Earnings Call: Q3 2017

Oct 25, 2017

Afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the Q3 2017 Results Conference Call. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. I would now like to hand the conference over to your speaker today, Jeroen Tardjevic. Please go ahead, sir. Okay. Thank you very much for that, and welcome, everyone, to this teleconference. I will just give we will open up with Johan's short introduction and summary of the results, and then we will open up for questions later on. And we are a little bit running tight on time today, so we have to end sharp at a quarter past 2 Swedish time as we have 40 minutes 45 minutes. So we will try to do this in a short and sweet manner. Okay, Johan, over to you. Thank you, Jonas, and thank you, everyone, for dialing in. So we now just reported our 3rd quarter results, and the context for this result was a pretty benign macroeconomic environment during the Q3. We had continued low interest rates and low credit spreads helping liquidity in the system. We noted that the stock markets were actually quite down in the first half, not meaningfully, but still noticeably, and then recovering back up the second half of the last quarter, ending up roughly at the same level as we entered into the Q3. And that if anything, there's been a little bit of solidified view of the synchronized macroeconomic uptick in the global economy. All three things particularly impressive given that it's been a very politically and geopolitically volatile quarter with everything from North Korea, discussions about Iran, elections in Germany and the post election uncertainty, Austria, Brexit, Catalonia, etcetera. But then going to the first page, we look at the 1st 9 months. And here, we will, of course, look at our comparable numbers when we talk about changes. Income up 7%, costs up 1% in the 1st 9 months of the year, in line with our cost cap of SEK 22,000,000,000 for this year and next, resulting in a 13% increase in operating profit year over year. Credit loss level at 6 basis points continues to be very strong and unchanged cost income of 0.48%. We had a 30 basis points increase in our core equity Tier 1 ratio and an increase in return on equity. Flipping to the next page where we look at Q3 isolated. Q3 is, of course, a seasonally weaker quarter as July August tends to be very low on the client activity side. And in that light, we must conclude that we post a decent quarter with only 2% reduction in income and 5% reduction in operating profit compared to the Q2. Year on year, we ended up around 3% higher in operating profit than last year. The same picture on the quarter isolated when it comes to credit and credit loss levels and cost income and common equity Tier 1. However, return on equity is marginally below in the quarter isolated compared to the 1st 9 months, much explained by the seasonality in earnings. Going to the next page where we call the net interest income development robust. You can note it's up 6% year on year for the 1st 3 quarters. However, the change between 2nd and third quarter was less, and that was only 3% increase. We've had a positive contribution if you look at the year on year numbers from a marginal increase in mortgage margins and a marginal increase in lending volumes. However, between the second and the third quarter, the most recent data that we conclude and talk about today, we saw flat margins across most areas in the loan book, corporate lending as well as household lending in the form of mortgages and volumes being roughly the same. In the NII, we also have EUR 377,000,000 of costs higher than previous year associated to the higher resolution fee. As you know, we are paying 9 basis points this year, and this is further to be expected and planned to be increased to 12.5 basis points next year. And our current estimate is that we will pay just shy of SEK 2,000,000,000 in regulatory fees for the full year of 2017. Switching over to the fees and commission that had a typical seasonally slower quarter. We can see that DCM, ECM, M and A, the investment banking areas, has been a strong contributor so far this year. However, as the lending activity for the large corporate space has not really grown, we didn't get any contribution to speak of from that. Custody mutual funds and payments, they were all up on a year on year basis with about SEK 100,000,000 each and ended up being so far this year, we're up 80% in fees and commissions. It is very difficult to draw any strong conclusions, but we do point to an unchanged view of higher activity within our investment banking field when it comes to the pipeline for the rest of the year and next. So nothing materially has changed. But there is, of course, a very much of a slowdown in activity and billing through July August in this country. Looking at net financial income, up 5% year to date. We come in at 1.7%, and this is particularly interesting to see in the context of a new record low volatility in the market, which typically is positively correlated with this number. So everything else being equal, that's a fairly healthy performance for this quarter. However, we do have a one off when we talk about the credit value the credit value valuation changes, which affected this quarter positively to the tone of EUR 291,000,000 isolated for the Q3 this year. Our favorite page is the next one that depicts how we think about our business model, and that is to keep costs flat or intact and that we have an increase in revenue also back on track that makes profit expansion happen. And here, I'll just restate that we still continue with a cost cap for EUR 17 of EUR 22,000,000,000 and for EUR 18. I won't spend much time on the next slide, but we do try to have some theme, and this was really aimed to show how we've transformed and driven higher productivity in our operations area, a smaller amount of people today compared to 7 years ago and process more than twice as many transactions. We've gone from 121,000,000 to 255,000,000 transactions handled by operations, and we've also increased the tendency of putting professional operational people in our center of excellence in shared service centers to a greater extent. 90% of we now estimate is done straight through processcompletely optimized, and that is, of course, part of the reason why you have been able to more than double the size of transactions concluded without increasing in sales. 2nd to last page is just concluding that we continue to have a very strong asset quality and a improved marginally, if not, but an improved capital position with very good liquidity. I thought I'd just mention a few words on IFRS 9 in Basel. IFRS 9, you all know we are in the last phase of concluding modeling it up. And as of 1st January 2018, it will be the new way to account for loss reserves. We will not indicate any numbers. We are not yet done. But we would say that there's been a lot of rumors and other speculation about what it means for European Banking, and we will guide to that. The effect is expected to be less than has been discussed in Europe on average. And we feel very comfortable given the strong position on this balance sheet slide that we are starting off with. So not expecting any major event around it. And it's going well when it comes to from an implementation standpoint. Secondly, I think there has been an increased debate in discussion around Basel IV and what's going to happen. We all saw rumors that they had agreed something to the tone of 7% to 2.5% standardized risk weights a few weeks or maybe 1.5 months ago, but nothing has formally come out. I did my first visit to the IMF and World Bank Conference in Washington and got the opportunity to meet a lot of regulators, other banks and experts on the topic. And my personal reflection is that everyone expects Basel to come out with something in the near future. But the uncertainty of what is actually going to be implemented is very large. There are political forces in play, not at least from the French, and that means that when this goes through implementation process in the EU Parliament and the Commission, then to be adopted by law, that might be a more tricky road than one before this trip could potentially expect. I think there is a lot of uncertainty on whom we're going to think what about this. Different countries will have different views, and there's also a divide between Europe and the U. S. On this topic. Regardless, I think we are finding ourselves in a very strong position to take anything that might come out. We also see this to be a very long process. Even if something come out in the very near future, it would most likely be years before we know exactly how it's going to be implemented and then there are years before it's actually implemented. So this is pretty much an exercise in being adaptable and prepared, which I find us to be very much so. I think I'll stop there. And if you have further questions, we'll take that on the Q and A. And the last page, I will just say we have some recent developments that we've pointed to. I want to say it was a solid, rather uneventful quarter for us. The low volatility definitely hurts in our markets division, while we saw activity hedging and risk management being of lower magnitude. But it did help in a way other more stable driven businesses such as Investment Banking and then continued very strong capital position and robust asset quality. And I think I'll stop there. Okay. Then we open up thank you, Johan. We open up the line then for questions. Thank And your first question comes from the line of Johan Ekblom. Can you please ask your question? Thank you. Yes, just one sort of broader question and then a detailed one. If we think about the outlook on the fee driven businesses, I mean, you say that the your long term outlook hasn't changed. But yet I think, generally speaking, a lot of people were disappointed with how seasonally weak Q3 was. So can you maybe talk about the outlook? And I guess in particular in the large corporate and financial institution space, what kind of upside do you see when we look into the maybe more active quarters in Q4 and in particular first half of next year? And then secondly, just to detail, there's a sharp increase in depreciation in the quarter. Can you just talk a little bit about what drove that? And I think this is sort of a new run rate we should expect going forward. Sure. Thank you, Juan. If I start with some comments around the fee outlook. First, I'd like to just describe what how we view the current situation. And the M and A, DTM and ECM, traditional PE only driven businesses had a very strong Q2 this year, and this is really where seasonality kicks in, in a big way. What has not been performing on the fee and commission line, not previously and not this quarter, is the fees that we generate on the very large balance sheet that we've committed to large corporates. So that fee has been it has been lacking up until now and continue to be lacking. And just to think about the loan book that we have for LC and FI, it's more or less stable. With an average maturity of 3 years, you kind of run you refinance that book a third every year, and there, of course, is some downside stability to what you actually make on it, but we haven't seen growth. So I think we could marry those 2 exactly that the underlying base not being supported by the fees generated from the loan book hasn't been there. Hence, the seasonality is more acute or more visible than one would hope in the normal case. Now the outlook for Investment Banking, M and A, DCM, DCM, and I will also put in acquisition finance there, The private equity driven is unchanged. And we've had a pretty positive view on market activity and pipeline several quarters up until last quarter that still been disappointing in terms of converting into real profit. But last quarter, we did have one. We don't draw too much conclusions from this, at least in the week. As you know, July and August is what it is. On the other piece, the kind of where we're not firing on all cylinders on the loan book, that continues. There's no sign that this will materially change from here and out. So we're kind of motoring on in a sideways type of movement and giving some stability to the line. And of course, the big question here is, will corporate demand for borrowings increase? And then something we have some real operational leverage here, so to speak. And thirdly, the area that I didn't these are the 2 big ones is, of course, that the markets area also drives fees and commission on several of the areas. So that was the delta weaker this quarter compared to many other quarters. So that also could be an explanation why you find if that's what you found, the seasonality to be slightly accentuated. And there is more of a anyone knows where that goes. So we don't have a pipeline and visibility to the same extent. It's more a function of financial institutions doing large moves in their portfolios, volatility being introduced and or markets performing well. And depreciation, you want to Yes. Yes. And I think the question there is, as I said, it's not only depreciation, it's also impairment test of other intangibles. And this is kind of, I would say, in the new world and you are taking capitalizing more over the balance sheet of IT in nature, you are then also exposed to more frequent impairment tests on that. And we are talking about SEK 100,000,000 of the top of it. It's not a new run rate. It's more that the impairment has come in more frequently. Perfect. Thank you. Thank you. And your next question comes from the line of Rilis Palermo. Can you please ask your question? Hi, good morning. Thanks for taking my questions. The first one is on the corporate lending side, which has, you pointed, hasn't picked up yet. Is there any indicator which makes you think it will change anytime soon? And the second part of your question, Tim, on corporate lending is regarding the real estate management. And if I compare it to the first half of the year, it seems that the trend is reversing. And I was wondering if there something deliberate in there in reducing the portfolio? Do you see any risk coming? Thanks. I missed the second part of the question. I'll start with the first, let my colleagues pick that up. So on corporate lending, I would say the signals there are 2 major force drivers behind this shift that we all would love to see. So one is, of course, that the debt financed organic growth, our corporate, our clients do is picking up. And we have seen a quite disappointment in corporates in the Northern European area, global companies domicile in the Nordic, not borrowing despite investing a little bit and doing very well in a benign macroeconomic economy. So that's the one. And we don't have any real signs right now that anything is changing. So this is a little bit sideways movement moving on. The other big driver would be something around more transformational transactions, M and A, got private lending M and A. There has been an uptick. But of course, in the second in the Q3, not a lot is happening, but this is really related to the investment banking pipeline. However, it's much more isolated events. It might be 1, 2, 3, 4 deals in every quarter that makes the difference. And there's some optimism around that, but it won't really change the whole thing unless the first point happens. So a little bit of a cautious view. 1, I will make some hopeful comments if we want to see this pick up, and then you can do your own assessment if you think this will happen. 1 is, of course, if capacity utilization in the corporate space in globally is at the level right now that further growth needs more capital formation and hard investments, not soft investments. That could be a very good shift. And some people are saying it's coming sooner or later. This has been the point about capacity utilization being fairly low all the way since the financial crisis, and maybe something's going to happen. We do have a synchronized global uptick in growth right now, which we haven't seen for a long time. So when all areas, or regions are growing, something might happen. And the other side is really if you have a strong belief in further M and A and transformational transactions. So cautiously optimistic. The second question, I think the other Yes. Still on the corporate side, I was just wondering on the real estate management, why is there a shift in the trends? It was decreasing or was flat this quarter compared to strong growth before. Okay. Now real estate, of course, very topical. Sweden has had a very strong growth in real estate and mortgages and housing prices everywhere. And we're finding that the last maybe 2 months, there has been a cooling off for sure in the Swedish market. You can also see that in the data, both external and also in our results today, that it's kind of flattened out. And we are actually hoping that this is a little bit of less growth in the marketplace, and we're very happy with our current position, not feeling anything close to being worried about exposure. We're very contained. Thank you. And then lastly, on the housing market, on the mortgage side, could you shed some light on the structure of the book data such as the percentage of flat compared to single home, city exposure and other? And what is the percentage of new loans where customers have a debt to income ratio above 4 50 percent? I'll ask Jonas to start with the answer on this, and I'll tell him if required. Yes. Thanks for that. And I think when I come to the mortgage book, first of all, I think you have to look at the underwriting criteria that we have that we're stressed out because I think we have been the bank has started 1st with the harshest underwriting criteria, both when it comes to leverage and also the upper leverage when it comes to the income in the co op as such. When you talk about the average LTV in the portfolio, it's low 50s, It's 51% on the portfolio. And as you know, we're growing less than that. If you are now looking at when it comes to the we have not provided a granularity on the indebtedness in the portfolio across the different what we have stated earlier is that we have said that every 10th application that is coming in as a new application is then hitting our underwriting criteria of 5x indebtedness of the household income. So that's, so to say, serves as an early warning signal. And then you cannot model the credit and score it and just go through the system. You have to have go up one level in the decision here to improve the credit. So that's where we are. And of course, with the house price inflation that we have seen, of course, this has been increased over the last years if you have house price inflation of 10%, and you haven't had value inflation to the same extent. So that's where we are on the granularity. And I'll give a map an external data point to complement. You must note that 1 out of 10 is 5 times loan to income. The finance inspection, which we met the other day, introducing the 4.5% is claiming that the Swedish economy has a 15% of the mortgage being in that category at 4.5% and above. And then you can, of course, make an assumption if we differ a lot or a little from the Swedish average. We are, of course, a little bit more in the large cities and have a relatively better off client base than the average, and I'll just stop there. Thank you very much. Thank you. And next question comes from the line of Jan Wolker. Thank you. Please ask your question. Yes. Jan Wolker here, Credit Suisse. And then thanks for taking my questions. Just a follow-up from the presentation in Stockholm this morning. So first on corporate margins. If we take a step back, so we haven't really seen, I guess, much repricing as a consequence of higher corporate weight. When you look ahead a year or so, can SMB do anything? And are you planning to do anything looking into the SME portfolio perhaps and trying to address that, lift the margin level as a consequence of higher capital requirements? How do you think about that if you look a year ahead? Or is it not the demand for credit strong enough to do that? So that's my first question. And the second one is just on the model approval that Acelity still expect to get. Do you think that, that still will be largely neutral in regards to the buffer? So RWA inflation is largely offset by a lower share requirement. Thank you. Thank you. I can start with the margins, and I'll do this little expoce. We start with large corporate and corporate margin, and there is less reason to believe that you can price the market regardless of what risk rates you have compared to SMEs. So it's more it still will be relevant as there are many international banks and even if some of them were mostly European, get the same type of economic incentive to carry more equity, of course, we would like to carry it out. But the trend is not visible. The market is flooded with cash, competition is high, demand is low. So there's no real bank right now, I think, who has any limitations or kind of liquidity issues with capital out of it to extend credit. So that's going to be the one where the market on average, you will follow it and try to be operationally efficient, have good funding sources at a reasonable price, and then you can do that more profitably than the rest. So actually look at the input costs to conduct your business and think about it a little bit like a given market price, and we can all assume it's going to go up or down. But right now, we are at a relatively low level in credit margins across the whole space. On the SMEs, you have a more immediate, of course, bilateral possibility to change the price. However, you do it in competition with another bank and it's very digital. If you're too high, you lose it. And if you win it, you get the whole thing. Again, there is very little to point to that the overall credit environment, even for SMEs, are climbing up. So this is the kind of the market margins, the gross margins in the market on credit spreads. We will, of course, always aim to offload all regulatory concerns or burdens that we will incur for carrying more capital in a very commercial way that makes sense for all involved parties. So that is unchanged from before. And not a lot is happening here right now. I think it's a little bit of a wait and see. And I know other banks are talking differently than what we do, saying they see the opportunities. We don't see that. Jan Erik, do you want to do the model improvement? Yes, sure. Yes, Jan. I think the applications have been there for some time now and they're working through it. I think, yes, we do think the net effect is going to be largely neutral considering the fact that we've lost a buffer sitting in our balance sheet of approximately BRL 15,000,000,000. I think we can compensate roughly for that amount. I can't see what's precise on that until I see the outcome from the supervisors. But there won't be anything material anyway. Okay. And just a follow-up question, if I may, there. When you look at the lending to the commercial real estate space in SOB, Could you shed some light over the criteria that you're using when you lend to commercial real estate, so shopping malls, etcetera, and then to property developers where the loan is secured by residential real estate. So in terms of LTVs, average LTVs or the range of LTV levels that you're working with as well as operating cash flow over interest cost or any other cash flow related metric that you set up? Thank you. Jan, Jan, thank you. I can start, but I can't give you the numbers on the top of my head. So I'll ask if Jonas or someone else can fill in. So we'll start with commercial. First, we are definitely cash flow based credit analysis house. So the LTV is kind of the second thing that we look at. The first thing is really what cash flow can this property generate, and that's the number one. We have a restriction on LTV. It's different from different commercial areas within the commercial real estate. We have amortization requirements and a pretty high standard on covenants and or general terms and conditions. And we have definitely said no to some business over the last few years if you compare us to someone else who has played much more into this market. We're also seeing that it is definitely a market that today performs okay ish, but we are at the point where someone needs to call who knows this stuff, where the loosening of structures is becoming a problem. And it could be around here and out. So there is some indefinite bull market symptoms in that space as well. You mentioned shopping malls or shopping centers specifically. That's been very topical, and that's a very microeconomic type of sub segment that one needs to be very careful with. This is driven by the ever increasing 15% of retail sales going through the web with home deliveries, and we've seen the trends in the U. S. And if I just say that we've acknowledged it and we adapt from that little cautious comment, You can understand our views on that sub segment of commercial. On property development, we actually have done very little if you think about the newcomers on in this space. There is an old traditional large construction company where we do them. And they're very different because you can help them to find a land plot and then you kind of have a very good corporate credit. We like doing that. That's not a problem for us. But you have these smaller residential developers. You might have seen in the press and in the stock market, they've had it pretty much meeting the last few weeks or months. We have very little exposure to them. And the part of the reason is that they dictate quite a lot of debt to be put into the co op for them to be sold to retail customers. We actually put the double leverage in. So throughout that system, we try to see through it, both in the construction phase, but also in the end, where a personal individual will have to buy it and have double leverage because the co op also has some leverage. And that's why we've been not really playing there. If you were to go into the details, I think that the rating grid that's or the LTV grid that we are you want to be alluding to that has the maximum LTV of 65% in the best 50 center areas in the AA locations and then it falls down the further out as we go in locations. That's where we are. And if you look at the relative portfolio strategy, you know that on the side where we have it. So I think location is the key for apart from cash flow, of course. Okay, perfect. Thanks. Thank you. And next question comes from the line of Ronit Klus. Thank you. Please ask your question. Hi. I had a couple of questions, please. It's Ronit from Citi. On the corporate lending side, so getting back to the fee income, I note the comments you made earlier about small number of big deals. But could you just clarify, is it just number of deals that's less, but also to tie into your earlier comments as well about lots of liquidity around competition, margin pressures? I'm just curious to know, is that fee income pressure margin related, volume related or both? And so I guess a big picture question, I guess you've had a lot of questions on this call and I guess you always do on corporate loan growth outlook. And I'm just wondering if this is just the new normal post balance sheet driven recession that we had at a global level, not in Sweden, but at a global level back in 2008, 2009, it's ages ago, but corporate's over levered and corporate treasurers, CEOs will remember that. And should we just stop expecting corporate loan growth to pick up? And if there is going to be fits and starts of credit demand will probably come through DCM or the CMO operations. So I'm just curious to have any color on that. And the final question is one of just a small one of detail. When I you probably discussed this in your release, but the deposit number, the client deposit number was up a lot quarter on quarter and it looks like it's been driven by a few one offs of corporate center stuff. Can you just give us some more color around that please? Is the delta quarter on quarter of €140,000,000,000 Thank you. Okay. Thank you. I'll start with elaborating on margin volumes for the Elginify loan book. So we can start with for an individual loan, the margins are stable. We are not charging less or making less compared to, let's say, the last year. It's been a fairly flattish market. So that's on a single number. On volume, that has been underlying flat, which is the normal base. Just a company borrows €1,000,000,000 and the next 3 years or 5 years later, they do another €1,000,000,000 But when they grow, they increase it. And when M and A kicks in, you have both an underlying kind of at least compensation for inflation on the company side. And you have some transformational thing in the portfolio that really asked for multiple 1,000,000,000 of dollars to be financed, and those have not happened. So I think I'm saying it's the growth required in volumes that explain why fees and commissions don't get that little contribution or not as little, it's quite a large contribution from the fees that you charge anywhere between 10 basis points and 2% when you arrange a loan at the upfront investment banking part. Then of course, net interest income is fine, it's stable, and that's more subject to the funding cost if that kind of expands or not on the margin where you have that type of market. If you then it's a philosophical Is this the new normal? Should one expect not to shouldn't you wait for effect? I think it's not the new normal. But I don't think you should we try to be very open that we don't see any signs in the short run for anything changing, but it could change. And here is a potential explanation that I found find particularly palatable. If you have a parallel shift in the way you invest in an economy, and maybe this is the first time we do it in the shape and form global economy is doing now, and that is I'm just looking at our bank. We are investing now EUR 2,000,000,000 of IT forward leading development money. None of that is really traditional capital formation that require us to borrow any money. And I think most companies are having a higher propensity of their investment in things like data services, engineers and or data warehouse or software technology, etcetera. And that we know has a lower propensity of requiring debt financing. The classic capital formation, building a factory or expanding geographically or hiring a lot of pet people and getting new premises, that is a very good thing for lending more money. And if it is, it's a parallel shift. During that parallel shift of I'm just making these numbers up, but it's going to be 10% of investments before and now it's going to be 30% of investments. During that transition, you will see very good growth, good macroeconomics, but you have very little loan demand supporting the growth that companies are able to generate. And this is really me trying to be an economist on a good day. Intermediation, you mentioned on DCM, that is very meaningful, but not when we look at a bank like us quarterly or annual result. It's going to be much slower, the disintermediation of the bank loan both into the capital market. But it is, of course, how we recapture it in the fees and commission line on the bond origination side for this part of the world. And I think it's a very slow but forceful trend that will continue at the Capital Markets of Europe will go towards the U. S. I've been doing this for 20 years. I was a bond originator in the past, and it's always for 20 years been a disappointment in the speed. So it's only a very few group of the high investment grade companies that become frequent issuers where it has a meaningful effect in the short run. And I wouldn't overemphasize this intermediation trend when it comes to understanding the volume growth of loans in Europe or in SEB. Deposits. Deposits is just a normal usually in customer demand. They would like to trade more deposits with us, especially within financial institutions, and then we are placing them in safe central banks. That has been driving up. It's nothing you see the seasonal patterns between Q4 and Q1 and then Q2 and Q3. Right. So these are customer deposits but not in LCFI, they're in the corporate center? Yes. It's institution. Yes. Okay. Just to pick up on that earlier point about on the loan side, on the corporate loan side. And I know we've been waiting for the last 20 years for Europe to get more disintermediated. But on that more specific point about the type of investment that's happening and we're all playing a big amateur economist, us as analysts as well. But I'm just wondering, I mean, this is a multiyear trend, right? I mean, I know where we are that, if it's going 10% to 30% or we're in a multiyear trend. So I'm just wondering if this whether it's short term or medium term, whether or not if it's going to be IP driven, intellectual property driven investments, whether at what stage that feeds into large corporate loan growth or CapEx driven loan growth. It doesn't feel like that's imminent over the next few years. No, I would I would that I mean, this is now a speculation, and Georges is as good as mine. But I think there are 2 things. I pointed to 1, that is when do we kind of when do we stabilize in IP investment as a proportion of fixed capital. The other one is, of course, your own view on capitalization because here, I'm maybe then an old economy, but I don't think you will have a synchronized global GDP growth for many years without more services than produce or product, meaning they need to be performed for the population that want to consume them. And all those things need factories and transportation and everything as we know it, and that needs capital. So I don't think we have a fundamental shift in how economics work. I think there might have been a parallel shift that is of semi permanent nature. But once you go from most of that is immediately associated with growth to something else. Capacity utilization, when that hits the ceiling, which we are now seeing in labor markets in some countries, we're seeing a scarcity production volumes and finding good staff. At least that signals to me that we are not having as much free capacity in the system. That could be the trigger. And that, I think, could come anytime. I don't see any trigger points here and now. Sure. That's clear. Can I just go back to your earlier, really interesting comments about your recent trip to DC? Roni, sorry. We have 2 we only have 4 minutes and we have a couple of questions on the latest that you'd like to I'll take it offline. Thank you. Thank you. All right. Thank you. And your next question comes from the line of Jacob Kruse. Thank you. Please ask your question. Just I guess one question. The so you said you're focused on the big cities. Your clients are a bit wealthier than the average clients. Does that at all filter into you being more active in the high end residential development space? Or are those things just not related? They are actually not related as the high end residential space is it's actually a unique decision a bank could take if you want to play in those when they're constructed compared to if a wealthy client of ours in the personal banking in retail then buys 1. They are actually separate decisions. And when we look at the residential construction, we are very conservative. We're also conservative when the wealthy client of ours that would typically have beat our average client comes in because we will model up the client's ability to pay interest rate, including higher interest rates in the co op. So we've actually been not playing there either, even for our clients in some instances. And have other major banks play there? Or would you say that's more specialist sport that the nontraditional banks have been active in? No. I don't think you can draw that conclusion, but I don't know. Okay. Thank you. I think it's inconclusive. We'll take there. Thank you. And no further questions at this time. Please continue. Okay. Thanks a lot for this, and sorry for cutting it short. And if there are any other questions, just reach out to us, and then we will get back to you then at year end. So we will we have now released the financial calendar for next year. Okay. Thanks all for your interest today. Thank you. Thank you. Thank you. And that does conclude our conference for today.