Good morning, everyone, and welcome to this presentation of Handelsbanken’s result for the first nine months and the Q3 of 2024 . The Q3 showed an increase in ROE to 15.6% from 15.2% in the previous quarter. Operating profits grew by 6% to SEK 9.1 billion. As income grew, expenses declined, and again, we saw net credit loss reversals. The cost-income ratio improved to 38.3% from 41.5% in Q2 this year. So in terms of the sequential P&L, we saw a positive development in more or less all the key lines. The financial position remains very healthy.
The CET1 ratio of 18.8 was 400 basis points above the regulatory requirement, and the anticipated dividend in Q3 of SEK 3.95 was equal to 109% of the earnings in the quarter. In the first nine months, the anticipated dividend amounts to SEK 9.20 per share, or 88% of the earnings. So both a steady generation of distributable funds as well as the capitalization level. When the Banking Package will be introduced in January first, the bank's assessment of the day one effect is a neutral, or in fact, a slight reduction of the risk exposure amount. Annual external surveys are usually published in Q3 each year, and the long trend continued with evidence also this year of Handelsbanken customers being more satisfied than those in our peers.
The highest scores show among both private and corporate customers, and in all of our four home markets. The bank also again received the award as the Business Bank of the Year in Sweden, and for the thirteenth consecutive year, Sweden's SME bank. The external recognitions align with our view that our locally connected and long-term relationship-oriented business model really stands out in the market and is highly valued and appreciated by both our private as well as our corporate customers. Now, if we look closer at the Q3, we can see again that our ROE increased to 15.6 from 15.2 in Q2. The cost-income ratio dropped to 38% from 42% in Q2, and credit losses again amounted to net reversals of two basis points.
NII was up marginally, and the fee and commission income grew by 1% to the second highest level seen so far. Total expenses dropped by 7%, adjusted for the one-off costs relating to staff layoff agreements, Oktogonen and FX, the expenses dropped by 5%. Credit losses consisted of net recoveries of SEK 141 million, and that gives us all in all an operating profit growing by 6% or 4%, adjusted for the items affecting comparability. If we move over to the accumulated numbers for the first nine months compared to the same period last year, ROE amounted to 15%, the cost- income ratio to 41%, and the net credit loss recoveries to two basis points. NII was down marginally, and fee and commission grew by 4%. Expenses increased by 10%.
The increase was attributable to annual salary inflation, increased pension and staff costs. The average number of employees increased by 6%, of which four percentage points were attributable to additional employees working in the branches due to a larger customer activity, and 1 percentage point within the bank's IT development. All in all, the operating profit declined by 4% on an underlying basis. Now, if we zoom in to the NII development compared to the previous quarter, interest margins were negatively affected by lower central bank rates, and the net effect on margins and funding costs was SEK 109 million negatively. This was, however, offset by a positive day count effect of SEK 97 million. Apart from that, there were only minor effects from other NII components.
Net fee and commission income grew to, continued to grow also in the Q3. Almost 70% of the fee and commission income comes from the savings-related commissions, of which the asset management business is the largest contributor. The positive development in the quarter was both driven by the stock market development, but also by higher net inflows. The other fee and commission lines were fairly flat in the quarter. Assets under management reached a new all-time high this quarter. For a very long time, we have seen the market share on net inflows into the mutual fund savings in Sweden so far, exceeding the bank's market share and outstanding volumes. The bank has continuously, over the past 15 years or so, attracted around 20% to 25% of the net inflows into the Swedish mutual funds.
But the market share of the outstanding funds volume has only grown, gone from around 8%-9% to around 12%. This suggests a potential for the bank to continue to grow well in this field, also going forward. The success over the years is a result of a combination of a very strong performance, early focus on mutual funds with ESG profile, strong customer relationship, and not least, a strong distribution capacity, and since the spring, we've also noted a strong development in Norway, where we, in the past two quarters, have seen the market share on net inflows into Handelsbanken's funds exceeding the market share by outstanding volume by more than two times.
The growth in business volumes is naturally also connected to the customer activity, and during this year, we've seen a good pickup in the number of advisory meetings in our branches, especially in Sweden and Norway. In the past few years, we've strengthened our branches with more capacity and underwriting mandates, and in addition to what we believe also increased the availability for our customers to meet our specialists, such as private banking and occupational pension advisors, locally, where the customer is situated. The number of private banking advisory meeting is up by around 40% in the first nine months of this year, compared to two years ago, and the number of occupational pension advisory meeting is up by more than 90%. Quite naturally, we see that the AIM, AI, asset under management, sorry, growing as a result.
Increasing assets under management, building structural earnings growth over time, and also an ROE-enhancing growth for the bank. Now, over to the expenses. We started this year by reviewing the efficiency in the bank. We have since then reshaped the organization and addressed efficiency measures, initially, primarily within business support and group functions. In Q3, we've started to see underlying effects in the cost base, and underlying expenses dropped by 5%. The total number of staff, meaning employees and external resources, has now declined by 3%, or around 440 people, since the spring. It's clear a negative trend in staffing has changed since the beginning of the year. Further initiatives are recognized and will be addressed continuously, just like we've done and showed now for the two consecutive quarters.
The efficiency work is important in order to ensure the long-term competitiveness of the bank and a long-term shareholder value creation. Now, briefly on asset quality and credit losses, or rather, the net credit recoveries that we've for the third consecutive quarter. In fact, the bank has in total not burdened the shareholders with any credit losses since Q2 2020 or more, over more than four years. Credit losses have been more or less zero for a long time, during that time we see no signs of deteriorating asset quality. This is a result of the bank's limited risk appetite, the consistency in the underwriting, and the preference for collateralized lending, and importantly, the local presence and connections via our branches with which enable the banks to be very quick in detecting signs of stress for customers and also handling such situations.
Also, in this quarter, the management add-on was trimmed down a bit, this time by SEK 76 million. The add-ons is reassessed each quarter and stood at SEK 378 million at the end of the quarter. A stable financial position forms the foundation for long-term customer relationships and long-term business growth. The bank's strong view is that it should always be able to support customers with financing, regardless of external factors, and without any aid from governments, central banks, or shareholders in rough times. In Q3, the CET1 ratio was 18.8, which was 400 basis points above the regulatory requirement, just in line with the previous guidance.
In order to calibrate the CET1 ratio to 400 basis points above the regulatory requirement, the anticipated dividend in the quarter amounted to around 4 SEK per share, or 109% of the earnings in the quarter. For the first nine months, the anticipated dividend amounted to 9.2 SEK per share, or 88% of earnings. As always, the board will make a holistic assessment of capital position in the Q4 report in February and decide on a dividend proposal for 2024 to the AGM. January 1st, next year, the Banking Package will be introduced, meaning that the implementation of the last parts of the Basel III agreements in the EU. The bank's assessment is that the day one effect will be a marginal reduction of the risk exposure amount.
The Banking Package is hence not expected to affect the capital planning of the bank. A few words about the respective home markets, which also improved cost-income ratios in the quarter. In Sweden, the volume growth remained, remained muted on both the lending and deposit side, but recovered on the savings side. The cost-income ratio dropped to 28, which is the second lowest level historically, and the ROE stood at a healthy 18%, the highest amount among the home markets. In Norway, the cost-income ratio dropped to 44, and the ROE remained around 11%. After the refocusing period during the spring, we are now seeing a more balanced growth between lending, deposits, and saving, which bodes well for future investment and improvement of the profitability in Norway. In the UK, the cost-income ratio improved slightly, and the ROE was 17%. Deposits continued to grow, as did the savings volume in the quarter. Finally, in the Netherlands, the earnings grew by 10% in the quarter, and the cost-income ratio improved to 51 from 55 in the Q2. The ROE increased to 14%.
So to sum up the first nine months for the year and the Q3 in particular, Q3 was a quarter which saw increased income, lower costs, and net credit loss reversals. The cost income ratio and the ROE improved. Customers showed their appreciation of the bank's locally connected and decentralized model in its in annual external surveys, and the bank is in a very solid financial position. So thank you very much for listening in, and we will now take a short break before commencing the Q&A session. Thank you so much.
Hello, everyone, and welcome back to the Q&A session. This is, Peter Grabe, head of Investor Relations speaking. And in this Q&A session, we will have Michael Green, CEO, and Carl Cederschiöld, CFO. And as always, we would welcome you to ask one question at a time, please, in order to make sure that everyone gets a chance to ask their question. And with those words, operator, please, could we have the first question?
Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We will now take your first question. One moment, please. And your first question comes from the line of Magnus Andersson from ABG Sundal Collier. Please go ahead.
Yes, hi, good morning. I have a question on the sustainability of the net interest income level in Q3. As it looks, you're defying gravity here to some extent. I mean, volumes are fairly flat quarter on quarter, while interest rates have been down two quarters in a row. Despite that, your NII is up two quarters in a row, and it looks like, if I look at slide five, that the negative margin and funding impact is much smaller than it typically was in the quarters when rates went up by the same magnitude as they have been falling. So please, if you could shed some light about this, if there are any funding effects in here that we should be aware of. I know Swedbank, for example, talked about liability swaps, related to the Swedish covered bonds that resets every three months. That had a huge positive impact for them, whether there is something in here for you, so that we are not know whether we are facing kind of cliff effect in Q4, or not. Any light you can shed on this, please? Thanks.
Thank you, Magnus, and good morning, Carl Cederschiöld. So yes, obviously, we won't guide on this going forward, but I think there are a few components worth to highlight here. As you mentioned, I mean, when rates are dropping, obviously, lending margins will drop or not, but lending, the income from lending will drop and the financing cost, the ones we have a transaction cost, they can't go much lower than they are today. So that will have a negative impact. But I think there are a few factors worth highlighting here, which have been a headwind when rates has increased, which doesn't necessarily become such a headwind or could actually become a tailwind when we drop.
First of all, obviously, it is the volume component, and as you say, that hasn't been strong in this quarter, but we shouldn't see that as unlikely that we'll return to growth when rates are dropping. Second of all, I think it is the lending margin. We know that the deposit margin will drop, but the lending margin could actually increase quite a bit, and especially if the banking climate goes back to growth, that could ease off a touch. Thirdly, I think there's been very strong incentives to move your money from cash deposits and transaction accounts into term deposits or even amortize your debt. I think there's reason to believe that at least incentives are dropping off when rates are going lower.
So you could see amortizations dropping off, and you could start to see people staying more of their cash at transaction accounts or even invest in funds, which is obviously going to be beneficial, though on another line. And then I think it is also the funding mix. I mean, as you know, we have a diversified funding mix between deposits and bonds and capital market financing. And the capital market financing component will move in line with the rate movement or perhaps even stronger. So I think there's definitely reason to say that our movement for us doesn't necessarily need to mirror the opposite direction we had when rates were increasing. But we won't guide on the outcome of this, but I think these keys, these things are worth to have in mind.
Can I just add on?
Okay.
This is.
Yeah
Michael Green. So there, you, I thought Magnus, you said there, is there any specific extraordinary things referring to the NII in this quarter? And I would say no, there are not. So the, you refer to Swedbank. We don't have that in our numbers, so this is quite clean from that perspective. And I think it's also, and you know this, but I'll say it anyway. So the... It's also, to add on what Carl just said, the product mix in our deposit side is crucial also to be able to maneuver and to adjust for interest rate, both going up and down. So the higher amount you have on the savings accounts, if you compare to the salary accounts or the transaction accounts, is actually one component when that mitigates to some extent the fluctuation in the market rates.
Okay, thank you. So there's nothing that could swing back or in the Q4 quarter then, as I read you. And to follow up there, Michael, on your deposit mix, would you say now, out of your deposits, is it still around 25% you have on transaction accounts? And if you can break that down on the various countries, please.
Yeah, that's my view, 20
Yes
Around 25%.
Okay, and for all countries?
It varies. This is Peter. It varies somewhat, but it's a touch higher in the other markets, but not by much.
Okay, thank you.
Thank you. We will now take the next question, and the question comes from the line of Andreas Hakansson from SEB. Please go ahead.
Thank you, and good morning, everyone. Before I ask my question, I just wanna follow up on Magnus' question. So on the page five again, when you have the minus 109, you say margin and funding. We could all, of course, assume that deposit margins is a very big negative. If you would have split margins and funding in two boxes, would the funding actually been positive in the quarter?
We won't break that up, as you know, and the reason for that one is that it is many moving components within the equation, but obviously you are correct in that deposit margins are definitely have a negative component in the quarter.
Okay, thanks. And then my question, Michael, it's for you. I mean, you still have quite a much lower profitability than the peer group and comparing it to Nordea and Swedbank that have reported the Q3 numbers so far. And we have been discussing many times about your lack of capital light products, and in that light, did you look at acquiring Carnegie, and if not, why not?
Right. So no, I agree with you, Andreas. We absolutely focus on bringing up the return on equity for the bank, and we do that with various activities in both on the, you know, on the cost side, as you know, but also on to increase our commission part of the income flow. And you know, we grow organically, and most of the time, sometimes we see fit that we could, you know, acquire something. We and we do not comment on the specific company or business. If there is interest and it will suit us, we will definitely be looking at it. But I'm not gonna comment anything on the Carnegie transaction for that sense.
But, I mean, it makes sense, right? That it's the type of businesses that Carnegie is doing where you would like to grow, right?
I'm not really super involved in Carnegie's detailed business, but I think some of the business there is absolutely a business we also are driving, the asset management, for example. We have a very strong and very well-functioning investment bank, and we're happy with that. So maybe to add on the AUM side, but not... I'm not gonna comment any more than that.
Okay, thanks.
Thank you. Your next question comes from the line of Gulnara Saitkulova from Morgan Stanley. Please go ahead.
Hi, good morning. Gulnara from Morgan Stanley. Thank you for taking my question. My question is on capital buffer. So, at the start of the year, you have decided that you will keep an extra one hundred basis points above your normal capital management buffer range. However, now, if you look at the rate cuts, they're flowing through faster than it was expected at the start of the year, as well as the macro outlook looks more favorable, CRE remains resilient, and you are delivering strong results. Given the solidity of the financial position and also the Basel IV bringing some reduction on the risk-weighted assets front with day one effect, would you potentially consider releasing this extra buffer with the full year results? And can you please explain the reasoning behind the conservatism here? Related to that, you know, what are the priorities when it comes to your excess capital? Would you potentially consider top up the ordinary dividend, do the special dividend, potential buyback, or pursue organic or inorganic growth via bolt-ons? Thank you.
Thanks, Gulnara, for the question. Well, as you know, we've throughout the year been transparent that we keep the distance with 400 basis points, so we have an extra percentage points on top of our normal target range of one to three percentage points. And this comes obviously with a history that where we had the soft dividend ban throughout the COVID, we were topping out at nearly 6% above, and then we've taken ourselves down to 4%. I think it's highly important that running a bank is obviously having a very strong balance sheet is the most important thing in order to build long-term relationship. And you know we're a very conservative and long-term bank. We will definitely play this conservative.
What we said is that in Q4, we will obviously recommend to the board the guidance they will give to the AGM when it comes to dividends or distribution. We historically have been using dividend more than buybacks. We don't close the door to do buybacks, but at least that's what we've done historically. So we think we are in a really good position. We, as you can see, following the P&L lines, I mean, we have had tremendous asset quality. You have to go back to Q2 2020 before you see aggregated credit losses. So I think that's, and this is throughout COVID, Ukraine crisis, and highly inflationary period. So I think this has been a stress test for the asset quality of the bank in real time. We are really pleased with the risk side of the bank, but it's also that way we wanna run the bank.
That's the way we believe you can be a very long-term bank, which is benefiting the society and the shareholders.
Thank you.
Thank you. Your next question comes from the line of Sofie Peterzens from JP Morgan. Please go ahead.
Yeah, hi, this is Sofie from J.P. Morgan. So just follow up on net interest, there is no kind of timing difference that would be material that we should be aware of in the coming quarters, that it's kind of fair to see maybe some margin pressure, but volumes that will kind of offset that. So if you could just kind of confirm that? And then my question would be on the Norway net interest income. When I look at Norway, it looks very, very strong, and it's quarter on quarter, especially in... And then when I look at the volumes in household lending was up, I think, 19% year-on-year, but your loan deposit ratio continued to be quite low, or quite high, sorry, around 320%. So how should I think about Norway net interest income going forward? Kind of, what's your plan here? How should we think about growth in Norway? Thank you.
Thank you, Sophie. Well, first of all, on the NII difference, no, there are no material financing mix changes you should be aware of. As you know, we had an AT1 and a Tier 2 bond maturing in the springtime. They haven't been refinanced as of yet. We see no stress in it. We have ample room of capital, as you heard us saying, so no material changes in the treasury financing mix. When it comes to Norway, you've obviously heard us talking strategically over the quarters about our wish to build a more balanced business in Norway. We've signed the agreement with the Akademikerne, and we have accrued quite a bit of clients throughout the year.
The positive thing with that one is that we see a very solid and balanced business mix coming into the bank. You can see that quarter over quarter, our lending grew one percentage points, and our deposits grew eight, and our assets under management grew four, so we think that is promising to our ROE, to the con- ROE contribution, even going forward, and this is a real focus of us, to bring on the private clients, but have a really good business mix from them because it is a good underlying client mix within the union agreement. I think it's fair to say as well that if you compare our Norwegian segment vis-à-vis the other home markets, obviously, we are later in the cutting cycle from Norges Bank, and we also have had the notice periods previously. So, we should expect NII to be more resilient in Norway.
Okay. Thank you.
Thank you. Your next question comes from the line of Nicolas McBeath from DNB Markets. Please go ahead.
Hello. I was wondering whether you could comment anything on how much of the cost efficiency measures you initially spoke about at the start of the year in central units, how long you have come on this project? Is there substantial more efficiency to get, to take out, or have you conducted most of it? And related to that, if you could say whether we should expect the net impact of any further efficiencies in central units to lead to net FTE reductions or if we should think that you know higher number of FTEs in the branches should compensate for any further reductions in the central units.
Hi, Nicolas, this is Michael again. I would say that. You know, we've started the year by reviewing, and I said that we would now start analyzing and also putting plans for to make the bank more efficient, starting with the head office and group function and business support functions, as I told both in Q1. And we've then reorganized. We've started to execute on the plans, but I'm not gonna guide. And I think it works well, so I'm happy with how it works and what's been done. And I'm not gonna guide, sorry, into Q4 in terms of reduction, any reduction of headcount or any reduction on the cost side. But we are... We do, as we say, and we will come back to you in Q4 with the outcome, but it works well.
Okay. Thank you.
Thank you. Your next question... One moment, please. Your next question comes from the line of Johan Ekblom from UBS. Please go ahead.
Thank you. Can we just come back to capital and your guidance around the impact of the introduction of the Banking Package, where you're now talking about a small reduction in risk-weighted assets? Can you give us some color as to where that is coming from? I think the general view would be that your risk weights are lower than many others, and some of that is clearly due to the asset quality. But with floors coming in, on certain parameters, I think most would have expected some negative impact. So what part of your book is driving that net reduction in risk-weighted assets, please?
Yes. Thanks, Johan, for the question. First of all, you can look at slide 34 in our debt package to have a more granular information on this. But if we put it in perspective, I think it's fair to say that Handelsbanken, as you know us, we are a very conservative bank, and we are not present in the most volatile or financial engineering aspects of the balance sheet. So, and being a large bank then, we have had exposure in many of the areas which already have risk weight floors on them. So I think it's fair to say that we, as a banking vehicle, has been fairly conservatively treated, and we've had thereby quite high capital density to the business mix we've had. Coming in now to the Banking Package, going into the day one effects, what you can see on the slide is that our operational risk, and this is just a purely model movement, will. Our estimate is that that will increase 22 billion in risk exposure amount. And that doesn't take into account the more the dynamic resettling on the operational risk. You know that we will, we will look back on the P&L, the last three years, and then, then we will come to a, a different figure when we're going in. But the model adjustment is adding 22 billion. Then, as you can see, the, the credit risk plus CVA component, they actually take away a bit, nearly 25 billion.
This is due to the more detailed effects of going into the Banking Package with comparing them to the risk weight floors we already have and the standardized components of our portfolio. That will have a positive implication for us. The net effect, in our view, is more or less the risk exposure amounts dropping or decreasing by roughly SEK 3 billion or so. I think this comes down, once again, to the fact we've been highlighting many times that if you buy Handelsbanken as a share, you buy one of the most stable banks in the world. You buy a bank which is not trying to more or less arbitrage the regulatory regimes in short term. Rather, we are involved in the more core and the more traditional banking areas. We have really strong clients there, really strong relationships. We pay the taxes to the society which are in place, and over time, when regulators catch up, you normally get the balance back, and that's the way we read this, at least, that having a marginally positive effect from Banking Package is credit to our business model.
Perfect. Thank you.
Thank you. Your next question comes from the line of Namita Samtani from Barclays. Please go ahead.
Morning, and thanks for taking my question. Could I just ask on Swedish mortgage pricing, if I look at September data of Handelsbanken versus the start of the year, you've cut three-month mortgage list prices by sixty-five basis points, but the negotiated price has only come down by fifty-four basis points. I just wondered how you managed to achieve this and why clients would accept this, given it's quite a competitive market. Thank you.
Yeah. So the how the pricing is set in Handelsbanken when it comes to mortgages is that we need to have a list price, as you are well aware of. And that list pricing come when it comes to the three months offer list price is reflected to some extent on the Riksbank interest rates, but not all of it. So we refer to market rates in general, of course. But the way we set prices, we set prices with our customers on an individual basis, and we talk and we deal with the customers in our branches and with our mortgages experts all over the bank. So that, and then we offer them both pricing and also other stuff. I mean, it's a general offer, which includes mortgages, and pricing is set by the branches on an individual basis and does not reflect on the list price.
Thanks. So do you think that people are accepting maybe a slightly higher price because they're getting other products from you guys?
Sorry, I didn't really get the question because the sound is not that good, actually.
It could be, Namita. You're asking about if we think we can the clients of us accept a higher price due to the services and a broader-
Okay. Right, right. So, yeah, so, okay. No, I don't think it's we don't get high price than the market gets. So this is a very competitive market with very transparent pricing. We need to be able to have the same price offer as anybody else. But on top of that, we add on other stuff that really probably sticks out in terms of local service, local knowledge, availability, and the quick credit decisions, and so on and so forth. So it's a general offer, and, but we're not able to, over time, I think, really stick out on the pricing. We do as much as we can, but it's a very transparent and a market with strong competition, actually. So. That's always been the case, so it's nothing new.
But I think, Namita, what you're, the way we build our business model is obviously, yes, many relationships or the mortgage is a key component of a private relationship we have with private clients. So obviously, that puts us in a good position. And we are lucky to see that the activity has actually grown quite meaningfully this year. As Michael said in the press conference, we have... Or I don't know if you said, but we have 90% higher advisory activity when it comes to occupational pension and nearly 40-50% on the private banking. So obviously, the even though we can't we live with the same prices in mortgages, that is obviously a key component of building a strong and income-generating relation.
Thanks very much.
Thank you. Your next question comes from the line of Shrey Srivastava from Citi. Please go ahead.
Hi, thank you very much. My first question is rather simple. Can you confirm that your Finnish divestments are on track to complete in 2024, and is the expected total REA release still about EUR 1.3 billion?
Yes, we can confirm that we are on track to close the other component as well during Q4. We, we haven't been explicit on the REA amount, but what we said initially was that we had roughly EUR 30 billion of REA in Finland and Denmark, roughly 50-50, when we announced the ambition to sell.
Okay, thank you. And secondly, just about the UK, do you have a structural hedge in the UK? Can you confirm this? And if so, can you help us size this up for?
Sorry, what's your question? If we can have structural hedging on the deposit base?
Do you have a structural hedge in the UK business?
Yes, thanks for the question. First of all, obviously, yes, PRA deems us to have structural hedges, or they deem us to calculate the behavioral maturity on our deposit base. That's the right way to put it. And thereby, obviously, if we choose to have the asset side on another level of maturity, then we will need to carry capital for that one. But as we've been highlighting, and we've actually got in the new joint assessment decision now, which we got end of September, we've actually have the approval now to have to calculate the behavioral maturity on the Swedish component as well. We got a partly approval, so that is definitely something positive for us. So we don't need to have the inconsistency nowadays between group and U.K. as much as we've done before. So, and what we said is that we already have partly hedging in place, so it's not necessarily that we immediately change our behavior on the treasury side, but at least nowadays, the regulators are more in line with each other, and it makes us easier to steer the bank, and we think this is a much better representation of the true risk in the book.
Got it. Thank you. And if you could give any sort of indication as to how much that contributed this quarter and expected to contribute going forward?
No, we can't give any guidance to that one. As I said, I mean, we won't. It's not necessarily that we change anything of our behavior short term. This is obviously, we like to have a hedged bank, but we're not immune to the market levels either. So, I mean, the timing where we change our decision is obviously dependent on market movements as well. So, but we won't guide on the impact of that one.
Got it. Thank you very much.
Thank you. Your next question comes from the line of Riccardo Roveri from Mediobanca. Please go ahead.
Thanks, so thanks for taking on my single question. I just want to better understand the 400 basis points stance you have. So I may be confused, is the 400 basis points something that stands now, but may be revisited at the end of the year results, or is it something that is written in stone for 2024, and maybe will get back to 300 basis points or the previous range from 2025 onwards? Thanks.
Thanks, Riccardo. You're very polite asking just one question. Thanks for that one. Well, I think it's. I mean, we are in a very good situation. We are highly capitalized. That's really good, a good condition to run a bank, and we come from a higher level. What we said is that our normal target range haven't changed. That is one to three percentage points above. We will get back in Q4 and tell you about the distribution we will guide or we will propose to the AGM. So you will get information in Q4. But, I mean, being a long-term shareholder of the bank, this is a good situation because there is distributable amount for them.
Thanks. Thanks a lot.
Thank you. Your next question comes from the line of Patrik Nilsson from Goldman Sachs. Please go ahead.
Hi, good morning, and thanks a lot for taking the time. I just had another question on NII, and I appreciate there's been a few already. But specifically on the Swedish NII, we've so far seen 75 basis points of cuts in Sweden, and I was just wondering if you could provide any color of how much of those 75 basis points that are reflected in today's NII figure and how much is yet to come, and maybe also how much you've benefited from lowering your current account rates in Sweden. Any color would be helpful. Thank you very much.
Yeah, when it comes to the impacts, I'm afraid, it's difficult to answer that question since there are so many moving parts in the NII, and you can't really isolate that seventy-five basis point impact as such. And also, again, I'm afraid we can't really guide as to what to expect going forward. It's, at the end of the day, a matter of competition and how the pricing, not only on the deposit side but also on the lending side, how that overall will affect the total NIM for the bank. Operator, are you there?
Thank you. We will now go to the next question. And your next question comes from the line of Jacob Kruse, Autonomous.
Hi, thank you, so could I just ask on the capital side, so you give the small positive impact of the day one effect. Do you have any idea of the full effect, how that plays out when the rules gets phased out? Thank you.
Thank you, Jacob. Well, first of all, what we've guided on before and what we said before is that we saw a fairly neutral total component. So now we got partly the day one effects of the Banking Package. We know from the Banking Package, we know that the market risk, FRTB, will come. That will come autumn 2026, I think. That will have a negative component, we think. Then we have the IRB overhaul that is obviously we don't know as of yet, but we think we have a fairly neutral there. Then we have the Finnish divestment, then we have the IRB approval in U.K. and Netherlands, which can be beneficial. So there are quite a few moving components. I mean, this is a fairly neutral outcome from day one, and thereby, I mean, you should think about it, that we will- we see it as a fairly neutral component going forward. But it could have implication. It could have positive or negative components, timing-wise, through quarters. My colleagues here are pointing out that I actually forgot that there is a possibility for us as well to apply to move from IRB into standardized model when it comes to the government exposure, and that will, if so, have a positive impact. Fairly neutral, the future factors hitting us.
Okay. Thank you.
Thank you. We will now take our final question, and our final question for today comes from the line of Piers Brown from HSBC. Please go ahead.
Yeah, good morning, everybody. Just a final question on the dividend. So if I look at the accrual, you've accrued over 100% of profits in both Q2 and Q3. I think the year-to-date accrual is running at about nine kronor, and you've accrued four of that in the Q3. So the question is: Is there any reason that the Q4 accrual would be a lot lower than what we've seen in the last couple of quarters? And I guess where I'm getting at with this is, obviously, if you were to accrue in Q4 similar to Q3, you'd probably be at a year-on-year dividend level, pretty much the same level as last year. So is that a realistic assumption?
I think, and I think that's a good point of yours, Piers. I mean, what we've said is that going into Q4, we've guided on the structural changes, so it's obviously the divestment of Finland, so that will take down risk exposure assets. And then, obviously, we don't know about the growth aspects as of yet. We shouldn't be surprised if we return to growing the bank, but nevertheless. So, yeah, we could at least structurally, we definitely have things pointing to an accrual level, which is high, and thereby, obviously, I think we went into this quarter with an expectation of a dividend just north of eleven crowns per share. And obviously, we don't know the PNL as of yet, and we will have to wait and see.
Yes, as an accrual level, we could prove to be fairly close to 100% as well next quarter, and that should definitely be positive. And I think that's one of the key components of our bank now, that if you invest in our bank, you buy one of the world's most stable bank, running more or less any risk angle you can look at, more conservative than most of our peers. And then generating a dividend or a distribution or a direct yield above 10%, that's not that many banks you see doing that one, especially if you measure that vis-à-vis the stability of the PNL lines, so I think that's a real core component of finding the interest in the share as well.
Okay. It's very clear. Thank you.
Thank you. We have a follow-up question. One moment, please.... Your next question comes from the line of Andreas Hakansson from SEB. Please go ahead.
Hi. Sorry, I dropped out for a second. On the hedge we talked about, someone asked you about UK hedge. When you answered, I wasn't clear. Do you now actually have a hedge in place also in Sweden, or was that only related to the UK?
No, no, you are correct, Andreas. We have a partial hedge in Sweden as well, and in place, so we have been holding capital to that one. But thereby, what I want my message going forward is that it's not a black or white situation. If you get this approval, it's not necessarily you change your hedging or your treasury operation immediately. So yes, we have a partial hedge in place in Sweden, and we have hedges in place in UK as well.
I mean, I hadn't heard that before, I must say, and that has quite a big impact on how the market is forecasting NII. So don't you think you should give some details on that, in duration and size and structure of it?
No, I think as I've highlighted earlier on today, I think there's many moving components when it comes to the NII. And I mean, we've had the hedges. It's not a meaningful change in the hedging component now, which you've seen the bank perform during the last two years. So, I don't think this is a bigger impact than it's been prior, and not more than the other components either.
But back to, I think it was Magnus that made a point in the beginning of the call, does this mean that you are delaying the decline in your NII, or do you think you're protecting it?
Well, of course, obviously, the NII hedge per se is protecting the NII levels. But they were in place as well when rates were moving upwards. So I mean, it's one of the moving components within the NII equation.
Okay. I think we'll come back to that in coming quarters as well-
Yes.
But, thanks for now.
Thanks a lot.
Thank you. That was the final question for today. I will hand back to the room for closing.
Thank you, everyone, very much for listening, and we wish you all a good day.
Thank you.
Thanks.