Good morning, everybody, and welcome to the presentation of Swedbank's 3rd Quarter 2021 Results. My name is Annie Ho, Head of Investor Relations. With me in the room is Jens Henriksson, Anders Karlsson and Rolf Marquardt, our CEO, CFO and CRO. We will begin with a short presentation followed by Q and A as usual. But with that, I think I'll hand straight over to Jens begin our presentation.
Thank you, Elmi, and welcome all to the presentation of Swedbank's results for the Q3. Again, A strong quarter with focus on the business. The quarter has been characterized by a Stepwise journey towards a new normal. In Sweden, restrictions are being lifted and many are returning to their workplaces. In our other home markets, Estonia, Latvia and Lithuania, there are still restrictions in place.
For the last 20 years, I have in one capacity or the other, attended the IMS Annual Meetings, so also this year, although digitally. And if I would summarize it, I would say the global recovery continues, but the momentum has weakened. There is a worry about inflation. It seems to be temporary. Although rising energy prices, shortages of semi Conductors and higher commodity prices combined with matching problems in the labor market could create longer lasting problems.
There are also risks associated with how and at what pace government tapers Support to households and companies and the pandemic is still far from over. In these uncertain times Swed results. For the Q2 in a row, our profit after tax is DKK 5,500,000,000. Net Interest income is stable and net commission income increased once again to record levels from increased asset management income and higher activity in the car business. Costs are in line with our forecast And our cost guidance of SEK24.5 billion excluding the expenses related to the U.
S. Investigations, It remains for 2021 2022. In the 3rd quarter, Swedbank had a return on equity of 13.6%. And as you all know, our return is impacted both by Our capital accrued during the year and that the quarter of the profit for 2019 2020 has not yet been paid out to the shareholders. But next week that can change.
The Board of Swedbank has asked for an General Meeting to decide on the proposed dividend on SEK7.30, a proposal in accordance with the bank's dividend policy. Our capital and liquidity positions are strong, our earning capacity as well, And we have a buffer relative to the updated Swedish FSA's minimum requirement of approximately 480 basis points. Our credit quality remains strong and we maintain a management overlay of approximately DKK1.9 billion. The continued work to improve governance and controls gives We have received a green light from the European Central Bank on the new organization of our Baltic Banking operations And availability in our channels increased again during the quarter. Our customers shall have access to us 24 hours A day, 7 days a week and be able to bank with us whenever or wherever they want.
Swedbank is the bank for mortgages. In Sweden, we were together with Savings Bank's market leaders in June, July in August. Our market share through our own channels exceeded 19% in August and that surpassed Our existing back book that is just 15%. And as usual, we do not get the market share figures Until a few weeks after month sorry, before month end, volume in September was at the same level as August, an increase of 65% compared to last year. We have shortened the time From loan commitment to closure, we have reduced the time spent in queues And the collaboration with Fastiersburen, our real estate agency, has improved.
And our pricing strategy helps. We are neither the most expensive nor the cheapest, but we have the best full service offering. We maintain our position as the leading mortgage provider in Estonia, Latvia and Lithuania. During the quarter, we have continued to meet our customers' needs as the economic conditions change. We are supporting businesses with Credit, bridge financing and to a larger extent helping them raising funds from the capital markets.
For our 7,000,000 private customers, we continue to develop and expand advisory. And this takes place in all of our channels and is being added in more parts of the business, generating a higher share of digital sales. Throughout the bank's history, we have been at the forefront of technological development, Using new technology to make our customers' financial life easier. And honestly, We are the original FinTech company. We have worked in the mass markets since the 1820s, we had bank buses and bank boats, minuted with cash from a machine was the first ATM in Sweden.
We began to offer Online services almost 25 years ago and now our customers carry the bank in their pockets around the clock using the most frequently used bank app and we launched it 10 years ago. Customer satisfaction for both the Internet bank and the app And we work continuously to improve our customer relations. During the quarter, we made it possible to Freeze and replace a debit card through the Swedbank app. We have launched more detailed information on card transactions in the mobile bank. It's a good way to quickly detect fraud and more than 90% of savings and pension transactions in the group are now made using digital channels.
Sustainable savings are attracting many customers and especially And to improve their mobile customer experience, we've developed a financial glossary, especially for them. And in Swedbank's fund platform, it is now easier to make climate smart decisions. We have introduced a label That shows the funds rating when it comes to ESG and CO2 risks, for example, all available in The app. To address climate related risks in the bank, we collaborate with the Swedish Metrological and Hydrological Institute that It's a contact point in Sweden for the IPCC. And we want to understand how the effects from climate change such as flooding can impact the real estate sector.
The EU's taxonomy will change the prerequisite for the banking sector. It will lead to increased Transparency and comparability regarding the sustainability of both lending and investment and correctly designed regulations contribute to sustainability being integrated part of the bank's offering. And the financial sector has a central role in the transition required to reach the Paris Agreement's climate target and the U. N. Sustainable Development Goals.
And we continue to develop our advice to companies that are in transition. A clear example of that is that during the year, We have arranged 2 green bond issues per week for corporate customers and Swedbank Grober now manage Assets close to SEK2 1,000,000,000,000 and the goal is to manage it in accordance with the Paris agreement by 20 25. And in Estonia, we want to build a sustainable savings culture. Customers who turn 18, they offer To be operating in Estonia and Latvia and Lithuania, where we continue to see a positive development. Three countries with rapid economic growth that already has surpassed the pre pandemic GDP levels.
For Swedbank, 3 home markets that for many years will grow faster than Sweden. The share of people owning their home is low, but rising. Demand for financial products such as mortgages, insurances and savings increase as prosperity grows. And we work To increase awareness about sustainable personal finance and interest in Rudolf's fund is growing. We are the largest Business bank in Estonia and the largest bank for private customers in Estonia, Latvia and Lithuania.
And we have a long term commitment to financially sound and sustainable society in Estonia, Latvia and Lithuania. And during the quarter, we received proof that we are doing the right things when Swedbank again Was named the most loved brand in Estonia, Latvia and Lithuania. With this love, I give it over to you, Anders.
Thank you, Jens. Now let's go into the details of the quarterly results, beginning with lending And deposits. Compared to last quarter, the total loan portfolio increased by SEK 15,000,000,000 in local currencies, excluding a positive FX impact of SEK 2,000,000,000 Mortgage lending in both Sweden and the Baltics Continue to grow on the back of strong markets and a continued business focus. In particular, Swedish mortgages increased by SEK 13,000,000,000 quarter on quarter, maintaining the all time highs in new Lending seen over the Q2. Corporate lending remains muted and quarter on quarter volumes were stable.
We see some growth in Swedish and Baltic Banking. While in large corporates, we continue to see demand for bridge financing and capital market funding from our customers. Customer deposit inflows slowed this quarter Increasing by SEK 19,000,000,000 excluding a positive FX effect of SEK 3,000,000,000. Corporate deposits in Baltic Banking decreased driven by customers with large deposits that are Total deposits in Baltic Banking was flat in local currency terms, if we Now looking at the revenue lines. Starting off with net interest income, which is stable.
The underlying NII increased by around €70,000,000 As a combination of increased lending volumes, overall stable lending margins, A continued pressure from deposits and effects from group treasury. The Treasury result benefited from internal pricing changes, interest rate risk management and lower Funding costs. The negative margin impact on the Swedish mortgage portfolio was only about 1 basis point in the quarter, and it was compensated by higher volumes. During 2021, Higher NII from volume growth in Swedish mortgages has so far offset margin pressure. Going forward, we continue to see certain tailwinds and headwinds that may impact NII.
Volume growth And lower funding costs will continue to support NII. On the other hand, excess liquidity in the system is Weighing on NII. There could be continued margin pressure in Swedish mortgages, if the market pricing dynamics Prevail and the trend of customer choosing fixed loans continues. Then it will be dependent on market rates and spreads development going forward. Over to net commission income, which is again at record high.
The asset management business continues to perform very well And year to date income has increased by 30% compared to the same period last year. The development in the equity markets continues to be supportive. Roebel Swedish fund business saw net outflows of SEK 3,000,000,000, partly due to outflows on the state run premium pension platform, while the outflows in Baltic Banking was due to the pension reform in Estonia mentioned earlier. Underlying card commissions improved sequentially quarter On quarter having benefited from the summer months and increased consumption levels from a gradual easing of COVID-nineteen restrictions. Income from FX transactions from foreign travel is improving, but still lagging.
Corporate advisory commissions were seasonally lower, reminding you that Q2 Q2 was positively impacted by a large IPO deal. Turning to net gains and losses. Underlying NGL was at a normal level. The NGL result was lower as there was a €100,000,000 valuation effect in the 2nd quarter from shares held by Fostitsperon in Hemnet, which had IPO ed. A few words on expenses before I hand over to Rolf.
Expenses were on a similar level as last quarter as were AML investigation costs, which amounted to NOK 96,000,000. Cost control is A key priority and our overall cost development is in line with Our cost guidance of SEK 20,500,000,000 for underlying expenses this year and next year still stands. I will now hand over to Rolf to talk about asset quality and the credit provisions that were made
Thank you, Anders. So during the Q3, we have seen continued economic recovery from COVID and signs of approaching a new normal. Economic growth has been good in all home markets, has been stable in Sweden, but there have also been new outbreaks in the Baltic countries. Asset quality remained strong during the Q3. The total credit impairment was 18,000,000 And as you can see in this slide, Swedish Banking recovered $83,000,000 and Baltic Banking $20,000,000 While that corporate and institutions continues to be impacted by oil and offshore exposures.
Macroeconomic forecast impacted slightly with $75,000,000 In the second quarter, the management overlay stood at almost $2,000,000,000 compared to $1,900,000,000 this quarter. In the Q3, a few adjustments have been made and in sectors where the impact from COVID is limited, dollars 365,000,000 was released. For portfolios where COVID related uncertainty remains, the overlay has been retained. This includes exposure To the hospitality, retail and transportation sectors as well as in the Baltic countries on the back of continued COVID uncertainty. For oil and offshore, an additional $265,000,000 Stage 2 provision was made.
To sum up, dollars 100,000,000 of the management overlay was released in the 3rd quarter. The Stage 3 provisions for individual assessments of $196,000,000 were mainly related to oil and offshore For the large corporate and institutions, rating and stage migrations increased provisions by 31,000,000 Volume migrations and other factors reduced provisions by $184,000,000 As we have communicated before, The main part of our oil and offshore business is in runoff. Since Q1 2020, the gross exposure has been reduced from SEK 12 SEK900,000,000 to SEK6,500,000,000 today. We now have SEK3,500,000,000 in Stage And total provisions amounts to $2,700,000,000 So now back to you again Anders.
Thank you, Roel. Let me now turn to capital. We report a strong capital position With the CET1 capital ratio of 18.5 percent, risk exposure amount increased by SEK 15,000,000,000 to SEK703 1,000,000,000 in the quarter. The capital buffer stands at around 4 80 basis points to the updated minimum regulatory requirements we received this quarter, which take into account an additional 150 basis points for Pillar 2 guidance and And the basis points reduction in the Pillar 2 requirement. In terms of future capital requirements, The Swedish FSA has announced that the countercyclical buffer will be raised to 1% and be implemented at the end of the Q3 2022.
Regarding the IRB overhaul exercise, It remains the case that overall we expect higher risk weights. Given that we already are in the last months of the year and We continue to await a response from the Swedish FSA regarding our submitted models. It is unlikely that any phase in will commence this year. We still do not know the exact impact from these regulatory But once we are through all these changes, we will remain well capitalized And we expect our CET1 capital buffer to end up within our capital target range of 100 to 300 basis points. With that, I hand over to Jens to conclude.
Thank you, Anders.
We continue to make our customers' Financial life easier. And the annual number of digital interactions with our customers is now 2,700,000,000. This year, we've educated 50,000 young people in Sweden on private finance. And in Lithuania, we have published a financial guidebook for teenagers. This is something we do based on our heritage in the Savings Delivered a profit of DKK 5,500,000,000 again with a strong focus on business.
Consumption of services and goods We covered in most sectors. However, we remain vigilant and we are prepared for new outbreaks and setbacks. With a strong credit portfolio, economic growth in our home markets and And with that, I give the floor back to you, Annie.
Yes. Thank you very much. Perhaps, operator, could you open up the lines for questions?
And our first question comes from Magnus Andersson, RBG, please go ahead. Your line is now open.
Yes. Hi, good morning. Just starting off with costs. I mean, you are still running a bit below your guidance, but you keep it. So I was Thinking since it implies a quite sharp uptick in Q4, like you had last year, it's a bit larger than we were used to before that.
Is there anything in Particularly, you expect to drive that? Or should we consider it as kind of normal seasonality? And secondly, related to costs, we talked about lower staff turnover During the pandemic previously as one reason for your headcount going up, it has slowed, but it's still up In all areas but the Baltics, are we back to normal there when it comes to staff turnover? Or is there still an effect from that? I think I'll start there.
Anders, do you want to start? Yes. Thank you, Magnus, and good morning to you. I agree with you that there is a Seasonal pattern in the cost development over the year and the same you saw last year and the year before that. So it's seasonality is the answer to your first question.
What I would like to remind you is that Q4 is a very intensive Quarter from a development and investment perspective. So I think that what is important for you is to understand that it's not entirely building run rate. As far as the FDA comes, no, when
we look on sort of churn, we have quite A lot of churn in the I think especially in the Baltics right now. I think that we could off a bit now when we see The sort of lockdowns in what was in Latvia the other day.
I'll stop there. Yes. And Magnus, I think it is We see that the attrition rate is coming back to even higher levels than pre pandemic in certain areas Or pockets. But we have a plan and we follow that plan. And the sharp increase you saw during The pandemic outbreak is not part of that plan.
Okay. Thank you. And if I I have a question to you, Jens, just on your financial targets. First of all, you have this ROE target of being above 15% Are we do you have any plan to put a timeline on that target potentially to put some more pressure on the organization? And That's the first one.
And secondly, just if you have any reflection about your profitability in the large corporate and institutions divisions, which remains around 9
Well, let me start by taking the overall picture here. And this quarter, we had a return on equity of 13.6%. And if you would deduct The dividend that shareholders will decide on October 28, it would have been 14.2%. In my introduction, I Talked about 4 areas of income growth. Mortgages, we are the market leaders in all our 4 home markets.
We have a price strategy that works. Advice, we have 7,000,000 private customers and every year we have $2,700,000,000 digital transactions and with FNZ, we're investing in a cloud based solution for tailor made advice for our Sustainability. We have a 200 year heritage of sustainability. And we are a part of the transformational journey that All our home markets are going through and the Baltics, 3 countries where GDP will grow with, let's say, 1 to 1.5 percentage points More than Sweden for many years ahead. We are the market leaders and we are the most loved brand in all three countries.
Four areas and continued cost control. And our target of 15% return on equity stands. It is possible, but difficult to reach. And our strategic direction is a broad strategy on how to reach it. So that's the overall picture.
But may I just follow-up? I mean, first of all Yes, Giuliano, sorry. Yes, on this overall picture, I mean, first of all, I guess your ROE target when you tells me what it If excluding dividend, etcetera, I guess you don't include 1 basis point of loan losses when you look at your RE target. My question was, would you consider putting a time line on it?
We haven't decided to put a time line on. We want to reach the 15 And as I said, it's feasible to do. Now looking at the LC and I, LC and I have Times when they are strong and time when they are a bit weaker. I mean, this is the kind of market when they are a bit weaker. It has to do with how the capital markets Work and we see sort of a lot of companies going into the capital markets rather than direct lending.
And that affects LC and I. You should also broaden it a bit to talk about the whole corporate sector. And we I mean, sometimes people say you should have target on NC and I and Swedish Banking and Baltic Banking. I think the key point is to have an overall For Swedbank, because that means that, yes, there is competition, but it also means that you can transfer Companies from Swedish Banking that want to move up to NCI and banks that want to have a local representative and stuff like that. So it's tough time for NC and I, but the overall target for the Swedbank Group stands 15%.
What do you think is a normalized level for NCI over time?
Well, I'm not going to answer that question. The overall target for Swedbank Group is 15% and that stands.
Okay. Thank you.
Thank you.
And our next question comes from Martin Leitblick, Goldman Sachs. Please go ahead. Your line is now open.
Yes, good morning. Thank you. I was just having a couple of questions as a follow-up for your earlier comments on the mortgage market in Sweden. I was just wondering if you could elaborate what trends you're seeing in terms of customers switching from variable to fixed. Is this broadly Stable, if it's accelerating or slowing down?
And what are customers switching into? Are they switching into a blend of 1, 3, 5 year or if it's more five Yes. Mortgages and I was just wondering what is your outlook for the switching going forward? You mentioned inflation Earlier, would it be rational to assume that there should be an increase in switching if clients are worried that inflation and at some point interest rates would go up? And related to that, I was just wondering what is your outlook for pricing in Sweden?
It seems like a lot of growth It's focused on fixed rate mortgages at the moment. Swap rates have increased for the Swedish krona. Would it be fair to assume that average Negotiated pricing, say, for the 5 year would also increase over time? Thank you.
Thank you very That was a load of questions. So if I forget some one of them or 2, you have to remind me. On your first question, The tendency of choosing fixed rate continues, Which I think is in a sense rational if you look at how the Price curve looks for mortgages in the Swedish market as we speak. They are mainly The nodes on the yield curve that are the most popular ones are the 1 and 2 year nodes, which essentially means that they will Reprice quite quickly. When it comes to inflationary Behavior, I don't think that that is the underlying reason.
I I think it is the sort of inverted market pricing curve that is driving the Preference for fixed rate. And as you You're correctly alluding to swap rates further out on the yield curve have increased sharply, in particular this month. We have seen small corrections by some players, but we are keeping our list price Intact. That means a margin compression on that specific part of the portfolio. But I think that when you talk about this, you need to have in the back of your head that you talk about front book and new sales.
We also have a back book of more than SEK900,000,000,000 of mortgages. So for us, it is a balancing act. We are we want to be relevant in new sales. And at the same time, we are Trying to protect back book margins and NII. So that is the balancing act that we are working with every day.
Thank you. One follow-up, if I may. Just looking, you mentioned headwinds and tailwinds Back to the outlook here. From today's perspective, how do you think about NII for the overall group To develop, should we assume this kind of €70,000,000 underlying run rate increase in the quarter to continue? Or would you Expect it to be more stable?
Or what is your outlook for NII progression over the next 1 or 3 years?
I've given you The dynamics, I will not guide you on any particular number. So you have to do that on the back of an envelope yourself.
Okay. Thank you very much.
Are all your questions Understood, sir?
Perfect. Yes, thank you very much.
Perfect. The next question then comes from Nicholas McVeigh, BNP, please go ahead. Your line is now open.
Thanks and good morning. So first question about your dividend policy. So Looking at your capital generation, I think you now generate return on CET1 capital of about 15%, which should imply that you could grow your REA by more than 7% without diluting your capital Joe, given the 50% payout ratio that you have. So just interested how you think about this. And do you think you will take on a more generous dividend policy in the In the future?
And if so, if you could comment also if you prefer to address any accumulating excess capital with buybacks or more dividends? So that's the first question, please.
Thank you. You're right. With the capital generation we have and with the dividend policy of 50%, you're perfectly right. I think We as we have stated, I think, first of all, there is a lot of unclarities still out there. So it's Too early to talk about this.
Secondly, if you have this target of returning 15% on your equity, you will not keep Your dividend policy for the sake of keeping it, that's for sure. But I think it is A bit too early to talk about these things.
Okay. And then the unclarities that you see, is it mainly regarding the Capital requirements and the IRB overalls or is it also that you want to know the outcome from the AML investigations Yes, Jens, before you think that the clarity is resolved.
It's the IRB overhaul.
Okay. And then second question please on the banks tax or the risk tax as they call it. What's the latest you've heard on the progress here? And Do you expect this to be implemented in 2022? And if you could also please update on the assessed impact that you see from the risk tax if it were to be implemented?
Well, making political guesses is always difficult. I had the opportunity to meet the Minister of Financial Markets and the Minister of Environment and the Vice Prime Minister yesterday. And I mentioned and talked about the risk tax and I actually I call it the bank tax. We said it was straightforward stupid. As I said, it was wrong to do it.
I don't like taxes for specific sectors and the tax that affects Large banks that take very much a societal perspective and really think about sustainability that they should be taxed More than small players, there's room. So that was pretty straightforward there. The effect, what is it, Anders? Around €1,000,000,000
or It's around the forecast is €1,000,000,000 next year if it's implemented. And then if it is accounted for as a cost, there is a tax deductibility to it You need to have in the back of your head. The SEK 1,000,000,000 is the estimate.
Okay. But could you say anything about if you heard any update about the progress because I think we're supposed to Got some news on it earlier in October, but it seems maybe they've received some pushback or that the European Commission had some thoughts on it. Have you heard anything about that that you could share with us please?
No, I don't. I didn't hear anything actually from the ministers yesterday. I just stated my point of view. I was there with other bank CEOs.
Okay. Yes. Okay. Thanks. That's all my questions.
Our next question comes from Maria Sveikovka, Citigroup. Please go ahead. Your line is now open.
Yes, good morning. Thank you for the presentation. A couple of questions. First, just a follow-up on NII in treasury. You mentioned different drivers including interest rate management and lower funding costs.
And I believe you expect that the support from funding So just to check if the number that we've seen in the Q3 is kind of a good run rate going forward? That will be my first question.
Yes. There were a couple of elements In Treasury, one part was the changed FTP on deposits that added to Treasury's result. The other one was a lower funding cost, which I think was I don't have the numbers on my head. The way you should view it is that it's very much dependent on the when Outstanding bonds are maturing, then you have the possibility to replace it with cheaper Funding. And there is, I think, a maturity coming up in Q4.
So I will not give you And it sends whether that is something you can expect from this quarter as a forecast. And the 3rd element is what the treasury always have been doing, managing the balance sheet risk and excess liquidity.
Okay. I see. Thank you. And then on mortgages, we've seen a very Strong recovery in market share and you continue to improve your processes and digital channels. So I guess the next big competitive step Full digitization of the mortgage journey.
Can you update us on where you currently are in the process and what The key milestones for the next couple of quarters.
Well, I cannot update you on Exactly how it is, but we are working to make it as digital as possible. It's difficult because this is also linked Just sort of how the government and what you can do. But we are working on making sure that we are up to speed. And as I said, we Delivered during the quarter, and we have speed up processes and we've cut down on telephone lines. And I would say we are getting better and better at it.
I understand. So you are not Committing to any time line on full digitalization?
No, as you know, I was very clear and I called the spade, the spade After the Q1, and I said that this is something we just need to deliver. Therefore, it felt pretty good to show that this Quarter, we were the market leaders in June, July, August and in August even surpassing our back book figures for dose that are sold through our own
Okay. That is clear. And just maybe finally, if there is anything you can update us on your investments in the new savings platform.
Sorry, take it once again. I missed that part.
Yes, sure. So Your new savings platform together with App and Get to develop the digital offering?
No, we are working with implementing it. It takes a while and then we will roll out customer friendly solutions for that.
Okay. Thank you.
Thank you.
Our next question comes from Andreas Hakansson, Danske Bank. Please go ahead. Your line is now open.
Hi, thank you. First question is just a follow-up on NII. We've seen a continued decline in your Just a fund with covered bonds, which is quite big decline over the last couple of years. Do you see a lower limit? Or How much deposit funding can you do in that area?
That's my first question.
Okay, Andreas. I think that I mean, first of all, the Question to ask yourself is, will the deposit inflows continue forever? I mean, as you are aware of, we Have been using covered bonds as sort of the balancing instrument here because we have to uphold a certain amount I don't think that there is a I mean, The balancing act that we are having is to keep A liquid curve on mortgages and be present in the mortgage market, but to so that's sort of The limit that you need to handle as far as I'm concerned.
So that should then be continue to be the main driver of your NII or it's in the coming quarters, I would assume then?
Placing old funding with cheaper funding.
Yes.
Yes, together with volume growth on the lending side.
Yes. But Would you say that the volume growth is largely as we see now, you had €80,000,000 of volume growth and €67,000,000 of margin decline. So it seems like That is relatively flattish and then your funding benefit is what's really what's driving the NII?
I think when you look at the underlying NII and if you decompose it a bit Andreas, You could say that in the quarter, the volume growth in mortgages compensated for the margin Pressure. And on top of that, you saw corporate loans, but in particular in LC and I, Where you have increased margins. And that goes back to my initial comments during my speech that we When you see more and more of the corporates moving into the capital markets, they are looking for other Solutions then direct lending, one of them is bridge financing. It could be bridge to equity or it could be bridge to bond. And that is where we have seen a slight increase in margins on the corporate side.
So it's a combination. It's related to both corporate and mortgages.
Yes. Thanks. And then just another question, a bit different. Out of your sales of mutual funds, how big portion are you selling yourself and how much going through the likes of Avans and Nordnet. Could you tell us that?
Are you talking about market share or are you talking about sales during the year?
Yes, over the year, like a percentage of flow, so to say.
Yes. I mean, if you look at the year, we have had a fairly low net inflow net. Yes. There are 4 sources to that inflow. The first one is, as you rightly are looking for, Swedish Banking and the Savings Banks.
Then you have the 3rd party platforms that are more volatile. You have the premium pension platform, which is a fairly sort of competitive market from an income And then you have the swing factor, which is institutions. But if I look at this during the year, Swedish Banking is standing for 90% of net sales in 2021.
Okay. Thank you.
Our next question comes from Sophie Popkin, JPMorgan. Please go ahead. Your line is now open.
Yes, hi. Here is Sophie from JPMorgan. My first question would be on the unused management overlay Provisions, you released EUR 100,000,000 this quarter, but how much do you have left of these unused management Spend overlay provisions and basically what needs to happen for these to be released?
Hi, Sophie. So we have left €1,877,000,000 of management And related to industry is that where we don't see an elevated risk anymore related to COVID and we have kept the management overlay for COVID impacted parts of our portfolios. And what needs to happen for us to release those parts is that we want greater clarity and Uncertainty. So we need to pause the point where we now or where we see a rollback of the supporting measures From the government and also that the situation becomes more normalized. And we are not at that point Now, but I think you can also from how we have acted this quarter, I think you can also sort of clearly see the strategy that we do have, where we have made releases related to the non impacted portfolios.
Okay. That's very clear. So it's almost SEK 1,900,000,000 that you Then she could release in coming years. My
second question
would be on M and A, you have plenty of excess capital. You're generating a lot of capital. What's your view on M and A and in particular on Honda Funk and studying their Danish operations, is this something that you would consider or this is 33 off the table?
Well, on the M and A, first, let's say, we always look for opportunities and we always look on that. But we have 4 home markets: Sweden, Estonia, Latvia and Lithuania. So we have no plans of looking into that.
Okay. That's very clear. Thank
As a reminder, we have now 10 minutes left of Q and A, means we are entering into the final phase of the Q and A session. Our next question comes from Antonio Reale, Morgan Stanley. Please go ahead. Your line is now open.
Thank you. Good morning, everyone. It's Antonio from Morgan Stanley. I have three questions, please. 1 on costs, 1 on mortgage market and lastly on NII In the Baltics, please.
The first one on costs. Just a follow-up, Willie, can you remind us what you've budgeted in terms of initiatives In order for you to keep underlying cost base unchanged next year. And could you also please remind us what's included in the EUR 500,000,000 AML related costs. I remember you had an action plan agreed with the FSA with about 2 40 activities or so, Of which about 60% were already completed. Would you stand on that now?
Could you share any more color anecdotally,
Please, that's my first question.
Okay. I think you take them 1 by 1. I have not given you any Indication of initiatives that we will take in order to maintain our flat cost guidance for 2022. The only thing I've said is that cost control is important and we have guided you on 20 22. As far as the SEK 500,000,000 We have forecasted for AML related expenses.
It is primarily for investigation costs, I. E, our advisers when it comes to the American authorities' investigation. When it comes to an update on the 2 40 ish program, I think I hand it over to
No, as you know, when I came, I talked about that every time. And then people started saying, why are we talking so much about this. So we decided that now we bring it into our daily work. And we are working with this To make sure that we are a low risk bank.
Thank you. My second question on the mortgage market. I mean, just an update On what you see in Sweden in mortgages, particularly if you could touch on some of the key points that were drivers in the past of the weakness, Excess liquidity and the contribution from savings banks, the weak corporate demand, which is now recovering that contributed to somewhat higher competition In the recent past? And lastly, if you've seen any changes in demand following the list of the amortization payments on households from September onwards.
Well, thank you for a good question. Now, so when you look on the Swedish mortgage Space. It is a competitive space. We've seen new entrants coming in. And also the combination of that And when we see more difficulties in sort of blending out to corporates, that means that the big banks are fighting about The mortgages.
So it is a tough market in that sense. The good thing is that, As I said, we were the market leaders in June, July August. And if you look on the volumes for mortgages, It gave us an increase of NII of what was it, DKK 40,000,000 during the quarter. And the lower margins meant that NII on this side
Thank you. Three questions, I think.
Yes. No, the last one was really on the Baltics because we've seen, obviously, excess liquidity and growth in deposits being a headwind. I think the NII in the Baltics continues to suffer also in this quarter, and I presume it's still on the back of that excess liquidity. When Would you expect this trend to start reversing? I mean, what are you seeing on the ground in terms of loan demand and rate of savings in Households and Corporates.
But you have seen a slight pickup as I alluded to in my Speech when it comes both on the private side, in particular in mortgages in Estonia and Lithuania, but also to a certain extent for consumer financing. We have also seen a slight pickup when it comes to corporate demand. I think that when you look at the volume versus lending margins In the bold fix, they are upholding their margins. So in that sense, it's not the margin pressure on the lending side. The issue at hand, now there is a curtain coming down.
I'm not doing anything. It's automatic. Just for your introduction,
we're getting closer to the time.
As far as the headwind for the Baltic comes, it is that they They are running we are running the operation on a loan to deposit ratio, which is 0.6. And as you know, they are in the euro area with negative interest rates. The way we have tried to handle it in the When it comes to deposit margins is to charge more and more customers for those
Thank you.
If you didn't hear my question, I will try again. I'm sorry for the
No worries. I think I got it. Thanks.
And our last question comes from Namita Samtani, Barclays. Please go ahead. Your line is now open.
Hi. I just had a question on the mutual funds in Sweden, where the New sale market share has been below the natural market share of 21% for some quarters now. Is there any aspiration to get closer to the natural market
Of course, we have aspirations. And that was one of the areas I talked about in my introduction. I talked Mortgages, I'll talk about savings and we have a huge potential here. We have more than 4,000,000 customers in Sweden and more than 7,000,000 private customers overall. And we have, as I talked about, the 2,700,000,000 Transaction that happened every year.
So using the platform that was asked about before, Merten said, and a good customer interface means that
And this concludes our Q and A session. I will hand back to the speakers.
I think all that's left is to thank you everybody for listening and taking part. Take care and speak soon.
Well, thank you very much for attending and looking forward to seeing you in real life.
Absolutely. All right. Thanks.
This now concludes our conference call. Thank you all for attending. You may disconnect.