Earnings Call: Q1 2019

Apr 30, 2019

Line is now open, sir. Please go ahead. Hi, everyone. Welcome. This is Johan Torgebi, SCB. Welcome to this Q and A call. I thought I'd just give a few minute summary of the quarterly results, and then we'll open up for questions. I'm also joined here by Masi and Christoffer, Finance Director and Head of IR. So we would characterize the Q1 as a very healthy quarter for SCB with good client activity, both in corporates and in private. Particularly strong was areas within LC and FI and the markets business area. We also saw a slight uptick in the mortgage growth rate in Sweden, and we've maintained a fairly robust growth rate for corporate lending around 6% to 8%, a little bit stronger in the areas of SMEs. We saw income Q on Q, year on year, up 10%, costs up 4% and operating profit up 12%. NII was up 7% year on year, fees and commission up 2% and NFI up 46%. So all in all, this was a good start of our new 3 year business plan financially. And we also did get some help for free as the resolution fund fee has been reduced somewhat by EUR 140,000,000 from previous year. And I'll just also remind everyone that we have had a EUR 700,000,000, EUR 800,000,000 internal transfer pricing change when you look at the divisional performance. They are a little bit exaggerated by taking money from treasury into the division, which has for years been the opposite way. So just so keeping that in mind once you when you look at the result by division. So I think I'll stop there and just open up for Q and A. Yes, sir. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Okay, thank you. We have a couple of questions that came through, sir. And your first question comes from the line of Adrian Sheehy. Your line is now open. Please go ahead and ask your question. Hi, there. Thank you very much for the presentation and Two questions, please. 1 on cost and 1 on NII. On cost, I just wanted to clarify a comment you've made this morning regarding the impact of FX on your cost target where I understood that the cost target of the $23,000,000,000 for 2021 is $23,300,000,000 at current FX rates. Previously, all the FX rates were sort of subsumed in the $22,000,000,000 target. Is the $23,300,000,000 a soft target? And if so, what other things except FX could impact it? And then on NII, you mentioned that the change in the gap between front book and back book and Swedish mortgages has sort of widened by 5 basis points versus Q4, which I sort of translate into a $250,000,000 headwind. Do you expect this to fully materialize over the next 3 years? Or do you expect this to sort of be offset at least in part by widening deposit margins? Thank you very much. Hi, Adrian. This is Matti Alpi. So on your first question on costs, remember that when we presented the new business plan in December last year, we set a new target of SEK 23,000,000,000 for cost in 2021. That target is based on the average FX rate in 2018. So given that the Swedish krona has depreciated so far this year, that target now just is higher in Swedish krona terms. Obviously, in local currencies, it's the same target, but in Swedish krona terms, it is higher now just given the sort of spot exchange rates between Swedish krona and other currencies. My comment is on the fact that right now, given the sort of where the krona is, that SEK 23,000,000,000, if you assume that the current FX rates stay the same until 2021, that target would be 23.3. Obviously, we also have an FX effect on our revenues. So all else equal, weakening Swedish krona also improved revenues by about double the amount as costs are increased. That's on cost. On NII, yes, we have a difference between front and back book mortgages by about 15 to 20 basis points. This is throughout all duration of mortgages from variable to sort of long term fixed mortgages. If you look at the variable parts, we renegotiate mortgages every 2 years, which means that if this difference stays where it is now at 15 to 20, it will take 2 years for the variable part of the mortgage book to be fully repriced. We have no sort of assumption on the repo rate. Our macroeconomists believe there's going to be a rate hike in April next year. But obviously, if rates go up, we will see a benefit on the deposit side. We have disclosed our rate sensitivity in the past, about SEK 3,000,000,000 for 100 basis points. But this difference that we have between front and back book on mortgages is the situation right now. Whether that difference will increase or decrease if rates are raised, we don't know at this point. But if nothing happens, if everything stays where it is now, you will see a negative impact from mortgage margins in the next 2 years, sort of gradually feeding through the book. Thank you very much. Thank you. We will now take our next question and this comes from the line of Johan Ekbloom. Your line is now open. Please go ahead and ask your question. Thank you. Just two questions, if I may. You saw pretty good client activity in Q1. And I guess we heard from some larger peers about activity, if anything, being similar to the end of the quarter or maybe even improving in Q2. So can you give us any indication as to what you're seeing in terms of or expecting for that matter in terms of corporate activity, in particular, market activity for the remainder of this year? And then just secondly, if you could say a few words maybe about the latest press stores around potential AML shortcomings in the Baltics dating back to the FSA report of 2016, please? Okay. We start with client activity. We don't guide really for the rest of the year, but one can conclude that when we look at the pipeline of business we have for Corporate Lending and Investment Banking, it is unchanged at a very healthy level. So there has not been any meaningful change in terms of the uncertainty for the global outlook when it comes to the short term assessment of client activity. I would, however, say we did see some remarkable growth year on year on the corporate book last year. So even if the activity remains high, the growth rates might come down. And then we saw lower activity in mortgages. So the market has continued to come down in growth rate. However, we did a little bit of better. So that's a market share change rather than a more positive outlook on the total. On the Baltics, if it's the December, I assume it's the 2016 report that was published by a newspaper here in Sweden 2 days ago, which is not relating to Baltics. It's actually relating to overall AML review from December 2016. And I'd just like to step back to describe what actually happened here. In the fall of 2016, there was a common, completely normal review of the policies and procedures around SEB know your client processes. They got at the finance inspection everything they asked and they write as is customary a preliminary findings report. This is not the final report, which is describing what they actually found. The preliminary findings report is what has been leaked to media and this is on what they base their pretty harsh conclusions about SEB. What we know that we typically when you get one of those initial findings, you then in this case enter into an 11 month complementary where you do new analysis, you give them additional data on those particular clients that they have identified. And in the final report, this was taken out. There was no longer found to be having these weaknesses. So we disagree with those conclusions that this news agency did. Thank you. Thank you. And your next question comes from the line of Riccardo Rovere. Your line is now open. Please go ahead. Yes, good morning. Good morning to everybody. Thanks for taking my question. I have a couple. First of all, on your buffer of 250, if I remember correctly, basis points on the minimum capital requirement. Over the past since this is in the start of the results season, 250 basis points look as maybe the highest among Swedish banks. How should we see that? How or and do you expect any further headwinds on your risk weighted assets going forward? And the second question I have is on staff costs. If I remember correctly, they you say they are up 7% year on year, if I remember correctly. But the FDAs are kind of flattish. Is there anything particular? It's just bonus accruals because you think the quarter has been particularly Hi, Ricardo. It's Matti here. On your first question on the capital, yes, I think the way you should see that buffer is that it's a healthy buffer. It's quite a bit above our long term target of around 150 basis points. There is headwind coming in Q3 and Q4 from the countercyclical buffers being raised in several countries. For us, obviously, the rate in Sweden has the largest impact. That's going to have an impact on the buffer. But then, obviously, we build capital with the profits that we generate and we try to be capital efficient. So I wouldn't say that sort of the requirements will go up because it comes to good buffer, but there's no reason for us to believe that there's going to be any additional inflation of risk weighted assets in addition to what kind of the asset growth that we have. We don't really manage the buffer in the year. So we do that by year end, which is a decision for the Board to take on the dividend that they decide on. So it is what it is right now. It means that we still have the financial strength to support our customers if they would ask for more lending. And guess we have a better financial strength than most of our peers. So for us, we're in a good position, I think. On your second question on the staff costs, yes, so the net FDs are pretty much flat year on year, but there's a reduction because of the sale of SEB Pension of about 2 40, 2 50 people. But then that's offset by Epti increases elsewhere, which sort of leads up to the net zero increase year on year. The 7% number is mainly, I would say, this quarter driven by the LTI programs, so the long term incentive programs with the share price now being in Q1 in 2018, it went down quite a bit and in Q1 2019, it went up. So the accruals for those LTI programs have increased, which is driving up the staff cost, which is reported on that line. But in addition to that, you have salary inflation, mainly in the Baltics, for example, which we try to offset by becoming more efficient and automize more processes. But I would say right now, it's a bit higher than usually mainly because of the share price appreciation. But also in the Baltics, you have the FX effect. Obviously, the salary costs in euros have gone up, which has a bigger impact in Swedish krona as the krona has weakened. Thanks a lot. Just a clarification on the first question. If I understand correctly, you're working, you're basically saying that the 250 basis point buffer you have, you're happy with that and you will continue to, when I say, prioritize growth opportunities over the next few quarters, like you were saying over the past few conference calls, do you see those opportunities, let's say, expanding, given that some of your peers are, how can I say, weather in turbulent times? Hey, Ricardo, Johan here. I would say it is we do have an expansionary view on certain areas of the business, but not for the reason that peers might be struggling. It's mainly related to the strategic initiatives. So we've just established a new investment bank, Corporate Bank Energy Group. So that's part of the FTEs that we have onboarded. We have some in private banking. And then, of course, the underlying business is performing quite well. And I think only this quarter, we had 15, 20 basis point capital consumption because of the business growth. You do that a few quarters in a row, you can quickly see that we are being able to, if things go well, use these for, let's say, progressive measures in order to build our business. But we do have a little bit of growth initiatives in there, which coupled with a little bit of uncertainty on the macro makes us very comfortable with 250 right now. Okay, okay. Very clear. Thanks. Thank you. And your next question comes from the line of Jan Wolter. Your line is now open. Please go ahead. Yes. Hi, Jan Walther. This is Hans Rys. If I could just return to the NII there, and if possible, if you could just give us the key tailwind and headwind going forward that you can see. And then starting with the negative back book repricing, obviously, so that's going to be a headwind. But would you still then say that the higher the repo rate increase on the repricing of the book in conjunction with that would offset that. So we can we can square that one. And then the other tail and headwinds that you could see going forward I think earlier today, you mentioned a number of things IFRS 16 as well as some higher resolution fund costs. Jan, thank you. I think we'll try to do a headwind and a tailwind list for NII. And I'll start and then I'll ask Marci to fill in. So I'll start with some of the headwinds sorry, tailwinds. So first, you see that we are having a fairly high speed on the loan growth, both for corporates in LC and FI and for corporates within CPC. So that's a tailwind for the future. And once these relationships are established, they tend to become very sticky and you establish a new NII level, but it takes a year or so before the real NII is accounted for in the P and L. There is another well, both a head and a tailwind. We are still growing in household mortgages. So outright, this is a tailwind. We will increase NII because household lending is increasing this quarter by 4% year on year, but we have margin coming down as an effect of higher competition on the mortgage side. Margins are they are very stable on the corporate side in this market. There is a little bit of tailwind also that we have this quarter and we have an ambition to gain a little bit market share, but the overall growth seems to be falling down for mortgages. Another headwind is so headwind now we have the margin side. I would say there is another thing with the resolution fund fee that will be, of course, benefiting us this year and continue to benefit us further. And I want to if there is a no more interest rate hike, we have said that the net effect will be $7.50 for this year, coming mostly in Q2, Q3 and Q4. And of course, that could be a further tailwind on NII next year should the Central Bank of Sweden increase more. What else? Yes, I can add a bit. So if you look at Q1, the repo rate hike really didn't have an impact on our NII because mortgage margins were repriced by the end of Q1. You saw about 25 basis points of margin pressure on mortgages and then you saw lower losses on deposits. Those 2 had a net impact of about 0 in Q1. In Q2, you're going to see the list price increase of variable mortgages of both 20 basis points by the end of March start to come into the numbers in Q2. That's what you're going to see sort of, I would say, the main tailwind for the rest of the year from here. And there are a few technical things I mentioned at the press conference this morning as headwinds. 1 is the IFRS 16 effect. We had a negative impact of SEK 23,000,000 in Q1. I think you can assume that's going to be about that level for the remaining of the year, which means that it has a negative impact of about €100,000,000 full year versus last year. The second one is that we have in Q1 accrued for a resolution fund fee charge in Sweden of SEK 1,500,000,000 for this year. We just got the invoice from a debt office yesterday, and that invoice says that we should be paying SEK 1,600,000,000 this year. So we have accrued SEK 110,000,000 to Littles in Q1, which means that we're going to be accruing a bit more in Q2, and then it's going to be, yes, a bit more negative impact in Q3 and Q4, but the sort of the part that we haven't reserved for in Q1, we will have to reserve for in Q2. And then it's the last comment on mortgage margins that Johan mentioned as well. It's 15, 20 basis on Frankfurt versus back book. That's going to be gradually go through the books for the next couple of years depending on how Frankfurt margins develop during this period, and we have to wait and see for how that goes through. No, that's great. Thank you. And the back of grid pricing, so that obviously will take a little bit of time. But then the magnitude of that will then more or less set the reprice of $750,000,000 or so from the positive side. Is that a fair summary? Or how do you see the magnitude of that negative reprice? Doesn't it offset the positive effect of the repo hike there of 750, please? Yes. The repo rate hike in the 750, that has its full impact this year almost simultaneous at simultaneously as the repo rate hike happens. The mortgage front book, back book difference takes 2 years to fully go through the book. If you look at our mortgage book, about 70% of the mortgages are variable. So if front book margins stay where they are, in 2 years' time, you're going to see a negative impact of 15 to 20 basis points. So that takes 2 years. So there's a lagging difference between the impact on the repo rate hike and the margin pressure on mortgages. So if we get another repo rate hike later this year, then that would obviously be positive. But again, depending on how mortgage list prices as well as negotiated prices are impacted by that repo rate hike. We can just conclude from the repo rate hike we had in December that, that put even more pressure on the negotiated mortgage rates. So it's possible that another reprice hike could put further pressure on mortgage margins. We just have to wait and see how competition evolves. And Jan, I would add the benefit that comes on the deposit side, not the mortgage side, is a more permanent nature as long as we don't change the rate to our retail deposit owners. Sure. No, that's on the 3rd, but then your gain on deposits are $750,000,000 And then loosely speaking, probably one can say that half of that gain will be lost in the 1st year or so from negative back book repricing. But I think thanks for the clarification. The other question I had was if you could just return to the views around the potential money laundering issues or report from the FSA there in FY 'sixteen. Are you saying that the remarks by the supervisor that they found, I think it was 15 clients or so, where the bank lacked adequate KYC documentation. Was that not correct? Is that what you're saying? That's what I'm saying. That was the if I remember correctly, that's where the harshest wording was in the preliminary report where they said they found a systemic something systemic around those 15, around documentation of data required for Know Your Customer purposes. That was not the final version once we complemented with the customer data, which we had in different systems, not just in one because they just looked in one system. Okay. Many thanks for that. And could you disclose the number of compliance staff in SLB as a group where the group is currently, please? I don't have it in my head. Let me get back to you. But we roughly speaking, we have 15,000 people employed. Everyone needs to go through the AML every year. So we have 15,000 people who are mandatory schooled in preventing, detecting and reporting. More than 50% of what we reported to financial police is found by employees who are very vigilant. Then we have roughly 5,000 people plus, maybe 5,300 people working at the first line and defense with the onboarding, the KYC, the AML, the annual updates, the due diligence, the extra due diligence and all the other bits and pieces that needs to be done. And then of course, we have the control functions, risk compliance and audits behind it. That's kind of the way we have it. Okay. But you're saying 5,000, but that would be onethree of all staff. We're looking for those who are dedicated to those are working 100% of the time within the compliance and monitoring division there? Yes. I don't have that number. I know you're after the compliance. Let me just give me 30 seconds here. The first line defense, everyone has what we have. We have 1st line defense, 2nd line defense and 3rd line defense. 1st line defense is where most of the suspicious transactions are actually caught. This is the front. These are the business people on client executive level predominantly, but also in product areas that are documenting and doing the work. So on every client, you need to fill in, if you onboard a client, all these 50 fields you need to do the diligence and do screenings and all those things. That's where we are kind of 5,000 people. That's where the job is happening. 2nd line defense in our bank is more or less compliance and the risk organization. Those are checking that all the systems and that the results and everyone is working according to the standard. And we have hundreds of people there. And then the and I would include finance as well, if you include accounting for and risks and capital liquidity, which are, of course, not as much in question now. So those are 100 and 100, maybe 1,000 of people. And then the 3rd line is internal audit, who do independent board reviews of compliance, risk and finance, 2nd line defense and first line. So it is I know it's a popular thing to say exactly many people you have in compliance, but for us, this is the kind of the mass of people working with these issues. And as you point that correctly out, not at all 100%. And in the front, you can estimate maybe 10% to 20% goes to this. So you have to one day a week. The rest, you're actually trying to solicit mandates. Okay. That's very clear. Many thanks there. Thank you. And your next question comes from the line of Polina Sokolova. Your line is now open. Please go back. Hi, thank you for taking my question. I just have one follow-up on the NII. Looking specifically at the large corporates and financial institutions division, it looks like NII has increased by just over SEK 200,000,000 quarter on quarter. Could you give us a sense for what's driving this? And specifically, if any of the improvement is linked to more volatile markets NII? And maybe how much of the increase is likely to be sustainable going forward? Thank you. Yes. Hi, Paulina, it's Matt here. Yes, so the main the 2 main drivers there are the resolution fund fee being reduced has the biggest impact on that division. So the SEK140 1,000,000 for the entire bank, they have a sort of a large share of that €140,000,000 reduction for them. And then the second driver is the market NII that have come back up to normal levels from very low levels in Q4. And so those are the main two drivers. Obviously, there has there is some loan growth, but it takes time for that to sort of materially go through the NII. So you have 2 more sort of technical factors driving their improvement Q on Q. Okay. Thank you very much. Thank you. And the next question comes from the line of Jacob Kruse. Your line is now open. Please go ahead. Hi. Thank you. So my first question was just, do you have any discussions or indications from the FSA that they would consider additional Pillar 2 buffers for the Swedish banks to reflect some of the uncertainty with respect to AML risk? And the second question was just on the commission and trading. So you say with the very strong trading income, you point to high client activity driving that in the quarter. While at the same time, it doesn't look like you had a record quarter in securities commissions. Is there a question of how basically revenues are being booked, which could have been commission income or trading? Or was there a real difference in how the trading operation performed relative to how your commission driving activities performed? Thank you. Thank you. I can start with the second one, and I'll give it a try. There are areas within the markets area that didn't perform that are fee generation or commission based and equities did not have a particularly strong area. Fixed income, credits, rates, commodities and FX had the relative strength. In those business areas, they also get positive effects not only from the commission that you charge for the bid offer, but also that you do have an inventory, which you don't have to the same extent in equities, which performed well just because credit spreads went down and interest rates went down. So you are by nature having a long and a short position. As you know, it's a tiny business for us as we don't have any prop trading. But for client facilitation, you have a warehouse. So those 2 benefited those areas. Therefore, the mix changes a bit. But it was very weak on the primary equity side. So if you look into the Investment Bank, it was mainly M and A. So ECM was which is a very good trigger for a lot of activity in equities wasn't there and secondary wasn't there. And you saw on top of that a slight shift, which I think is more a leading indicator in our asset management business that people during the volatility of December, January moved out from equities and into lower commission income lower commission areas as fixed income and liquidity funds. Did that explain some of your question or did I miss it? Yes. No, that's clear. Thank you. And your first question on the Pillar 2 chart, no, there is no indication of that. Great. Thank you very much. May I just add, it's Christophe of MYR, to your question earlier, Paulina, with regards to the change in net interest income with LC and FY. Of course, also we had the internal pricing effect on deposit as well. So just make a note of that. Thank you. And your next question comes from the line of Matti Hakkas. Your line is now open. Please go ahead. Yes, good afternoon. Matti Hakas here from Danske Bank. I was just looking at the investor presentation on your website and you have the key financial summary and it's actually quite interesting that the coverage ratio has actually decreased from 2015 onwards. I know there is the IFRS 39 and 9 change overall, but that has been coming down all the time. And at the same time, the share of the NPLs or Stage 3 loans has increased. Is this just quarterly volatility? Or what explains this trend in your opinion? Yes. I think it's difficult to draw any sort of conclusions from that. I would say just a general comment is that we feel well provisioned for what we see as more problematic loans. And there is definitely an effect from IFRS 9 coming to force last year. So I think you can just assume that we have provisions as much as we think we should supposed to do given the sort of more problematic credit. And so I wouldn't draw any conclusions from that drop in coverage ratio. Great. Thanks. If I have a follow-up as well, how long do you think you can continue this very, you could say, almost massive growth in LC FI and corporate and private customers? It is quite extraordinary taking into account the environment. How long do you think this can last? I have no clue. But I'll I mean, in the long run, this is the way I think, if you want to it's if you just bank a stable steady state market and the corporate sector and the industrial side of that country grows over time in line with nominal GDP and you don't have more leverage or less leverage, you would have nominal GDP. After that, that's kind of my guiding principle of what in the long run should be. And now we're probably running if not double, at least 50% higher as we have a 6% growth rate. We also have a bit right now, I think, benefit from a catch up effect. We had a couple of years, I think, 2016, 2017, where growth was great and corporates did well and stock markets were strong, but we did not see this. We plateaued almost for, I think, 18 months. So it's just a little bit natural. Hence, that's not sustainable and it will come. This is mean reverting. But on top of that, one needs to consider are your is SEB doing well in the marketplace? Because in our way of viewing the world, we are gaining market share both in LC and FI and in SMEs. And SMEs, of course, is an area where we've gone from 10% to 15%, 16% and internally we dream about 20%. So we will continue and that's of course helping the growth rates to on a relative to peer basis be higher. But there's nothing strange for me. These things run-in 2 to 3 year cycles. Now we kind of peak you share, they will continue a bit. And then you get a little bit more cautious growth rate. And in the medium term, macro is important. So right now, there is a debate about future investment plans amongst our large corporate clients. They are debating and it's a quite scattered picture what people thinks about particularly Europe. China has come out as not being the disaster we all feared in December, January, so a little bit of relief. But these things are more discussed about for future investment planning purposes and capital unclear macroeconomics and future investment plan. Great. Thanks. Thank you. And your next question comes from the line of Roni Kohl's. Your line is now open. Please go ahead. Great. Thank you. It's Roni from Citi. I just had a couple of follow-up questions please to ones that have been asked already. The first one is on NII. On the front book, back book for mortgages, could you give us any more color that you can share on sort of the trends? Now maybe you talked about it in the morning presentation, of course, I couldn't I didn't listen to that. But in terms of the pressure you're seeing or the competitive trends, is it like the same as you've seen for the last several years? Or is there any change in trend? Are there any extra pressures coming from, say, the newer players, like the digital players, like the Stabilos of the world versus the SBABs? Any commentary around that would be great. Secondly, just to follow-up on Jan's question on compliance and AML. If you are digging up the numbers, what would be great to see is if there's any kind of data point as of the end of 2018 for AML or compliance officers versus a year ago or 2 years ago. I guess where the questions are coming from and I'd like to hear your thoughts as well is looking ahead, if I see what's happened to U. K. Banks and U. S. Banks as well as the fines they've all paid, they've seen substantial increase in headcount in the 2nd line defense. Of course, all first line bankers are onboarding, doing KYC, but the 2nd line defense is where you've seen an explosion of headcount and costs the U. S. And U. K. Banks? And my final question is a small point of detail on the corporate deposit number. There seemed to be quite a strong growth Q on Q, about 5%. Again, any more color you can share on that, that would be really interesting. Thank you. Yes. Ronny, I'll start with the NII question. It's definitely so that composition is more intense now than what was the case a couple of years ago. You have many more mortgage providers. You have banks that didn't use to provide mortgages that nowadays do. And you have new players, startups that have entered the market and are providing mortgages with other business models. And obviously, in some cases, these business models don't require any capital, which means that they can price their mortgages, everything else equal, lower than we could. Now we have obviously addressed that competition. You can see that our margins are lower now, but it's definitely the case that competition has ramped up quite a bit. And there's always a question that if you have lower lending growth, sort of the aggregate lending growth in the market with more players, you're going to see more competition for sort of a lower supply of mortgages. So typically you have better margin development when there is high lending growth and worse margin development when you have low lending growth. And now we're going from a higher lending growth environment to a lower lending growth environment. So that has a negative impact. On the corporate deposit numbers, I think there is some So So by year end, we usually clean out our books driven by a year end effect, has something to do with the resolution from C that is based on the year end effect. And then in the interim period before year end, you see those short term deposits coming back in the book. So I wouldn't say that the long term deposit engagements in the bank have increased by 5% Q on Q. So it's more of a sort of going back to a normal level after a low level by year end. And the last one on compliance, FTE staff. I mean, I understand the question and there is obviously a lot of attention on exactly how many people you have dedicated. But I think what's important for us to say is that there are so many people that are responsible for detecting and reporting these kind of activities. And we want to we don't want to internal or externally limit that to some sort of separate part of the bank. We want to say that everyone is involved in this. So that's why that's the reason why we sort of go back to the fact that we see this collaboration between the first, second and third line defense when it comes to these tasks. So that's why we're referring to that work rather than just FCs dedicated this or have AML in their title, for example. So it's broader than that for us. Sure, absolutely. Thanks for the answers in the first two questions. And I understand on the third question, the AML exactly what you're saying, but maybe more if I could take that question more generically then rather than putting headcount numbers around as 100 or 200. I guess where we're coming from as well is from an analyst perspective different to a media perspective is trying to understand, do you think that in Sweden you're going to see or the Nordics quite an increase in headcount, some of your other banks, 1 or 2 other banks in the region have already experienced that. Obviously, banks internationally have experienced that. So I'm just trying to gauge if one of the consequences of all this, once we get past the immediate news headlines is actually there's going to be a growth in these control functions and that's going to be a headwind for costs? [SPEAKER JEAN MICHEL RENE GAULT:] Sorry. I'll give you a few broad brush. You asked about the last year or 2. I don't have the number. But I would say don't kill me if I'm not super accurate. But we more than doubled in the last 7 years in the compliance staff function. Late last year, we increased by another 10%, 15% in terms of FTEs, but we don't think about it as FTEs. We also have had an initiative launched, what we call the strategic initiative, with about around $2,500,000,000 of further spend in the next 3 years. And then a lot of those initiatives and they were publicly disclosed exactly how much. If you look at the data, the client, the automation, it's a lot dictated by the compliance agendas we have. We call it roadmaps for transaction monitoring, roadmaps for AML, the road map for client onboarding, etcetera. So there is a significant of an increase. The other thing generically, when we've had the last 6, 9 months as we have had in this part of the world, focus of the 15,000 employees should not be underestimated, goes in this direction. So even if you don't externally hire people, you can easily put another 100 people to work on one particular project in order to get the resources allocated. And that includes business, management attention, local CFOs, including, of course, compliance and account management, which is the big one, where you have all the work filed and done and reviewed and risk classified. For the future, do we expect more to come in this? Certainly. We are seeing a much well, a lot is happening in this area. We see that we have gone from a time where we have introduced new regulatory regimes, including things like MiFID and IDD, etcetera, to become much more of a supervisory relationship with the supervision authorities. And these reviews will become more frequent, more in-depth, and we need to comply with the new law. And AML V is just around the corner. So that's going to be another wave of implementing a new law and tightening up all the standards. We are saying today, however, that with the previous doubling, with the increase last year and with the strategic plan, we think we are covered according to what we currently need to do under the cost guidance of $23,000,000,000 in constant FX of 2021. But as I said on the press conference, everyone should understand that if there ever would be a conflict in hiring more people or investing in new technology versus keeping a previously communicated cost cap, we will always prioritize doing the right thing. So should it be different in the future, we'll get back to you. But right now, we think we can finance it within the framework we have. Great. Thank you very much. Thank you. And we have another question from Adrian Chigi. Your line is now open. Please go ahead. Hi, there. Thank you very much for taking my follow-up question. Just one quick follow-up on the asset quality point. The 8 basis points in cost of risk in the quarter, have you had any sort of one off items either on the positive or negative side? And do you see the outlook for this as sort of relatively stable versus the last few quarters? [SPEAKER DOCTOR. JALAL BAGHERLI:] Jalal Bagherli:] No. Yes. I would say it's not a one off. So it's not something we guide that we will come back to the 6 basis points or so. It's a little bit more broad based. And we feel it like going we're in a normalization going from this super cycle of almost no losses to something more normalized. In the short run, we don't have any guidance other than thinking about our loss level around this level. But of course, there we've talked a lot about more kind of hypothetically that in the long run, these loss levels are very, very low and should probably come up a bit over time. But in the short run, we have established a bit higher loss level here from 6% to 8%, and it's probably where we're going to be for the short run. And anything can happen, of course, as you know, one bad day and things change. Thank you. And no further questions have came through, sir. Please continue. Then I will thank you all for your attention. In Sweden, we have a quasi holiday. So if you don't, I will still wish you a happy holiday. Thank you. Thank you. And that concludes our conference for today. Thank you all for participating. You may now