Ladies and gentlemen, welcome to Handelsbanken Interim Report, January to September 2014. Today, I am pleased to present Mr. Ulf Riese, CFO. For the first part of this call, all participants will be in listen only mode, afterwards there will be a question and answer session. I will now hand over to Mr. Ulf Riese. Please begin.
Good morning, everyone, welcome to this conference call for the third quarter 2014. Joining me today, I have Lars Höglund, Head of Dep IR, and Jörgen Olander, Group Head of Accounting. The slides used for my presentation are, as usual, available at handelsbanken.com. I will start as so many times before to show you the value creation of the bank on slide number two. Again, equity per share, including dividends, has continued to grow by 15% on an annual basis, the more exact number is now 15.2%. The bank has continued to build capital, with core capital now reaching 20.7% at the end of the third quarter, up from 20.1% one quarter earlier. Return on Equity for the first nine months was 14.1%. On slide number five, we have the profit and loss account for the third quarter compared with the third quarter 2013.
Operating profit rose by 7%, and in the U.K., the increase was 53%, and in Finland, earnings rose by 68%. Net Interest Income increased by 5% for the group, but 12% in the home markets outside Sweden. Higher business volumes, but also higher lending margins in most markets, including Sweden, drove this growth. Sequentially, Q3 compared to Q2, Net Interest Income rose by 4% for the group, 2% in Sweden and 7% in home markets outside Sweden. Net Commission Income rose by 13% compared to Q3 2013 and was flat compared to the seasonally stronger second quarter. The good development in asset management and card fees continued and compensated for seasonally weaker brokerage and advisory fees in the third quarter. Net gains and losses on financial transactions, which increased by 10% versus the third quarter last year.
Here is the improvement in the customer business within capital markets is one of the main explanations. In total, revenues rose by 7%, while total expenses only increased by 2%. Adjusted for currency effects, costs were unchanged. Loan losses increased in the third quarter entirely due to one exposure in Sweden and one in Denmark. Loan losses amounted to eight basis points of total lending in the nine months period. Credit quality remains stable, and the bank had no impact from negative rating migration in the quarter. On slide number 12, this shows the continued good cost development of the bank. For five consecutive quarters, costs in the Nordic markets, including Sweden, have decreased and by almost SEK 500 million on a rolling 12-month basis. This comes natural for all the units where revenue growth is muted.
Costs are then adjusted by local daily fine-tuning to increase cost efficiency. As you can see in the slide, when you add up the effect, all these local fine-tuning decisions, they are balancing the investment costs we incur when expanding in the U.K. and the Netherlands, where, of course, business volumes and revenues show good growth. From a group cost perspective, this means that all this expansion is almost entirely financed by higher efficiency in the Nordic home markets. The cost-income ratio in the group also improved in the third quarter, decreasing to 43.9%, down from 44.6% in the second quarter and from 46.1% in the third quarter 2013. On slide number nine, we show the profitability for each home market for the first nine months of the year.
Here, I think it's important to remember that all capital of the group is allocated to the units and no part of the capital is kept centrally. Here we can see that Sweden, Norway, and U.K. are at 16% ROE, despite it was 12% in the first half of this year, and this is achieved in an economy which is still, of course, quite weak. In the Netherlands where we opened two new branches and appointed another branch manager during the third quarter, profitability is already at 10%. Still, of course, it goes without saying that we see room for improvements in all our home markets from these levels of profitability. To the sequential development of net interest income, which is shown on slide number 20.
Here you can see that in Sweden, deposit margins decreased another SEK 155 million due to lower nominal interest rates. Lending margins, however, improved, and together with higher lending volumes, this added SEK 131 million. The margin on Swedish mortgage stock increased by four basis points to 96 basis points in the quarter. In the home markets outside Sweden, deposits gave a very marginal impact on the change quarter-on-quarter. Higher lending volumes added SEK 42 million, while lower lending margins, primarily in Norway, gave a negative impact of SEK 31 million. In the U.K., however, corporate lending margins improved somewhat further. Effects like currency effects, state fees, benchmark, and different number of days in the quarter, in total contributed SEK 187 million.
The strong inflow of deposits, together with the fact that our liquidity reserves are very high, means that we have had a structurally lower need to replace bond funding that has matured this year. This is the main explanation behind the item marked other in the slide, which had a positive impact on net interest income of SEK 123 million in the third quarter. We expect the benefit from this slightly changed funding mix to remain in the profit and loss statement going forward. Going back to slide number 10, we show how our balance sheet has developed from a funding perspective since the second quarter of 2013. The bank has now seen a strong inflow of deposits, that is for quite a long time.
For example we are the only large bank that has increased our market share of household deposits in Sweden since 2006 and also in 2014. The strong inflows are also seen in our other markets. We take a very conservative view on how to use deposits from a liquidity standpoint. Volatile large corporate deposits are not used to fund lending. However, a part of the total deposits that are proven to be sticky can be used for fund lending. Even if we take a more conservative view, this is what's in line with how regulators view different types of deposits. The strong growth of deposits, in combination with a very large and stable unused liquidity reserve of more than SEK 800 billion, means that the need to refinance maturing bonds has structurally decreased over time.
As you can see in the slide, market funding plus deposits have grown more than lending since 2013. The result is a higher liquidity reserve. Our need for market funding is currently lower than in the earlier years. In the first nine months of 2014, we have issued long-term bonds, including the Tier 2 bonds and staff convertible, of SEK 141 billion. That compares to SEK 235 billion of bonds and extendable notes in 2013. In the third quarter, we issued SEK 6 billion worth of senior Japanese samurai bonds at the tightest level any European bank has done since the start of the financial crisis. On slide number seven, we show how the financial position of the bank again has developed and become stronger than last quarter. Core Equity Tier 1 ratio improved to 20.7%, up from 20.1% at the end of the second quarter.
Here, earnings in the third quarter contributed 0.3 percentage points. Total capital adequacy rose to 25.6%, up from 25% in Q2. For the real capital experts out there, I think it's worth noticing that cash flow hedges in the OCI, other comprehensive income, which due to current accounting rules are fairly volatile, are adjusted for in the capital base and thereby has not at all contributed to the capital adequacy ratios. On the 8th of September this year, the Swedish FSA published another report on capital requirements for Swedish banks. Here there were only marginal changes compared to the May report, but now also including a risk weight floor for mortgages in Norway. The countercyclical buffer in Sweden has been decided at 1% to be implemented on the 13th of September 2015.
For Handelsbanken, the Swedish FSA now estimates that the Core Equity Tier 1 requirement in Pillar 1 and 2, all in all, is at 17.5%. This estimate from the Swedish FSA is, however, still based on the standardized assumption for the individual Pillar 2 add-ons. We hope to get clarification about the models to be used for calculating the add-ons during this fall. We believe the group to be well capitalized also with the coming new capital rules. To slide number 14 and an update on our U.K. operation. As you can see here, the development continues to be strong with operating profit in local currency increasing by 36% year-on-year. In total, we have opened 18 new branches so far this year, including the six branch managers already on board for new branch openings.
At the same time, mathematically, the proportion of growth coming from existing branches is increasing over time. At birth, a branch typically has four persons. When the branch reaches its third or fourth birthday, typically one more senior person is recruited, increasing the time for clients by 25%, but at a cost increase that is far less than that, since all the basic costs of furniture, et cetera, are already paid for. This means that over time, the growth becomes more and more cost efficient. To this, we can add the increasing scale effects and improved efficiency coming from gradually climbing the learning curve and accumulating experience, which in turn lead to possibility to grow efficiently and fast without compromising the high quality.
This can clearly be seen in the slide where the dotted lines show the cost-income development five years ago compared to the already improved situation today. The development per branch is already much stronger today than five years ago. This development continues over time. In U.K., our wealth manager, Heartwood, shows good progress. Assets under management have grown by almost 50% since the acquisition in the summer of 2013, and Heartwood is a significant contributor to the 77% growth in fee income in U.K. year-on-year. To summarize, equity per share, including dividends, continued to grow steadily by 15% per year since 2007, also when the third quarter was added. Operating profit increased by 9% during the nine months of 2014, and in the home markets outside Sweden, the growth was 14%. Revenues grew by 6%. Costs only by 2%.
Adjusted for currency effects, costs were unchanged. In the Nordic markets, including Sweden, costs continued to decline and balancing the expansion costs in the U.K. and the Netherlands. Cost-income ratio for the group improved to 43.9% for the third quarter. The bank has continued to see strong deposit inflows resulting in structurally lower need to refinance maturing bond volumes in the market. This is in spite of keeping the liquidity reserves well over SEK 800 billion. Return on Equity for the group was 14.1% for the first nine months, and the bank continues to build capital. Core Equity ratio improved to 20.7%. With that, I conclude my presentation and open up for questions. Thank you.
Ladies and gentlemen, if you have a question, please press zero one on your telephone keypad and you will enter a queue. We have the first question from Mr. Omar Keenan from Deutsche Bank. Please go ahead, sir.
Good morning. Thanks very much for taking the questions. On net interest income, and then just a quick question on capital. If I look at the NII split in the quarter, you've helpfully indicated that most of the SEK 120 million was from lower liability cost on mix between wholesale funding and deposits. Is this an ongoing tailwind that you expect to come through for margins, going forward? Or was this a one-off benefit in the quarter that we shouldn't expect to see repeated, going forward? On mortgage margin, one of your peers indicated that two-thirds of the repricing on the variable book was complete. Is that a trend that you recognize? I've just got a question on capital. Thanks.
Thank you very much for those questions. First of the 123 item other, this is an effect that we see as a structural effect. This will be also prevailing in the coming quarters. Whether the effect will increase or not, that has to do, of course, with the inflow of all the combination of development in lending and deposits. It's not a one-off effect. I think even more importantly maybe is to go look beyond this and see how well the bank's whole structure is developing. You can see also that our over-funding has increased. You can see that in one slide from 110%-119% in spite of this fact. The balance sheet structure of the bank is, as you can see, very good with a very high kept unused liquid reserve.
On the mortgage margins, we are price takers, so we don't have any view on the mortgage margins going forward. As you can say, we saw an uptick when we sum up the numbers in the quarter, going up by four basis points. You can say that a little bit more than 50% of the stock is at variable rates. That means that you can say that about 40% of the stock is fixed, more than three months fixed. Of course, the repricing takes place over time. You cannot do some mathematical, so you can exactly expect this number to come through in the coming quarters because you have also the development, of course, going forward in new pricing on new deals.
Okay, thank you. That's very clear. Could you potentially tie in what it means for your issuance plan? What issuance in the first nine months of wholesale funding has been compared to redemptions? Just to put it in that context to add a bit more color. Just a question on capital. Risk-weighted assets fell by SEK 15 billion in the quarter, and 40 bps of that was due to model changes. If you could give some helpful color there. Thanks.
Yes. I think that when you talk about the RWA or the RWA, the most important thing there is, of course, the ongoing work that our branches are doing in terms of making sure that new deals that are coming in is of a better quality than the old ones. You can see consistently, each quarter there's a rather large effect of that. Lars, you had an answer on the first question here.
The first question on our funding plans and the funding compared to maturities. The issued bonds we have done so far this year are slightly smaller than the volumes that have matured. Going forward, we never project exactly what issuance we plan to do. If you look at our maturity profile, you will see that we have, of course, some domestic covered bonds maturing next year. They will be replaced in the domestic market to a large degree. We also have senior maturities in the neighborhood of SEK 50 billion, sort of EUR 9 billion. To what extent we will replace them, again, will be a reflection of the volume development of deposits and lending.
One maybe, if you take an outside in view to describe it, is that we have consistently built maturity in the balance sheet if you look in the last quarters. This quarter it has been stable. Of course we have, as you can see, very large inflow of deposits. The inflows have been an increase of 21% if you take the accumulated figures. That means, of course, that the need to issue senior has gone down. Having said that, of course, there's also, as you know, NSFR and LCR and other ratios and so on. This is something that you cannot drive into infinity, so to say. It's a positive effect. It's a structural effect, it means all things being equal, that we have a lower need of replacing senior bonds going forward.
That's very clear. Thank you very much.
We have the next question from Mr. Alvaro Serrano from Morgan Stanley. Please go ahead, sir.
Hi. Thank you for taking my questions. I had a question, first of all, on a follow-up on the Swedish NII outlook. You've mentioned that there's still some repricing to go in mortgages, but I'm not sure what the margin outlook might look like over the next few quarters. If you take into account the repricing that still has to flow through the P&L, and potentially if you might be able to give us any color on if there's a rate cut, what the updated sensitivity might be. In general, it sounds from the outlook from the different banks that reported it seems to be sort of running to a standstill, i.e.
The revenue outlook looks pretty challenging in Sweden, a lot of them have to cut costs to maintain pre-provision profits of just some color on what your revenue outlook for Sweden might be in this context. Second, obviously there's been the proposal of mortgage amortizations. There's been a lot of repricing obviously during the second quarter. Can you give us your views on what you think the repricing could go from here if you start asking clients to amortize? Could that potentially interrupt the repricing trend or what are your general views about the impact of amortizing by clients? The third and last, there's been some talk of the introduction of the leverage ratio, or even a hike of the leverage ratio requirements.
You shared in the past your views about that ratio, I'm more interested in your views of how plausible you think it is that that introduction might happen in the short term, and what kind of constraints that might cause Handelsbanken from a lending perspective. Generally, what's the visibility on capital for you at this stage? Thank you.
Thank you very much. On the first question you went through the sort of the revenues lines in Sweden and top line growth as I interpret your question on various items. When it comes to mortgages we don't have any forecast as you know. We have implemented the 25% risk weight floor capital coverage that you nowadays need as of the date when the Swedish FSA came out with that decision. That is now, of course, taken at the self-cost to our branches. Our branches are price takers, so how the margin moves or the price to the clients moves is really a matter of how the market moves. Of course, logically banks insured in a market economy increase the price in equivalent to this.
Having said that, there is always one of the other participants that seems to take some sort of strategic decision that they want to be big in mortgages. It has been that throughout the years. You never really know how this will play out. Structurally, we don't want to be large in Sweden in terms of lending. We have about the kind of market share that we want because of quality reasons. The reasons we are not growing right now is that the segment that is growing in Sweden is a rather risky segment where, for instance, newly formed real estate entities can get full financing from banks and in combination with issuing bonds and virtually no or extremely small equity. That kind of deals we are not doing. We are not losing our customers. We are taking in new good customers.
When you look at the total market, you will see that there is some volumes that some of our competitors like, that we don't like and that you don't see in our figures. The revenue growth for us in Sweden, that will come from commissions. As you can see from the figures, we have healthy growth when it comes to mutual funds, insurance, also cards, debit cards and credit cards. That is taking out our product range to our own clients. That is developing very well. Also, the development you see in the investment banking area looks very good. As you've also seen, we have as of Q4 also included Handelsbanken International into Handelsbanken Capital Markets.
I think that is an interesting thing going forward because over this financial crisis, we have really focused the abilities in Handelsbanken International to excel our core clientele in our home markets. Volume has gone down, as you've seen over the years. Now that the structure is finished and we put Handelsbanken International into the very active context of capital markets, I think that could also be hopefully a very good driver for us. Mortgage amortization, yes, I think it's likely to come. We have implemented it since a long time in our advice to our clients, but there will probably be more general rules about this in the market. I think that there are for structural reasons, if you look at the whole market, it's a good thing that the growth does not continue here. It has been maybe a little bit of too high of growth.
From a credit perspective, we are, of course, extremely happy with what they got, and there's no threat whatsoever from that aspect. From a basic economic view, when you look at the whole of macro Sweden, I think it's good that it will not continue to grow. It has nothing to do with the ability to reprice. The affordability is very good, so you can't say that you cannot reprice because now it's more amortization. I don't personally think that there's any correlation at these very low interest rate levels. Leverage ratio, we know that the Swedish authorities, the Swedish FSA, and also the government in general is not in favor of leverage ratio as a binding ratio. As you know, Sweden has gone along the route where we have quite a lot of extra capital charges in the risk-weight framework.
That is the way that Swedish authorities want to address model risks and those kind of things. Leverage ratio should, from the Swedish point of view, only be implemented as a backstop. We'll have to see what comes out from the EU implementation here.
Would you say in general, your visibility on capital is close to having that visibility that might allow you to review your capital position? Where would you say we are? Is it still very early days?
More specifically on the leverage ratio, it's a bit early days. On other things, it's pretty clear. Right now when it comes to some Pillar 2 models, the Swedish FSA is supposedly to come out towards the end of the year with the models for interest rate risk in the banking book, pension risk, and concentration risk in Pillar 2 terms. On leverage ratio, it's a long journey.
Great. Thank you very much.
We have the next question from Mr. Nick Davey from UBS. Please go ahead, sir.
Yes, good morning, everybody. A few questions, please, from my side. One follow-up, I think from Q2 as well, just as the risk weights on your advanced IRB book on the corporate side continue to tick lower, I'm just wondering of your thoughts from a top-down level, really of a world now that the 25% mortgage risk weight floor in Sweden has been reconfirmed in which your cost of capital on the SME side or on the corporate side is lower than on the mortgage side. Whether that makes you consider when you're setting your target capital ratio, whether it's right to do it under Basel III terms or whether you'll also be thinking along some Basel I terms as well. Second question on Swedish retail costs. Obviously, some of your peers getting excited about the potential for digitalization to bring down the cost to serve over time.
Now, I know you don't budget centrally, and I know you don't guide on a forward-looking basis overall, but I just wondered if you could spend a little bit of time talking about cost efficiency in the Swedish branch network. I know you have a long-standing idea of a 30% cost income, and clearly you'll get there over time from the revenue side. I just wondered whether you can imagine a world of declining absolute costs in Swedish retail. Thirdly, and finally, just back on this amortization point, please. Thanks for the color so far. I just wondered if you could give us a flavor of looking at your mortgage book of the amount of your borrowers above a 50% loan-to-value that currently amortize. If you have a sense of that number. I understand, as you say that affordability currently is very strong.
I'm just wondering at the margin as we go into 2015, how many Swedish households will likely be waking up with a slightly different cash flow situation in 2015 versus 2014? Thank you.
Thank you for those questions. On the first question, when it comes to RWA risk rates going down for corporates, it's not rocket science. It's that we have, of course, better clients and better quality there. It's a very easy explanation why it goes down. To your point, should one look more into minimum risk weight kind of thinking when it comes to corporates or leverage ratio and so on. I think that to us when we look at the bank ourselves, and do our stress testing for our own sake, we look of course at the risk-weighted numbers, the real numbers. The 25% risk floor in Pillar 2 terms when it comes to mortgages, that is an artificial creature.
The regulation that you have to obey, of course, when you calculate the capital need, it has the benefit then when you do that in the stress test, it cannot move from that point, even if you stress it very badly. It's extremely hard for anyone that I met that even contemplate the situation where you would lose so much money on mortgages so that you will end up with a statistical risk weight of 25%. That is just not possible in any scenario. The world has gone under before that. We will come back to the capital goal when we have all the input we think is sufficient from the regulatory authorities. We know ourselves, of course, our portfolio racks and so on. We need the input on the details of all regulation. On digitalization, we can talk quite a long time on that.
It's a very interesting subject. As you've probably seen, we are starting now from 1st October, a new branch in Lund, in Sweden, we are very proud and happy of that. We are absolutely sure that the best way to be cost efficient is to do banking by branches and of course combine it with the best digital services there are. As you know, in Handelsbanken, we provide them for free for our clients, and we have very happy clients with the combination of these two things. I think that is something that is, to us, always been very obvious that you have to have the combination and with the core capability at the branch, but then adding up other digitalization possibilities. Yes, this, of course, we can say, can improve cost per transaction in a way because the clients do things themselves.
The number of transactions goes up very much because the clients want to look more on their account and so on. We don't think you should see this as a cost driver. It's a way of making the client more happy with the services to combine services. I think those that do it only for cost purposes, they will end up with less satisfied clients and not such a happy business in the long run. While talking about cost efficiency, we are now at 33.9% cost-income ratio in the Swedish operation. It's not bad, but we keep on working on that. As you know, we are now slowly changing the backbone systems in the branches to the same kind of platform that we have for our clients, and that will also help this over time.
To amortizations, you can say that if you take the new loans in our mortgage company, Stadshypotek, and you look at the number of clients between 50% and 70%, you can say that nearly half of these were amortizing. From a credit standpoint, of course, how you amortize in terms of credit worthiness for us and our clients should never be questioned, because then it's the wrong client. From the client's perspective, it's good to, in the longer term, amortize to make sure that the cash flow you have when you go into pension also match the kind of loans you have. That is the kind of numbers that we have. I haven't seen statistics in the whole of the market, but my feeling is that the risk appetite with our competitors is much higher than in Handelsbanken.
That is usually the way when we talk about any sort of credit.
Very clear. Yes, 34% cost-income, Swedish retail, I think not bad is probably a polite way of putting it.
Our next question comes from Mr. Geoff Dawes. Please go ahead, sir.
Yes, good morning, everyone. Geoff Dawes here from Société Générale. A couple of questions, perhaps related to the same point. The first one is on non-performing loan stock, and the second one is on your corporate lending book in Sweden. On the NPLs, there's been quite a lot of volatility over the last few quarters. We've seen it go from SEK 7 billion down to as low as SEK 5.8 billion, then back up to SEK 7.2 billion this quarter. Can you just explain what's driving that quarter-over-quarter volatility? I know we're at quite low levels, but it'd be interesting to know what the inputs for that are. The second question is, if I look at the Swedish corporate lending book, and particularly if I take out the mortgage component, there's been quite a significant quarter-over-quarter decline of about 4% or 5% in that book.
Is that reflecting weak lending demand in Sweden, or is it just quarter-over-quarter volatility? Those are the two questions. Thank you very much.
Thank you very much. When talking about impairment, of course, as you know, net impaired loans is not taking into account the kind of collateral that you have sheltering this. This number can go up and can go down over time. It has been, as you said, about 18, 17 basis points. It went down to 13 basis points and now it's up to 18 basis points again. When you look at our book, we have no negative migration in the quarter, and the credit quality in all measures are very stable, and so on. The credit losses that we have in the quarters and the increase, we are now at eight basis points accumulated, is explained totally by two cases, one in Sweden and one in Denmark. Those are not relating to any macro or specific industry or portfolio or like that.
It's really single events. The answer to your question is that we see a very stable quality in the credit book. Loan demand in Sweden is, as you say, sluggish. That has to do with that companies are not really investing because of the general outlook for export companies being the most important factor. Also that the kind of clients that we have are at good standing. They have good cash positions and good working capital generation and so on. There is really not any increased demand.
If you look at the total numbers and the statistical numbers for the whole of Sweden, you will see that there are, from time to time, some increase, and that is coming from high-risk deals where you put, for instance, property in a special purpose vehicle or entity, and you get bank financing, and you can also issue bonds to get nearly 100% financing that is without any equity. There have been a couple of those cases recently, and they are quite fairly large in numbers. They affect the statistics. Those are, of course, not deals that fit our credit policy, so we never participate in those kind of deals. That's why you can see the figures you see in Sweden. We're not losing out any clients. On the contrary, we are taking on clients.
The underlying business is developing good, but the demand on the lending side is very sluggish. We have seen an increase in commitments, and usually, that is an early good sign for the lending demand to come on. In this business cycle, this is rather special because that has not happened. I think it has to do with the fact that we have rather low economic activity in Sweden, but combined with so much money around and risk willingness with some of our competitors. This is a bit of a strange combination and, as I said, from stable, good companies, no real loan demand.
Okay. That's very clear. Just on credit quality, you're happy to see this as just volatility, seasonal quarterly volatility rather than any kind of deterioration or start of a trend?
Yes. From a financial standpoint, it's no question and no worries. From Handelsbanken credit philosophy standpoint, we want the credit losses to be zero. Don't misunderstand. We look very seriously at every credit loss because it's not only the financial numbers, but you will end up with a client that is not happy. We're not happy with any sort of credit loss number or impaired number unless it's zero. Very hard to get to zero. We are constantly, of course, looking, can we improve?
Got it. Thank you very much.
Mind you that if you want to ask a question, you will have to press zero one on your telephone keypad. Our next question comes from Mr. Riccardo Rovere from Mediobanca. Please go ahead, sir.
Good morning to everybody. I had a couple of questions, one on leverage, the other one on corporate risk weights. They've already been asked. Just a curiosity, if I may. Given that your corporate risk weight at group level is now 24.6, if I remember correctly, and it is down from 28 in less than nine months, I would suppose that the corporate risk weights in Sweden must be lower than the one in Denmark, in the Netherlands, in the U.K., and so on. Would it be possible for you to give us an idea what is the corporate risk weight just in Sweden? Thank you.
I want to refer you to our Pillar 3 report that comes out each year at the beginning of the year, where we provide a lot of statistical information on each of these markets. As a general remark, as you know, we are even more restrictive in, for instance, Great Britain and Holland than we are in Sweden. Mathematically over time, you will expect as the numbers filters through the statistical material in the different risk classes, that risk weights over time actually get less in those markets than in Sweden. As you can see from the credit loss numbers over time, credit losses have seemed to be fairly the same regardless of if you look in Sweden or Finland or Denmark and so on, if you look over a business cycle.
It's also a fact that the extra attention we are giving this in the U.K. actually could mean that we will end up with even lower risk weight. In the longer perspective, this is not something that will come in next quarter or so on, but from a philosophical point of view.
Okay. Thanks. Thank you.
There are no further questions registered at this time. Please go ahead, Mr. Riese.
Okay. I thank you very much for participating, and as usual, if you have any more questions, we will be happy to answer them over phone. Don't hesitate to give us a call. Thank you very much for participating. Bye-bye