Earnings Call: Q4 2015

Feb 4, 2016

Thank you for standing by, and welcome to the Annual Accounts 2018 Conference Call. I would now like to hand the conference over to your speaker today, Annika Falkengrad. Please go ahead. Welcome to the presentation of our results for 2015. Today, I'd like to also summarize the business plan that we worked with the past 3 years and also present some pieces of the new business plan that was presented today earlier. Page 2, just to complete, it's been exceptional year in many ways, where each quarter has its own character. I think I leave it at that. On Page 3, we reported an operating profit of DKK 20,900,000,000. And as we stated in previous quarters, there are one off effects in both 2014 2015. We have the Swiss tax court ruling in the 2nd quarter, which was adversely impacted by earnings by a total of 900,000,000 dollars This Swiss tax court ruling is actually an event far back in time. It is a withholding tax refund between the years 2,000 and six 2,008 that in all courts until the very last one was actually approved. I'd also like you to remind you that the last year, we had a total positive impact of DKK 3,000,000,000 from the sale of our card acquiring business, UroLion, and our shares in Mastercard. We did not calculate here with those capital gains in the 2014 annual result either. So we always try to strip away these effects regardless, of course, if they are positive or negative to give you a feeling for the underlying operational results. So you really get a feeling for how the bank is running. So having said that, income increased by 2% in 2015, costs were unchanged and operating profit increased by 7% to DKK 21,800,000,000. Return on equity was 12.9 percent and our common equity Tier 1 capital ratio increased to 18.8%. The Board of Directors proposes to the Annual General Meeting a dividend of SEK 5.25 which means continued dividend growth. Page 4. If we go over to the 4th quarter, it was just as in previous years, seasonally stronger than the 3rd quarter. Income increased by 2% compared to the same quarter 2014 and costs fell by 4%. And then operating profit of DKK 5,500,000,000 was 12% better than the same quarter in 2014. If I then comment briefly on a few of those lines, net interest income fell by 5% compared to the full year 2014 and was largely unchanged from the Q3. If we compare the average repo rate in 20 15 to 2014, it corresponds to a negative effect on net interest income of around DKK 2,500,000,000. Lending volumes have been stable on the corporate side, even if we in the second half of the year saw increased demand for credit from small and medium sized enterprises. Net fee and commission income remained strong and amounted to TRY 16,900,000,000 during the year. That was an increase of 4% compared with the previous year. Customer activity was higher at the end of the year, and commissions from IPOs, loan transactions and mutual fund operations also increased in the last quarter. Whilst management continued to attract good inflows and markets had a very good end of the year. Net financial income is clearly better than last year, up by 69%. And during the year, customers chose to hedge their flows at the same time as fixed income markets came back after week ending of 2014. We have had market valuations, the so called CVA, VVA, etcetera, on our side this year, which we all know can, of course, vary a lot between the quarters. If I then move over to Page 5, my last page before I turn to the new business plan, I can state that we will continue the trend of, totally but steadily, increased income and also make sure that we keep the costs stable. We have now, for years, been working with the cost ceiling. Our day to day costs focus produces long term results. And also this year, at SEK 22,200,000,000, we came in under our cost cap of SEK 22.5 On Page 6, you see the divisions, and they all show a profitability of at least 13%, but they've all had some differing developments during the year. If we look at Merchant Banking, the result for the year is up 14% and again excluding Switzerland. Given the uncertainty in the markets, clients' demand for risk management and hedging across all asset classes has been high during the year. The number of IPOs was a record high, and we took part in the bulk of these in the Nordics. But major business deals have been lacking and credit demand has been generally low. The result for the Q4 increased to SEK 2,600,000,000. Retail in Sweden had headwinds from the negative interest rates, and both net interest income and operating income fell by 5% for the full year. Operating profit in the 4th quarter was 6% lower compared to both the previous quarter and the same quarter last year. Negative interest rates hit deposit margins, but we, of course, want to avoid having negative interest rates affect private savings. Since last summer, we have grown more slowly when it comes to mortgages, basically half of the pace in the market. We have long stood for households reducing their vulnerability by amortizing their mortgages down to 50% loan to value. Today, basically, all customers, more than 98%, with new loans and loan to value over 70% and actually 93% between the capital between LTV between 50% to 70% amortized. You could say that everyone actually amortized down to 50% today. Furthermore, we are big in the cities. And here, we now notice that our of not lending more than 5 times gross income means that 1 in 10 borrowers actually falls outside our own limit because of house prices have come up to such high levels here. Then multi life and wealth, they both report significantly better results for the year, up 6% 8%. New sales within both Wealth and Life remained strong. Performance fees in Wealth amounted to DKK 175,000,000 during the Q4. And for the full year, they were a result of DKK 679,000,000 for the group, and that was an increase of DKK 220,000,000. In the broad mix, where the profitability was almost 19% in the banking operations, including the real estate companies, the operating profit was 11% lower than the full year for the full year, mainly due to lower net interest income given interest rates and impairments in the real estate company. In local currency, lending increased by 2% year on year. Both consumer and corporate lending is actually increasing in Estonia, Lithuania. However, volumes declined in Latvia, while asset quality all in all was strong. On Page 7, I'd like to move over then to closing the plan that we also did during the end of 2015. That was the end of the business plan, and we presented kind of almost exactly 3 years ago. And at that time, many of course, Brexit was pretty ambitious. We will not only keep costs under control, but also increase revenue by 15% over 3 years. This is an environment where many countries still have big challenges in the real economy and many banks in Europe are not seeing any growth whatsoever. During the past 3 years, we've been able to further refine the platform we have invested in for the other Nordic countries with a clear focus on selected large corporate institutions. And today, we are regarded as the Nordic law as the leading Nordic corporate bank. We have continued to invest in deepening relationships with all of our customer segments. It's all about having relevant and accessible offerings with good advisory and, of course, good staff. We have delivered on the targets. We have increased revenue by 15%. Return on equity would actually have been 15% if we would have had the common equity Tier 1 capital ratio of 13%, which was the requirement 3 years ago. During the same time period, we have increased our capital by DKK 33,000,000,000 or 30 percent and increased the annual result by nearly DKK 7,000,000,000 or almost 50%. The total shareholder return has, at the same time, been 23% per year, and all this is in an environment with continued substantial challenges in the world economy and where negative interest rates did not even enter into the imagination for any of us, I think, 3 years ago. So if we then move forward to Page 8, I'd like to comment on that. Last year, we did a very thorough job, almost during the entire year of working with a decent 2025, taking in impressions from the world around us and trying to visualize what we think could happen over the next 10 years. And of course, ask ourselves what should we change in order to become the best bank in the eyes of the customers a longer term perspective. And our Vision 2025 is about how we see the changes in customer behavior, the rapid technological advancement, but also the continued strong influence of regulation and a changed complexity landscape. So we created a new vision to deliver world class service, and that reflects a future where customer focus and digitization is increasingly important, And actually, the customer experience will be crucial. And what we feel is so special with this one is that we don't comment anything about financial or other banks or anything. We just want to be compared to any other world class company that is in the service sector. On Page 10, together with employees, we also work through how we see the customer expectations for a bank in a digitized world 2025. And we have established very clearly internally that everything we do is based on the biggest advantages, and that is trust. Customers want to share our knowledge and thereby feel that they are making good choice to choose us. And that's why we need a deep understanding of the customer's business and needs, increasingly important. Customers must be that we understand them. And proactive activity and staying 1 step ahead makes customers feel secure and that we make it convenient and easy to manage all their financial matters. And these are things that we will focus on, put KPIs in and clearly work with in the bank. When we then, on Page 11, have converted our long term vision to a business plan for the next 3 years. We've done so both from a growth perspective as well from how we will transform the In the growth area, you will recognize what we said before, but we will even further consolidate and strengthen our position in Sweden. We will also continue the growth with large corporate institutions in the Nordic countries as well as Germany and now also the First Step into the UK. We would further advance positions throughout the savings area. Changing demographic poses challenges for pension systems. We see that with our complete savings offering, including traditional insurance and basic financial security solutions for business owners, we can meet the need of long term savings for our customers ahead of retirement. The three focus areas for transformation are we put effort into investing even more distribution service and on digitization, which means that we automate our own business processes with a perspective to do so on the basis of the entire chain, so called end to end processes. We have already identified the biggest and most important processes on the basis of an efficiency and capital perspective. But digitization also implies that we must invest using all the customer data we have in order to be able to give our customers even more individualized advice. So we will invest even more in skill development among both our own employees as well as in service design. We are recruiting a role previously did not even exist in the bank, a CDO, Head of Design, UX Specialist, etcetera, etcetera. And on Page 12, we then put the new business plan into the numbers. You can, of course, see that this is another pretty ambitious plan. The goal is to continuously to increase operating profit by around DKK 6,000,000,000 in the coming next 3 years, I. E, kind of the same rate of increase as previous business plans. This mean an annual increase of nearly 10 SEK 2,000,000,000. Currently, the FSA capital requirement is core Tier 1 equity ratio of 16% by year end 2016. We said that on top of that requirement, we need to have a buffer of around 1.5 percentage points for currency fluctuations in the balance sheet. That means that we start from a core Tier 1 of around 17.5%. We know also that FSA intends to introduce some kind of higher countercyclical buffers, and we assume that these will be around 50 basis points higher. And that means that over these next few years, we come up to a quarter 1 of approximately 18%. With the business plan we have laid out, we expect thereby to yield around 14% at the end of 2018 and at that time assuming a capital ratio of 18%. But we, of course, know that there may be more changes ahead such as the potential bank tax, standardized risk ratings and other regulatory changes and that circumstances around the world, of course, can change, but this is the base case. So before I conclude, our financial ambitions are in that perspective pretty unchanged. A dividend policy, which means that we want to distribute at least 40% of our profit and where we strive for continuous dividend growth. A core Tier 1 cap ratio, which is 1.5 percentage points higher than the capital requirement from the Swedish FSA. And of course, to maintain the cost cap for another 2 years, that means 2016 and also 2017, and to ensure a competitive return on equity, which means that over time, we aim to achieve a return of 15% is our aspiration. Customer expectations will be key in our efforts to fulfill our goals. We do not want to do anything in this bank where we haven't asked the final and very thorough control question, does this mean that the customers become more satisfied with us and making sure that in everything we do, it is a virtual service that we also will deliver. And with that, I'd like to open up for questions. Thank Your first question comes from the line of Johan Ekblom of the Bank of America. Please ask your question. Thank you very much. Just 2 areas, I guess. First of all, looking at your plan out to 20 18, but maybe more near term as well, how do you think about the revenue environment? I mean, it seems that net interest income growth is clearly lacking at the moment and maybe we'll have some tailwind by 2018 from rates. So what have you assumed there? And then on the non interest income, I mean, is it fair to assume a sort of 5% CAGR pretty evenly through the period or whatever thoughts you might have there? And then secondly, just even more short term, I mean, it's been a spectacular in some way start to the year with this immense volatility, etcetera. And any indication you can give us in terms of how you've navigated this environment? Hi, Johan. It's Anke here. But I think, I mean, the base case for the kind of environment around us, we use the Nordic Outlook. And I know that there will come out a new Nordic outlook now just in the capital days, but we use the one we had during auto. We always do that. And of course, we need to all the time, and we always do. But the best case is the Nordic outlook. But we perceive that negative interest rate all through 'sixteen. But end of 'seventeen, it will start to pick up. So of course, we'll have to have a positive yield going forward. And then of course, again, of course, we need activity all in all. But I think I mean, last year, I think we were the only bank so far that did lend to SMEs and mid corporate. And that is a pretty healthy business as well. So I think, again, we need to dig where we stand. We can always find business. The large corporates have not been very active. And of course, we hope that, that will happen. We don't know. I mean, the year has started. I said at the press conference, pretty challenging. Stock exchanges are down. Of course, we don't have a pipeline or IPOs. In that case, it's been pretty quiet. But again, it's an early start, so it's a bit too early to say that we think this year is going to be tougher than last year. Perfect. Thank you. You're welcome. Your next question comes from the line of Heine Lutz of Goldman Sachs. Please ask your question. I got like 2 questions also Mike around your targets on the capital. Generally, you sort of want this targets given you sort of you have the rate outlook going up to towards the end. Should we sort of generally sort of expect this to be sort of more back loaded? And then the second thing on that I have a question on is, like you've when I look at the distribution where you see the growth coming from, like you have the biggest one coming from corporate and private customers more like maybe include sort of retail, which seems already sort of a bit stretched while you have sort of life on investment management plus 5%, which is sort of a segment I think people usually sort of naturally put a decent growth rate on. So can you maybe talk a bit sort of where you come to the split and how much you think things will be back loaded? And second question would be will be back loaded? And second question would be basically, Mike, you had very, very strong capital formation in the quarter. So looking at sort of the ROE part of your targets, would that imply we should see any sort of further sort of dividend hikes to not sort of have the capital buildup weighing on the ROE ambitions? No, I can just start with the savings part and the different parts. I mean, I think we try to show it in a more to make it more that exact of the kind of the back of the envelope is. Because you could see, if you look back 3 years, we were all on the Baltics. We did not expand as much in the Baltics as we'd hoped. But on the other hand, retail went better, for example. So it's quite difficult that it's kind of some of the parts. We need to do $2,000,000,000 more every year. And what we think in the focus where we are now, we do think that the SMEs and mid corporate sector, that will probably grow a bit better than some other part because the large corporate is so dependent on what they do. So I think also that when you look in SEB, when we see the savings model on the bank assures model, how that will work, we strongly believe in that also. So that is part on kind of corporate and private part because depending on where you put the P and L on the customer or on that part. So I think all in all, we also strongly believe in the savings. And it's not so to put it so exact, I don't think we are able to do that. But for these coming 3 years, we actually in the plan, we don't think that merchants with all the regulatory that is helping them and everything else they're doing that they will be the bigger part. But we might be wrong. I mean, we don't really know, but that's how the plan is what we think at the moment. And Jon Erik, you have some details also. Well, let's see if I got your questions correctly. But I think the first one related to whether the plan was backloaded or not. And I think on that, maybe I'll take the opportunity to comment a little bit on the repo rate assumptions that we've gotten a couple of questions on this morning as well. The repo rate assumption from the Nordic Outlook in the autumn says we're going to dip down to negative 0.45 during this year and then start to head back into positive territory beginning in 20 17. Nordic outlook goes out to December 2017, where it's positive 0.75. And I think so in that sense, I suppose it there's an impact from that interest rate curve coming into positive. And maybe I'll say something around interest rate sensitivity while we're on that topic. I think some of you are trying to sort of solve for how much of the operating profit pick up from 21% to 27% is attributable to that to the interest rate hike. And I think simplistically, I think we can say that the interest rate sensitivity today, where we are in negative, is around $3,500,000,000 per 100 basis points. And why is it so high? Well, primarily, of course, because that we are in negative territory and we've got larger volumes when we are here that are non interest bearing. As we approach positive territory, that sensibility comes down. And if you think about maybe a year or 2 back, our interest rates used to be around, say, 1.3%, 1.4%, then it started gradually to come up to 2% and then 3.5% which we've got today. So I think coming up to 0 in interest rate or in repo rate is probably around $1,000,000,000 Then the next step up to 0.75% positive at the end of 'seventeen is a little bit less than another 1,000,000,000 dollars So that could give you a little bit of an indication on what that looks like. That was a long answer to that one. And third question, I think, was around capital formation. And I think what we're saying is that we're factoring in what we know here and now, and that is that, as I said, capital requirement from the regulator at year end was 16.0%. That's our best estimate. We add the management buffer of around 150 basis points, takes us to 17.5%. And then we add 50 basis points, which is our assumption of the 1 or 2 steps of an increase in the countercyclical buffer, which brings us to 2018. Then whether we can distribute capital or act on that in one way or another, again, remains to be seen. And what's hanging out there is the uncertainty around the corporate risk and possibly Basel's the Basel Committee's view on standardization of risk weights. So we'll just have to come back to that later on. Your next question comes from the line of Omar Khin of DB. Please ask your question. Good afternoon. Thank you very much for taking the questions. My first question is on capital. If I understand correctly, I mean, there's a 2 80 basis point buffer now above the regulatory minimum. I know it will get a little bit smaller when the countercyclical buffer comes through. But I understand you took a €9,000,000,000 provision for corporate risk weights, which on the total group is about a 1% risk weight, which is kind of the same assumption that one of your peers made. Just wondering what are kind of the calculations that are behind that? And given it's such a small risk weight increase, has this all been a bit of a kind of storm in a teacup? Kind of leaving aside here the questions from Basel. And then I just have a second question on revenues. Could you offer perhaps kind of a near term outlook on NII? Can we expect kind of sequential growth to resume? Or is it still is it flat? Or is it lower from here? Thank you. Hi, Omar. I think on the capital and the SEK 9,000,000,000 provision that we took on that, there's not that much science behind it, Omar, as you're, I think, trying to suggest. I think all we're saying is that we've been referring to for a number of quarters the fact that we've got a $20,000,000,000 risk weighted asset effect that we've been waiting for. Now 16 of that has come through at year end. From that 16, we've added back 9 as a provision for what may come. It's not that shouldn't be seen. It was the 16 was basically divided into 2 parts and one of the parts was 9. And we put that aside and it's not to be seen as our sort of scientific calculation of what will come in the year. It's just a a part of the effect that we put aside. And I think you should see it in the context of the debate that's been prevented during the year in that I think everyone in this country is trying to from regulator to banks is trying to defend the risk weighted view of the balance sheet. And I think it might be a short lived victory, so to speak, to bring in the full effect and then just have to add it back. So it's quite pragmatic, really. And in terms of the revenue outlook on NII, I think I'm going to have to pass on that. I think where we stand here and now, I think we all know that loan demand is fairly slow and margin buildup is also fairly slow. I mean, though I expect we will continue to see some in the mortgage book. I think we have been path lagging a little bit on that, and we'll continue to do that in a good way. I think we added about 17 basis points of mortgage margin during the past year, and we'll continue to try to push that. Your next question comes from the line of Jan Wolter from Credit Suisse. Please ask your question. Hi there, Jan Wolter here. Thanks for taking the questions. So first on the corporate credit demand, I think you just highlighted that it's slow. Could you just give some color on what we could expect and what you see among front office people in Asebia in terms of corporate credit demand? Is there any sector where you could actually see that coming up in the next 12 months or so? And then on mortgage repricing, is that now the efforts that the bank did in the second half last year? Is that now fully reflected in the P and L? And then I wonder whether or not the interchange cap, how much impact could that have in 2016? Have we seen the majority of that already in Q4? Or will that come in the year ahead? Thank you. Okay. I think you can start with the first one regarding corporate credit demand. I mean, it's really difficult. But I mean, on large corporate, it's been almost nil. But now, of course, you could say that commercial paper markets, I think, are rather quiet. And all in all, liquidity in the market is rather poor. So I mean, I don't know, maybe they might do something, but we can't really see it coming from there. I think what we can see on credit demand, it's really much more from SMEs and mid corporates. And as I said earlier, I mean, we lent $12,000,000,000 into that segment this year last year. It's not a lot, but it was the only one the only bank that grew there as far as I can understand it. So I still think that, that is the market that we will hope to gain more from rather large corporates. It's really difficult regarding the demand. I think it's very much up to how China will evolve and how Europe will evolve and kind of other macro factors to really sort of see the wheels turning. But I mean, there are cashiers, they're doing well, and there might be that's coming up a bit more. But it's too early in the year to really tell, I dare say. Would you like to take the mortgage question, Jan? Yes, sure. On the mortgage repricing, Jan, I think all of that hasn't been coming through yet. And as we spoke to Omar just now, I think we'll try to continue to push that up. I think the last quarter, now we've got another 5 basis points or something on the back book. So I think that's been a quite positive development. So we are aiming for additional effects per month. In terms of the interchange fees, they started to kick in, in December, as you know. And I think we will certainly work hard to compensate for all of that. But as we stand here and now, I think that's will hit us by some SEK 35,000,000 a month. But that needs to be worked on hard and that's being done as we speak. So I'm hoping that number will come down, but we'll update you further on that as we go. Okay, many thanks for that. And just a follow-up there. If we assume now that interest rates stay at current level, does the bank foresee any incremental NII pressure from the Q4 level if we disregard again interest rates and perhaps the mortgage repricing? So can you see now that you have a bond portfolio positions that mature that will by default mean a pressure on the NII line? Thank you. Jan, there will be a bit of that, but I would say about neutral bottom line, there will be positive and negative. So I can't see any huge change from here really. Okay. Many thanks for the help. Your next question comes from the line of Adrian Sighi of RBC. Please ask your question. Good afternoon. Thank you for taking my questions. I have two questions. One follow-up on capital and one on asset quality, please. On Slide 12, the envelope slide, it shows an illustrative figure, but it shows an 18% CET1 by 2018, which is lower than the Q4 level. Two questions here. Do you expect further clarity in regulation to allow you to actually reduce the CET1 in the future? And in addition to the discussion on corporate risk weights, what does the 18% target assume in terms of other impacts from fundamental trading book review, kind of cyclical buffer Can you give us the time line for this guidance? Is this 2016? Or do you see this potentially extending to 2017 as well? Thank you. Hi, Adrian. On capital, again, what we've done there is to start with the 16 percent regulatory requirements at the end of December 2015. We've added the 150 basis points management buffer and our estimate of what the regulators may do this year and next in terms of increasing buffer, and that's 50 basis points. And that takes you to the 2018. We have not included any estimate of what fundamental review of the trading book or IFRS 9 or standardized risk weights or anything like that will mean. We're just trying to deal with what we know this far. So I think that's uncertainly you'll have to make your own estimate on that or judgment call on that. In terms of asset quality, I think what we're saying there is that we're pleased that we're at 6 basis points now. At the same time, we're very much aware that that's probably unnatural in terms of the long term run rate. So again, we're not speculating on timing or what the level might be, and we normally refer folks to the regulators or the Central Bank's main scenarios, which still deal with something like 11, 12 basis points, and you'll just have to put in the number you feel is adequate there. Many thanks. Very clear. Your next question comes from the line of Jacob Kruse of Autonomous. Please ask your question. Hi, thank you. Just two questions. Firstly, on commission income. You're kind of annualizing at around SEK 16,000,000,000 for the second half or for the Q4, and then you have this close to €400,000,000 interchange fee effect coming into next year. How do you because the first half of last year was extremely strong, so how do you feel about the comparison there and your ability to grow commission income relative to 2015 in 2016 and 2017? And then my other question was just on this whole market and operational risk weighted asset review. Have you done any sensitivities there? And is there anything you can share about your potential risk of additional risk weighted assets coming in? Thank you. Well, Jakob, I think on this, I can't be very clear on either of those two questions. I think what I would say though is that, yes, certainly, we are running all sorts of sensitivities on the standardized risk weights and not least ahead of the capital and dividend discussion into this decision we've just made. There's been a lot of that sort of exercise going on. At the same time, I think one has to be realistic with this that we just don't know what the regulator is going to come up with. I think the Swedish regulator is just trying to navigate in fairly difficult quarters here with the Basel Committee trying to build something 2, 3 years down the line before that hit the Swedish law. And they're trying to build a bridge between what we've got now and what will come later. And I think that's what we're trying to simulate as well. And I think there's nothing in terms of sensitivities that we would want to share today. It just becomes very speculative. So we're going to refrain from that. In terms of the commission income, I think for the outlook there, again, I don't want to be very specific, but I think the recipe for creation of commission is the same as before, broad client base with a deep product penetration into that client base is the recipe for commission, And I think that's going to stay. But sorry for not being very specific, but we'll have to stay there, I think. Can I just ask also on your oil and gas and mining exposures, did you take any collective provisions against that book in this quarter? No. No. Okay. Thank you. Your next question comes from the line of Alice Temperley of Morgan Stanley. Please ask your question. Hi, thanks very much for taking my question. I just have a quick follow-up from the previous question. Just on your oil and gas book, could you just remind us the proportion of investment grade versus non, please? Alex, we're just looking that up now. You could say that half of the portfolio is investment grade and then the latter is just under the I would say, sub investment trade and the rest of the bulk. And it's a there is no clients as of today in the watch list territory. And we have the as we mentioned earlier today in the morning, we have roughly then €29,000,000,000 worth of on balance exposure to this. And I think it would be fair to consider the exposure then if you divide it into different segments, you can have very different we perceive the risk to be different in different segments of the oil portfolio. And you can divide the value chain in many ways, but we're looking in it and where we see high risks at the moment in oilfield services and in offshore. And I also think that it's worth to mention that SME as a bank, we are most of this exposure is to the North Sea. And we are since we are not active in the SME and midcorp segment in the Norwegian market, I think that might be a difference from competition. And we have also then we have had a franchise an oil and gas operations for many years. So this has not been sort of an opportunistic late cycle move for us. We are doing business with strong owners and with prudent structures. So I think that would be the conclusions from and this exposure to 'twenty nine includes things from all the from the whole loan portfolio across segments that we consider to be oil and gas exposure related. And just remind me, of the SEK 29,000,000,000, how much of this is the oil services sort of segment that you just mentioned? I would say, we haven't disclosed the different parts of that. We have a value chain of roughly 4 different segments that we are looking into, and there is no part of this of the value chain that has the majority part is quite evenly distributed out of those categories. Your next question comes from the line of Christopher Roskist of Barclays. Please ask your question. Yes. Hi. Thanks so much for taking the questions. I have 2. I I'll start off with M and A fees and outlook there. I mean, at the moment, we see receding corporate credit growth in Sweden, if I interpret the statistics correctly, after I suppose a period where M and A activity and acquisition finance has sort of boosted the credit growth in the Nordics and Sweden. And then I suppose that receding growth to me signals sort of poor or declining corporate confidence and sort of no greater need to grow. And I suppose this is what Anneke, you spoke about China and global growth. But it also sort of lowers my expectations of that the M and A activity that we saw, I suppose, from the Q2 2013 through to the middle of 2015 will be repeat. I mean, if there is a relationship normally between corporate confidence, corporate credit growth and also M and A activity. So what I'm trying to get to is, is there any reason to believe or expect that the high M and A activity that we saw during a large portion of your previous 3 year plan will be repeated going forward even though at least credit growth you use that as an indicator, is not suggesting that corporates would be, in particular, active going forward? Hi. I mean, I wish I had a crystal ball, so I could answer it clearly. But of course, I mean, M and A, I mean, it can change, the sentiment can change quickly. I think on the other hand, of course, that corporate has found a different way to finance themselves. That will not change, of course. They can't finance themselves outside the banking system. So I don't think you need to count. It depends on how much you need the balance sheet or not. But regarding the M and A, I think what we did see in the Q4 and what I think I need to rest assure is that when activity comes, SMB, we get a fair share of that business, even probably more than a fair share because I think, again, we don't miss out on anything. So when it starts to move, we can surely make sure that we will do good. So then, of course, will it come or not? I think, again, the sentiment can change rapidly. There will be, of course, M and A. Will it come 1 quarter, another? It's really, really hard to say now. I think some corporates have delivered all the stable and good results that we've seen coming out now also. Not everyone has had a tough time. So I think, yes, we remain fairly positive. Of course, there will be some M and A business. And of course, there will be some growth corporate activity, albeit now it's pretty quiet. That's what we are trying to admit. But it's a 3 year plan. So if 1 month is rather quiet, that means that it will stay quiet for the whole period. Okay. So I suppose in the Q1 I think the Q1 of 'thirteen was a little bit sort of a surprise in the lack of activity there and then everything opened up in the second, but not really for growth reasons. So do you have a similar pipeline today with companies that are looking sort of more for to change the structure of their assets rather than position themselves for growth? No, but I think I actually have not looked back at 13. I mean, for me, kind of we turn the page all the time. So I try not to look so much backward. We try to bring everything into reality. I think at the moment, we hope to get more from SMEs and meat corporate sector. That's actually where we think we can do a lot more. The large corporates, we stay close to them, and we will get the portion. But of course, what they are thinking about and what they might do, it's a bit early. But that's why we put the bet slightly more on across Sweden now and across asset classes and also on the sales part. So there might be a mixture of where we see it. I think the important thing is to see that to make sure that we get all ancillary business that we can get. That needs to be a close on that. So of course, if there is a Kamsen IPO, who is the owner? Where does the owner go? Are they cash flow to private banking? Will it be foreign exchange involved, will it be corporate finance involved, will it be results involved. That's how Clittabits make sure that we get every revenue stream from every deal we do. I think that's where we become really customer focused. And that's why we also reorganized now to make sure that on every deal we do, make sure that we cover up everything, while before it was more product oriented. So I think from that, we will also be able to hopefully get more spin off deals from one existing deal. Okay. Thank you. I just also wanted to ask, since instead of looking back and then really looking forward and speaking about your Vision 2020 5, could you say anything about sort of whether you see the scope of SEB changing? And I'm thinking about how you about financial technology companies, some non bank companies that might cannibalize on the bank's traditional business models, whether you would see SEB partnering with those kind of companies, whether you would see SEB organically growing into new fields, if there is anything sort of any color that you can add depending on what's in the presentation? I think I have mentioned that before. I think a little bit how we work with our innovation lab that have already created quite a few things. We had our new glasses were out last week where you can go and look at apartments for sale with you kind of with your mobile in a special format, and then you can sit at home and go through every room and also being offered a loan. So you can just kind of blink your eye and then you have a loan in the kitchen or whatever you like to see. So it's quite fun. They do a lot of fun stuff there that is coming out from Innovation Lab, and they have a lot of things coming. I think also that we have tweaked our venture capital unit that have invested a lot in biotech, historically more from a venture perspective. But that is more in runoff today and where we want to make new investments that will be more focused into fintech. And that's for many reasons, not because we think we can do nice exits, but actually because we think we can learn to stay close to a few of these by having a shareholding between maybe, I don't know, 10% to 30%, doesn't have to be majority at all, but to learn and to stay close. And then of course, in the future, how close we would work with some of those, it depends. I still think it's important for us to keep the brand close to our customers and not to white label too much because I think that is more challenging long term. I picked up when I went to Silicon Valley the first time some years ago, I picked up a phrase that we use sort of entirely, and that is that everybody needs banking services, but not necessarily banks. And I think that's what we use a lot internally to challenge ourselves and make sure how we think about things and also that the competitors might not necessarily be the one around us. It could be other competitors. So we're, of course, trying to find make sure that we stay relevant to what our customers need and what they might need in the future. But at the same time, we don't need to be scared about everything. A lot of things about the future is quite exciting. I think we can do pretty well. So we need to see how that evolves. We have now one person on the group's ACT committee. That was Jervo, who has been an adjunct member to only focus on all these digital things. So he's working closely now with the mobile bank, the Internet bank and what's going on in history. He's running these end to end processes where we digitize fully processes. The consultants have worked internal consultants, S. E. B. Way that we have in the bank, they are now into these processes. So I think we're doing a lot of things and hopefully keeping the executive committee really close to it by having a CDO also in GC. Okay. Can I just follow-up on that? I mean, do you have any number for so any revenue streams where you see that the barriers of entry are particularly low or where banks as we know them today don't necessarily have economies of scale that would I'd say that, but of course, we've gone through many, many areas. But also, it depends on how you do it. If you look at, for example, I mean, the Swedish solution we have in Sweden for payments, that's kind of the all of the elephant banks went together and found a fantastic solution, made the barriers to entry for anyone else into this country into payments. It's going to be interesting to see now what Facebook is doing that, if that is working off because we already offered it for free and it works really, really well. We have 4,000,000 users. So of course, are there other examples of that? And there are many things where we thought we could work better together. At the same time, we have the competition laws and we're very, very careful on where we can work together. So of course, this is also challenging in this industry to find good solutions, but sometimes, you have to do this on your own because you cannot invite others to work together. But this is one good example, I think. But we need to see now, of course, and then we have, of course, the regulatory. I think on the other hand, the regulatory sometimes can play us well because we are complying. We can afford all these regulatory hurdles. It's quite expensive for some other new entrants as well. So there are some cuts and minuses. I don't have any really specific areas that I worry about. Thank you very much for those answers. Your next question comes from the line of Daniel Doherty from JPMorgan. This has already been asked, but just two questions. The first one was in terms of your business plan. I mean, if the revenue environment sort of proves tougher than you're expecting, I. E, if rates don't rise as quickly, would you then simply have to revisit the $27,000,000,000 perhaps lower the ambition or do you have other tools in the toolbox, a plan B, so to speak, where you maybe revisit the cost base? That's the first question. And then the second question was on more just a follow-up in terms of the 5% CAGR that you're guiding to in the Life and Wealth Management. Just wondering why that is so low. I mean, is that just because you're being very conservative on market growth assumptions? Or is there any other reason behind that? Thank you. No, I think maybe we're trying to do this a bit too much scientific because, of course, I mean, it's a couple of years until we reach 27. I mean, this is something that we felt that we worked with it. We think that we can do SEK 2,000,000,000 a year. And we need to start to see that without tweaking 3 years ahead. A lot of things will change in this plan until the end of 2018, and we are very much aware of that. But we feel that this bank and all our employees, we kind of like to have a target and we like to focus from that. And this is kind of how we have together work to say, what do we think is viable and what do you think we can do? Then if we are able to do all this, we don't know. But it's definitely not 1 or 2 or 3 quarters 20 16 that will make us change the target. 2018, I think that's too early to say. So let's see how this evolves. I think we did in the last plan, we kind of said SEK 2,000,000,000 from Argentina, SEK 2,000,000,000 from retail and SEK 1,000,000,000 from kind of the Baltic and the rest. It's a little bit of the same in this plan. We think that albeit that we think that corporate and private will contribute a little bit more, but they also have all the distributions. Since we're now focused on customers and customer profitability, the Life of Wealth are only kind of the product and the revenues of the distribution will be booked in corporate and private. And that's probably why corporate and private is a bit higher because that's where you see the growth in bancassurance, for example. There don't appear to be any further questions. Thank you. Okay. Thanks a lot for the interest. And then for the people based in London or traveling to London tonight or tomorrow morning, we will then host not to the breakfast tomorrow, just to make sure that we can go to D and B and ourselves. We will then host you for the lunch meeting at 12:15 local at our premises in London. So welcome there and have a great day.