Earnings Call: Q4 2014

Jan 29, 2015

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 speaker today, Alf Gronezio. Please go ahead, sir. Thank you. Welcome to the conference call on SEB's Q4 results 2014 as well as the annual accounts. We will go through a short presentation that you should find on our web page and then we will conduct the Q and A session. With me in the room is Henneke Falkingren, our CEO and then Jan Erik Vak, our CFO. Please, Annika, go ahead. Okay. Welcome, everyone. On slide 2, I would like to highlight 3 items that have characterized the year for us. We have seen increased activity from large corporates, Many Nordic companies have made acquisitions and others have carried out initial public offerings like IPOs. As the Nordic region's leading corporate bank, we have been involved in most of these transactions. Secondly, we have for several years invested in our platform and we are now seeing the results in the Nordics as well as in Germany. We have also amid this uncertain global economy continued to focus on maintaining a strong balance sheet and proactively managing the credit portfolio. Turning to Slide 3. Total operating income amounted to SEK 46,900,000,000 for the full year and costs were SEK 22.1 percent. Operating profit was DKK 23.3 percent. But as we have communicated earlier, our divestment of UroLion and the shares in Mastercard created a total capital gain of DKK 3,000,000,000. Excluding these two one off items, income was up 6%. Operating profit came in at DKK 20,400,000,000 and that was 12% up. The Board of Directors proposes a dividend per share of kroner4.75 If we then turn the page again and look at the 4th quarter, If we then turn the page again and look at the 4th quarter and excluding the SEK 1,700,000,000 gain from the sale of Euroline, revenues increased by 1% compared to the same quarter in 2013 and costs increased 2%. Operating profit is slightly lower compared with the previous quarter and the Q4 of 2013 by 8% and 2% respectively. Then on slide 5, net interest income increased by 6% compared with the full year 2013 and by 2% compared with the same quarter 2013. Customer driven net interest income has increased by 11% during the year, driven by higher volumes both on lending and on deposits and slightly improved lending margin. However, the low interest rate environment followed by the 0 interest rate environment puts additional pressure on deposit margins. NII from funding and other declined by 40% during the year due to lower interest rates, which lowered the yield our large liquidity portfolio and also book equity. Turning to Slide 6 for more details. The 3% lower net interest income compared to the 3rd quarter is explained by lower interest rates and slightly softer lending and deposit volume. As the short term rates now are close to 0, deposits margins are almost gone. Our interest rate sensitivity to the last 25 basis points cut was around DKK 700,000,000 on a full year basis, which means that the sensitivity increased two times compared to the start of 2014. The NII margin was 100 basis points in Q4 and it has been very stable around that level for the last couple of years. It means that we've been able to compensate lower rates by higher lending margins. Then turn to Slide 7. Net fee and commission income amounted to DKK16.3 billion for the full year, up 11%. Compared with the Q4 of last year, net fee and commission income increased by 18 percent. Net fee and commission income increased partly as a result of a larger customer base and partly because large corporate activity has gradually increased primarily with event driven corporate transactions. This has led to higher lending and advisory fees. Custody and mutual fund volumes have also increased. Asset values are higher and we've had good inflow of net new volumes both within Private Banking and Institutions. A more detailed quarter specification of the fees is presented on Slide 8. Performance fees were strong in Q4 at $263,000,000 versus $145,000,000 a year ago. For the full year, the number was $434,000,000 or $167,000,000 higher than in 2013. Overall, we have more funds performing better than we've had historically. On the back of much higher corporate activity and especially M and A during 2014, our lending fees continued the positive development and were up 10%. The pipeline for M and As in especially Sweden and Norway still looks healthy. Also fees from payments and cards continue to increase, up 3% in 2014. On Slide 9, you see the NFI decreased by 28% during the year and was down by around 70% compared with the same quarter a year earlier. If we look at this income line, it looks weak, but the line itself does not give the entire picture. As you can see at the lower right, our trading business, meaning markets within Merchant Banking, did perform well with the exception of fixed income. Both equity and currency trading increased income by 15% last year. Fixed income on the other hand has been negatively affected by extremely low interest rates, low volatility and weak secondary market. That is not specific for SEB, but the whole market. Tyce credit spreads also played a role. It has been painful to adapt to the new environment, but we expect net financial income to improve 2015 and we are cautiously optimistic that it actually will grow compared to last year. On Page 10, we continue to show a clear and long term trend of our stable growth. Average income and profit continue to increase as costs are stable. We have extended our cost target of coming in below DKK 22,500,000,000 with an additional year to also include next year 2016. Worth to remember is that we start this year 2015 with more than DKK 500,000,000 in higher costs due to already known pension and foreign exchange effects. We have clearly shown that we can invest and grow at the same time as we reduce costs. Over the past 3 years, we've taken out nearly 10% or DKK 2,000,000,000 of costs by streamlining operations. Our model with the cost ceiling has worked very well. On page 11, the improved operating leverage is true for all divisions. Looking at Merchant Banking, the results are 11 percent better than the year before. The underlying business was strong and credit losses fell in the 4th quarter after we reported a specific loss in Denmark in Q3. Income has been positively affected by several larger transactions and by having more customer outside of Sweden. Retail Banking in Sweden continues to perform well, both in the private and corporate segments. Operating profit increased by 15% compared with a year earlier. The mortgage portfolio continues to grow with the market and was up 6% during the year, while corporate lending trend slightly. Small and medium sized companies, SMEs are continuing to be cautious with low demand on loans for working capital and financing. Our credit card business, which is the leader in corporate cards in the Nordics, has implemented a number of structural measures to continue to build scale. But for example, taking over DNB's corporate card business in Norway and also acquiring Eurocard Corporate Cards in Finland. Within Leidtowest, the combined operating profit increased by 23% year on year. And within wealth, we attracted about SEK 90,000,000,000 in net new assets under management, of which SEK 55,000,000,000 came from institutional clients within Life. Sales continue to be strong in both Sweden and Denmark. And last but not least, our Boardwalk division operating profit increased by 13% during the year, driven by better net interest income and cost control. On page 12, you can see merchant banking's focus on attracting new clients and cross selling on the existing clients continues to make good progress. The nearly 500 new clients now contribute 12% of total client income for Margin Banking, up 25% from last year. At the same time, existing clients increased their activity level during the year. Growth outside Sweden created geographic diversification that has contributed a double digit increase in all countries since we began the expansion in 2010. On Slide 13, the same recipe, to broaden and deepen the customer base, form the basis for our 3 year financial plan that we presented in early 2013. Today, 2 years into the plan, we have generated 12% higher income and through being cost efficient, we generated an operating profit above DKK 20,000,000,000 1 year ahead of plan. On a divisional level, most divisions are in phase, except the Baltics, which are lagging due to the macro headwinds from the recent geopolitical turbulence in Russia and Ukraine. The use of cost gaps have been central to our cost efficiency. On Page 14, we pinpoint some of the activities that continue to support our productivity. As foreign exchange effects and increased pension costs in 2015 create more than DKK 500,000,000 of headwinds, we will take out costs by being even more focused on decentralization, finding synergies and utilizing the shared service centers we have in Riga and Vilnius even more. Importantly, all growth must be self financed. And briefly on Slide 15, we highlight the strength of our asset quality and balance sheet. Those levels remain low at 9 basis points. Funding and liquidity meets all requirements and are well balanced, and we continue to build capital strength. And that leads into our updated capital targets on Slide 16. As Sweden Financial Supervisory Authority clarified implementation of the long awaited CRD 4 with Pillar 2 capital buffers for Swedish banks, we have been able to clarify our capital target. As the capital requirements will vary over time, we have chosen to express our goal as a buffer of approximately 150 basis points over the minimum level determined by the FSA. With this capital goal, we want to achieve competitive returns in line with what we see at other banks in our region. And for us, this means that we over time aspire to reach earth on equity of 15%. We retained the dividend policy to pay each year at least 40% of EPS as dividend. And for 2014, the payout ratio was 54%. On Page 17, we illustrated the dynamics of the capital target. When the countercyclical buffer of 1% is activated in September 2015, our pro form a assessment today is that with the current balance sheet and with the current understanding of the rules, we will need to have a common equity Tier 1 capital ratio of 17% to achieve the targeted 150 basis points margin over the regulatory requirement. The common equity Tier 1 capital ratio requirement communicated by the FSA in November was 15.6. So we are above the requirement, but would like to add further margin. The rationale behind the 150 basis points are due to the sensitivity of the capital ratio to currency movements and the size of the pension surplus. That you can see on page 18. Currency volatility is hard to predict and counteract. And looking at SEB's risk weighted assets or REA, the major currency is euro 40%, while SEK is only 1 third. A 5% change in SCK impacts the core Tier 1 by 50 basis points. Pension risk is another important factor, where we today have a surplus. But changes in asset values and discount rates create a sensitivity in the capital base. A 50 basis point change in discount rates impacts the quarter 1 by 50 basis points. And then we have the general macro development, which among other things affects the country cyclical buffers. So formulating our target as 150 basis points margin at least we think make sense. And finally before questions on page 19, we are continuously sticking to our business plan even amid this environment of more global uncertainty. We have a strong financial position and we're well equipped to develop together with our customers. We have fantastic colleagues in our bank, who with strong commitment collaborate and seek common solutions that we always will be there for our customers. And with this, we can open up for questions. Thank you. And your first question comes from the line of Omar Khunan. Please ask your question. Hi. Thanks very much for taking the questions. I just had a question on operating leverage. And as you said, you've delivered kind of consistently that over the past few years. But I was hoping you could perhaps add a bit of color as to whether you think in the very near term for 2015 that kind of delivering underlying €2,000,000,000 of operating leverage growth can be achieved. It feels like a fairly mixed picture for revenues. As you said, kind of negative rates and increased rate sensitivity might mean that kind of positive on fee income and perhaps a bit of a recovery in trading versus last year. So could you just help us out a little bit on that? And then just have a second question on capital. Thank you. Okay. I can start saying that, yes, instead of doing this back of the envelope for you, you can do it yourself. And then you, of course, notice that we need to continuously improve the profit by approximately $2,000,000,000 every year continuously. And I guess what we are saying is that we do feel quite comfortable with continuously on that target. We will keep the costs. And again, we could probably have lowered the cost a little bit, but we do have headwinds due to mentioned costs already on pensions and foreign exchange. So it's continuously working with costs and then improving more revenue. So I think that's what we hope to continuously deliver and we are aware of that. When it comes to the NFI, I think that we have probably levered out. We had a very fast performance on fixed income this year, but we think it has levered out. So I think we're slightly more optimistic when it comes to markets actually that equities have done well, for change have done well. The doors were fixed income, but they are now slowly coming out of that. So we look fairly optimistic that we can continuously deliver. Of course, the environment is quite tough, but despite that, we think there is a possibility to do that. Even in 2015? Yes, that's what I'm talking about. Okay, great. Great. Thanks very much. And then second, I just had a question on you gave kind of very clear explanations as to why you're running with 150 bps additional buffer above the requirement. But I just wanted to ask you another question on further regulatory risk that you see in the future. I mean thinking here specifically about capital flaws, which might have kind of a particular impact on Swedish banks. So just assuming that kind of a European level that we have a fairly tough capital floor put in place with limited national discretion. I was just wondering if you've had any kind of preliminary conversations with the regulator around capital floors And whether kind of in that scenario they would ease up on some of the buffers that they've put on SEB and kind of generally Swedish banks? Thanks. I think what I can say that there is a continuous discussion with the finance inspection and they have been open about that if there will be changes again with the flaws we have today on mortgages and if it would come in a different way on corporate, of course, that needs to be discussed in this Pillar 2 or Pillar 1. So I think we have an open dialogue whether that would happen or not. But of course, there has to be discussed with order in Swedish, Finnish that is there. So I feel really comfortable that that will find a different way. I don't know, Janik, if you would like to add something to that. No, I agree with that. I think Omer is quite clear that the regulator is but they're not maybe they don't sort of speak out very clearly. But I think they are certainly indicating that if and when that would happen they would have a second look at the hike of the capital bar that they have now set. So they will it's a new generation of regulation which will we all have to adapt to and including the regulator. So it's good. And finally, Omar, I think that the decision they made to actually go with the 3% leverage ratio was also an important signal, because they had of course support from some other people over here that they could go further than that to restrict the effects on the capital or potential capital release using the leverage ratio. But then they anyway said that they see that using a sort of risk and non risk sensitive measure as a backstop and don't really want to push the bank to use that as a liquidity factor. So we are quite comfortable that it won't be any meaningful restriction on us anyway. Okay. So it sounds like you're feeling fairly relaxed that if we have a capital floor kind of the real equity amount that SCV has to run with won't increase as it would for other banks as well? That's a reasonable assumption to make. Okay. Great. Again, we'll have to come back to this. This is probably a couple of years into the future, it's not more. So it's difficult to predict, but that's a reasonable assumption to make at this point. Great. Thank you. That's very clear. The next question comes from the line of Peter Kaczakoff. Please ask your question. Yes. Hi, Petr Kaczakoff here from Carnegie. Just a couple of follow-up questions on the back of the press conference earlier today. I guess, first of all, on the capital target, you mentioned the 17% core Tier 1. How should we look at the distribution potential of capital when you reach the 17% quarter 1? Should we see it as a strict level that any capital above 17% can be distributed either through dividends or buybacks? Or how is what is your thinking around this? That's my first question. So I think that this is the first line that we're coming up with and then we'll see we haven't reached it yet. But when we reach it, of course, you have dividends and you have buyback, but it's also about a timing issue regarding the political climate, whether it's possible or not and how to work with this. So I think again, let's take that one when we read it. But of course, it's the same as last time. Of course, we don't want to carry more capital than we actually need for the business, but everything is not really set yet. Okay. So it's sorry. Jan Erik wants to comment. No, I'll just add to that. I mean it goes back to Omar's question a minute ago that when we get there and when that decision is to be made, we have to keep an eye on whatever new regulation may be coming in as well. But other than that the capital target is there for a reason. It's there to signal where we think it should be in the long term. Okay. So but there's nothing else that's stopping you from increasing the payout ratio further or starting to do that? No, no, no, thanks. Okay. Then just looking at market shares for mortgage lending in Sweden, we saw that you lost volumes during December, your figures that were out to date. And your market share on new lending was 6% versus back book of 16% for November. Do you have any comments there? Is there any change from you? And how you look on that market? I think first of all the market was very thin in December, so it's hard to make that one as an earmark. So slow market, very few active. And also there were a lot of credit commitments that were quite weak, but we don't know if that's really going to materialize in new lending as well, because many clients lost many banks for prices now. And last but not least, of course, we see many clients that are jumping around kind of and that would be kind of the lost strategies on every bank, I guess, that every time it's time that they jump around. And that's probably something that's been seen also. We try to find the kind of long term clients that stick with us. But I think this is part of it. But I don't think it's an alarming signal at all. I mean, we will make sure to look after all the clients that we have brought into the bank. Profitability is very important. Long term clients is very important. And the competitive part of mortgages is really, really tough at the moment. And I think we try to play it in a way we like it. We kept our total market share at 16, but I've been rather comfortable still with that. Okay. But you're not seeing any margin decline or increased competition that is taking margins lower? I think the competition has definitely increased. The acquisition is fierce. Margins did improve with 1 basis points or something, marginally improved still, but it's getting tougher. Okay. And then just last couple of questions on your financial goals. You're saying that you still want to reach a return on equity of 15% on a capital base and of 17% quarter 1. However, how is your thinking around the timing of this? Previously, you've always focused in 3 year periods. I'm not sure whether you have thought in those in that kind of time frame again. And what kind of implicit profit would that give us at the year at the end of the target? No. I think we can all see that it lacks kind of approximately SEK 6,000,000,000 or something to reach it. So as we said, if we continue the way we have worked, we need another $2,000,000,000 every year. I think 2015, 2016, 2017 might be tough coming all the way to 2016, but we might be quite close. That's as far as I can tell you. Okay. So continued good earnings growth is what you see and then of course possibility to pay out or hopefully be able to pay out everything above 17% quarter 1? You said it. Okay. Excellent. Thank you very much. Next question comes from the line of Shintan Joshi from Nomura. Please ask your question. I had two questions on the buffer. The first question was, I just wanted to understand the 150 basis points requirement. When I think about the risks you're talking about pension risk, FX risk, these risks are Pillar 2 risks essentially. And within your 15.4% minimum, there's already a 3.5% buffer against Pillar 2 risks. So what you're telling us is that you have so much risk within these 2 buckets that it is more over and above the 3.5 percent that is within the capital stack that you have to provide an additional 150 basis points. I wanted to understand whether that is how you think about it. It just looks like a large number against these Pillar 2 risks. And if you are at that level, then other banks also need to have buffers. So just wanted to think about that. And secondly, again on the buffer, a lot of banks manage the FX risk in their capital ratios. Shouldn't use card doing that as well so that you don't have to hold buffers against FX risk on your capital ratio? Thank you. Hi, Quentin. Jan Erik. No, I basically agree with what you say there. The buffer is there to protect from the volatility around those risks. And I think we don't want to be near dipping into the capital stack as defined by the regulators. So it is there to protect from that sort of volatility. And I think we can only relate to our own volatility and our own risks and the own height of our capital stack. And let others comment on their conclusion. So were you told by the regulator not to dip into that 3.5% because that's what that 3.5% is for. It is for those Pillar 2 risks, right? Say that again, Chetan. Were you told by the regulator not to dip into that 3.5% in your capital stack? That 3.5% for Pillar 2 is for risks like pension risk and FX risk. So by saying that you don't want to dip into it, are you saying that the regulator preferred that you did not dip into it or whether you are just being conservative? No, we're just being conservative if that's what you want to call it. There's been no pointers from the regulator or any individual discussion on that topic as then what you can read as well from the May November communication. They have told all the banks what they think the height of the capital stack should be. And we want to say about that. And that's the reason behind it. Okay. And on the hedging bit, hedging of your capital volatility against FX? We have certainly So that will reduce your buffer requirements if you did that? Yes. Certainly looked at the possibilities of and the pros and cons of hedging the ratio. But it's I think it was quite difficult or quite expensive. So we haven't yet. Okay. And if you did do it in the future, would that reduce your buffer requirement? Well, let's cross that bridge when we get there. Understood. Thank you. The next question comes from the line of Johan Ekblom from BOA. Please ask your question. Thank you. Yes, just a follow-up really on costs and then on net interest income. You're saying €22,500,000,000 cap for 2015 2016. And if we assume there's some underlying wage inflation of 2% or so and this €500,000,000 on pension, I get to something like €1,000,000,000 cost reduction over 2 years. Is that broadly how you view it as well? And I'm guessing should we see in terms of timing, would you expect that the costs that to be front end or back end loaded? And then just secondly on net interest income, it was down a bit in the quarter. Given what happened to rates, that's probably not that surprising. But as we look into 2015, it still feels that there are more headwinds than tailwinds. I mean, probably we'll have some volumes on the positive side, but rates are going to be lower on average and might go even lower if we get QE or anything like that in Sweden. It doesn't feel like the Anneke just said that the competition on mortgages is heating up. So how should we think about the potential to grow net interest income 2015 on 2014? I can start with you're assuming on the cost. I think I mentioned today on the press conference that last 3 years we've taken out 10% of the cost base already. And I think that's probably correct way of looking at it. That is possibly where it is in productivity measures instead. So that's probably where we are. So I think that's what we are trying. But we don't want to guide further than 2017, because again, we don't really know what will happen in this new environment and we might want to do things. But I think that's probably quite fair assessment when it comes to that. I think if you look at the balance sheet for 2014, you can see that we will have I think $170,000,000,000 or something to corporate and $25,000,000,000 or $27,000,000,000 to households, I think that shows kind of what the corporate bank we are and where we are and what we do. So I think when it comes to the corporate activity and also outside Sweden, that is probably where the revenue should come from and where the combination of volumes and margins, what you will see also drifting down to the NII rather than kind of deposit margins, which are gone. On the other hand, that is mostly affecting SEB in Sweden, because in Sweden, the Board is because they are the only places where we have universal bags. But the growth will be on the corporate. It's a combination, I would say, on margins and volumes there. But of course, the Swedish retail would have a more tougher time going forward in the coming year due to deposits. Do want to add something? Just to add that I think what Henrikar is describing is that in total, if you put all that together, NIM has been very stable. It's been stable around 1% and that's what we're hoping to be able to do going forward as well to compensate on the asset side what we have lost on the liability side. So we've been successful in doing that for quite some time and we're pushing hard for that to continue. And just maybe a quick follow-up on the corporate volumes. I mean, you commented that a lot of the volume has been deal related environment that will continue. But if it does not, how quickly does that portfolio run off? So I'm assuming it's quite short duration. I think that when it comes to bridge financing, they're usually 12 months or shorter. But I think the average for the whole merchant banking and large corporate lending portfolio is 3.5 years. Perfect. Thank you. The next question comes from the line of Jan Wolter from Credit Suisse. Please ask your question. Yes. Good afternoon Jan Wolter, Credit Suisse. Just two quick follow-up questions from the presentation this morning and returning to the capital target that the bank set and also the this question has been asked in various ways during the call. A 150 bps buffer is equal to around €10,000,000,000 in extra equity. So that's something like SEK 120,000,000,000 drag on the bank's return on equity. So I understand it's not possible to hedge for all risks, but wouldn't it be possible to hedge a meaningful part still given the meaningful drag on the return level of the bank. It looks like even if the instruments or hedges used are expensive, it could be worthwhile. So that's the first question. And the second one is fees are up nicely Q on Q although client activity has been muted. Does the pipeline of business that SBS sees does it give you comfort that we've reached a new level now on the fee line which could be sustained into 2015, naturally adjusting for seasonality in the Q4? Thank you. Hi, Jan. I think the buffer discussion is obviously a bit of a tricky one when it comes to hedging for those risks. I think it's a debate that we have internally all the time and it's a normal sort of cost benefit discussion. Up to this point, we haven't seen that benefit outweighs the cost, but that's something we will constantly review. And if we see that change, we will of course do it. I think it's what helps the situation now is that now we know the rules we know how to interpret the different layers in that capital stack and we can start to optimize against that. So certainly, we think that there's more to be done, but we needed to have this clarity before we can start to act on that. I think if I comment on the business pipeline, I dare say that it still looks very promising. And I think I had a slide also in the press conference that showed a bit I think on the diversification of where we are. I think the good thing is also if you look at Page 12 where you could see the kind of traditional large corporate client base of merchants, the Swedish kind of base without the new clients that really came off in 2014. So of course, we need to see more activity from all these clients. And we were a clear market leader on a major part of all transactions that was made. So I think we run on everything and we get pieces of everything. And when we get the piece, it's a lot of different departments within SMBs that are suddenly involved. And that does render a lot of NFI. So I'm of them I am cautiously optimistic that we don't really see that this trend is not trending upward. I think the challenge is that why is it that SMEs and mid is a much more hesitant in loan demand rather than the large corporates are actually quite active now in doing a lot of deals. Okay, very clear. Many thanks for that. The next question comes from the line of Anton Koryaszko. Please ask your question. Hi, good afternoon and thank you very much for taking the questions. Just two follow-up questions please. 1 on capital. Now that you have a target which is above where you are currently on capital, are there any capital efficiency measures on risk weighted asset side that you're planning to implement over 2013 that we need to keep in mind? And the second question please on fee and commission income. This quarter a big part of the pickup in fees and commissions was driven by the payments and cards business, which is normally low volatility in the P and L line. So I was just wondering whether this increase in the payments and cards related fees was a sustainable one Or were any one offs there that have distorted the picture? Thank you. Hi. When it comes to the additional efficiency measures on risk weighted assets, we've indicated around €20,000,000,000 more in terms of reduction that we're waiting for. We've got model changes with the regulators where we are waiting for answers and their judgment on that. We've had that outstanding for some time and it's notoriously difficult to predict when the answers are going to come. But I'm hoping for the etcetera, I think you're referring to the line which says payment cards, etcetera, I think you're referring to the line which says payment cards and then lending deposits guarantees and so on, which is up 12% in the quarter and it's actually up 8% year on year, 2% which has actually to do with payments and cards and then 50% which refers to the lending fees that we discussed in terms of larger transactions and so on. So if you look at the breakdown of that line, you can see that it's more driven by the event driven transactions and where we have helped with bridge financing etcetera rather than traditional car business. It's not that volatile even though it's growing. Okay. That's very clear. Thank you. And next question comes from the line of Jeff Dorris. Please ask your question. Hi, good afternoon, everyone. It's Jeff Dorris here from SocGen. A couple of questions on my side. Three questions actually all very quick. First of all, on the dividend policy, how important is it to you to have a dividend that creeps up every single year? Is a rising SEK amount more important to you than the payout rate that you pay? Second question is on that 150 basis points buffer again, but a very quick one. Did you come to that 100 and 50 basis points entirely independently? Or was there any input from either the Swedish side or the ECB? And then finally, a quick one on the commercial real estate book. I know it's quite a small part of the overall book, but it's notable that it's been flat for some quarters now both on the commercial and the residential side. Is that to do with just the demand in that business? Or is that a kind of note of caution from yourselves on the commercial real estate market in the Nordics and beyond? That's it. Thank you very much. Hi, Jeff. Yes, quick answers as well I think. On dividend, yes, EPS is more important than payout ratio. So growth in the dividend per share is more important? Yes. Absolutely. That's we've been very clear on that. We want to be able to show long term investors a nice positive development of DPM. On the second question, the buffer of 150 basis points is set completely independently of both the Swedish and European regulator. It's something that we have formed our view on. And number 3, in terms of real estate exposure, I would agree with the description noted caution. I think we have come to that conclusion ourselves. We have stayed away in all our geographies from a high share in the real estate market. Great. That's very quick and efficient. Thank you very much. Thanks. And the last question comes from the line of Christopher Roskis. Please ask your question. Yes. Hi. This is Christopher Roskis from Barclays. Just two questions from my side. The first one is on the Retail Banking division. I'm looking at the 20% planned income growth that you have on slide 13 versus the current 14%. And just wondering if you could elaborate a little bit more. Is that the deposit margin compression? Is it the cross selling that is slower than expected? And or what is it that is deviating here from your plan? And perhaps we could speak a little bit about what you're looking at going forward, if it's simply a matter of catching up that the penetration on new customers is happening a little bit later than expected, but you're still confident that it's coming? Because I think you mentioned at least once today that you have to increase the uptake of number of products per customer. So that's that. And then I have one more question on deposit margins, please. Thank you. I think on the I think you're referring to the slide on our income growth targets and so on. And one should note that we're talking about 2 out of 3 years. So the plan was to grow it by 3 years and now we have had 2 years and we are roughly in line in terms of where we come out on retail as well as some of the others. So if we had another year, if you give us this year as well, we are quite sure that we will get to that type of number. So you're with the current progress in the retail bank, you're confident or you're at least on aggregate for the group the growth is sufficient? Yes. Yes. I think we're just trying to say in that slide that we made 12 out of 15 percentage points in 2 years. Okay. The other question I had is on deposit margins. We're seeing 2 quarters where there's been a significant drag there And I think the reason is quite is to understand. But you're also seeing that there's been quite a lot of repricing on deposits, especially term deposits in Sweden. And I was wondering, is there a lag effect in the actions that you have taken that there is some upside on your deposit margins going forward due to that? Or if there is or any other actions that you haven't taken yet that you would that you're now considering? No, I don't think there is any big upside there, Chris offering in the near term. I think that's going to be painful still. I don't think we don't project any interest rate hikes during this year, next year hopefully. So it's going to be continue to do so there. But as I said before, what we've been able to compensate on the asset side for whatever has happened on the liability side. And hopefully, we can continue to do that. So you see so but I meant more rather not exogenous developments in the market, but rather actions taken by SEB to manage what's going on in the market. But should I think about you as price takers rather than on deposits as well and that you will following the market and we'll see continued and even increasing sensitivity to the rates? Christophe, I think we try to look at it from the customer's point of view in terms of what we would recommend them to put their money. And of course, even if we're to have a very interesting deposit account, we wouldn't really pay very much. The question is, what are the offerings we would like to go to the customers and for those who have the money to invest into the market or at the deposit account whether they should have a large part of their share on the deposit account. So I think it becomes more of an allocation question rather than a level question because in the best of words, we wouldn't be able to pay very much on a deposit account anyway. So with that, we are not feeling that we should restructure the pricing of deposits because we are so close to 0 in those accounts anyway or at 0 that it wouldn't matter very much. We have an account where we're still paying a little bit, but we see that as more when the clients are willing to commit their money for some duration and where the alternative for us to use that deposit money as funding would be to go to the commercial paper market or any other senior market and borrow the money. There we could pay up a little bit, but otherwise we wouldn't really do it. Okay. Thank you. I understand. And it's important as well that when we do this, we're looking at it more from a customer point of view in terms of the holistic, are there true customers of S and B or shopping around for a good rate basically? So the deposit margin might then subsidize the benefits of other parts of the customer relationship? No. Subsidized, I'm not sure. It's bells and whistles, swings and roundabouts. It's looking at this from a customer profitability point of view. Okay. That's very clear. Thank you much. Next question comes from the line of Peter Kessiakoff. Please ask your question. Yes. Thank you. Petr Kessiakoff here again. I have some additional questions. First of all, just looking at mutual funds, we could see that you and other Swedish banks lowered fund fees during the middle of November. Do you have any intentions to or do you see further lowering of mutual fund fees during 2015 on the back of lower interest rates and the debate that is going on there? Secondly, just looking at the Baltic operations, you have the Baltic real estate holding company, which has roughly SEK 2,600,000,000 of assets, and it's started to decline after many, many quarters of gradually rising. What should we expect there going forward? And will that is there potentially write downs that will be needed to be taken once these assets are sold? So those are my questions. Thank you. I can talk about it. Regarding the funds, I think we've been cleaning up and doing a lot for many years now regarding the funds and also cutting a lot of lowering the fees overall and also offering pure indices funds without any fees at all. When it came to the interest rate funds, we made sure that we cut fees, so no client of SCDs should ever participate in the interest rate funds and getting a minus of the deposits. So that's why we'll be more proactive in that. That might continue. There is a small, small deal in that funds a day. But otherwise, I think a lot is already done. And I think also paying for performance is where we are going. I think that's transparency, pay for performance. That's where the whole industry is going. I think we might have been a little bit ahead there. So I feel rather comfortable with what we have seen and what we have kept, but there might be even more capital in the interest rate fund. But that one is quite most of it is already taken. So it's on very low levels now. And Peter, on the Baltic Credit Company, you won't see that number come up from where we are now. It's going to reduce as you indicate. And I don't foresee any material write downs on that impact. I don't think that we need to do any, but I shouldn't promise that away, but nothing material anyway. Okay. But we should expect the assets there being sold going forward, so gradual reduction? That's right. Okay. Thank you. There is no further question at this time. Please continue. Okay. Then thank you very much for participating in our call. We will have a Q and A session at our new in our new offices in London tomorrow and then we will see investors in London and then it's weekend. So with that, if you have any calls or questions, let us know. Take care. That concludes our conference for today. Thank you for participating. You may all disconnect.