Earnings Call: Q4 2018

Jan 30, 2019

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to SEB Quarter 4 2018 Results Call. I would now like to hand the conference over to your speaker today, Johan Torhebe. Please go ahead, sir. Thank you very much, and welcome everyone to this conference call today. I thought I'd just start with a brief note about how we would like to run these calls in the future. As some of you may know, we've always had what we call the press conference at 9 o'clock on reporting date in Swedish. But today, we, for the first time, switched that into English. So in the future, we are thinking of having the press and analyst call live streamed, but in English and only people present can ask questions. However, we will maintain this call while we will no longer do the presentation again on this call, but rather use it for Q and A session. So thank you. So a quick intro. We came out with our 4th quarter result this morning. It was a solid performing during the Q4. And both in the Q4 and across the year, we can clearly see that the around 9%. In the 4th quarter, we had a very healthy rebound in our Markets division, which was up 40% Q4 versus Q3. And the volatile markets, falling share prices, increasing credit spread, We had, of course, a dual effect to the papers and the AUM and whatever securities we are long, they, of course, had some challenges during the quarter. However, we saw a dramatic pickup in activity in markets that more than compensated for that weakness. Yesterday, we also concluded with the Board to propose a normal dividend for 20 18, ordinary dividend of kronor, which is SEK 0.25 higher than previous year, and that's in line with our long term aspiration to have a progressive increasing dividend in the long run over time through the cycle. But also given last year's particulars, we will propose extraordinary dividend as a one off for SEK 4.18 of kroner 0.5 in addition to the kroner 6, ending up a total payout of kroner 6.50 and over and beyond the normal strong performance over the last couple of years, in 2018, we sold 2 businesses. 1 was the SEB Pension Business in Denmark and the other one was a stake we held in a company called UC, which is the credit scoring company in Sweden that we sold to a Finnish entity. Together, those 2 gave us a bit of income over and beyond the organic one. And hence, when we weigh those things together, we propose the extraordinary dividend of kroner. So I think I'll just stop there and go straight to Q and A. Thank you. Thank you. Ladies and gentlemen, we will now begin the question and answer The first question is from the line of Ronit Ghos. Please ask your question, Ronit. Great. Thank you. It's Ronit from Citigroup. Just a couple of questions, please. First of all, on net interest income, you've obviously given the guidance for rate sensitivity. And could you talk a little bit about any offsetting headwinds we should be thinking about when we are factoring in our forecast for this year in terms of any negatives to offset the rate sensitivity, number 1? Secondly, in the cost line item, is there marked drop in the salary cost line? Maybe you've called this out already and I missed this, but could you remind me why the salary costs fell so much in Q4 quarter on quarter? And lastly, you had a very strong ECM, M and A fee income performance in the Q4. Can you give us any color on the pipeline, please? Thank you. Okay. So I can start on the rate sensitivity. Previously, we've talked about the increase central bank rates in Sweden of 100 basis points, resulting in approximately EUR 3,000,000,000 of positive profit contribution. Now we don't need to guess for the Q1 of a hike. So today, we've done the numbers and we've seen where mortgage margins have gone, and we see what benefits you get from the first 25,000,000 and conclude that's a EUR 750,000,000 positive, including the mortgage margin contraction of 5 to 10 basis points for 2019 full year results. Now if you were to think about future dynamics, if further hikes would come, is really this dynamic between where will the market's new equilibrium be when it comes to mortgage margins as the drain from having negative rates on deposits will be reduced. And it's interesting to just say that the first hike we've now seen, and we one could argue it's somewhere between 5 10 basis points margin contraction. We did exactly in line with the average of the market, namely And for the 2, 3 years, I think it was 15. And for the 2, 3 year, I think it was 15. And then there was no real meaningful change on margins on the longer end. But as you know, the majority of mortgages in Sweden are in floating. So I think that's the normal headwind one needs to assess where are margins and volumes going on the mortgage book when rates go up. It's not particularly difficult to see the positive side from deposit being less of a drag once we normalize rates around 0 or even get into positive category. On salary cost, there are 2 things. One is that there is, of course, a few FTEs going with the disposal of our the pension business. So there's a little bit less reduction in LTE. But otherwise, it's part of the salary cost is actually the long term incentive programs that we have accumulated over the last 3 years not yet vested for all employees, and those are correlated to the share price. So when the share price drops, the future potential cost of buying those number of shares that we have promised is reduced. So there is a little bit of positive correlation on the salary cost from that element. When it comes to ECM and M and A, I would say that last year was a clearly weaker ECM year and a clearly stronger M and A year than we've seen from the previous 3 years before 20 18. There is no meaningful change in the pipeline. So ECM seems to come to a more normalized level. It was exceptional as you know, it was exceptionally low between 2,009 and 2013, 2014, then exceptionally high, 14 until 2017. And now there's still a good pipeline, but not in line with what it used to be. And M and A has really come back. And pipeline indicated the mix of this year is probably the one we would call for next year as well. And as you know, with difficult probability assessment of what will actually be converted into a rare business or not. But for us, it's great to see a more balanced pipeline where both Equity Capital Markets, IPOs and secondaries, together with larger strategic transactions that requires funding is there because we need to play on both cylinders. And this year really showed our strength in the Investment Banking business when M and A came back, and it's been a quite large shift in the marketplace on who succeeded and who did not when it goes from ECM to M and A. And just a quick word, DCM was actually quite good year, but the mix was slightly more to frequent issuers, high grade and financial institutions, super sovereigns and hence the fee mix was slightly against us. So we didn't have this fantastic contribution, but still an active market. We did see towards the end of the year, DCM on non investment grade and corporate side come down a little bit, and we saw an emergence to a little bit of flow back in the real estate sector, high yield sector as well. Was that Great. That was great. Thank you. Can I just have just one quick follow-up on the NII point, please? I get clearly what your guidance is. In terms of mix shifts or any other headwinds because we are seeing it seems to be bit more of a pickup in terms of going out the yield curve, so more longer dated rather than shorter dated. And I'm just wondering if any either kind of mortgage new issuance, mix shifts or other factors I should be thinking about when thinking about sort of the margin and the NII guidance for this year Or are those still not material enough for this year because it's still small beer? I'll start and I'll ask Marcin to fill in. My personal view is that it's not going to be meaningful to talk about even though we do see a slight trend to increasing fixed. It depends on where this year will end up in the margins on the fixed rate. You will still get significant NII. It's actually higher gross numbers. Margins might be slightly different depending on where you are on the curve. And if there is another hike priced in, these things will move around. But it's only going to be on the new business done in the last 11 months of the year. So I don't think it materially changes the picture. Matti? Yes. I'm just adding that we mentioned this morning as well that going into the rate hike, we did have a 10 basis points lower margins on front book mortgages than back book mortgages. So that's a headwind in addition to sort of the rate sensitivity that we've already flagged for. But when it comes to the corporate side, we're saying that margins are pretty much flat, unchanged. So that's neither a headwind or a tailwind in the market, but you should obviously be aware of that 10 basis point headwind on mortgages, and it takes about 2 years for that to fully come through the books. Got it. Thank you. I have to add one more thing. We talk about NII and excluding the mortgages, which is still only a part of it, that you have seen spread widening and we've had very little pricing power in corporate lending investment grade. Nothing has changed right now. We're not calling a margin increase. But once you just at least note that the pressure on margins for corporate lending seems over the last 3, 4 months to have completely come to an halt. So at least we should see stable margins in the short run for those. Okay, great. Thank you. Thank you. Your next question is from the line of Matti Aukas. Please ask your question. Yes, good afternoon. Matti Agas here from Danske Bank. Two questions, if I may. Firstly, on the net financial income line, do you see any structural reasons why this line should kind of pick up or actually decline in 2019? Or is this the kind of normal level we should be looking at? Then Johan, you mentioned about the corporate volumes picking up, but if you look at the LC and FI lending book, it's actually been declining for 3 quarters in a row. So how should we look at this going into 2019? Have you heard any of your clients? What are they saying about the softer economic outlook? And without kind of holding it against you, I would like to hear some kind of view on what could be the volume growth in LC FI in 2019. Matthew, do you want to on NFI, if we talk about structural changes, I wouldn't change anything from what we have said is our guidance on this line, that's 1.2 to 1.4. Now given that, so we will still keep at that as it's a reasonable base assumption and allow volatility around it. It's treasury and it's the market valuation of financial securities that really just goes wherever the market goes in a quarter. But the kind of base and client generated should generate in the 1.2 to 1.4 with a certain degree and sometimes high volatility around it. Matti, anything else on NFI? No. When you talk about structural changes, what would it take for us to indicate higher? I would say there is a debate and has been for a long time. And that is what is cyclical and what is structural in the performance of markets as a business line. And this quarter, we had a bit better. But as you know, for years, we've had a pretty lackluster development for sales and trading in the market area. And it's rather that one should ask oneself, do you think there is a structural shift in markets to these lower levels? Then of course, there's no upside. If we would have a normalized yield curve and normalized interest level in this country, in particular, where we have a large market share within the financial institutions, would this be on a higher level? And of course, it's reasonable to debate these 2 up and down. But for now, we're changing the underlying client driven NFI. Sorry, what was the other question? The lending volumes and the outlook in LC FI, you mentioned it was been growing, but actually the reported lending book has been coming down now for a couple of quarters. So what's happening there? And what should we expect for 2019? Okay. I don't recognize that the LCN5 portfolio for lending is down, but I do know there's a difference between the credit portfolio and the lending portfolio. So when I talk, I look at the lending portfolio as a laggard and the credit portfolio as the leading indicator. And here is that the lending portfolio only takes what's actually been drawn. And that is a majority of what we do is actually not drawn debt. It could be credit that is put into place in short term that you won't see being permanently there, but you see good uptick in the fees generation coming from it. That's particularly event driven. Then we do a lot of RCFs, all the big really big ticket loans we do for corporates on an ongoing basis. Those are typically undrawn as commitments. That means that credit exposure could be €1,000,000,000 in one deal, but there's no loan that actually picks up. But you get NII and high return on equity from those as it doesn't consume as much capital either. So right now, corporates are performing quite well in our book, even though maybe the drawn side, the loans are less. And I can we can check a little bit here where one can see I have my IR head here pointing to Page 32 in the fact book, where you can see these on and off balance sheet. And just quickly looking at it, it seems to be growing to me. Great. Thanks a lot. Thank you. Your next question comes from the line of Robin Rain. Please ask your question. Hi, thank you for taking the question. So this morning, you mentioned that widening credit spreads might be pointing to more profitable lending going forward. But to what extent do you think that widening credit spreads is also an indication of rising cost of risk? And then secondly, so I understand you want to keep capital to be able to serve high and should, for example, be an increase in the lending demand. Now you're 120 bps above the 150 bps management buffer and still want to keep some capital, wouldn't it be more transparent to formulate a target buffer range instead of a target figure like today? Okay. Thank you. When we talk about credit spreads, I don't want to overemphasize using it as a leading indicator. It was more of a very transparent way of explaining how we think and how I particularly think. It is definitely always a liquidity and a credit quality assessment that is the fundamental reason for spreads to move. But as you know, more or less the enormous monetary stimulus we've seen with too much cash out in the system chasing too few goods, it's been very difficult to actually assess the implied credit quality from credit spreads. They've been very, very tight. So regardless of why they go up, the difference between our credit spreads and the spreads that we charge our clients is a good proxy for some type of pricing power. Then, of course, it could be associated with lower credit quality, and then I just have 2. Then you can't just welcome wider credit spreads because it could indicate a deterioration in the general market's perception of credit quality. But you should also know that given you have a fixed more or less fixed cost of equity, it is very difficult as you will see to make any money in terms of return on equity on investment grade lending. It's a very nice income generator, a very nice cost income improver, but it is a very difficult thing to have a super expanding investment grade book and not having struggled struggling with return on equity. Hence, you need to have a very good investment bank and corporate bank over and beyond your lending portfolio to make the whole equation to work. So don't overemphasize my comment this morning. I'll still point to that the widening in credit spreads and that's the capital markets in form of credit markets has repriced some of the things. And there's a big there's a low correlation in the short run with loan financing and bond pricing and CDF prices. But over time, there's also a limitation on how the pricing of credit can differ between the capital markets and the bank market. So we like to see it this way rather than the other way just to not forget it. Then on capital, I'll just say, I hear what you say. I mean, it's obvious that we have a communicated management buffer of €150,000,000 Even though we do a small extraordinary dividend, we still have a significant buffer over and beyond it. And in spirit of transparency, which we, of course, strive to be transparent, I mean, we'll just take that comment with us that we might need to come back to how these things are worded. All right. Thank you very much. Thank you. Your next question is from the line of Adrian Cighi. Please ask your question. Hi there. Thank you very much. I have two follow-up questions, one on NII and one on capital. On NII, during the press conference, you mentioned that you under earned by some €100,000,000 in NII during this NII category over the past 9 quarters? And then on capital, do you have any known headwinds that you might be holding some additional buffer for potentially impact from TRIM program by the ECB? Thank you. Thank you. Yes. So starting with NII, we can't give you the exact numbers for NII in markets for each quarter. What we're basically saying that if we look at the last nine quarters and look at the average, we can see that in Q4 2018, we're about €100,000,000 below that average. And it's usually pretty stable around those numbers, but in Q2 last year and in Q4 last year, it went a bit away from those sort of averages in Q2 on the positive side and Q4 on the negative side. So we do expect it to come back at some point to that average level that we are currently €100,000,000 below. Just to clarify on that, is this sort of NII from markets related or is it sort of other source? No, it's market related business. It has to do with coupons and validations on different kind of instruments that we hold. Okay. Thank you. On capital, there are a couple of headwinds in 2019. You should be aware, I'm sure you're sure aware of at least one of them. That's the countercyclical buffer that's going to be raised in Sweden, and that's going to cost us about 30 basis points in September. There's also an accounting change with IFRS 16, has to do with leasing contracts and you have to how you have to account for them on your balance sheet. That's going to cost us somewhere between 10 20 basis points on the capital. That's a headwind of about 15 total that we know of. When it comes to the EPA guidelines and those kind of issues, it's way too early to say whether that's going to be any implications whatsoever. But I'm going to repeat what I say I have said on this in the past, and that is the message from the Swedish FSA that in to the degree that EBA guidelines lead to higher risk exposure amounts, the FSA does have the ambition to compensate for that by lowering Swedish banks' capital requirements. So in total, we don't expect those kind of changes to lead to us having to have more capital than we have today. Very helpful. Thank you very much. Thank you. The next question is from the line of Jan Wolter. Please ask your question. Yes. Jan Wolter here, Credit Suisse. Just to ask around the primary and secondary market revenues, which were obviously very strong in Q4, and you highlighted that. Could you just give us some color whether or not the primary market fees there were any catch up effect there where my deals older deals were now booked for one reason or another? Or are these revenues booked now in Q4 primarily deals being made in recent time? So that's the first question. And a similar question on secondary market revenues, the €575,000,000 which also were quite strong, and it's a bit different from what we've seen and heard from peers both in Europe and in the U. S. Reporting in the quarter. You can give us some color whether or not that's a consequence of you taking market share in different businesses by brokerage, derivative business, etcetera? Or what it emanates from? And the third question is really on asset quality, which came up has come up a little bit in the second half, albeit from low levels. But when you look into the future, do you see this level being more of a normalized one? Or should we move up further from here? How do you view it when you look at your credit portfolio? Thanks. Thank you. On primary and secondary, we start with primary and the potential lag. There is nothing unusual with this quarter, the previous one or what we expect for next when it comes to business awarded, concluded, executed and invoiced. So no particular OA. But it is, of course, as you allude in your question, it is a lumpy business and there's it's quite common. It takes between 3 and 6 months for M and A deals before between they're mandated until they're actually booked. On DCM and those things, those type of fees, they are much shorter. I mean, everything from you can be mandated in a day and you're done in the afternoon to a corporate bond, which take a couple of weeks. So there's very little on that side. But there's nothing I'll comment. Should we have had a pipeline that indicated a lower potential deal volume, we would have said that today, and we just say we don't. Then, of course, we do acknowledge that volatility in the market during more prolonged periods are not good for Investment Banking. More trades get canceled, fewer non quality names can access the market and those things. So of course, we have that as a more of a macro potential impact if things go worse. Right now, we've had a pretty supportive beginning of the year, but you know how it felt in December. When it comes to type, I mean, we can just almost conclude the same thing as you did. We've seen some of the other banks who have exposure in fixed income, equities and foreign exchange. And we do see that we stand out a bit. I will point you to Page 32 again in the fact book, another slide another exhibit there. And it was really a strong FX. So FX volatility is, of course, coming on the back of higher volatility in any foreign type of securities that we trade. FX get helped. Also that the industry, the exporting industry did not have a bad quarter as far as we can tell, and that's also a good driver. Equities did very well as well in the quarter from the volatility and the higher activity. It's one of the best we've seen for many, many quarters. It's on Page 32. And then the most surprising one is that the activity levels in fixed income and derivatives compensated for the drag. Now those were kind of all what happened. Then I would also acknowledge, we are a bit lucky as well as it was the inventory on the fixed income side or the trading of fixed income that hurt, and we have a bit less of that. That's just D and A. And as we are only 23% fixed of of this volatility. And then, of course, AUM did get hit on the Investment Management side by the fall in equity markets. So that's not good. Arndt, it's Matti here. On your last question on asset quality, yes, I will say that the level you've seen in Q3 and Q4 around €400,000,000 or 8 basis points when it comes to expected credit losses is pretty much the outlook we also have for the future, at least for the coming quarters, given the current macro outlook that we have. We could obviously vary around that number, but it sort of seems at a fairly normalized level given the current macro outlook. But then obviously, you should be aware that the macro outlook has changed quite a bit when it comes to at least different market participants out there. But if you look at our Nordic outlook and the GDP growth we have in there, based on that, yes, in line with the second half of twenty eighteen. Okay. That's it. Many thanks for that. Thank you. Thank you. Your next question is from the line of Johan Ekblom. Please ask your question. Thank you. Just one thing really. I mean coming back to the dividend and the capital discussion. You've sort of embarked upon this split between an ordinary and the special. Is this something that we should consider on a recurring basis as a way to distribute the excess buffers if they remain after the headwinds that you highlighted? Or should you view this purely as a reflection of the extraordinary gains that you had in 2018? It's it's Matt here. It's very uncommon it has to do with the generally sort of strong capitalization that we have in the bank currently. We cannot sort of rule it out for the future, but I think you should generally sort of look at our history and see how we have behaved when it comes to shareholders. And I think this you're going to see that what we did in 2018 stands out relative to historical patterns. So I think in general, you should just assume that we continue to increase an ordinary DPS through the cycle every year. Because I guess the question is, if we put in a 0.25% increase each year on consensus earnings, you either need to double your growth or you will continue to the buffer will continue to grow every year, right? So how should we think about managing that and profitability in a medium- to longer term perspective? I mean, I'll try to explain why we have the buffer we have today. I think I'll just do it that way instead. I mean, the 150 basis points or around 150 basis points is a financial target, is a through the cycle financial target. Our view is that if there is any point in the cycle, you should have more capital than that target. This is actually a pretty good point in that cycle. And that is driven by a few things we've mentioned. Widering credit spreads could lead to flowback risk from capital markets to bank financing. We want to be there to be able to take advantage of that, not just for our shareholders, but obviously for our clients in general. You've seen an improvement in asset quality in the last few years, which has led to positive risk migration, so lower average risk weight. It is possible. I'm not saying that's a great case in error, but it's possible that, that reverses if you have a more negative macro development next couple of years. Now if you have strong growth on your balance sheet plus negative risk migration, it's very difficult to be able to cope with that if you have a lower buffer than we have today. So I think we stand out in a way that we can do both in the next couple of years if this scenario sort of plays out the way I've just described. If it doesn't and we stand here again in a year's time with an even larger buffer than we have now, then obviously, that's going to be an issue for the board again to look at. And how they act or behave at that point is difficult for us to say right now. Thank you. Your next question is from the line of Riccardo Rovere. Please ask your question. Good afternoon to everybody. A couple of questions, if I may. The first one is on again, to get back on NII. If I remember correctly this morning, you stated that in the EUR 750,000,000 guidance you provided us, you include the note repricing of the corporate loan book. In this context, do you think that maybe a portion of the 25 basis points could be somehow translated onto the corporate book at some point over the course of 2019? This is the first question. The second question I have is to get back one second on your previous comment on loan losses when you stated that you think the kind of €400,000,000 that we've seen over the past couple of quarters at the kind of run rate from now on. How basically, that means that the credit losses did more or less double or doubled Q4 and Q3 versus the previous few quarters. The outlook is slowing down, but I would imagine that from an incurred losses standpoint, not much must have changed. The GDP has not collapsed. There is nothing like that. So I was wondering, within this new, let's say, new outlook that you are giving us, how much is the impact of having inputted in your numbers, in your models as lower GDP growth affecting the lifetime expected loss? And if that is the case, would you be in the position to say to tell us what are the major variables you plug into your models to calculate the lifetime expected loss? Okay. Starting with NII. So what we said is that in the $750,000,000 we include the mortgage margin pressure that came out of the REIT rate hike. We're not including anything when it comes to corporate margins because generally corporate margins, they don't change depending on the rate changes because they are fixed versus a market rate in many cases for us obviously STIBOR or LIBOR and that's why we don't assume any changes to corporate margins. But it is possible you're going to see margin pressure or margin improvement that's up to you to sort of have a view on and model into your well, put into your models. So we're just saying that we're not including any changes there in that guidance. On Lola, I can start and then Johan can sort of follow. Obviously, the models you use are a bit more complicated than just saying exactly what happens if you just change one of the factors in the models. So I don't think we can go into that kind of a detail. But in general, obviously, the IFRS 9 framework is should be more forward looking than the old framework. So in the sense that we've had higher losses in Q3 and Q4 and you see a more negative macro going forward, that should have taken that into account. So it's sort of expecting obviously a deteriorating macro in a sense. But when talking about loan losses and reserves at these kind of levels and then discussing a doubling from 200 to 400, it's still very small numbers. So I don't think personally it's interesting to talk about doubling or halving loan losses at these kind of levels. It just happens that if you have large exposures, one of them can default and then obviously this number could double or half from 1 quarter to another. So yes, that's what I have to say about that. Yes. And when it comes to modeling credit losses in the new world of IFRS 19, I would just say this that one of the most interesting processes we all got to learn over the last year is that every time we remodel our expected credit losses, we start with the macro assumption. So the macro assumption in our bank comes in this way. We look at our we ask our macroeconomists to give us the base case, which is published in the Nordic outlook. They then construct an upside case and a downside case. Then you assign a well balanced probability assessment. How likely is it right now? Are downside risks increasing or not versus upside risks or potential increasing or not? These have an effect on expected credit losses. So in the future, what we're doing right now, it's not really a fair representation of what we actually lost in the quarter. It is what the whole book is expected to lose. And then there's a so called mark to market, if you wish, on that going forward. So the idea was, of course, to create through the cycle stability, but we know that just by the fact that one could change the macroeconomic projection over the next 3 to 5 years and one could also increase the probability of downside scenarios, those have an effect. In the long run, it doesn't matter. Cash flow wise, it doesn't matter. But it's definitely an expected outcome that expected credit losses through these models will be positively negatively correlated with GDP growth. And then you do consumer and particular regression analysis for retail lending or consumer lending, etcetera, house prices for real estate, etcetera. And these are done by Monte Carlo simulation. I think we have 7,000,000 Monte Carlo simulations to come up with this number in order to model it now. And this is just the new one. So what we indicated was rather than saying this is a normal in the long run is to say we've had it exceptionally low. The year came out at 6 basis points of expected credit losses, and we had, I think, 8 in the 4th quarter. And there's no drama around it. They're all very low, but the super low numbers are very difficult to commit to. And absolutely, we don't want to use it for our internal model purposes or we don't want to recommend you to do it either if you want to be slightly conservative. Thanks a lot, Fabi, for this. Just to be 100% sure, can I I understand that the majority of the uptick in the credit losses of the past capital quarters has to do with the lifetime expected loss? So it is something that is thrown out of the models, right? It is. We had no meaningful credit failures of significance that we can point to, which we do when we have. So this is nothing this is not at all strange for us that if we would have had a big loss or 2 where we really got hit hard, we would have told you this was broad based expected credit losses. So in IIS 39 world, in a world of incurred losses, your credit losses would be lower than what we have seen over the past couple of quarters? Don't dare to get I haven't looked at it lately, so wouldn't know it. They are different, but in the long run, they're the same. All right. Okay. Thanks. Thank you for your The next question is coming from the line of Jacob Kews. Please ask your question. Hi, thank you. I just wanted to ask on NII. Swedbank mentioned yesterday they had made some net interest income over the past years from short term U. S. Dollar markets. And I was just wondering if you have a similar situation and if that's something that you that has had already fallen out or could come off. And my second question was just with respect to the MREL funding. I know you don't really know what the time line is here. But do you have any sense of the pickup in spread that, that would imply for you for your funding cost to issue that? Thank you. Yes. On NII, we have had that in the past that we've been able to make money on U. S. Short term funding. I would say that in 2018, especially by the latter part of 2018, we did not make any money on that, and we don't do that. We don't make any money on it anymore. So the margin there is 0 basically. On Amrel, I mean, I think you can just look at peers that are similar to us and look at how much extra they pay for nonpreferred senior versus senior, and that's a good indication of how much extra we would have to pay. Obviously, in general, we have a better rating in the I think if not the lowest, at least the 2nd or 3rd lowest CDS spread in Europe on our senior preferred. So I'm just assuming that it will be in line with that on nonpreferred senior, not as low, but in line with us having the lowest spread in Europe. But it's we are a few months off as we don't know the timing yet. So we haven't really gone to the sort of latter stages of exactly knowing how much you would have to print those kind of papers out. We have another question from the line of Ricardo Rovere. Please ask your question. Thanks. Thanks for taking my follow-up question. Just to get back from your to your previous comments on repricing of the corporate loan book when you stated those loans this loan book is mostly fixed. So it is not dependent upon movement in short term rates. But I would imagine in a world where rates are moving up, they must be somehow hedged or swapped to the variable at some extent. Is that the case? I'm going to As I can imagine, not the whole fundings underlying the loan the whole loan book cannot all be fixed, right? It cannot be? No. So in general, the corporate loans are relative to a market rate, LIBOR or STIBOR base. And since LIBOR and STIBOR move in line with the rate environment in general, there is no margin changes based on a repo rate change. That's what I said. Ricardo, you're absolutely right. The majority is floating rate, but the credit spread, the margin element is fixed over the life of it. So that's what we did. So when rates go up, nothing happens. The margin of the yes, our funding costs go up because interest rates go up, absolute costs and absolute Okay, okay. Now makes sense. Okay, thanks. Thank you. Thank you. Your next question is from the line of Richard Smith. Please ask your question. Yes. Hi, there. Thanks for taking the question. Just one quick follow-up just in terms of NII. I guess, you were mentioning this morning some of the uncertainties that you have around the rules on MREL and what the ultimate outcome will be yet just for the sake of how we should be thinking about it for the next year, 18 months. Presumably, you'll be continuing to refinance your existing senior as and when it matures into non preferred? Or should we be thinking that you prefer to back end load it once you have more clarity on what the ultimate rules are looking like? Thanks. Yes. I think as I said this morning is that we don't really know whether the timing is going to be 2022 when we have to be fully compliant or 2024, and we don't know whether nominal amount is going to be in range of around SEK 50,000,000,000 or around SEK 90,000,000,000. So that creates some uncertainty for us. We hope that it's going to be cleared out in the next few months. And as soon as it is, we will obviously plan accordingly. If the time line is that we have to be fully compliant by 2022, then I think that during this year, we'll start to issue non first senior. And obviously, that would replace regular senior funding. It wouldn't be in addition to that. That will be depending on sort of how much our lending book growth in relation to our deposit book. But in general, I think you should assume that just replace the senior, obviously, at a higher spread than senior, but then we'll have to see to what extent you can pass on that higher spread to your customers. So if the time line is 2022, this year is likely. If it's not 2022, if it's 2024, I think it's more likely we're going to start in 1 to 2 years' time. Okay, great. And just to check that higher spread that you're mentioning there in terms of the issuance, what are you assuming there in terms of your €750,000,000 sensitivity? Nothing. We're not assuming anything. Okay, great. Thank you. Thank you. Your next question is from Ronit Goss. Please ask your question. Hi. Just a quick follow-up. Thanks. On the pickup on the U. S. Money market funds, you said you got nothing recently. But for the full year 2018, was there any benefit? Or can you remind me what it was in 2017, please? Thanks. It was close to 0 in 2018 and it was more than 0 in 2017, but I can't disclose any numbers. But it's So the full year was close to 0 in 20 18? Yes. Okay, cool. That's great. Thank you. Thank you. And now ladies and gentlemen, we'll finish the question and answer session. And I would like to hand the conference back for closing statements to Mr. Johan Torgebi. Please go ahead, sir. Thank you, everyone, for dialing in. We'll meet some of you in the near future. So wish you a good day. Thank you. Ladies and gentlemen, this does conclude your conference for today. Thank you very much for participating. You may now all disconnect.