Okay.
Here we go. Good morning, everyone. You're all very welcome. It is time to present the annual accounts. Johan is going to open up with his address, and then we'll have a Q&A session immediately after. Go ahead. Thank you. Can you hear me in this microphone? Welcome, everyone. Excellent. Welcome to the SEB Annual Accounts 2017 presentation. Starting off with a comment on the favorable conditions and premises we've seen with a growth on the stock exchange, globally speaking, a little bit less so in Sweden, but nevertheless, it has to be characterized as a very good year indeed to operate in financial activities. Continued low interest rates, and in fact, a new all-time low in recent history and credit spreads. We've had a truly favorable situation in terms of operating in the bank.
A SEK 22.7 billion profit, 5% increase on income items, 1% on expenses, but well in line with the SEK 22 billion that we have as a cost cap that led to a 12% increase after credit losses. It's worth noting as well that the credit loss level remains at an exceptionally low level. Cost income up by two units to 0.48, and provided the proposed dividend from the board of directors to the AGM, SEK 5.75, an increase by SEK 0.25 per share. Core equity to CET1 at 19.4%. The return on equity was 12.7%. I mentioned all of these numbers before the items affecting comparability. Q4 in isolation then. It should really be seen against a backdrop of Q3, which seasonally speaking, was a lower, more weak quarter.
Q4, on the other hand, slightly stronger, in particular towards the end of the quarter, where we saw increased customer activity in several parts of the bank. On an annual basis, we saw an increase of the fourth quarter compared to the previous year by 2%, and costs down by 2%, and on an annual basis, profit up by 10%. Approximately the same number for the bottom line numbers that you can see here. If we look at net interest income, the NII, it's up by 6% for the full year compared to last year, driven by marginally higher volumes and somewhat lower funding costs. Those two contributed in a positive manner, and we can see this in lending in particular. In our disfavor, on the other hand, we had very negative interest rates.
It's very clear now that the contribution to deposit is down to zero, and funding and other saw a slightly less negative contribution reflecting a slight improvement in funding. It's worth underlining the resolution fee here. In 2016, it was based on 4.5 basis points. It went up to 9 points this year. SEK 450 million more in terms of its impact on our results. For 2018, it's going to be hiked up to 12.5 basis points, and it's going to mean another increase of SEK 600 million-SEK 750 million in addition. Before we get to 2019, when it changes too, and will be lowered. All in all, for 2017, SEB in resolution fee and deposit guarantee schemes were paid about SEK 2 billion.
The net fee and commissions up by 7% for the year, up to SEK 17.7 billion. The factors driving this in a positive direction were the positive development in the equity markets, the performance fees, and an upturn for assets under management. Towards the end of the year, we also saw an increased customer activity in many parts of the bank, not in the least investment bank and LC&FI Large Corporates & Financial Institutions with IPOs, a number of advisory services for acquisitions, as well as payments and lending. They all contributed in a positive manner. We will proceed and look at the net financial income situation. We noted a drop by 3% down to SEK 6.9 billion.
An innovation in this slide, many of you have seen it before, of course, but here, rather than just talking about the so-called market valuations or letter combinations, not primarily driven by our operations, it is now in a bright purple shade to point out that in this year, 2017, should I say, these letter combinations or market valuations on financial instruments had a positive contribution of SEK 210 million, and that is the sum total of what you see on the four quarterly illustrations for the year. Last year, however, they contributed negatively to the tune of SEK 219 million. SEK 429 million in terms of the change over the years in the contribution of the market valuations. We often talk about stability and resilience in this item, and we expect with some variation that this should be somewhere between SEK 1.3 billion and SEK 1.5 billion per quarter. Here is another favorite, operating leverage.
This is the slide, the graph, which shows our most concise way of presenting these points, and it is very nice to see that after the small glitch in 2016, we are now reporting higher quarterly income. We have falling or unchanged costs for the eighth consecutive time, and we also have an increase in average quarterly profit. Our cost cap of SEK 22 billion remains in place. We are now in its third year of the three-year business plan, we still have the same in place for 2018, therefore. This is an attempt to talk a little bit about our cost cap in more detail and our thinking in terms of investment, focusing on IT needs for the future, and the concept of not costing any more than the year before. It might sound a little bit simple, it is not a self-playing piano by any manner or means.
We have listed things to the left, the items we need to focus on in terms of cost cap. We have the inflation on goods and services, property, real estate. It gets more expensive in terms of running and using every year. There is also the fact that the cost increases by 2%, 3%, but in the Baltic States, 7%, 8%, 9% in terms of the factors. All this has to be taken into account. There can be operating efficiencies or reducing the costs to compensate. At the same time, we have an ambitious growth agenda, and you need to see this in light of SEB, an organic growth agenda where all parts of our business have plans to do more with the same or even using less of available resources. We have also invested in our analytical capabilities in equities.
We have invested in investment banking staff, IT investments in private customer becoming a customer via the electronic way for mortgages, also links here to SMEs in Sweden. We're expanding to some extent in the U.K., which is apparent for the first time in our annual accounts for this year. We can give you an initial presentation. In IT, a great deal of our costs have been focused on IT for the future. We're focusing on the future so that operational efficiencies can take a real leap forward. At the same time, there's an absolute must where we have to stick to the regulatory requirements. Without sounding boastful in any way, the second part of 2017, we saw a very proud SEB getting through IFRS 9, MiFID II, turning Germany into a branch, and it was indeed a very hectic Q4 for all parties involved.
To the right here, we have our thinking on how to finance all of this. The first point is operating efficiency in every manner or means, doing everything a little bit better with less resources. That's a real mantra for change and transition, and it's part of the DNA of the bank, I would put it to you right now. Strategic initiatives are also required. You cannot simply rely on operating efficiencies to free up all these resources to achieve everything that's listed on the left on this slide. Over a long period of time, we made quite extensive and significant strategic initiatives, selling off retail in Ukraine, retail banking in Germany, closed down Dusseldorf and Hamburg two years ago.
Now, if anything, that has really been accentuated even further now that we finally revamp our German operations from a legal entity, an AG, into a branch of SEB. At the same time, we've announced intended sale of SEB Pension in Denmark. All of these strategic decisions are intended to give us more of an opportunity to invest in the most relevant part of our customer base. If we look at the different customer divisions, we can look at larger corporates and financial institutions, where we had down turn 7% to 8.8%. Return on equity ended up at a 10.1%. I talked about this during Q3 as well, that there are a couple of reasons for this.
Trade with the securities has been lower because of low volatility, and at the same time, we have advisory fees and those parts that have been doing very well. We see that we're moving sideways still when it comes to loan and capital, but we have seen certain signs of increased customer activities, should we say, the last few months during Q4. The reason why this was somewhat weaker was that we had a weaker Q3 that was not compensated for during the other quarters. Q4, we have 26% up compared to Q3, and ROE there, looking at just Q4, was 11.1%. We have corporate and private customers where profits increased with 11% to SEK 8.1 billion, and return on equity pretty much as last year at 15.1%. The positive driver here has been the customer behaviors that we have seen.
They've improved thanks to digital improvements, digital mortgage promises that you can use digital means to become a customer, and also the better improved app with a new look and feel. Mortgages were up 4% and have also contributed positively. It should be noted that we continue to grow under the market and average, the market being at 7%.
House prices in Sweden have pretty much stayed the same during the year. Looking at small companies, we have moved from 10 a few years ago in market share. We continue to gain market share. We got some 7,000 SMEs as customers in 2017. The Baltics, and this makes me feel like a parrot, continues to go well in all three countries. They have momentum in customer segments and increased over the year 24%, ending up with the profit of SEK 2.2 billion.
Here as well, we have seen positive effects from digital improvements. We have the equivalent to mobile banking in Sweden that has now been introduced in the Baltics and also mobile payments and remote advisory services as well, where we do not have to have physical meetings, but we can use IT solutions to meet customers using a screen or something similar. Life and investment management, we are up at 13% through SEK 3.6 billion with an ROE of 27.8%. Total assets under management was up to SEK 1,830 billion, an increase by around SEK 81 billion compared to 2016, where we can see that we're still not completely satisfied. Albeit things are moving in the right direction, we think that we can improve things further in how we meet the customers.
Here I would also like to stress that we have a focus on sustainability. That has been beneficial when it comes to investment products where we're still strong. One topic I feel has been topical throughout the year is growth perspectives for the balance sheet. The companies, what do they think about borrowing more compared to what they've done before? We wanted to look at the history, not just comparing quarters. Here we have corporate, for example, and also to a certain extent, public administration. We see the journey. We see our Nordic German growth case that we had between, say, 2009 and end of 2014. Now for the last few years, things have just been moving sideways. We've been sort of confused thinking about the macroeconomic strengths that we have seen over these years.
Why have companies not needed that capital to meet the macroeconomic growth? Things have been moving up and down, of course. If we look at two years at these three categories that you see on the screen, we see that they're all between 8%-10%. We see that companies have not grown at all, and households have contributed with a 5% growth. Here we have tenant owner associations and mortgages. What we want to say here is that we see a sign of a pickup, and that is the green line where we have the quarter with a 3% increase between Q3 and Q4. We do not want to exaggerate this trend, but I do think that there are signs that give hope.
We also have households, and here we see that we're with real estate down about 10%, and we're pretty much at the same level when it comes to house prices today as in December 2016, even if we've seen some cooling off effects when it comes to mortgages. Market, as I said before, 7% up. We were up 4%. Another theme that has been discussed is how to work with information technology in the world that changes very rapidly, and what are different banks doing. It's very difficult to make comparisons.
We feel that there is an old bank, the jar with the bigger circles where you think in cycles one, two, three years, and you spend a lot of time making forecasts on ROE, work with a project at a time, you look at future costs and revenue, and you check all the time that you're on the right way. This is something, a methodology that's based on the utility Vattenfall, waterfall technology. Here we want to work instead with value delivery-based systems. That is where we have the 90 kilometers an hour sign. We always want to be able to deliver within 90 days to a customer. Instead of looking at big projects and doing one thing at a time, we want to work with thousands of small improvements every year in the bank.
We feel that this is much better suited to what we feel about this rapidly changing world where we need to calibrate all the time, and you need to make decisions as to what IT you want to buy, and you have to be able to rethink. The idea, of course, is to increase quality and get faster results. Something else that is very interesting is robo-advice and robo-advisors. This has been something that has been hotly debated with startups who work with offering these advisory services based on algorithms. Recently we introduced our own functionality based on robo-advisors. You can only do this if you log in, unfortunately. You have to be a customer of the bank or become a customer of the bank to use it.
This is a first version, but it's advisory services that's based on algorithms, looking at all assets and all debts that a customer has with the bank. That is used to produce good, sound advice as to what to do. We also have follow-ups on those advice automatically when things happen, and not just with robots, but we also have people there if you want to ask something or check something. We feel that this is the beginning of something very exciting. The balance sheet. Well, I just want to say that we have a very strong capital position, and asset quality is very good. Well, I just wanted to mention that and say that the year has seen low interest rates, strong equity markets, and low volatility.
It feels like there is a big belief in the market, and I don't think there's anything that will change that image. We've seen certain signs that we've seen more activities towards the end of the year and continued good capital positions and credit or asset quality. Thank you.
Thank you, Johan. Now it's time for the Q&A session. Wait for the microphones. We remind all of you to remember to say your name and the institution you represent when you get the floor. Starting with Robin over there. Lasse is on his way with the microphone for you. Starting with Robin, right over there.
Hey, Rick. Rickard Hansson. From Nordea. First of all, the growth you see in corporate lending has mainly been on the SME side, I understand. Which sectors are drivers in this setup, and what's the outlook for large corporate lending? Second question, did you make any calculations for Basel IV that you can share? I'll take the first one. You can think about the second one, says Johan. The numbers would suggest that that is the case, but it is actually a little bit broader than just SMEs.
If we look at the different lines, like leverage finance, et cetera, it's all gone up. The entire corporate sector is up. I think it's to the tune of SEK 19 billion approximately, with small increases pretty much everywhere, on every line, but also in SMEs, small and medium-sized enterprises. This rather low increase, which feels a bit broader than just one particular factor, this is something which is not just a recovery from a rather weak Q3. We're just indicating now that the situation was even better towards the end of the year without reading too much into it right now. As for Basel IV, we've made more calculations than some of you might believe in this, and we've been doing this for a long time now.
We've heard what the Basel Committee would like to see as their final proposal. Based on what we've seen before, I think this shouldn't be translated into the actual end result. This entire regulatory package needs to be grinding its way through the EU starting in 2020. It's going to take one or even a few years before it's through the EU machinery, then it has to be implemented in national legislation in Sweden. We know that we have the Swedish Supervisory Authority and Swedish government agencies who do not always often agree with the proposals from the Basel Committee. I think in the end, it's going to be something other than what we see right now. When we're standing here and now, we feel very secure in what we've seen so far.
It's a somewhat more light version in the final word from the Basel Committee than we'd expected. Our ability to adapt is good. We're very well-placed right now with a good capital quota and good levels of flexibility for how we can deal with the very long implementation period ahead until 2027. We feel that this is a development we'll be able to manage well. Thank you. Passing the mic on to Mats please. Mats Gerdau from Handelsbanken.
Could you say a few words? Well, you said that you had a good level of customer activity in Q4. What's the situation so far this year? Have you seen a continued good level of activity? In particular, issue of securities, for example, that was fairly strong in Q4 after all. Then more on the new five-year plan. When will you tell us more about the plan?
Thank you. I'm not going to say anything about the first 30 first days of the year. 2017 was a very strong year for IPOs. It improved in terms of M&A, advisory services on acquisitions, and in DCM, and that part of operations. It's an unchanged positive picture for the year. We see a continued good level in the bank with high level of activity generally. When it comes to the plan, management and all those concerned in the bank during the course of this year will be doing two things. First of all,
Summer of 2015, we adopted a 2025 vision, sort of a blueprint on a big map to relate to when we table our regular three-year plans that we update every year. We're going to revise the plan we adopted in 2015. It's going to be about three years, so summer 2018, and see whether our commitments then are sufficient, if we need to recalibrate it in any way. Then we're going to add a few additional significant points, what we want to do above and beyond that three-year horizon. I think we can commit to saying something by the end of this year. We'll have to get back to you on that. Thank you. If you can please pass the microphone to Magnus.
Magnus Andersson.
Hi, Magnus Andersson from ABG. A follow-up from the telephone conference that you had about a week ago, perhaps we can look a bit more into the future today. The cost guidance 2018, SEK 22 billion, in spite of you selling the activities in Denmark, you have the write-offs as well with some SEK 200 million per year. Germany should also reduce costs, perhaps that you do have IT investments that you need to do. Why do you keep that guidance unchanged? Is it because you have big investment needs, and you want to use the guidance? Or is it that you want to not make any changes before you have the new three-year plan in Q4 2018? Well, both, I guess. We need to wait for Denmark to close down. We'll see limited effects now compared to 2019.
The full year effects, if this goes through, we'll have in 2019. There is no shortage in investments that we could do to increase returns and customer benefits. There is a long list, I mentioned a few initiatives, but you should not believe that it's difficult to, if you have the money, the resources to make a better bank. It's sometimes difficult to calculate the revenue. We do not want this to be a black hole. We have certain things that will happen, and we need to invest in such a way that things are good for the bank and the customers. We're doing solid work within the bank now to think about where we want to have an imprint, where we're strong in this part of the world.
What SEB is doing here, that is what we need to think about, where we want to be. Here it's cost efficiencies that we have, and that is something that we can use when we make strategic decisions. We want to be very strong in terms of capital if we will want to expand, and that is why we want to be a bit cautious now to have that flexibility. It's not like you're saying 22, that is going down to 21.6. No, that's not what I'm saying. Then another question. Germany, you write in the report that what is not being moved into the bank as a branch, that there will be write-downs over time. How much? There is no mention of how big a part of the portfolio, the time span, and what effects that will have on our ROE.
Could you give us a bit more of a feel for the road ahead, what it looks like? I think we will be able to provide more information about Germany over the year to you and others. What we have done is that we have transferred much of the support functions in the AG, and what we have there, that has been moved or sold to the branch. Then I think we're talking about a time span up to 2020, perhaps. We will be working with the things, functionality will be moved to Swedish IT platforms, Nordic platforms, offshoring in the Baltics will happen over that period of time, and the AG will be dismantled step by step. Maybe 2020, maybe it will be a little bit faster.
Over time, the AG will then be dismantled and will become something very small where we basically just have a funding license, maybe a little bit of funding and real estate. What will happen basically as of now with SEB is that we'll have a branch. From a German perspective and our perspective, that will be value created for the bank. That is something we have in place already as of January 1st. This branch should be seen as something positive, something good, and the AG now is a support side that will continue up until 2020, but will be dismantled and something you have to sort of see on the side. Question about the volume split. We basically have no business there in AG with the exception of what I just mentioned, some funding and some real estates.
It's very small today, and it will successively over the next two, three years become smaller. Most of the lending will be moved then to the branch. There are some real estate businesses still in the AG, but basically everything has moved to the branch. Then finally, trading income and by that line You moved from 1.3 to 1.5, and you have since 2015 Q1 basically been on 1.2. Is there some reason why you're below that?
It's difficult looking at the variations. We have had good treasury funding costs the last few years, perhaps that is why it's a bit higher than what we have had in our guidance. We think it's positive.
Hey, Nicolas McBeath.
Nicolas McBeath from DNB. I have a question on mortgages. You mentioned that you're growing a little bit less rapidly than the market. Looking at Q4, we had a quarter of low growth. One of your competitors has announced that they're going to grow faster than the market and adjust their pricing in mortgages. Do you see an equivalent need to make changes to increase your rate of growth, or are you satisfied with the current situation?
We don't see that need. We're happy where we are. It's about giving a really competitive offer to each customer. Sometimes you're at 3% growth, sometimes you end up at 5% in a fairly strong market. It's not that we have the realization that we need to reduce prices to get to some sort of average level for Sweden.
We deal with one customer at a time with a fairly cautious credit policy. Thank you. A more detailed question on NII, the net interest income for Q4. SEK 64 million more positive on lower fees on the deposit guarantee scheme compared to Q3. What's the underlying here? Do we expect to reduce by SEK 64 million? How should we think? That's a good question. I'll start, says Johan, and then the others can add to what I've said. This is the charges for the deposit guarantee. It was lower, and we saw the impact in the fourth quarter. Depended on the assumptions initially, of course. If you assume that you would get it in bulk over the year, you can look at the annual number, and there's no need to make any adjustments.
If that hadn't been the case, you probably need to divide it by four if you're an analyst and see that we had a slightly better net interest income for the first three quarters and a change for the fourth quarter. That's pretty much what I'd say. I think it's important to look at all the other items as well. In fact, in markets, for example, if you look there, you see that the NII is in fact down there to the tune of SEK 400 for the year.
SEK 1.1 billion, says Johan.
Yes, this means that there's a lot more within the bank which has been performing extremely well in order to compensate. It all depends on your assumptions originally, as Johan pointed out. Thank you. You can pass it on to Jens.
Carnegie. Ann Colleen, Carnegie. You've talked about the cost cap for 2018. You had an objective as well for operating profit. Do you still have it?
Well, it has been documented. Of course it's still there. It's always difficult in advance. We ended at SEK 22.7. We had talked about SEK 24. Of course, we can compare those numbers. We have assumptions about increased interest rates, for example, that never happened. We're working on it.
Okay. The credit growth, things are going pretty well in Sweden. If you look at demand, what is it like? What do you think? Just to get an idea of what you think about 2018.
Demand for what?
Well, I'm primarily thinking about mortgages.
Well, we do not have any strong views when it comes to a market call, if I may say that. We have to remember that it takes time for these things to change. It's slow. It doesn't move that easily. We've seen a 10% decrease and decreasing activities, so there are no surprises there. We also have the new amortization requirements that we'll see as of March 1. Perhaps we'll see a slight increase before then to get in, so to say, before March 1st. We've seen that before, that we have certain fluctuations there between the left and the right side. Basically, the situation in this country is very sound, also for households and mortgages, and there will be a big need in the future as well for building more, looking at income, decreasing unemployment, GDP, et cetera.
I think that we have a good protection. We will not see any dramatic downturns.
The question. Well, last question. Credit losses are exceptionally low in Q4. Looking at large corporates and looking at 2018, do you have any comments there?
Well, it has been exceptional for a while, and now it's going down a few basis points. It's within a margin of error, though. I don't think you can use that to look at a longer term. There is no concern at all shorter term, and we see that margins are higher, and we've been through a difficult situation, for example, Norway, and we now begin to see the light. Short term, things are good, but I don't think that you can expect that low level. You also have to remember that we're entering into a new regime with credit losses, and we basically do not have anything from the past we can use. We have to look at Q1, and then we have to learn from there.
Hey. Andreas Håkansson from Exane BNP Paribas. If we go back to the net interest income, you talked about the margin on lending and the volume are positive and a negative impact from the deposit margins. Could you tell us about the STIBOR impact in Q4 and how it impacted the deposits? If we go into Q1, STIBOR is pretty much at the same level as the beginning of Q4. Do we have the negative impact behind us?
I'll go first, you can comment on STIBOR. If we look at the price against market for shipping, for real estate, for mortgage, SME lending, et cetera, we see that there are no major changes, more or less. It's just moving at level. It's the margin measured against customer, and it's stable. We also have funding costs, of course, impacting what remains and what doesn't. We've seen a positive impact in that our funding has been better than the ones we did a number of years ago, and as they mature, we've managed to achieve an improvement. The STIBOR impact in Q4, when we make a change between the bank internally and the different divisions on the deposit margin, it will have an impact throughout.
It appears as if it's the customer-driven margin, which is lower and with a smaller impact on the bank internally. That's a movement, and it takes longer when you have the STIBOR impact on the lending side. We're going to grow into it. It takes a lot longer to see the impact there. Because we're funding for a longer time horizon, I would actually reduce the sensitivity for short-term STIBOR impact. The repo rate is more relevant, the policy rate, than STIBOR generally. As Johan mentioned already, it's important to bear in mind that both lending, as Johan explained, and how the markets NII and treasury NII look like with this very flat curve. We've reduced inventory levels, of course, considering the current situation. We see lower levels of activity towards the end of the year.
You need to include all those factors when you look at this.
The impact is mostly seen in retail NII, I assume.
No, I would say that you also find it in large corporates and institutions.
One final question. The maturities which impacted favorably on funding towards the end of the year, you probably had things that would impact more this year than last year. How much more can we expect there?
I think we said in Q3 that we had maturities in September, I think, which more or less made us earn about SEK 100 on lower funding costs as a result of that. We said that for the next quarter, we expected this to continue. I think that's pretty much more or less where we are. We had an SEK 81 which matured in December. I think we refinanced that in March. Give or take SEK 100, +SEK 100 possibly.
I think that sounds a little bit high if you ask me, but nevertheless. Plus, minus something like that?
Chris.
Well, I have two questions. One having to do with income growth. I believe around 5%, where you see better primary market activities, for example, and Q2 and Q4 being very good, and then you had a letter combinations. 5%, what do you feel about that growth level for 2018? Is that less of a challenge or more of a challenge? We have the resolution fund and other things. Well, those costs will go up maybe SEK 650 million, and then you have SEB Pension in Denmark, and that will have maybe the same type of an impact this year. What is your thinking there? What will drive what, or what would have to drive what to manage 5%?
Well, I do not really like to talk about 2018 and performance compared to talking about five. It's interesting to look at securities and markets and looking at the industrial side or the sector where we see big banks with heavy downturns. We need to decide whether there is a real need for these types of services for trading raw materials, et cetera. We believe so, but there is a cyclical component, also a structural component that we could discuss looking at that part of industry where things seem to be changing. Two components. That, and there is no big contribution from large corporations that contributed to the 5%. It depends on what you believe will happen about these two aspects. Well, looking at pipeline, et cetera, what did do well, if those things continue to do well, then of course things will improve.
Thank you. Another question having to do with the capital levels. You say in your report as well, and you have been saying so for a few quarters, and you've also said that it takes a while to get more information. The capital situation in SEB, when do you think that the board will say, "No, we need a buffer that is 150 points or more compared to the capital requirements." How much more information will you need to make such a decision, considering the fact that we will not really know too much about Basel IV until 2020? Given all the political negotiation that will have to be done, I can't say much about the board and what they will do, but the plan I can talk about. Basel is one factor, but it's far removed.
We are going to discuss our new thinking about the bank with the board, and all these components will be included, and then the board will have to make a decision about capital requirements, management, buffers, et cetera. We're looking at these things. What we're saying today is that we're saving. We want to have some dry ammunition, so to say. We will then also be able to look at real management and strategic decisions. You cannot say anything today. Do we need to wait for Basel IV and that decision, for example, before you change the buffer level? I can't say anything about that.
Peter.
Peter.
Yeah, Peter. Thank you. Petra Kassov, SEB Equity Research. Two questions. One has to do with employees, and secondly, corporate lending. On the number of employees, you're currently at about 14,900. If we go back one year from now, you mentioned that the reduction would be more or less on par with previous years, implying that you'd see a drop by about 400 in headcount during 2017, ending up a total drop of about 100. What are your ambitions moving forwards? What numbers of employees towards the end of 2018 or early 2019?
Johan.
Well, I'd like to say pass on that question until we've finally determined on our plans beyond 2018. However, disregarding that, we still have the same trend that we see. We certainly won't be more, but 2017 in many ways didn't turn out as expected. We needed hundreds of people to get MiFID II and IFRS 9 through and working with everything that needed to be focused on. We needed a lot of hands and feet available to work with extremely complex issues, updating the systems of the entire bank, in fact, to adapt. That's really the only thing I'm prepared to say on that question right now.
Perhaps I can just add that we do not have any specific targets on the number of employees. We have profitability and customer satisfaction and cost targets. However, the number of employees is just one of a number of different variables that we have as relevant, which is to focus on for everyone in the bank. We've no particular indication there.
What about corporate lending? My second question. I feel like you are slightly more optimistic. After all, you showed us the graph of corporate lending over the past few years. If you look at the one-year lending, it's up somewhat. If you look at two years, much bigger upturn. Look at three years, however, in the same graph, you get the impression that it's unchanged over a three-year horizon. Where do you feel more confident? Where are these green budding signs of growth going to come? There used to be some of them before, some hopes in the past as well, but they didn't always come true.
It's still hopes, and you saw the picture that I showed you. It's difficult to draw any far-reaching conclusions, but I did mention that it has been a bit surprising that it hasn't grown even more, considering the macroeconomic growth situation that we've witnessed. There is a type of argument which changes over time. The macroeconomic approach to capacity utilization as employment is going up and capacity utilization in this country and industry and globally going up. My interpretation would be that the likelihood is going up for an increase, but there has been some disappointment in that type of analysis. We haven't seen it. A few green budding leaves, absolutely, and hopes which we're presenting, but nothing more than that today.
Hey, Rickard Hansson from Nordea. A couple of follow-up questions. The SEK 24 billion, the objective for operating profit, is there any thinking, perhaps external investments that will contribute, or are you just thinking internal investments that are going to contribute to possibly getting there?
That is next year. We have a ways to go. We're basically thinking organic. We have no plans to do anything else to close those holes. Of course, we can never say never, but we have accelerated, and we have focused on transformation with the AG that is being changed to branch and also the changes in Denmark. Of course, we have to use that where we see long-term possibilities to improve customers. 70% of the profit adjusted for non-recurring effects is being distributed. That compared to other banks. Handelsbanken has talked about an extraordinary dividend to get to the interval. You will be the most conservative bank, perhaps, when it comes to dividends. What is your thinking? Because your capital buffer is just as strong as the ones in the other banks.
I cannot really talk about the other banks, but we have a dividend policy that has been decided upon, and that is to pay 40% or more of the profits. We usually talk about our strong commitment and that we want it to be progressive over time. It should increase progressively over time. Now we have a 5% increase, i.e. SEK 0. 25 per share, and we feel that that is good and appropriate for us living up to that promise and to try year on year to increase the dividends. Thinking about our strategic work, perhaps we also want to have a little bit extra in the margins to be able to use, looking at capital position, risks, cost levels, and now we have that freedom to do things.
Another maybe more detailed question. Looking at inflows and outflows under asset management, it was negative in Q4. Have I missed something like a restatement, or was it just that, well, it happened?
Well, thinking about asset management, you also have to remember that it could be how you define things. Something goes from one item to another, maybe move to real estate or somewhere else, you have to look at that entirety, the entire picture. Outflows, you can assume from asset management has gone to other asset types.
Okay. I don't see any further requests for the floor. Individual interviews with Johan will begin now outside. Thank you all for joining us today.