Earnings Call: Q4 2016

Feb 1, 2017

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to today's Annual Account 2016 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 must advise you that this conference is being broadcast today. I would now like to hand the conference over to your speaker today, Jonas Soudendly. Okay. Thank you very much. So welcome everyone to the telco for annual accounts 2016. And as usual, Annika will do a short introduction to what we said this morning, and then we will open up for the Q and A. So please, Annika. Thank you very much. I'll move directly to Slide 2, the highlights. It's been an exceptional year in many ways, and each quarter has had a different character. Year in many ways, and each quarter has had a different character. We operate in an environment with low or negative interest rates, and this seems to be continuing actually longer than we thought. And we'll come back to that. The first half of the year was characterized by falling stock markets. But after the summer, stock markets and the sentiment improved. And at the same time, we had several unexpected events that created volatility in the markets, which was good for us. Throughout the year, our customers have increased demand for advisory and risk management services. And during the autumn, the level of activity clearly rose among our corporate customers, and we saw and are seeing an increased demand for those. We continue to see risks in the macro environment even though the growth in the global economy has picked up a pace a bit. And during the year, we have further strengthened our resilience and asset quality remains very good. On Page 3, this contributes that today we can report an underlying profit of SEK 20,300,000,000. As we stated in previous quarters, there are items affecting comparability for 2015 2016, and we will exclude those effects whether positive or negative. And for simplicity, I will then present the result of underlying operating profit. Excluding the following items, income fell 3% in 2016. Costs were unchanged, and operating profit decreased by 7% to the SEK 20,300,000,000. Above all, this is the effect of negative interest rates excluding SEK 900,000,000 negative market valuations and the stock lending business that had created headwinds this year compared to 2016. Return on equity was 11.3%, and the Core Tier 1 capital ratio of 18.8% for the full year. And the Board of Directors proposed a dividend of CHF 5.50 to the AGM, which means continued dividend growth. On Page 4, if we then look at the Q4, we saw a strong finish of the year, and we have increased income by 8% versus the 3rd quarter and cost by 7% and operating profit of 5.6%. That was 6% better compared with the 3rd quarter, And return on equity was 12.3% in the 4th quarter. And we also said at the press conference earlier today that this quarter has also started on a positive note. On Page 5, you see NII decreased by 1% compared to the full year 2015, but increased by 3% versus the 3rd quarter. Customer driven NII increased by 10% compared to last year, mainly due to lending, where both margin and volumes made a positive contribution. If we compare the Riksbank's repo rate in 2016 to 2015, this is a negative effect by around EUR 900,000,000. And this is seen primarily on NII from deposits and from our treasury operations, which find increasingly difficult to get the return on our increasing liquidity reserves. At the same time, we have extended our long term funding, and the larger volume also continued negatively. On Page 6, the NFI amounted to 16.6%, and that was a decrease of 9%. And that is mainly due to the beginning of last year, where sharply falling of stock markets, which affected both income from asset under management and also performance fees totaling a gross decrease of nearly SEK 1,700,000,000 year on year. In addition, we had last year the effects of the so called interchange fees within SEB Card Business and the strategic decision to reduce the stock lending business within our corporate defined institutions, a step towards adapting to the new liquidity regulations. Customer activity was higher at the end of the year, and commissions from IPOs, loan transactions and fund operations increased last quarter. Commission income increased by 14% versus the 3rd quarter and by 5% from the same quarter last year. Asset Management attracts continued strong inflows, totaling SEK 77,000,000,000 during the year, and we see that our bancassurance model gives us extra good momentum. On Page 7, the NFI is clearly better compared to last year. It's up by 13%. And during the year, customers have chosen to hedge their flows with the focus of the foreign exchange side, and the activities remain good with events such as the Brexit and the U. S. Election. Stock markets turned sharply upward during the end of 2016, while long term rates have risen. All these have contributed to higher customer activity. We've had market valuations working in our favor in the last quarter by $223,000,000 but year on year, there are still a headwind of $822,000,000 We usually show resilience on this line, and I now can look back on 8 consecutive quarters of stable development. But no, it's my mistake. I will not give any guidance on this one because when I did that last time, it immediately dropped. So I just hope that we keep this one very stable. On Page 8, we see the operating leverage. And I can just state that the average income is a little bit low in 2016 given the headwinds from, among other things, negative interest rates and lower stock markets, while costs continue to develop fairly well and we maintain to stay under our cost cap of SEK 22,000,000,000. We've also decided to extend the cost cap also including 2018 and also, Northavena, including the potential bank tax that according to Janier, it is slightly more than SEK 700,000,000 when that one comes. We also kept the cost now unchanged or lower every year since 2010. That can sometimes sound a bit simple if you just keep them stable, but it's important to remember that we try to do the transition behind the scenes, and we do invest the SEK 2,000,000,000 in IT and that we also make annual efficiencies of approximately SEK 300,000,000 in the operations to deal with inflation, regulation and foreign exchange effects that are all within the cap. And on top of this is the banking tax and that interest rate deductibility for subordinated debt will also disappear. So in total, 2017, with the new tax and also with the interest rate deductibility that's disappearing, that is totaling to EUR 1,000,000,000 that needs to be taken out already in the cost cap this year. If we agree to comment on the divisions on Page 9, if we look at the large corporate and institutions, the result is down by 13%, excluding items affecting comparability. The main reason for this is the negative market valuation. Customer demand for risk management has been high in all asset classes, and the number of corporate transactions and loan demand has gradually increased over the last 6 months. FX adjusted lending increased by €35,000,000,000 during the year. And with the international institutions, the year was marked by the big Brexit and U. S. Election events. Activity was generally good during the year, but that's what the year started very slow. But since, I would say, midsummer June 2016, we actually had a really good activity. And the results for the 4th quarter amounted €2,800,000,000 which was 31% better than the 3rd quarter, and credit quality remains good. This was actually one of the better quarters in LCSI for a very, very long time, and we also see that the activity has continued into Q1. The corporate and private customers division in Sweden was adversely affected by negative interest rates as well as new rules regarding interchange fees on the car side. Despite this, operating profit increases by 1% versus last year and 4% from the previous quarter. Also here, credit quality is good. On the corporate side, we continue to take market share and have now over 15% of the market. And at the end of 2,009, when we began our expansion efforts on the corporate side in Sweden, we had a market share of 10% and the goal was 15%. We intend to continue at the same pace in the future and the next milestone is 20%. Since last summer, we've grown slowly on mortgages, actually half of the pace of the market, 3% annually. We are not really satisfied with these developments. It can be explained by we were very early in introducing we could be more in line for the market this year, and we could see good moves in December. So in December, we moved on par with the markets. We also think we'll pick up now. And looking at the savings area, we see that customers selected more strategy and equity funds again. In Private Banking, we continue to attract a lot of new net inflows of funds as much as EUR 28,000,000,000 last year. We were happy with that. On Page 10, when we see the Baltics, they showed a better result than last year, actually increased 6%. And we also see continued increase in customer activity and loan demand in all of these three countries and for both corporate and individual. Baltic companies have been able to mitigate the impact of Russian sanctions, And asset quality remained good. Return on equity is stable above 20%, which I think is really good for Universal Bank today, and the Vodix are doing that really well. Life and Investment Management also reported better results, up by 3% versus last year. And here, the stock market fall until the summer hits the asset valuations, and both the base commissions and performance based income decreased, but have in Q4 gotten a lot better. And our fund rating for Morningstar continued to improve, and we maintain our leading position among the big fund managers. Overall, we see that both private and institutional customers appreciate our focus on sustainability in our asset management. We are, for example, the European player that has attracted the largest net inflows in microcredit funds in 2016. That's something we are pretty proud about. The last business results increased. We are, of course, the only bank with a complete savings offering, including traditional insurance, which is depreciated by customers. During the year, we strengthened our position in the market. Of the total insurance market in Sweden, we now have a market share of 8.4%, and that is an increase of almost 1 percentage points in the year. In total, weighted new sales in life totaled to EUR 40,000,000,000,000, which is slowly but surely building value for the future, not so much P and L today, but it definitely will be, and the entire savings area is an important puzzle piece for us and for society at large. On Page 11, you see our balance sheet there, which is strong and has been further strengthened during the year. And as always, it sometimes helps us to look back for the past few years what we have achieved here. And since the financial crisis, we have been focusing on our areas of strength, reduced the earnings volatility, which has been really important to us. We have also divested and sold off parts that were outside our core business. We've increased the cost efficiency, and we are today one of the European banks with the strongest balance sheet in terms of capital, liquidity reserves, funding structure and asset quality. We have around onefour of our balance sheet in liquidity reserves compared with about 10% in 2,009. Resilience was further strengthened last year. Asset quality remained very good, and nonperforming loans continue to decline even though there was a slight increase between the 3rd and the 4th quarters, but not much worth mentioning really. And the credit loss there was 7 basis points for the full year and 8 basis points in the last quarter. We have a lot of respect for that being a low figure, but we actually do not see any significant change in asset quality in the near future either. Our core Tier 1 equity cap rate ratio was 18.8 compared with 11.7 just in 2,009. Our assessment for the Swedish FSA requirement for the common equity Tier one capital ratio is that that amounts to 16.9% at year end. So we have a buffer of close to 2 percentage points. A few words on the business plan on Page 12. A year ago, we presented this business plan and the figures for a 3 year plan, and we drew our bow with an ambitious growth plan that will be supported by rising stock markets and interest rates. What we could not foresee at that time when we did the business plan that was worked on in autumn of 2016 was the sharply negative stock market performance directly started in January last year and then prevailed more or less until the summer and led to lower activity. Nor could we imagine that interest rates would actually go down by another 15 basis points and get stuck at minus 0.5%. Added to this were negative market valuations. So altogether, this affects earnings negatively by approximately SEK 2,500,000,000 that we couldn't really foresee in the plan. Apart from those external factors, the first year of the recent plan actually has developed in line with what we have predicted. So the things that we could do or we set out to do, those have been executed on, and we have increased underlying results by EUR 1,500,000,000 despite the lack of rate hikes and at the same time also accelerating the transformation of the bank. So how should we then look at the back of the envelope, the remaining 2 years and the SEK 27,000,000,000 we said? It's difficult to give a forecast, and we really don't want to do that. And it's 2 more years than the last plan we actually did in the end of the last year. We're trying to do something. Of course, we know into 'seventeen we will enter 'seventeen with a lower base than we could have predicted. That is the SEK 2,500,000,000 that I just talked about. We can't do much about that. The future interest rate path is slightly flatter than we thought a year ago. But the underlying plan and the higher volumes and the more customer and the growth rates are still firm. So all things being equally, you take the SEK 27,000,000,000 and you deduct the SEK 2.5 billion, and you have approximately SEK 24 euros 1,000,000,000. But also, also remember that in that figure, we expect also to offset the additional headwinds of around SEK 1,000,000,000 driven by the proposed tax in Sweden that I mentioned earlier and the reduction of subordinated debt disappeared also. So that's what we would think that the reason. And I think, again, the focus on the 27 minuteus the 2.5, that's what we should think about. And we can't really give you any more details than that because everything that we can predict and work with, we think still are doable. So in summary, we feel confident that with the underlying business plan, even in times such as these, we will get there. The activity level is high, both within the bank and among our customers. This year started really well. And that means that even if the train now changed the driver, the journey with the goal will continue in the same pace, and everybody in the Duke Executive Committee is very aligned and committed to delivering on this plan. So to conclude my presentation on Slide 13, the financial goals are exactly the same. A dividend policy that we will distribute at least 40 percent of profit, and we strive for constant dividend growth, which we delivered on also this year a Core Tier 1 capital ratio of approximately 1.5 percentage points higher than the capital requirement from the Swedish FSA, check on that one too, and to create a competitive return on equity, which means that over the time, we aspire to achieve a return of 15%. We had 12.3% in the last quarter. Of course, we have some more to do that, but that one is still valid. In addition to that, we will maintain the cost cap, let's say, below the EUR 22,000,000,000 for the next 2 years, also including 2018, including the tax. And finally, the strategy and direction is intact. We know what we're doing. We will continue on this path. And the Thrive Drive on. It's in really good shape. This train today, I guess, say addresses that the race are also carefully looked after. Everyone on board is entirely focused on delivering world class service to all the passengers is also on board. So I think we feel comfortable again saying it's going to be it's up to reach the plan, but again, we have to get some more tailwind that will not be impossible. So with that, I'll be opening up for questions. Your first question comes from the line of Johan Eglom. Please ask your question. Thank you. I just want to follow-up. I think you made a comment in the press interview, Annika, about NII momentum having started very strong this year. When we think about the drivers this year, can you maybe walk us through, I guess you have the roughly $750,000,000 increase in resolution fees. I think at the this morning you talked about volume growth broadly in line with the markets. I guess that's 4 ish percent or something like that. But maybe tying also what your expectations are in terms of margins, interest rates? And then related to that, I mean, we saw quarter on quarter quite a big drop in the NII in the corporate center. Is there anything we should read into that or any specific drivers that might be of a temporary nature there? I think when we discuss also I mean mortgages is one thing. And I think now we will be up to pace there again. I think also one of the explanations on the mortgages was that we had our own model. And we also could see, even though we have been having very competitive offering, it was much more difficult talking to the customers about an internal SUV price plus the margin. And now we are aligned with the market. We do it with rebate instead, and we have a gross price. It's easier to charge. That way, it's easier and more transparent. So I think that one will be easier for us, and we can see we're picking up again, and we are making sure that we kind of keep our market share because we want to do that. So that will continue. When it comes to corporates, I think it's also it's both a volume game and at the same time gaining more corporates. We gained another 9,000 corporates last year. And I think we have a really good traction when it comes to Sweden and SMEs and mid corporates. And I think also we've been very supportive that SMEs really appreciate our mobile offerings. We have a special mobile for sorry, it's all that means the kind of SMEs corporate, and they do their business that way. They will also hopefully now start to borrow more. We've seen more lending in to real estate and then building like this, but that will also change. I think also the mix, we brought in still quite a few new large corporates. We also hope now that we can have the acquisition finance, the M and A, things that is going on. So I think we're looking both at the slightly increased margins, but also much more of the cross selling and being able to kind of cash everything that is out there. And we could see that on the large corporate side that both the M and A and acquisition finance mode was quite positive in Q4. But so far into this year, it has started off really well. But of course, will that stay on or not? It's hard to say. But I think the sentiment is much better. So I think what we've seen at all times now is that the sentiment is changing from last year when we really started with a big stop. I think most things are going either direction. Now I look at so I think, again, the volume mix on NII is beneficial for us. So that's why we think that NII will continuously grow. I now look at Jonas, do you want to add something? Yes. We can on the Corporate Center, you want me to say that there's an extension in terms of fund transfer model that is then affecting, you could say, as a one off effect between the corporate center and lending in the division. And then you also have we have refinanced the Tier 2 bond that is maturing in September 2017 that is then adding. And then also now, with the new upcoming new NSFR regulations, we have increased the total funding volumes for the bank. So that is then a decrease or increasing the funding costs. So those are the things. So there are you should not extrapolate this negative effect in the corporate treasury. Okay. But it shouldn't revert either to the levels we saw in previous quarters? No. No. Okay, perfect. Thank you. Thank you for your question. Your next question comes from the line of Willis Valermo. Please ask your question. Hi, good morning and thanks for the presentation. The first question is to continue a little bit on net interest income. I didn't get if you were hoping to pass on completely the higher resolution fee to customer and if not, how much you think you can offset by higher repricing? And still on repricing, how much do you think can you continue to reprice in 2017 compared to 2016? And then the second question is on commission income. As the performance based was quite high in the Q4, as expected. Now last time, you mentioned having high watermarks. And I was wondering how much would it be fair to expect to see in the first half of the year as a result? Thanks. Eiran, Erik here. Well, on NII and the ambition to pass on regulatory cost, that's still there. Whether we will be able to reprice fully for only to not only to pass on cost for that, but also corporate risk weights, mortgage risk weights, we've done basically all of us. I think any regulation or tax, we will have the ambition to reprice. When it comes to commission and performance fees, that's very difficult without a crystal ball to say where that's going to go. It's really a matter of where the stock market is going. It seems to be quite positive right now anyway. So we'll Thank you very much. Thank you for your question. Your next question comes from the line of Omar Kinan. Please ask your question. Good morning. Thanks very much for taking the questions. Firstly, I think Anika, you're with us for another quarter, but thanks a lot for all the interaction over the years and wish you the best for the future. The first question is just on the rate sensitivity of EUR 2,000,000,000 for 100 basis points or EUR 1,000,000,000 for 50 basis points. Can I ask what assumptions are in those numbers? There's been a lot of debate around floors. Is the floor impact of flaws in the lending book included in the €2,000,000,000 And if it's not, could you let us know what the share of the floors are? And then just my second question is, if I look at 2016 in totality compared to 2015, fees are down €1,700,000,000 and trading is up €1,600,000,000 pretty much as you guys said. If the environment improves, I think there's about €4,000,000,000 of underlying revenue growth that you seem to need for the plan, aside from rates. What kind of macro environment or help from the macro do you need to get there, if you kind of give us an idea of that? Thank you. Pierre? So, Omar, on the rate sensitivity, I think we're just giving you a broad number that moving from negative 50 basis points up to 0 means SEK 1,000,000,000 and then another SEK 50 basis points is another SEK 1,000,000,000 That's basically what we're saying. And when it comes to the structures of flooring on the asset side, we haven't gone into any detail on that, so I won't do that now either. But we I would say that the Large Growth and Financial Institutions division is, through that structure, fairly well protected from negative interest rate movements on the downside. And so if we start to see our assumption on the unit per material life here, we should see a positive traction. Then on the fees and trading, I didn't quite get your thought there, Umer. Can you just repeat that, please? Yes. So there's been a balance between fees and trading. So fees have been up 1.7 and trading has been down 1.6. So in a kind of mixed macro environment, the trading has helped while the fees has been a headwind. If we kind of look to where we are today versus the plan, there's about €4,000,000,000 of underlying revenue growth. What kind of macro help do we need to get to that? I guess kind of in a more normalized environment, trading might come down a bit, but we'd hope fees to be up. Is there a kind of ideal Goldilocks macro to get to your target? Well, I think two aspects on that. I think the macro assumptions that are underlying our business plan are there for you to read in the open. They are Nordic assets. So you can pick it up there with the exception of what we think about the stock market, which is in that publication, and we don't sort of discuss how we reason around that. But still, we expect it I can say we expect it to be positive. But other than that, all the assumptions are in there. So that's how we build the plan. But I think what you're describing is also the diversification aspect that we talked about many times that in different environments, different revenue lines will work. And now when we've seen a lot of volatility and currency volatility, interest rate volatility over the year, trading line has delivered well, whereas the corporate activity and the underlying sort of transaction activity has been fairly slow throughout large parts of the year and then picked up a lot during the later part of the second half of the year. So you see how different lines, decent revenue lines work in different environments, and I think that's good strength of the model. Okay, great. Thank you very much. Thank you for your question. Your next question comes from the line of Matti Ahokas. Please ask your question. Hi, yes. Good afternoon. Matti Ahokas here from Danske Bank. A bit continuing on the same tone regarding the split of revenues in your financial targets. Is it fair to say that the level of net financial income in your expectations is now higher than before and maybe commissions lower? And also related to that, how are you viewing credit quality and loan losses going forward? Are you assuming now a lower level of loan losses than a year ago? Thanks. No, I don't think that we're not building the plan on hoping for higher trading activity. I think the point we're trying to make is that we think we've got good diversification effects. So all of top line needs to grow by about 5% compound annual growth rate, and that's what we said last year, and that sort of underlying assumption still holds. And then whether it's commission or trading, it depends on the underlying circumstance in the year. And when it comes to credit quality, I think we always have said that sort of 7 basis points area where we are now is, in the long term, has got to be too low. And so that means that when we do 3 year business plans, we say seeing gradually somewhat higher credit losses, but that's proven to be wrong, frankly, for some time because the asset quality tends to be very strong. But we do that because we normally say to people, look at the Swedish regulator or the Swedish risk factor in their stress tests and their main tenorias, they usually have 10 to 12 basis points. That's quite a bit away from the settlement we do today, but that's where we point people. I think also I can add what we have learned looking back is that we know our customers really well, and we stick to this region where we are. We have the Nordics, we have the Baltics, and we have Germany. But it's kind of very well focused on large corporate outside Sweden, while Sweden and the Baltics grow universally back. So I think we know our customers really well. So I think also that that plays in our hands. Just to clarify as a follow-up, if I understood you correctly that one could obviously think that with the lower interest rate, the credit quality also would remain stronger than previously. So the negative on the NII would be compensated by the positives on the credit quality, but this is not in the business plan for 2018. Yes. That's one way of looking at it, I suppose. Great. Thanks a lot. Thanks. Thank you. Your next question comes from the line of Jan Wolter. Please ask your question. Yes. Jan Wolter, Credit Suisse. Can you hear me okay? Yes. Thank you. So a couple of questions. First on capital, following up from this morning. You're now at 18.841, so that's well above the 150 basis point management buffer that company has set. And if we get clarity on outstanding Basel proposals during this year theoretically, should investors then expect us to be to communicate any capital actions over and above the ordinary dividend? Or what needs to happen before the bank can communicate anything on that front? So that's my first question, please. Well, Jan, I think, as you say, we are well capitalized today. We're almost 200 basis points above the regulatory minimum. So that it leaves us in a positive zone, and that would still increase the dividend as Seneca talked about earlier. I mean, it's always been the case. We've said for years that we strive now for this capital buffer, which needs to be around SEK 150,000,000 to be exactly that, but around that number. And if we have clarity, and I suppose clarity means full clarity to actually understand and can project with a reasonable degree of certainty what's going to happen in the sort of near to mid mid term, then we will adjust accordingly. But I think it's a bit premature to engage in that discussion today because it's far from clear. Maybe you've seen there has been in the market flying around a what is apparently a letter to Chairman, Jellin, instructing them to cease negotiations on Basel IV. And of course, that doesn't exactly give support for that process. So who knows where this is going to go. It doesn't give clarity yet. It gives more uncertainty, I think. So I think we'll have to come back to that discussion, Jan. Okay. No, that's fair enough. And then just a clarification around the new PBT target or ambition here SEK 24,000,000,000. I think you highlighted in the presentation this morning that, that assumes roughly 25 basis points repo rate. So that would imply 3 rate hikes from here, give or take. And just is that the same thing as the bank adding something like SEK 3,000,000,000 to the revenue line due to higher rates? Because I think that is what the rate sensitivity that you have given implies. So you basically add SEK 3,000,000,000 to the revenue line in your plan for higher rates. Is that the way you think about it? Thank you. We're just saying, Joon, that all our assumptions for the business then are found in the Nordic outlook. And we're just saying that whether it's 2 or 3 hikes, I don't know. That's to be seen what the Riksbank is doing and when they do it. But in our assumptions that these things happen towards the end of the 2 year cycle rather than in the beginning. So the effect of the from the curve, so to speak, and the addition from a rising interest rate curve happens later and is therefore smaller. But there is some in that, and I think you have to make your own assessment of how much happened somewhere. Yes. And then we have long debates regarding, of course, also being able outpace the macro. We're not only a macro case, we're also growing the volumes. We're growing our customers. We're very happy with the business mix in the bank that we have a much better stability today, but we can also, on the other hand, the icing of the cake is, of course, of small volatility definitely on our side. And we had that in the last quarter, and we hope that we will continue to have that. The activity and the optimism is slightly better. If that continues all the way, we don't know yet. But so far, it seems pretty good, much better thought this year than last year. Okay. No, that's very clear. Many thanks. Thank you for your question. Your next question comes from the line of Anton Krayochok. Please ask your question. Good afternoon. It's Anton here from UBS. Thanks a lot for the presentation. Just a couple of questions coming back to net interest income. Firstly, can you give us an update where your front book mortgage margins are versus the back book? I remember previously you've used to talk about it. And secondly, just coming back on the resolution fund fees. In your management report, you state that you expect regulatory charges to go up from EUR 1,400,000,000 to I think EUR 2,000,000,000 and that basically implies an increase of EUR 600,000,000 rather than EUR 100,000,000 rather than EUR 750,000,000 that we have talked before. So just to clarify, is the resolution fund fee increase still in the region of €750,000,000 or and are there any other things that are offsetting it? Thank you. Yes, Anton. The resolution of P and C, our calculation is an additional $750,000,000 this year from that. And when it comes to the mortgage margins, we don't, in fact, talk about the front book margins, but the back book margins. And the back book is 122,000,000 at the moment. But I would say that front book margin has been for some time quite a bit higher than that, particularly large, and so is the prolongation margin. So those 2 helped reprice the back book, and that will continue for some time. Okay. No more questions on the line or Operator? Excuse me. Sorry, we had a slight computer hiccup here, but we're back to normal again. Next question comes from the line of Jens Hallen. Please ask your question. Yes, it's Jens Salen here from Carnegie. You've answered most of my questions, to be honest. But I just wanted to see if I can get a bit of clarification on the NII and getting to your €24,000,000,000 target. I guess what you've said is most of the new regulatory cost is going to be passed on to the customer. But I guess you also need a margin expansion to reach your target. How do you see that happening with sort of modest volume growth over the next couple of years? Well, I think you were saying modest volume growth. I'm not sure we're saying that we're going to aspire to grow a little bit quicker on the mortgage book than we've done in recent months and quarters. So today, our is to grow more in line with market growth and slower than market. We will continue, as we talked about in the previous question, for Manzan at UBS to discuss the front book margin and the long Asia margin will continue to push the back book up. We talked about earlier, Annika took a question on the mix effect in the large corporate financial institutions, more acquisition finance, perhaps more private equity driven transactions with typically better margins. And so I think that in combination with overall better demand in the market throughout And the ambition from all institutions to offload regulatory costs, that's not something we are doing and fighting that battle alone, so to speak. We're all directionally moving in the same way. Another positive, I think, is the Baltics, who have reshaped themselves in a very good fashion over the past few years, and they are now producing 20% returns. And the loan demand is increasing in all three countries. So I admit some perhaps not so interested levels, but it's a positive directional change. So I think when you start to add these things up, it's that's what we do. And we come out with what we think is a reasonable and credible plan. And then whether it will be modest or not, we can all have different views as such. Okay. Yes. Fine. Thank you very much for that. Okay. Thank you for your question. Your next question comes from the line of Riccardo Rovere. Please ask your question. Yes. Thanks for Just one clarification from my side. When you were mentioning the sensitivity to rate hike, I just wonder whether you are referring to moving the current short term rates to from minus 50 to 0. So if you were mentioning just movement in the short part of the curve, if that is correct. And if that is correct, we're just wondering what would be the sensitivity, if any, of NII to a movement in the long part of the yield curve? Ricardo, we're really talking about a kronor based hike of the yield curve, and it's it's basically a parallel shift of the curve. Okay, okay. Clear. Thanks. Thank you for your question. Next question comes from the line of Andreas Hakansson. Please ask your question. Yes, hi. Just one follow-up here. I was listening. Jan Erik, I didn't quite hear. Did you say that the margin on the back book was 123 bps? 122, Andreas. Okay. So if I just look at finance in Spakon and in their market front book number, they talk about 167,000,000, so some around 45 bps difference. What's the duration of the fixed mortgages that then should move up over the next couple of years? But Andreas, you cannot really compare that apples and apples with the back book and so on. And I think that it's not a fair comparison to drive that comparison. I think that what we are saying is that we can see that we still have higher front book margins than we have on the back book, but the pace that we have had of 'seventeen and 'eighteen basis points is maybe not possible to have at the same extent, but we expect higher margin back book at the end of 'seventeen and in the beginning. And we can also say that we have already factored in the resolution fund fee in our back book pricing here. I think that the SEK 122,000,000 is actually what we're starting on a net basis from the 1st January this year on the Okay. But still, if we exclude the 3 months variable mortgages, how big portion of your loan book is then fixed? And what's the average duration of the fixed? It's roughly 30% that is on a fixed basis. And I would say the popular most popular tenors are between 1 3 years. So you will have an average duration of just over 2, I would say, on that portion. Excellent. Thank you. Thank you for your question. Your next question comes from the line of Jacob Kruse. Please ask your question. Hi, thank you. Just two questions. Firstly, there was some comments in the news this morning that the FSA had sent letters to the banks regarding their view on the Panama examination. I was just wondering if you could comment at all on what you've learned from that. And my second question was, when it comes to the mobile and online banking offer that you discussed for SMEs, but also retail, roughly, how much of the bank in terms of product suite can the clients in those two segments access on the mobile or online relative to what is accessible if they go into the office? I can start with the Panama letters. And yes, we have received a letter, and we have answered that and sent it back to the finance inspection. So let's see. We don't know anything more than that, but it wasn't difficult for us to answer that letter. So we will see what will be the next move from the financial section. When it comes to client onboarding and what kind of services that they can do, it varies a bit on what kind of demand that they have actually. But the two main things have been a client onboarding and also being able to do a lot of things on the mortgages side. And for the SMEs has been also some of the simpler things to do, but you cannot do everything online yet. But you can do they can do many of the kind of usual simple stuff, whereas one of the most important one has become kind of just becoming a client online, where actually you couldn't do that before. In SLV, you also had to visit a branch, which you don't need anymore. Okay. Thank you very much. Thank you. Next question and last question comes from the line of Nicholas McBeath. Please ask your question. Hello. Thank you. I was wondering about the bank tax. It's been receiving lots of pushback from several stakeholders recently, and it now seems quite controversial to implement. Do you have a view on how likely you think that it is that the tax will be implemented based on any potential recent feedback from the government? And then secondly, also, assuming that the tax would not be implemented, what would that imply for your SEK 22,000,000,000 cost cap? Well, I think the likelihood of it happening, we've deemed to be, well, more probable than not. And so we built it into the business plan, as you know, we talked about it here now. I think once politicians get the appetite for SEK 4,000,000,000 to SEK 6,000,000,000 to be sucked out of the Swedish banking system, then it's difficult to walk back on that. At the same time, criticism in the consultation period now has been immense and from many areas. And I think the fact that the proposed tax hits not only the banks, but thousands of corporates who engage in financial activities was perhaps not the intention from the beginning, but that's in fact what would happen. So pressure is building up to, if not, demolish the whole thing, find a different construction of the whole thing. And perhaps that would mean it will be delayed or watered down or something. I don't know. We'll see. But we factored it in just for us to be cautious on that anyway. If it doesn't happen, then we'll assess that there. But obviously, we won't immediately run away and spend it on something else. It will be more a question of lowering the cap, I think, when we get to that point. But if I mean when that happens, we'll talk to you about that again. Okay. Thank you. Thank you for your question. Okay. We understand from the queue that there is no further questions. So we thank you all for participating in today's telephone conference, and we wish you a good rest of the afternoon everywhere where you are. And if there are any further questions, just call into any of your IR contacts. Thanks a lot. Thank you. Thank you. Ladies and gentlemen, this does conclude our conference for today. Thank you for participating. You may all now