way to set up monthly savings. It's directed to the saver segment. We also launched the trading on the London Stock Exchange, as I mentioned in the beginning, and a lot of new features both in the app and the web during the quarter.
With that, I hand over to you, Lennart, to talk a little bit the financial performance.
Thank you very much. We can go to the next directly. I will not go very much deep into this one, as Lasse Åke already pointed out, but we still have a year-on-year growth of customers by 15%, excluding those customers dissolved by the KYC project, really. It's a good growth in this market and also the savings capital is at good level. We can continue to the next slide. Here we can see the quarterly revenues split by revenue streams. As we discussed before here, we have the transaction-related that is decreasing due to the market sentiment of course. As you see on the interest side here, where we have SEK 240 million in NII for this quarter.
The difference to Q1 is actually the NII from the liquidity portfolio. I would very much stress that during 2021 those SEK 16 billion yielded zero, nothing in interest rates. Now we are just in the first quarter giving SEK 36 million of those. This will increase throughout the years coming. This is not an abnormal thing or anything like that, it's really going back to normal interest rates. We have had zero interest rate on those for several years now. It's a strong one coming back that is also resilient going forward. You can go to the next one. As we pointed out, the costs are stable. We've been able to keep them flat for four years and continue doing so.
We are continuing looking at the costs. All that is why we can held on this flat. Also that we do control some of them. The increases we have is mainly in tech and product, and that is our own choice to continue delivering on the building the best platform. That is the role of it. Otherwise we look on everything to decrease them. Yes. Okay. This is why we still have this considerable operating leverage in our business model, with the revenue, with the flat cost giving us a tremendously good effect on the profit before tax to adjust it to say, with a huge growth rate throughout the years. We can go to next.
In respect of the balance sheet, we do have the deposits, and that is how we distribute it by liquidity portfolio and the lending. One third of the liquidity is in lending, of course, but with very high quality. That is where we have big growth, ending at SEK 26.7 billion in lending portfolio, mainly driven by increase in mortgage, but also on the margin lending portfolio. The unsecured is on a stable level, as we have said before. The credit losses are in line and only related to the unsecured. Nothing on the margin lending or the mortgage. Yes. The capital situation is stable, with the leverage ratio, which is the constraint to say on 4.2%.
It's also on a good level. It has decreased from year-end by 4.8% due to unrealized effects in the liquidity portfolio, which only in Other Comprehensive Income you can see there. Also that we are ceding some funds that increases. We are on a good level with both the leverage ratio and capital adequacy. We can go to the next. Yes.
Okay. Thank you, Lennart. Just a short recap of the strategic ambitions with starting with engaged customers, building the best platform savings investment, being a clear number one on NPS as a target. In order to get there, we need to have really passionate and talented staff and have a good trend on staff satisfaction, which we have. Sustainable business. We are in a trust business. We need to earn that trust every day. Strong compliance and risk management is key, and that we overall is a trusted and liked brand. The profitable growth that we captured and the fantastic growth potential we have in the Nordics with 6% market share and room to grow for many years, but also that we ensure scalability going forward, both with the cloud-based platform and also the automation initiatives that we have.
Can go to the next. When it comes to financial targets, these are rolling 12 months, and we are on track so far on all targets. When it comes to customer growth and savings capital per customer, for the rest of the year, it depends a little bit on, of course, how the market is developing. That's of course a lot to do with the inflation, interest rates and the recession. I think to fully meet the numbers, we need a little bit clearer direction for the fall. On the revenue margin, currently around 45 bps, we see an upside potential from the big increase in margin from net interest income. Of course, we're gonna continue to maintain costs according to our guidance with single-digit growth.
All in all, the picture looks quite okay for the year. Can go to the final page. Just a slide to remind ourselves a little bit on the holistic picture that Nordnet is taking market share in the growing market. We have 6% market share in an addressable market of SEK 13 trillion, and that market share has been increasing then from 3% in 2016. We foresee that the addressable market is gonna be around SEK 20 trillion in 2025. If we have a downturn for a couple of years, it might take a bit longer, but we'll get there. Both our online market growth, but also a bit of the new products, pension product in Denmark and Finnish wrapper in Finland.
Hopefully, we can also continue to grow a little bit of market share also going forward. We're taking market share in the growing markets. Also we talked about the customer base, that we almost doubled the customer base since 2020, and that's good customers with a lot of savings capital on the platform. They are active, and of course, there's big potential for us when trading starts picking up again and activity levels are picking up. That was the last page, I think, Johan. With that we move to Q&A.
Yes. Great. Thanks a lot, Lars-Åke and Lennart. Like Lars-Åke said, it's time for a Q&A session. If you wanna ask your question verbally, you just raise your hand digitally at the bottom of the screen, and I will enable you to speak. When I do so, you also need to accept to be unmuted on your screen, a box that pops up on your screen. You can send in your question in writing by using the Q&A button. First question today comes from Mr. Patrik Brattelius from ABG. Hello, Patrik.
Hello. Can you hear me?
Yes, we can. Please go ahead.
Perfect. Thank you. I would like to start off with a few questions around NII, please. You mentioned a little bit about the announcement from ECB, first off. Can you try to quantify that expected impact, please, in regards to your guidance there of SEK 300 million-SEK 600 million?
I think Lars-Åke is.
You're muted.
Muted, Lars-Åke.
I don't know if you wanna take that, Lennart, but of course, that means that we're gonna start the rate increase on a higher level earlier than expected. We don't have the full number for that yet, unless you do, Lennart.
No, I do not. I come back to you. That is, of course, I mean, what we did expect was the central bank's expectations in two weeks ago, and this was unexpected and not in the market. You can see parallel shift in the volumes that we have for each currency.
Yeah. You know that you see what we have in the currencies. You can look at that.
Okay. Thank you. A little bit of a clarification here. You say SEK 300 million for 2022, and then you have seen so far SEK 40 million, so that is SEK 260 left. You said a negative effect of around SEK 50 from Denmark.
Yeah.
Is that correct? The remaining SEK 210, what should we expect in the phasing for the last two quarters, please?
I think when it comes to Denmark, just to clarify, that's a full year number. So the impact is gonna, of course, be less during the fall. So it depends a little bit when the Denmark are increasing their interest rate and when we shift the regime there. On the other question, Lennart, do you wanna.
Sorry, I missed. Can you please repeat again, Patrik? No.
The SEK 300 billion-
Yeah
For full year 2022, we have seen SEK 40 million so far.
Yeah
Approximately. Right.
Yeah.
You had a little bit of a negative effect from Denmark, you mentioned, but that was an annualized number. The remaining there, which then I guess would be more than SEK 210, which I just said, can you talk a little bit about the expected phasing for the last two quarters, please?
Yes. You can see it on the slide. I don't have the exact numbers as those are, I mean, moving targets to say, both regarding volumes and interest rate hikes. Approximately a little bit more than SEK 100 million in Q3, and the rest in Q2 is a step up to say, really, because that is in line with the expected interest rate hikes from the central banks. That is how you should look upon it. Then in addition to that, you also, which is not in those 900, is that the lending portfolio will also see increased interest rates, of course.
Okay. Thank you. A little bit of a strategic question regarding NII. What are you thinking there regarding giving something back to the customer? Like, do you have a strategy when the rate has come up to a certain point that you give some interest rate to the customers? I guess that Norway is the country with the highest interest rate level currently. What's your strategy there, please? I know we touched upon it in Q1, but
Yeah
If you can give some.
It depends, of course, a little bit on competition as well, and how the interest rates are moving. The way we're doing it is, I mean, in Norway, we have a special account type. It's a savings account type where we currently have 20 BPS interest rate, but it's very low volumes. Customers don't really move the money to that account, so it's fairly low volumes there. I think in the other countries it will take definitely longer before we add any interest rates. If we do it's not gonna be on all account types. It's gonna also in the other countries be a specific account, savings account type.
Okay. If you were to see a 25 basis points rate hike in Norway, for example, now, would you by definition raise the interest rate on that type of account by 25 basis points or-
No. No
Is it a lag? No.
There's a lag, definitely. It's a, you know. We have not increased very much versus the increase that's been so far. It, it's definitely not a one-to-one. We will not match one to one the increases in in Norway .
I think one should compare it to when the interest rates were decreased, we did have zero on those zero deposit rates on the accounts as well. Really it takes some time before this is actually we did not follow it to negative interest rates except for Denmark then. That is what will happen here as well. It will have a lag, and it will at some point, yes, of course, increase interest rates on deposits as well. It is the savings accounts that will be the interest bearing account on that occasion.
On the interest levels we see now it's not gonna be material.
No.
Of course, if it shifts up even more, then we start giving back. I think in the other countries where they're on the way about 1%, 1.5% before I think we do anything. Of course we follow the market there.
Yeah.
Thank you. As a last question, so I don't block the whole call with my questions. You talk a lot about this 15% annual customer growth target. Do you see there is anything you can do to drive further customer growth or are you just in the hands of the market?
Of course, market is probably what's impacting the most. Of course what we do on building the best platform for savings and investments with really being a one-stop shop in all countries is also contributing, I think. Opening mortgage in a way I think is gonna be beneficial. The pension product in Denmark, definitely beneficial. The endowment wrapper in Finland, definitely beneficial. Of course all the small parts we do also with features on in app and web and coupled with all the information that we constantly give to our customers with savings economists and digital channels. I think that all pays out. It's not just the market, it's also what we do in building the best platform for savings investments to be clear.
Thank you. A follow-up. When is the updated launch on that mortgage offering in Norway?
Yeah. It's the estimate is after summer.
Okay. Thank you. That's all for me.
Thanks a lot, Patrik. Great questions. Next person up is Jacob Hesslevik from SEB. Hello, Jacob.
Hi. Good morning. My first question is on your liquidity portfolio, and if I recall correctly from your Q1 presentation, you said roughly half the liquidity portfolio is linked to the Euro, 30% is in SEK and 20% in NOK. I was just wondering if the composition has changed since this comment was made.
No, we have about the same composition as that. It's all depending on the market because what we do is we have the deposit in one currency and thereby we lend in the same currency and we place it in the same currency in the liquidity portfolio. We do reduce or rather we do not add any FX exposure. That is why we do it that way.
You can look at slide 12 in the presentation.
Mm-hmm
When it's up on the site. There you see the full breakdown per country, so there you can see how much is in the liquidity portfolio per country.
Okay. Perfect. My second question is on fund income. I mean, it was almost in line with last quarter, just a tad weaker.
Yeah.
I was just wondering if the mix shift in investing in passive mutual funds from the active funds had continued during Q2, or if the big shift was made during actually the last quarter, Q1. Maybe you could also remind me what the average fee in bps is for passive versus active funds on average on your platform. Thank you.
Yeah. We do see some mix shift, also in quarter two. I think it was bigger in quarter one. Also in the fund area, as you know, we do a lot also referring to bringing on new customers. I think the fund area is also a very important area for us to attract the big saver segment. It's also what we do in our own fund company there, here that's important. With the launch of new allocation funds now per country, I think it's gonna be very beneficial. Also our broad portfolio of index funds is also beneficial to us.
When it comes to breakdown in fees in passive and active specifically, Lennart, I don't have it on top of my head, so we might need to come back if you wanna disclose that fully.
Yes. No, I don't have it either. No.
The mix is around 32 basis points.
Mm-hmm. It differs in different countries but due to platform.
Okay. Thank you. Yeah, my last question is on the Danish pension market. I was just wondering if we could get an update on the progression of setting up the insurance company in Denmark, which I guess is needed.
Yeah
in order to access the Livrente market. Do you have any timeline you could share with us?
I mean, first up now is Finland. We're setting up now insurance company there, and the plan to launch during first half of next year. In parallel now we're working with the Livrente, but it's slightly behind in timeline. Hopefully second half next year we will see at least insurance company and launch perhaps. Let's see. It's fairly complex. It can be end of next year, but can also be beginning of 2024.
Okay. Thank you. That's all for me. Have a nice summer.
Thank you.
Thank you.
Same to you, Jacob. Thanks a lot for great questions. Next person up is, Nicolas McBeath from DNB. Hello, Nicolas.
Hi, can you hear me?
Yes.
Yeah.
Perfect. A couple of questions on, related to growth and revenue margins given the changing market environment and conditions so far this year. First of all, on growth, looking at your annualized customer growth in Q2, it came down quite a bit versus levels we've seen recently. It would be interesting to hear whether you think your 15% customer growth target is still credible also in a higher rate environment. Do you think a more normalized market environment would be sufficient condition for your customer growth to re-accelerate again? First question, please.
Yeah. I think we can move back quite a bit in customer growth when the market turns positive again, for sure. We need to see a shift in the market for not just a month. I think it needs to stabilize for perhaps a quarter before we see a trend shift. That's both for customer growth and also savings capital per customer. On the other hand, like I said, we have an upside on revenue margin from net interest income, and we're gonna continue to maintain costs. If you look at holistic picture, it looks quite okay. It's just it differs a little bit between the targets.
We also have to remember the targets we gave is mid-term, so it's average over a period. It's not specifically just for one year.
Yeah. Maybe just to play devil's advocate a bit. What makes you confident that customer growth will increase when market turns? One can also make the other argument maybe that growth is actually now on a more normalized level following exceptional circumstances during the pandemic and with, I mean, extremely low interest rates. What's your reasoning that makes you comfort in that growth will recover just-
Yeah. I think.
because stock markets recovers?
I think we show that also on slide seven a little bit, the long-term trends on customer growth and trading. We see after COVID, especially from summer last year, I think, the growth normalized and the trading normalized, and it was on a normalized level until quarter one, but then it dropped quite a bit, both trading and customer growth in quarter two. We do assume that part of that will come back. Let's see how exactly it plays out, but we definitely will see a comeback in the trends, when the market turns. You can watch. You can look at the long-term trends also on page seven in the presentation that's gonna be uploaded.
I think it's also important to see the historical views before 2020 and 2021, where we had a growth rate of 15% and above for several years.
Okay. Then a follow-up question also on the revenue margin. Revenue mix now seems to be shifting from commissions to net interest income with higher rates. How do you think about the net impact on your revenue margin from this shift? Do you think it's positive, negative or neutral? Do you still think that your 45 basis points revenue margin target is reasonable in the medium term given current market conditions?
Yeah, I think it is. In the second half and also into 2023, we will see a quite positive contribution on the margin from net interest income. I think a lot of the hit already on trading we've already taken, so that will mean an upside for us going forward. I think in the medium term, I think it depends. I mean, if you have interest rates that's focused now around 2%, on the central bank rates, I think that's a quite okay scenario. Of course, if inflation is not mitigated, the central banks need to double to 4% or 5%, then of course, it's a different story. That's not just for us.
Okay, perfect. Thank you.
Thanks.
Thank you, Nicolas. We have more questions coming up here. The next person up is Maria Semikhatova from Citi. Hello, Maria.
Yes, hello. Thank you for the presentation. Several questions. First, on net inflows. We saw more than SEK 8 billion of net inflows in the second quarter.
Yeah.
Maybe you could comment how that was distributed between existing customers and new customers?
Mm.
Actually, it's very useful, the slide 7 that you provided. Just wanted to hear your thoughts. Do you see the risk of inflows turning into outflows?
Mm.
on disposable income and sentiment.
Yeah. Yeah.
If they continue to be hurt by the current environment?
That's a good question. I think overall in H1, if you look at the net inflows, or net savings was SEK 30 billion for H1 and then SEK 8 billion in quarter two. 44% is then coming from 2022 quarter and another 40% from 2020 to 2021 quarters, give or take. New customers are putting a lot of money on the platform and also be prepared to, I think, start trading when the market shifts, which is positive. When it comes to outflows, we have not seen any increase of outflows so far. It is very steady. We have seen a slight decrease on inflows, but that's due to that we have less new customers in impacting that. We have not seen any big shifts on outflows.
Understood. Just maybe shifting to fund commissions. We saw the headline, that there is a ban on kickback commissions in Norway.
Yeah.
I think there was a suggestion sent to Ministry of Finance.
Yeah.
What do you think that would mean for your fund commissions in the country?
Not really because we're already compliant. We don't have any kickbacks in Norway, and we have a platform fee where we charge 29 bps then for active funds and 19 bps for passive funds.
Do you see any changes across other geographies on the near-term frame?
Not currently. If it happens, we are prepared. I think in Denmark we already mitigated by giving some of the retrocession feedback to the customers if you're a big customer, and Finland and Sweden is so far rather quiet.
Okay. Maybe just on the cost side, we do understand that market environment is outside of your control.
Yeah.
Maybe if there is, you think that there's leverage that you can use if customer growth don't come back.
Yeah, yeah.
Near-term that you can.
Yeah
be below the 5% target.
Yeah, we can. I mean, there's two levers, and if the activity drops dramatically, we can of course reduce operational staff, and that doesn't need to be a big program because the staff turnover is fairly big. It's just that we avoid replacing people that's leaving. The other part is that we then because where we grow cost now is product and tech, because we wanna have more engineers to be able to deliver faster on our exciting roadmap. Of course if the market is really poor in the coming year, we can also pull that lever, of course, to stop recruiting.
Great. Thank you. That's it from me.
Thanks a lot, Maria. We have a couple persons left on the list to ask questions. We have Maths Liljedahl from SEB. Hello there, Mats.
Yeah, hello. Good morning.
Yeah.
A few follow-ups before we.
Yeah
...take summer vacation.
Yes.
A little bit into the savings or fund the launch of Nordnet One and also the
Yeah
the fund platform here. Do you see any impact on that? Or, I mean, how was the fund flows in the quarter? Do you notice any-
Yeah
you know, big challenger coming up here. Avanza wants to take a chunk of your fund plat-
No.
Have you noticed any change in?
No. We have pretty good flows actually during the quarter. I think the launch also of Nordnet One and allocation funds is well received. It's of course early days, but we also see our broad portfolio of index funds, both global index funds and local index funds, is very attractive and has generated positive flows actually the entire H1 in spite of the market turbulence. I think.
Okay
The entire focus we have on funds going forward is a growth potential for us clearly.
Okay. Thank you. That's all for me. Have a nice summer.
Thank you. Same.
Mats.
Same to you, Mats. Thank you. We have Mr. Enrico Bolzoni from JP Morgan. Hello, Enrico. Are you with us? Enrico, are you with us?
Hi. Yes, I just got unmuted.
Yeah.
Thank you for the presentation. Just a couple of questions from my end. One, I was just looking at the, basically the average revenue per trade that basically came down quite a bit over the quarter. However, if I look at the average ticket size per order, it was actually not getting bigger, but actually coming down as well. Usually I would think that smaller order size should lead to a higher yield. Why it has not been the case? Related to that, I also wanted to ask you, what do you think it's a floor in terms of trading activity per customer if things, you know, slow down?
Are you still confident that we will not go back maybe to the much lower levels we had pre-pandemic, or if not, can you give some color there? Another question I had was on the actual competitive landscape. I appreciate you have the target of customer growth. You know, Avanza, your arguably closest peer in Sweden also has a quite ambitious target there. You know, when I look at Swedish population is actually not huge clearly, and between the two of you already have a substantial share of the market. Can you just give some color in terms of which demographics are you targeting?
Do you think still there is a lot to do with the younger part of the population or actually now it's about convincing older customers maybe of traditional bank to switch? These were my two questions actually. Thank you.
Yeah. Good. I mean, revenue per trade I think is a little bit mixed between retail and private banking heavy trading, where retail is trading a little bit less versus the heavy traders and private banking customers, and they have a lower commission. I think it's mainly due to that. When it comes to trade per customer, as we showed also in the presentation, we are below the average, the long-term average now, on trades per customer, and also below the average in 2018, 2019, before Corona. We follow the same seasonality as before. The low point is gonna be in June, July, but we're slightly below the average from before.
We see of course if the market picks up that there is a potential to increase trades per customer again. Customer growth, I think, we have currently around 6% market share in the Nordics. For us it's that we can address the entire Nordic customer base, which is around 20 million customers, 27 even. As you know, we grow more outside of Sweden, and I think we have plenty of room to grow on the customer base in many segments, not just young customers, but also in the mid segments and also in the high-end segments with the products, not least the pension products we get the new fund products with the allocation funds and also endowment wrapper in Finland.
I think we have a good potential across the demographics. Again, we're really benefiting from being in four countries and just not just being in Sweden.
Thank you. Can I actually? Sorry, a follow-up. I forgot. On cost, I just wanted to ask you if the inflation remains very high-
Yeah
We have, let's say, 7%-8% or even more. What should we expect in terms of cost growth going forward?
So far we've maintained our guidance and I think in the coming years I don't see inflation spilling over one-to-one to salary increases because if that happens, we have huge problems. I think the Nordics learned that last time we had big inflation. I think in the coming years that will not happen one-to-one. We see slower salary increases versus the inflation.
Thank you.
Thank you, Enrico. We'll take a couple of questions that have come in in writing as well. This is from Henrik Milton. "Hello. Can you please clarify your long-term growth targets when it comes to revenue, net interest income, and return on equity?" Could you comment on that?
Yeah. We haven't any specific guidance on those numbers. By our midterm targets, if we have customer growth, same CapEx, sales capital per customer revenue margin and cost, I think you can deduct most of the numbers from there.
Good. On a theme that you have talked about before, Lars-Åke Norling, but, I'll ask this question for the sake of it, "You have a clear 5% cost growth target which was set before revenues fell substantially. Is there room to improve your cost, especially given that the key near-term revenue driver and net interest income does not drive costs?" So what can you say about cost level?
Yeah, I think I commented that with Maria. I think if we maintain the cost guidance we have now because we wanna add more resources in tech because we wanna deliver faster on our exciting roadmap. Of course if the world is not improving, then we can reduce hiring in engineers. Also if there's really low activity and low inflow of customers, we can also then reduce operational staff. In a market we see now and where we are now, we will not change the cost guidance.
Okay. Good. I see we have one more person on the speaker list. I think it's Ermin Keric from Carnegie. Is that correct? Hello, Ermin.
Hi. Do you hear me?
Yeah. Very well.
Great. Thanks for presentation and for taking the question. Perhaps starting on the fund side, I know you reduced your platform fees in Norway in April.
Yeah.
Is that basically fully visible now in the numbers, or should we expect any more lag effect into Q3?
No, it should be visible now in the numbers. The entire base was got the lower fee from 1st of April.
Great, thanks. On your own fund company and the launch you've done there, could you talk anything about the profitability in those products compared to general allocation funds or index funds, kind of like for like funds that you're just distributing?
I think we have a slightly higher margin on both index and definitely on the allocation funds, I would say. We have attractive pricing for our customers to drive flows. I think we see better margins instead of just doing it with someone else.
That’s very clear. Thanks. Then the last question was just on the leverage ratio. It has been coming down. I know Lennart, you said you’re still comfortable at 4.2%, but do you just see it as sort of you can just remedy it partly with reducing dividends or even stopping dividends for a year if deposits continue to rise, or are you at all considering any additional tier one issues from here?
We don't regard any further issuances. I mean, if there would be anything, it would be reducing dividend. I think it's very important to know that the 4.2% is related to two measurements. The one is the guidance, which is 3.9%, and we can have additional, I think it's about, SEK 10 billion-SEK 20 billion more in deposits without breaching that. Going down to the real requirement, which is the minimum requirement of 3.0%, we can have SEK 45 billion-SEK 65 billion more in deposits. That is why I'm quite comfortable with that. The guidance is actually not. It's a target where we do report to SFSA, but there are no, what do you say? Claims after that from them. We need to watch it.
We need to be above it. We do report it. It's more of a soft measurement. The real one is 3.0, but still we at all times do want to be above 3.9, of course. Still we have the SEK 20 billion in capacity.
Have you quantified any kind of buffer you want to have to the guidance?
I think it depends on the market situation, of course, but at the moment, I think this is a good buffer. This is where we know where we are about. We have not quantified it in any limitations or anything like that. This is a stable way. We don't mind having it further on, but it all depends on the market condition. With this term or where some savers have sold off and also put in net savings, which they haven't invested yet, I think this is a good level.
That's very helpful. Thank you for taking the questions and have a nice summer.
Thank you, Ermin. Same to you.
Thank you.
That was it, I think. Thanks a lot for attending this session, and thank you for all the great questions. Our next quarterly report comes out late October, but before that, we will of course publish our monthly statistics as usual. Please don't forget to visit our corporate site, nordnetab.com. That is where you'll find all the information and the presentation from this event as well. Thanks again for being here today and your interest in Nordnet. Have a nice summer. Bye-bye.
Bye-bye.
Thanks, everyone.