The bank reported a solid quarter, with earnings growing compared to Q2. Operating profit grew by 8%, and the ROE amounted to 13%. As income grew, increased by 4%, as income increased by 4%, and costs dropped by 5%, the cost-to-income ratio improved from 44% to 40%. The cost-to-income ratio improved in all of our home markets in this quarter. Net credit losses again, now for the seventh consecutive quarter, amounted to net credit loss reversals. Clearly, the asset quality remains very strong. Highlighted many times before, the bank is not only run with low credit risk, but also with low funding and liquidity risks, and an ample liquidity portfolio amounting to around one quarter of the total balance sheet. The CET1 ratio stood at 18.2%, which was 350 basis points above the regulatory minimum, and thereby 50% above our long-term target range.
The anticipated dividend for the first nine months, which is deducted from the capital base, amounted to SEK 10.65 per share, or 119% of the earnings generated this year to date. During the quarter, the bank received a number of external recognitions, highlighting the customers' appreciation of our way of running a bank. For the fourth consecutive year, the bank received the reward, the Business Bank of the Year, and for the 13th consecutive year, Sweden's SME Bank. In the annual EPSI survey in each of our home markets, the bank scored higher overall customer satisfaction among households and corporates than the sector average, as well as the larger peers.
To note in the comments by the Swedish arm of EPSI, or SKI, as it's called here in Sweden, the customers do not only appreciate the local presence and offering, but also rank our digital offering the highest among the larger banks. For the bank, a state-of-the-art digital offer to the customers is merely a hygiene factor, and we rather believe that the USP for the bank relates to our locally connected, decentralized, and customer-oriented business model. Of course, we recognize and we appreciate the recognition. Now, if we look closer to the financial summary of the third quarter compared to the second quarter, ROE amounted to just above 13%. In the wake of lower policy rates, the NII dropped by 2%, which offset otherwise beginning signs of lending volume growth in several of our home markets.
Increased volumes in the savings business contributed to an increase in fee and commissions by 4%. Compared to Q2, the income development was also supported by NII returning, as expected, to a more normal level after temporarily negative effects in the previous quarter. All in all, income grew by 4%. Expenses continue to develop in line with the trend seen for some time now, and decline a further 5% in the quarter. The drop relates partly to seasonality, but also a stronger general cost awareness throughout the bank, with an everyday challenging of unnecessary costs. The cost-to-income ratio improved to 40%. Again, we saw net credit loss reversals this quarter of SEK 35 million. Now, if we instead compare the nine months of the year compared to the same period last year, NII declined by 7%, again mainly as a result of the material cuts in central bank policy rates.
Net fee and commission income, on the other hand, remained resilient and increased by 1%. The key contributor was again the savings business. Due to primarily the drop in NII, the total income declined by 8%. Expenses dropped by 6%. When adjusting for FX, restructuring expenses, and Octogonen, the underlying decline was 3%. The reduced cost base comes as a result of the initiatives carried out over the last year, with effect offsetting general inflation and annual salary increases by a wide margin. Net credit loss reversals amounted to SEK 308 million compared to SEK 369 million a year ago. All in all, the underlying operating profit was down by 10%. Now, if we turn to slide five, over a number of months, we've seen positive signs of recovering growth, particularly in the UK and the Netherlands, but also in the mortgage lending in Sweden.
Overall, however, volume development only contributed with SEK 22 million to the NII in the quarter. The main effect in the NII, however, related to policy rate cuts that impacted the net margins and funding. Other effects overall had a fairly small effect. If we look to slide six, net fee and commission income for the nine months increased by 4%, and the quarter in the quarter by 1% accumulated year-on-year for the first nine months. The bulk relates to the savings business, especially in the mutual funds offering. The increased commission comes as a result of higher assets under management, thanks to both the positive market development as well as continued strong net inflows into our fund markets' funds under management.
The bank has, for more than a decade, continuously had a market share of net inflows into the Swedish mutual funds market at around two times the market share of the bank's current outstanding mutual funds volumes. We saw that the trend continued during the quarter, as well as the first nine months of this year. The second largest fee and commission line is payment fees, which followed the seasonal trend of uptick in the third quarter. These were up along with the normal seasonality and fairly stable compared to last year. The other fees were relatively stable. Now, over to the expenses. Over the course of the past 18 months, intense internal work has been carried out to put the bank in a more cost-efficient position. We've streamlined in central and business support functions and reduced the usage of external consultants.
The level of IT development spend has also affected the run rate of the cost, and it's currently at a lower level compared to the elevated levels in the previous years. Although running the bank with a lower level, there's been no change in our ambitions to continuously invest in order to improve efficiency and productivity in our daily operations, as well as continuously develop and enhance our digital offering to our customers. The total staffing, meaning employees and external resources, has been reduced with more than 1,200 people, or 9% compared to when the internal efficiency work was initiated in Q1 last year. Compared to the same quarter last year, the total underlying cost and other expenses, staff cost and other expenses were both down by 5%. Now, over to asset quality and credit loss reversals. Over the past five years, the bank has total booked net reversals.
To bear in mind, this includes a period of pandemic, sharp up and downturns in policy rates, disruption of supply chain, stress in the commercial real estate sector, war breaking out in Ukraine, tariff turbulence, etc. The absence of credit loss is an evidence of the prudency in the bank when it comes to managing credit risk, both in terms of underwriting capacities and risk capabilities and risk appetite, the customer selection, and consistency in our underwriting procedures and policies when it comes to, as well as the preference for collateralized lending. Also, not least, in the ability to detect early signs of credit risk deterioration and the ability to quickly make necessary actions. In this context, the local presence throughout our branches and the close connection to our customers is essential.
Now, in the bank, we always limit funding liquidity and market-related risk as much as possible in order to ensure the capabilities to always be able to support our customers and safeguard the bank regardless of whatever unknown external events that might occur. In Q3, we received the annual regulatory requirement by the Swedish FSA, the so-called SREP. The Pillar 2 requirement was lowered by 15 basis points, which means that the regulatory requirement dropped to 14.7%. As we anticipate the dividend during the year, to calibrate the CET1 ratio to be at a 350 basis point above the SREP, the CET1 ratio was 18.2%. As I previously mentioned, the anticipated dividend for the first nine months amounted to SEK 10.65 per share, which was 119% of the earnings generated during this period.
The CET1 ratio was, in other words, 50 basis points above the long-term target range of 100 to 300 basis points above the regulatory requirement. As we've said previously, this buffer level above the target range is renewed at a continuous basis. The solid financials, including the robust capital position, put the bank in a position of strength, being one of the most trustworthy and stable counterparts in the industry. This view is shared by the leading rating agencies who rate the bank as the highest among the comparable banks globally. In Q3, the bank also, again, was ranked as the safest bank in Europe and one of the world's safest banks by independent surveys. Now, turning to slide 10, a few words about our respective home markets.
In our largest home market, Sweden, which accounts for 73% of the group earnings, the market position in Sweden is very strong, with the bank being the largest combined lender in private and corporate lending. Mortgage volumes are showing signs of picking up, while corporate remains a bit cautious given the current business cycle and geopolitical situation. The savings business, as I've touched upon earlier, continues to develop very well. The cost-to-income ratio was 31% in Q3. The profits grew by 1% in the quarter, and the profitability was 16%. The UK amounts to 13% of group earnings. The trend in household lending volumes has broken the negative trend seen for a number of years, and we have now consistently seen volumes increase each month since the beginning of this year. Also, on the corporate lending side, we've seen a clear trend shift since a year ago, with growth again.
High activity within our branches has led to more business at the same time as the amortization levels have come down from the high levels seen in the past year, meaning that the new business we've seen now also starts to show in the net number. In the recent quarters, the UK has been improving the efficiency, and we're starting to see initiatives filtering through in the cost base to offset margin pressure on NII relating to the lower short-term rates. The cost-to-income ratio improved slightly in the quarter to 59%. The profit before credit losses was flat versus Q2, but operating profit decreased by 4% as the net credit losses recoveries were a touch lower. The profitability was 13%. Now, Norway accounts for around 10% of the group earnings.
After a refocus period that started during the spring last year, the business is now gradually becoming more balanced between lending, deposits, and savings. With the competition, especially in the mortgage market, is fierce and has picked up gradually over the last year. The bank continues to focus on deepening our customer relationships, also in the field of deposits and savings. In Q3, deposit grew by 2%, and assets under management grew with 6% compared to Q2. The increased cost focus is also gradually showing in the numbers, offsetting margin pressure from lower rates. The cost-to-income ratio improved to 41.5%, and the profits grew by 3%. The profitability was 12%. Finally, the Netherlands accounts for 2% of the group earnings. Since a year back, we've seen growth in both our household and corporate lending.
The positive volume development was, however, being offset by margins that also in the Netherlands have been affected by lower short-term rates. Although coming from a low level, the commission income is ticking upwards, mainly as a result of a growth in assets under management. The ROE improved somewhat in the quarter. Finally, a few words to wrap up where the bank stands after this quarter. NII has adjusted to a more stable level after a period in the past two years with unusually big volatility in margins as a consequence of the big swings in policy rates. We start to see positive household lending growth in most of our markets, with corporate lending growth also in the UK and the Netherlands. In Sweden and Norway, the corporate lending growth remains somewhat muted, which is not surprising given where we are in the economic cycle.
However, we have a firm belief that the activity and borrowing demand from customers eventually will pick up along with an improved macro picture. The commission business is growing, and we see momentum continuing to build in the customers' saving volumes. Costs are decreasing as we gradually become more and more efficient. Asset quality is strong, also showing the financial position, even though the bank is anticipating 119% of the earnings in dividend. Finally, not least, our endless efforts on making sure that our advisors in the branches are close to and easily available for our customers continue. We're happy to see evidence not only in our own interaction with customers, but also in external surveys. With those final remarks, we now take a short break before moving into the Q&A session. Thank you so much. Hello everyone, and welcome back, and welcome to the Q&A session.
This is Peter Grabe, Head of Investor Relations speaking. With me for this Q&A session, we have Michael Green, the CEO, and also Morten Bureman, the CFO. As always, we would appreciate it very much if you limit your questions to one question at a time in order to make sure that everyone gets a chance to ask their questions. With those words, operator, could we please have the first question?
The first question is from Magnus Andersson from ABG Sundal Collier Holding ASA.
Yes, good morning. I have a question about the household mortgage market in Sweden as margins appear very thin. What do you think about the prospects to eventually increase household mortgage margins in an environment where rates no longer fall? Related to that, what kind of volume growth do you deem necessary for the margin pressure to ease? Thanks.
Hi Magnus, this is Morten speaking. Yes, I agree with you that the mortgage business is super thin in terms of margins. The whole idea with the mortgage business from our perspective is to broaden the business with the customer, obviously, to have a more broad business with each and every one of them. We've been fairly successful with that throughout the years. If you look at the hindsight, also we have had a huge market share in the mortgage business in Sweden for a long time. We are now, since a couple of quarters, also taking a fair bit of the market as well, and we are happy with that. In terms of the margins, I think that obviously, as you alluded to, long term, I think that we will see margins also come into a better position. That will potentially take a little bit of time.
As of now, the margins are very thin, and the mortgage business stand alone is not a good business profitability-wise. Again, it's just an entrance into a broader customer relationship with our customers, and that is nurtured by the branch office network, as you know, Magnus.
How about it? Okay. I guess it will be very difficult to raise list prices when rates don't move. Number one, are you alluding to that you will reduce the discounts to clients? Secondly, do you think that the three-month mortgage product will reach profitability in line with cost of capital again on a standalone basis?
Magnus, this is Michael. Good morning. The list price is something, and the real price that we do in our day-to-day business with customers is really what it comes down to. The branches and the employees working with this always strive to minimize the discount from the list price, if you put it that way. That's a day-to-day ordinary regular business with customers. We do not, we can, but we don't measure specific products. We always measure the business we have with the customer. That includes mortgages, that includes occupational business, and also deposits and assets under management. We always focus on the customer, not on products. Sometimes, over the years, the product is more or less profitable, but we're very long term. We have very strong customers. We focus on doing more of their business with us and thereby creating a profitable business with each and every customer.
Okay, thank you.
Thank you. We will now take the next question from the line of Andreas Håkansson from SEB. Please go ahead.
Thank you, and good morning everyone. I have a question on the UK. I'm looking at the NII that's been declining, what is it, 10%-15% over the last year on falling interest rates, of course, and the ROE is now down to 12.8. I mean, we expect Bank of England to continue to cut rates, I guess something like 100 bps more. Could you tell us the sensitivity to rates now in the UK? Has that increased as we come lower down in rates? How should we expect NII to develop? How low ROE are you forecasting for the UK operations on those lower rates, please?
Thank you for that question. First and foremost, we see a pretty strong quarter in the UK. We are happy to see, finally, if I may say so, the business momentum is turning a little bit to our favor as it regards corporate lending. We saw small signs of that during Q2, and now we feel confident that is really something that has changed. That's the first thing I would like to say. As you say, we expect, I think most believe that we will have two more cuts over the next two years or so in the UK. Obviously, we will be affected by that, but we have to keep in mind also that the market share we have in the UK is still fairly small.
I think that we can grow, and the volume pickup that we have started to see now in the UK will be the factor that will play into that also in our favor. We're not too worried about the margin pressure in the UK.
Just on the back of that, you say that volume growth, I mean, then we seem to only talk about lending. I mean, mutual funds, you have negative flow in the quarter. I mean, look at these stock numbers go down 7% year-on-year. Your number of branches go down 7% year-on-year. Are you willing to invest in the business to grow it, or are you just hoping that lending picks up?
You're right that we expect a little bit more in terms of the asset management side in the UK. I agree to that, and we've been waiting for that for quite a bit, actually. We have a plan now in place to try and grow that as well. The flows in the asset management are going down a little bit. We are working on that. I think we can only look at, for example, the Netherlands, where we see now that the trend is shifting also there, where we have inflows in the asset management side from the branch office network coming into play. We expect to see that in the UK also, but it will take some time. We have a little bit of obstacles in the way to sort out before that can actually kick off. In terms of the asset management side in the UK, that's it.
I think that are we willing to invest in the UK? Yes. We still believe that we have a really niche piece of the market that's super sweet for us. The model that we have with the decentralized model and the local knowledge also being very close to the customers is very fitting to that market. I think that basically, since we are so small, we are less affected by the macro as such. We have high hopes for the UK still.
Okay, thanks.
Thanks.
Thank you. We will now take the next question from the line of Nicolas McBeath from DNB Carnegie. Please go ahead.
Thank you and good morning. I had a question on the staffing level. Could you just first confirm what the staffing level was at by the end of the quarter, and also what you think is the kind of right size of the organization currently? Are you seeing the organization as right size at the moment, or where do you think the staffing would come from here? What are you hearing from the Swedish branches? Are these the increased business opportunities and expect to increase staffing, or do they see more potential to work with more efficiency?
Thank you. I think I'll start with the branch office feeling in Sweden. I think in terms of staffing, we are at a good place. We should also bear in mind that we have actually launched a pretty extensive, you know, help in terms of IT to the branch offices lately. They are now digging into that and trying to improve their processes and make the ability to stay closer to the customer even better. In terms of staffing in the branch offices, I think that we are in a very good place. You shouldn't expect that piece to go either up or down, I guess. In terms of the head office, I think we are at a good place also there. I think that we have seen a huge effect of those initiatives that were carried out a little earlier in the year.
You shouldn't expect too much more on that end. I think all in all, we are in a good place to run the business as we would like to.
If I just may add, I think it's important for me to again stress the fact that we've been working with our efficiency and the productivity and the cost side. You know all about that the last couple of years, actually one and a half years. Now the focus in the bank is not working to decrease costs further. We are in a position where we have a strong operating bank right now. We, of course, will watch out for unnecessary costs, but the focus for this bank is now to grow with profitability. All efforts we are making now when it comes to do more business with more customers, bringing on volumes both on the lending side as well as the deposit side and the asset management side and all that, that's the primary target for the bank now.
You should not expect me to talk so much about costs going forward. We're in a good place. Now it's focused to grow our income and the revenues should grow balanced between those different product types in order to create profitability for the banks. This is the focus. It's not about reducing anything more. I just wanted to stress that. If I may just follow up based on the comment you made about the new help from IT systems in the branches, how are the branches at this point incentivized to implement these kinds of IT systems, which I suppose are more centralized initiatives? If you could comment on that, please.
Right. When I speak to our employees in the branches, you don't need that much incentive because the working tools that we provide them now, which are new to them, are so easy to use, and it creates so much more business opportunities. Also, the offering we can give our both private and corporate business when it comes to how we team up, how we approach customers, how we work very efficiently with the branch managers, the branch employees, and all of our specialists throughout the bank. You don't have to incentivize them. It's very easy to use, and they see so much benefit in their day-to-day business, and they can do so much more with customers and create so much more quality when they meet customers. I think they do it by themselves, actually, which is very good.
Okay, that's great. Thank you.
Thank you. We will now take the next question from the line of Tarik El Mejjad from BofA Securities. Please go ahead.
Hi, good morning. Just one question from my side, please. We've been discussing for a while now the potential churn in household lending growth, especially in Sweden. You sound more constructive on some first signs. On the numbers, we see mainly in the Netherlands and UK. Can you expand a bit on what you see on the ground in terms of potentially increasing demand on the housing market? Maybe how do you read the potential positive news from the elections and also from the fiscal stimulus next year? Thank you very much.
Yeah, you're correct. We will see a fiscal stimulus coming into play sooner or later, probably the first half of next year or so, and that will probably have an impact, obviously, on the household as intended. By that, I think that we are cautiously optimistic about the household lending demands, and we are supporting those customers, obviously. As I said earlier, I think that we are happy with the pace in which we grow the mortgage book as of now. We don't want to bring on every customer. The growth that we have in the mortgage book in Sweden as of now is perfectly fine. It's more what Michael just said, that growing the business profitability-wise is the measure that we take right now.
If I just may add, I'm a bit more optimistic now than I was last quarter when it comes to our corporate side, our corporate customers having more discussions with us when it comes to investments from their perspective, both in M&As, but also in just regular investment in their business. I think it's a bit more positive underlying feeling, if you put it that way, when it comes to the corporate side, also in the, as Morten just said, on the mortgage side, where we've seen a pickup in volume growth over the last two quarters or so, which is quite nice. I think in general, the consumers in Sweden are gradually becoming more and more, what do you say, safe or, yeah, safe when it comes to their ability to invest more. I think I'm a bit more hopeful even there.
I said that last year, it didn't come into play because there was too much noise this year as well. I think now when it comes to lower rates, fiscal stimulus, inflation is coming down, and you have had time to adjust to that, I think we're a bit more in a better position now when we look forward than we were a few months ago. I mean.
Thank you. It looks like really the fiscal stimulus and getting distance away from the crisis helps the household sentiment to improve. What about the risk to see a behavior in terms of lending deleveraging cycle maybe in Sweden? Is this something that you think we should exclude at this stage as a scenario, or is it still a risk from a behavior point of view to be witnessed?
Sorry, I didn't really get the question. Sorry about that.
The question is, I mean, there's been a risk of the scenario of credit cycle deleveraging, means household, you know, not willing to leverage more, which was actually kind of a scenario that could be possible given that we are already at the end of a cycle and there's no pickup at all, which is quite unusual in Sweden. Do you think that risk is now behind us or is it still something we could contemplate?
As I just said, I think risk off is not really how it looks right now. I wouldn't say it's risk on, but it's something in between. I think I see signs of actually the willingness for consumers and corporates to bring on more risk and not leverage anymore. I think we're just in that position to see the shift. That's what I feel.
Thank you.
Thank you. We will now take the next question from the line of Sophie Peterson from Goldman Sachs . Please go ahead.
Yeah, hi, good morning. Eris Piercie from Goldman Sachs . I wanted to talk about your capital position. You have accrued already a dividend of SEK 10.65 in the first nine months of the year. You've got a 350 bps capital buffer. Why not use some of the capital for organic and inorganic growth opportunities? Would you consider M&A? If so, would you consider any M&A potentially outside of the Nordic region? If you were to consider any M&A, what would be the type of transaction that would make you interested? Also, related to the capital, if you're not keen on M&A, how do you view share buybacks and potentially also announcing an interim dividend similar to one of your Swedish peers? Thank you.
Okay. No, let's just say that we don't have any news as it regards the buffer as such. We want to stay 1%- 3% above the required capital. No news for you from that perspective. We have said earlier on that we will move into the range and we continue to say so. The only thing we don't know for the moment is when. No news from that angle. As it regards the M&A, yes, we have our eyes and ears open, obviously, to those opportunities. We're not ruling it out. That being said, I think you all know that our preferred method of growth is customer by customer, strengthening the relationship with each customer along the way. It takes a little bit more time, but it serves the purpose of being really cautious and sensitive also from a credit risk perspective.
We know actually what we bring onto the books a little bit more carefully than through M&As. Again, we're not ruling it out. If you look historically, we have also bought businesses throughout the history. We're not ruling that one out.
Would you consider any M&A that would be more transformational?
I'm not sure I want to go into that. Obviously, as I said, we are looking into all opportunities as it regards M&A. We have been investing in bolt-on acquisitions in the history, and we could potentially do that again if the timing is right, if the counterparty is right, and the customer base is right. We're not ruling that one out.
What about using some of the excess capital to introduce an interim dividend? Is that something you would consider?
I didn't get the question, really.
Did you like an interim dividend that you pay one dividend, let's say, in the second half and the final dividend in the first half of the year?
We do not consider that right now.
Okay. Thank you.
Thank you. We will now take the next question from the line of Riccardo Rovere from Mediobanca. Please go ahead.
Thanks. Thank you for my question. Quick one. You have roughly SEK 580 billion in assets and liabilities in dollar, which makes a lot of sense to me that the numbers match each other. More than 50% of the assets are in cash, and more than 50% of the liabilities are in bonds, which I guess the two should be somehow the remuneration from the two or the cost of the two should be linked to something different: short-term rates for the cash and maybe long-term rates for the bonds. When the Federal Reserve starts cutting rates again, should we expect a negative impact on NII from the fact that these two things may be linked to different rates outlook? A second one, sorry to ask a second one.
If I calculate total risk-weighted assets for credit risk divided by the loan book, I know it's not just a loan book, but it's a bit brutal. I noticed that over the past two years, that ratio has gone down from 33% to less than 29%. What is driving the consistent, continuous, progressive reduction in the risk density of your loan book, of your credit exposure? It's a fairly large one. It's four percentage points in only two years out of 33%. It's already low, and it's getting lower and lower. What is driving that? SRPs, maybe, I don't know, anything that can explain that. Thank you.
Yeah, this is Peter speaking. On your first question, the simple answer is that the rate cuts in the U.S. should not be expected to impact the NII. The reason for having balances in the U.S. relates to partly our sort of normal long-term funding of the bank, where we utilize the U.S. dollar market. Also, from a liquidity reserve perspective, we deposit money at the Fed. The simple answer is that you should not expect a rate cut in the U.S. to materially impact the NII as such. To the second question, I'm sorry, could you please repeat the second question?
The second question is, you take credit risk RWA, you divide it by the book. In September 2023, the ratio was 33%, and now it's less than 29%. I'm wondering, from an already very low level, how can it be possible that this number keeps going down and down and down every single quarter? Every quarter it goes down. I'm just trying to understand what is driving the intrinsic positive risk migration within the book, despite everything that happens on this planet. I mean, whatever happens on this planet, it doesn't affect you. Nothing, nothing affects you, it looks like. I'm just wondering how this can be possible. Because it's already very low and it's getting lower. I'm not, I'm just trying to understand why.
I think the simple answer is that the underlying credit risk in our books has decreased. You can see it on a quarterly basis when you track the drivers for the RWA development in between quarters. You can just look in the appendix of the past number of quarters. You can see that we have had, we're seeing in particular positive volume migration, i.e., new customers are coming into the books with lower risk rates than the ones leaving the bank. I would say that that's the key driver. The other thing, of course, is relating to mixed effects in the overall book, which can vary over time.
Okay, so there are no SRPs, transfer of risk, anything like that over the books?
No, you can read it as it's pure underlying positive development of the asset quality in our books.
Perfect. Okay, thank you very much. Thanks.
Thank you. We will now take the next question from the line of Shrey Srivastava from Citi . Please go ahead.
Hi there, and thanks very much for taking my question. It's just conceptually on how you think about the cost base. Again, you beat expectations this quarter, and we know that you mentioned a continued emphasis on just the cost culture around the bank. Is it now that you reach a steady state of cost from which you can invest further, particularly in the international operations, or as a business, for these costs that are top-down rather than branch-driven, how exactly do you think about them? Thanks.
I think that the initiative as such that we launched, and it was a necessary one in the head office, taking down the IT spend a little bit and also merging some group functions with Swedish similar ones, had a huge effect. That was very successful. On top of that, I think it also brought something from a culture perspective into the bank and into many parts of the bank. As we see it now, I think if you look into the UK, for example, Norway, for example, they have done pretty much the same journey as the Swedish head office has done, bringing down the cost. If you look into where we decrease cost, it's not related to business close to the customer. It's rather supporting functions that we have decreased cost in. It's a little bit of a mindset.
The initiative as such, we have that behind us now. We're extremely happy with the outcome, but we are also happy with the steps that we've taken from a cultural perspective, taking us back basically to our roots where we are very cautious in terms of spending our money. I think that the initiative as such, that brought more than one good effect.
I'll keep it on. Thank you very much.
Thank you.
Thank you. We will now take the next question from the line of Magnus Andersson from ABG Sundal Collier Holding ASA. Please go ahead.
Yes, hi. I have another question on the savings business and then just a follow-up on the UK. If I look just, you talk about the savings business and you're obviously proud about the inflows and have been for quite a long time. However, when I look since, if I just look at the fact book since Q4 2023, your assets are up by more than 20%, 23% or so. When I look at the fee level, it's up 7%. You have quite significant margin pressure there. Do you have any view on that? Anything you can do about the mix, any initiatives you're taking there? Secondly, just to follow up on Andreas' questions about the UK, your cost-to-income ratio is nearly 60% now. It's twice the level in Sweden. The market is pricing in another three rate cuts.
I know you've earlier talked about an elevated investment level in the UK impacting costs. I'm just wondering, for how long will that cost level remain elevated and how should we think about cost-to-income ratio progression with normalized rates? As it looks now, you will have to answer questions about the UK every quarter for another year or year and a half.
Right. I'm happy to talk about the UK as well as I'm happy to talk about all the other home markets, Magnus, as you know. Bring it on. I'll just start with the margins within our mutual funds business. You're right, the numbers are as you described. I would say that we've seen that for quite a long time. There is some flow now more into the, what do you say, index funds, do you say that? Yeah, index funds instead of the actively managed funds, but not a huge part. We try to always have the offer, you know, a very strong offer in the market. Of course, people choose, customers choose their own risk profile. For many, many years, you know, 10, 15 years, we've seen an increased inflow in the index fund. That's probably how we should look at it.
We always do what customers feel like is the right thing for them. The good thing is that the flow is there, the inflow is there, and we're bringing in much, much more new customers to the bank in the parent banking side as well in our premium side. I'm quite happy with that, actually. When it comes to the UK, you're right, the cost-to-income ratio is a bit on the high side. We're now in a position where we are able to grow the bank. It's all about growing. It's not so much about bringing down cost. The cost-to-income ratio of 30% in Sweden, that's something else. I would say look into, we look into volume growth, we look into increased income in the UK. That's where we focus right now, not on the cost side. We try to bring down the cost-to-income ratio.
Mainly, it should be driven by higher income.
Okay, so the cost level in the UK is not impacted by any temporary elevated investment level or so. This is the actual running cost base.
Yeah, I would say that.
Yeah, okay. Thank you very much.
Thank you. We will now take the last question from the line of Andreas Håkansson from SEB. Please go ahead.
Yeah, thanks for the follow-up question. You talk about an improved corporate environment in Sweden. Can I just ask, when I look at your lending, you're, of course, very big in commercial real estate lending, that's declining in the quarter. I sit across from our commercial real estate analyst here in Stockholm, and he's very optimistic on the bond side of the funding for corporate real estate or commercial real estate companies at the moment. Could you tell us what's the outlook for volumes in that sector? Also, if the bond market is back and being now at quite tight levels, what are margins really doing when it comes to bank lending to that sector? Thanks.
Yes, I recognize also the bond market and the capital market is on there. It's very liquid and the pricing is quite tight, as you say, but it's been that for a while. We always compete with market financing and bank lending. It's nothing new. I would say when I say I'm a bit more optimistic, it's because I see many more, what do you say, we talk a lot more with our corporate business, not only on the commercial real estate side, but also on the other corporate business. They're much more interested in discussing investments and also mergers and acquisitions. Sorry, acquisitions. We don't have any forecasts, but I'm just saying I feel a bit more confident that the volume growth will pick up, not only on the commercial real estate side, but also on the other corporate side. We'll see.
We always compete with the capital market and the financing going there. We're also there. We help our customers enter and also to finance themselves in the bond market as well from our investment bank, obviously. That's also business for us.
Okay, thank you.
Thank you. I would now like to turn the conference back to Peter Grabe for closing remarks.
Thank you everyone for listening in, and we wish you all a good day. Thank you very much.
Thanks. Bye-bye.